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CLOSED END
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ACM Government
Opportunity Fund
Annual Report
July 31, 2000
Alliance Capital [LOGO](R)
The Investment Professional's Choice
<PAGE>
Investment Products Offered
---------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
---------------------------
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
LETTER TO SHAREHOLDERS
September 8, 2000
Dear Shareholder:
This report contains the performance, investment strategy and outlook for ACM
Government Opportunity Fund (the "Fund"), for the annual reporting period ended
July 31, 2000.
Investment Objectives and Policies
This closed-end Fund is designed to provide high current income consistent with
prudent investment risk. The Fund's secondary objective is growth of capital.
The Fund invests principally in U.S. government obligations. The Fund may also
invest up to 35% of its assets in securities of foreign governments and up to
20% in equity securities. Additionally, the Fund may utilize other investment
instruments, including options and futures.
Investment Results
The following table shows how the Fund performed over the six- and 12-month
periods ended July 31, 2000. For comparison, we have also included performance
for the Fund's benchmark, the Lehman Brothers Aggregate Bond Index.
During the six-month period ended July 31, 2000, the Fund outperformed the
Lehman Brothers Aggregate Bond Index. Our opportunistic allocation of emerging
market debt contributed positively to the Fund's performance. In addition, our
Treasury duration structure and Treasury security selection enhanced
performance.
INVESTMENT RESULTS*
Periods Ended July 31, 2000
---------------------------
Total Returns
---------------------------
6 Months 12 Months
----------------------------------------------------
ACM
Government
Opportunity
Fund 7.41% 12.22%
----------------------------------------------------
Lehman
Brothers
Aggregate
Bond Index 5.28% 5.97%
----------------------------------------------------
* The Fund's investment results are total returns for the periods shown and
are based on the net asset value as of July 31, 2000. All fees and
expenses related to the operation of the Fund have been deducted. Returns
for the Fund include the reinvestment of any distributions paid during the
period. Past performance is no guarantee of future results.
The Lehman Brothers ("LB") Aggregate Bond Index is composed of the LB
Mortgage-Backed Securities Index, the LB Asset-Backed Securities Index and
the LB Government/Credit Bond Index. The LB Aggregate Bond Index is a
standard measure of the performance of a basket of unmanaged U.S. debt
securities. An investor cannot invest directly in an index, and its
results are not indicative of any specific investment, including ACM
Government Opportunity Fund.
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ACM GOVERNMENT OPPORTUNITY FUND o 1
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
Investment Strategy
Over the six-month period ended July 31, 2000, we maintained a longer interest
rate duration than the market, generally employing U.S. Treasury holdings with
maturities of 10 years or more. We opportunistically employed securities issued
in foreign countries to enhance portfolio yield. In the emerging market sector,
we increased our positions in Mexico and Russia, anticipating relative
outperformance based on their improving credit profiles.
Market Review
The global macroeconomic outlook continued to improve during the six-month
period ended July 31, 2000. The U.S. economy remained strong, growing at a rate
of 4.8% in the first quarter and 5.3% during the second quarter. Inflation and
unemployment remained low. However, the rise in commodity prices-led by
oil-along with low unemployment, put upward pressure on U.S. inflation. Strong
U.S. economic activity prompted the Federal Reserve to increase short-term
interest rates from 5.50% to 6.50% during the period.
The U.S. bond market, as represented by the Lehman Brothers Aggregate Bond
Index, posted a return of 5.28% during the six-month period. Among the
traditional sectors of the U.S. bond market, the U.S. government sector recorded
the strongest performance, at 5.8%, as a result of the Treasury buy-back
program. Faced with a growing budget surplus, the Treasury began a long-term
project to reduce the supply of outstanding government debt. The yield curve
inverted during the period as investors focused on tighter monetary policy as
well as the Treasury buy-back program. Two-year Treasury yields fell from 6.59%
to 6.28%, and 30-year Treasury yields fell from 6.49% to 5.79%.
The mortgage sector returned 5.2% during the period, benefiting from a strong
underlying housing sector. However, its relative performance was dampened by the
Treasury buy-back program, which affected all non-Treasury sectors negatively.
The emerging market debt sector returned 13.61% during the period. Emerging
market debt reacted positively to improving global economic fundamentals.
Outlook
Our near-term outlook for financial markets assumes that U.S. growth will
moderate, but not enough to resolve the inflationary imbalances (labor market
and trade deficit) in the economy. There remains a risk of further tightening
before year-end. We expect technical supply considerations to play an increasing
role in shaping the U.S. Treasury yield curve.
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2 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
In the period immediately ahead, we expect the curve to remain inverted,
reflecting the likelihood of further tightening by the Federal Reserve. In
addition, the quality and liquidity features of the mortgage-backed security
market, coupled with low prepayment risk at current interest rate levels,
continue to make this sector attractive. In the emerging markets sector, we
believe that most emerging market governments remain committed to necessary
economic and financial reforms. We believe this asset class will continue to
produce attractive returns, albeit with considerable volatility, over the
medium-term.
Notice To Shareholders
On July 20, 2000, the Board of Directors of the Fund approved the acquisition by
ACM Government Income Fund of the assets of ACM Government Securities Fund, ACM
Government Spectrum Fund and ACM Government Opportunity Fund.
The proposed acquisitions, which are not contingent on each other, are subject
to stockholder approval, and concurrent special stockholder meetings to consider
the acquisitions have been scheduled for November 14, 2000. A detailed
description of the proposed acquisitions is included in the proxy statement for
the special stockholder meetings. Those acquisitions that receive stockholder
approval are expected to be completed during the fourth quarter of this year.
Your Fund's Board of Directors believes that consolidation of these very similar
funds is in the stockholders' best interests. It is expected that, under current
conditions, the acquisitions will be fully protective of ACM Government Income's
attractive earning power and distribution rate.
Under each proposed acquisition, stockholders of the fund whose assets are
acquired will receive shares of ACM Government Income equivalent in aggregate
net asset value to the shares they hold immediately prior to the acquisition.
Stockholders participating in a fund's dividend reinvestment plan will receive
full and fractional ACM Government Income shares. Other stockholders will
receive cash in lieu of fractional shares.
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ACM GOVERNMENT OPPORTUNITY FUND o 3
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
[PHOTO John D.
OMITTED] Carifa
[PHOTO Wayne D.
OMITTED] Lyski
Portfolio Manager, Wayne D.
Lyski, has over 26 years of
investment experience.
Thank you for your continued interest and investment in ACM Government
Opportunity Fund.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman and President
/s/ Wayne D. Lyski
Wayne D. Lyski
Senior Vice President
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4 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
------------------
PERFORMANCE UPDATE
------------------
PERFORMANCE UPDATE
ACM GOVERNMENT OPPORTUNITY FUND (NAV)
GROWTH OF A $10,000 INVESTMENT
7/31/90 TO 7/31/00
[The following table was depicted as a mountain chart in the printed material.]
ACM Government Opportunity Fund (NAV): $24,795
Lehman Brothers Aggregate Bond Index: $21,127
This chart illustrates the total value of an assumed $10,000 investment in ACM
Government Opportunity Fund at net asset value (NAV) (from 7/31/90 to 7/31/00)
as compared to the performance of an appropriate index. The chart assumes the
reinvestment of dividends and capital gains. Past performance is not indicative
of future results, and is not representative of future gain or loss in capital
value or dividend income.
The unmanaged Lehman Brothers (LB) Aggregate Bond Index is composed of the LB
Mortgage-Backed Securities Index, the LB Asset-Backed Securities Index and the
LB Government/Credit Bond Index. The LB Aggregate Bond Index is a standard
measure of the performance of a basket of unmanaged debt securities.
When comparing ACM Government Opportunity Fund to the index shown above, you
should note that no charges or expenses are reflected in the performance of the
index. An investor cannot invest directly in an index, and its results are not
indicative of any specific investment, including ACM Government Opportunity
Fund.
--------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 5
<PAGE>
------------------
PERFORMANCE UPDATE
------------------
PERFORMANCE UPDATE
ACM GOVERNMENT OPPORTUNITY FUND (NAV)
HISTORY OF RETURNS
YEARLY PERIODS ENDED 7/31
[BAR CHART OMITTED]
ACM Government Opportunity Fund (NAV)-Yearly Periods Ended 7/31
--------------------------------------------------------------------------------
ACM Government Lehman Brothers
Opportunity Fund (NAV) Aggregate Bond Index
--------------------------------------------------------------------------------
7/31/91 12.67% 10.70%
7/31/92 18.43% 14.78%
7/31/93 16.49% 10.17%
7/31/94 -3.16% 0.09%
7/31/95 8.62% 10.11%
7/31/96 9.40% 5.54%
7/31/97 15.99% 10.76%
7/31/98 6.52% 7.87%
7/31/99 -0.09% 2.49%
7/31/00 12.22% 5.97%
Past performance is no guarantee of future results. The Fund's investment
results represent total returns and are based on the net asset value (NAV). All
fees and expenses related to the operation of the Fund have been deducted.
Returns for the Fund include the reinvestment of any distributions paid during
the period.
The unmanaged Lehman Brothers (LB) Aggregate Bond Index is composed of the
Lehman Brothers Mortgage-Backed Securities Index, the LB Asset-Backed Securities
Index and the LB Government/Credit Bond Index. It is a standard measure of the
performance of a basket of unmanaged U.S. debt securities. An investor cannot
invest directly in an index, and its results are not indicative of any specific
investment, including ACM Government Opportunity Fund.
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6 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
-----------------
PORTFOLIO SUMMARY
-----------------
PORTFOLIO SUMMARY
July 31, 2000
INCEPTION DATE PORTFOLIO STATISTICS
8/26/88 Net Assets ($mil): $98.1
SECURITY TYPE
o 62.71% Treasury
o 22.36% Sovereign
o 5.32% FNMA
o 5.06% Brady Bonds [PIE CHART OMITTED]
o 2.33% Other Short-Term
o 1.97% GNMA
o 0.25% Time Deposit
COUNTRY BREAKDOWN
o 70.24% United States
o 6.99% Mexico
o 4.59% Brazil
o 4.09% Turkey
o 2.77% South Africa
o 2.37% Panama [PIE CHART OMITTED]
o 2.00% Philippines
o 1.83% Russia
o 1.57% Qatar
o 1.45% Bulgaria
o 1.43% Poland
o 0.67% Argentina
All data as of July 31, 2000. The Fund's security type and country breakdowns
may vary over time. These breakdowns are expressed as a percentage of total
investments.
--------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 7
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
PORTFOLIO OF INVESTMENTS
July 31, 2000
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
U.S. Government and Agency
Obligations-87.2%
U.S. Treasury Bonds-46.8%
6.25%, 5/15/30(a).............. US$ 2,750 $ 2,929,603
8.125%, 8/15/19(a)............. 4,875 5,957,396
8.875%, 2/15/19(a)............. 230 299,000
10.75%, 8/15/05(a)............. 4,000 4,764,360
12.375%, 5/15/04(b)............ 2,500 2,998,050
12.75%, 11/15/10(a)............ 3,250 4,153,890
13.25%, 5/15/14(a)............. 1,350 1,967,206
13.75%, 8/15/04(a)............. 6,620 8,342,259
14.00%, 11/15/11(a)(b)......... 10,500 14,567,070
------------
45,978,834
------------
U.S. Treasury Notes-22.6%
5.875%, 11/30/01(b)............ 6,000 5,957,820
6.50%, 2/15/10(b).............. 1,900 1,962,643
6.875%, 5/15/06(a)............. 4,090 4,221,657
7.50%, 11/15/01(a)............. 6,375 6,455,708
7.875%, 11/15/04(a)............ 3,350 3,550,464
------------
22,148,292
------------
Mortgage Related Securities-9.1%
Federal National Mortgage
Association
7.50%, 11/01/29................ 4,774 4,705,136
8.00%, 6/01/28................. 1,783 1,798,461
Government National
Mortgage Association
6.50%, 2/15/29................. 2,546 2,414,221
------------
8,917,818
------------
U.S. Treasury Strip-8.7%
Zero coupon, 5/15/15(a)........ 21,000 8,568,000
------------
Total U.S. Government and
Agency Obligations
(cost $88,528,014)............. 85,612,944
------------
Sovereign Debt Obligations-30.8%
Argentina-0.8%
Republic of Argentina
10.25%, 7/21/30................ 1,000 820,000
------------
Brazil-4.5%
Republic of Brazil
12.25%, 3/06/30................ 1,250 1,175,000
14.50%, 10/15/09............... 3,000 3,255,000
------------
4,430,000
------------
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8 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
Mexico-5.4%
Mexican Treasury Bill
22.40%, 9/07/00(c)............. MXP 11,129 $1,171,755
United Mexican States
10.375%, 2/17/09(d)............ US$ 3,850 4,134,130
------------
5,305,885
------------
Panama-2.9%
Republic of Panama
9.375%, 4/01/29................ 3,000 2,895,000
------------
Philippines-2.5%
Republic of Philippines
9.875%, 1/15/19................ 1,500 1,200,000
10.625%, 3/16/25............... 1,500 1,248,750
------------
2,448,750
------------
Poland-1.8%
Government of Poland
10.00%, 6/12/04................ PLZ 9,000 1,751,743
------------
Qatar-2.0%
State of Qatar
9.75%, 6/15/30(e).............. US$ 1,900 1,923,750
------------
Russia-2.3%
Russian Federation WI
2.25%,3/31/30(e)............... 4,800 1,945,500
Russian Ministry of Finance
3.00%, 5/14/03................. 600 297,000
------------
2,242,500
------------
South Africa-3.5%
Development Bank of
South Africa
Zero coupon, 12/31/27.......... ZAR 120,000 439,529
European Bank for Reconstruction
and Development
Zero coupon, 4/07/27........... 43,730 222,984
International Bank for Reconstruction
and Development
Zero coupon, 12/31/25.......... 120,000 660,155
Zero coupon, 2/17/26........... 110,000 591,870
Zero coupon, 7/14/27........... 107,725 546,671
Republic of South Africa
13.00%, 8/31/10................ 6,750 931,252
------------
3,392,461
------------
--------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 9
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
Turkey-5.1%
Republic of Turkey
11.875%, 1/15/30............... US$ 1,250 $ 1,360,625
12.375%, 6/15/09............... 750 811,875
Government of Turkey
Series 24T4
72.00%, 10/03/01............... TRL 580,000,000 1,142,968
Turkey Treasury Bill
Series 14T
Zero coupon, 8/23/00........... 1,170,000,000 1,684,010
------------
4,999,478
------------
Total Sovereign Debt Obligations
(cost $33,043,520)............. 30,209,567
------------
Collateralized Brady Bonds-4.5%
Brazil-1.2%
Republic of Brazil
Discount Bonds FRN
Series ZL
7.375%, 4/15/24................ US$ 1,500 1,181,250
------------
Mexico-3.3%
United Mexican States
6.25%, 12/31/19................ 1,750 1,498,525
Series C, FRN
7.80%, 12/31/19................ 1,750 1,736,875
------------
3,235,400
------------
Total Collateralized Brady Bonds
(cost $4,223,702).............. 4,416,650
------------
Non-Collateralized Brady Bond-1.8%
Bulgaria-1.8%
Republic of Bulgaria
IAB PDI FRN
7.75%, 7/28/11
(cost $1,752,792).............. 2,200 1,771,000
------------
Time Deposit-0.3%
Bank of New York
6.125%, 8/01/00
(cost $300,000)................ 300 300,000
------------
Total Investments-124.6%
(cost $127,848,028)............ 122,310,161
Other assets less
liabilities-(24.6%)............ (24,173,136)
------------
Net Assets-100%................... $ 98,137,025
============
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10 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
(a) Securities, or portion thereof, with an aggregate market value of
$51,903,213, have been segregated to collateralize forward exchange
currency contracts.
(b) Securities, or portion thereof, loaned at July 31, 2000, with an aggregate
market value of $24,791,913 and cash collateral received from the
counterparties of Merrill Lynch & Co., Inc., Deutsche Morgan Grenfell,
Inc. and Lehman Brothers, in the amount of $26,911,375.
(c) Interest rate represents annualized yield to maturity at purchase date.
(d) Security trades with value recovery rights expiring June 30, 2003.
(e) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At July 31,
2000, these securities amounted to $3,869,250 or 3.9% of net assets.
Glossary of Terms:
FRN - Floating Rate Note.
IAB - Interest Arrears Bond.
PDI - Past Due Interest.
WI - When Issued
See notes to financial statements.
--------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 11
<PAGE>
---------------------------------
STATEMENT OF ASSETS & LIABILITIES
---------------------------------
STATEMENT OF ASSETS & LIABILITIES
July 31, 2000
Assets
Investments in securities, at value (cost $127,848,028) ..... $122,310,161
Cash ........................................................ 93,816
Receivable for investment securities sold ................... 4,531,250
Interest receivable ......................................... 2,534,790
-------------
Total assets ................................................ 129,470,017
-------------
Liabilities
Deposit for securities loaned ............................... 26,911,375
Payable for investment securities purchased ................. 4,215,563
Interest payable on securities lending ...................... 45,953
Advisory fee payable ........................................ 44,685
Administration fee payable .................................. 22,833
Net unrealized depreciation of forward exchange
currency contracts ....................................... 3,382
Accrued expenses ............................................ 89,201
-------------
Total liabilities ........................................... 31,332,992
-------------
Net Assets .................................................. $ 98,137,025
=============
Composition of Net Assets
Capital stock, at par ....................................... $ 124,258
Additional paid-in capital .................................. 108,131,600
Undistributed net investment income ......................... 504,226
Accumulated net realized loss on investment and foreign
currency transactions .................................... (5,082,188)
Net unrealized depreciation of investments and foreign
currency denominated assets and liabilities .............. (5,540,871)
-------------
$ 98,137,025
=============
Net Asset Value Per Share
(based on 12,425,781 shares outstanding) ................. $7.90
=====
See notes to financial statements.
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12 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
-----------------------
STATEMENT OF OPERATIONS
-----------------------
STATEMENT OF OPERATIONS
Year Ended July 31, 2000
Investment Income
Interest................................ $12,323,889
Expenses
Advisory fee............................ $ 750,655
Custodian............................... 157,221
Administrative fee...................... 150,131
Transfer agency......................... 69,310
Printing................................ 64,465
Audit................................... 46,160
Directors' fees......................... 36,350
Registration............................ 27,537
Legal................................... 7,160
Miscellaneous........................... 4,281
------------
Total expenses before interest.......... 1,313,270
Interest expense........................ 791,086
------------
Total expenses.......................... 2,104,356
------------
Net investment income................... 10,219,533
------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions
Net realized loss on investment
transactions......................... (3,413,610)
Net realized loss on foreign currency
transactions......................... (756,607)
Net change in unrealized
appreciation/depreciation of:
Investments.......................... 4,480,906
Foreign currency denominated assets
and liabilities.................... 127,637
------------
Net gain on investments and foreign
currency transactions................ 438,326
------------
Net Increase in Net Assets
from Operations......................... $10,657,859
============
See notes to financial statements.
--------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 13
<PAGE>
----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
July 31, July 31,
2000 1999
------------- -------------
Increase (Decrease) in Net Assets
from Operations
Net investment income ........................ $ 10,219,533 $ 8,031,801
Net realized gain (loss) on investments and
foreign currency transactions ............. (4,170,217) 793,091
Net change in unrealized appreciation/
depreciation of investments and foreign
currency denominated assets
and liabilities ........................... 4,608,543 (9,177,968)
------------ ------------
Net increase (decrease) in net assets
from operations ........................... 10,657,859 (353,076)
Dividends and Distributions to
Shareholders From:
Net investment income ........................ (8,891,738) (8,031,801)
Distributions in excess of net
investment income ......................... -0- (203,495)
Distributions from net realized gain
on investments ............................ (228,758) (281,054)
------------ ------------
Total increase (decrease) .................... 1,537,363 (8,869,426)
Capital Stock Transactions
Repurchase of shares in accordance with
share repurchase program .................. (4,845,549) -0-
------------ ------------
Net Assets
Beginning of period .......................... 101,445,211 110,314,637
------------ ------------
End of period (including undistributed net
investment income of $504,226 at
July 31, 2000) ............................ $ 98,137,025 $101,445,211
============ ============
See notes to financial statements.
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14 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
-----------------------
STATEMENT OF CASH FLOWS
-----------------------
STATEMENT OF CASH FLOWS
Year Ended July 31, 2000
Increase (Decrease) in Cash From:
Operating Activities:
Interest received ......................... $ 9,739,526
Interest expense paid ..................... (745,133)
Operating expenses paid ................... (1,324,428)
-------------
Net increase in cash from operating
activities ............................. $ 7,669,965
Investing Activities:
Proceeds from disposition of long-term
portfolio investments .................. 133,395,404
Purchase of long-term portfolio
investments ............................ (147,288,670)
Purchase of short-term portfolio
investments, net ....................... (6,628,378)
-------------
Net decrease in cash from investing
activities ............................. (20,521,644)
Financing Activities:
Net increase in deposits for
securities loaned ...................... 26,911,375
Net redemptions from capital stock
transactions ........................... (4,845,549)
Cash dividends paid ....................... (9,120,496)
-------------
Net increase in cash from financing
activities ............................. 12,945,330
-------------
Net increase in cash ...................... 93,651
Cash at beginning of period ............... 165
-------------
Cash at end of period ..................... $ 93,816
=============
--------------------------------------------------------------------------------
Reconciliation of Net Increase in
Net Assets From Operations to
Net Increase in Cash From
Operating Activities:
Net increase in net assets from operations $ 10,657,859
Adjustments:
Decrease in interest receivable ........... 310,524
Net realized loss on investment
transactions ........................... 4,170,217
Net change in unrealized appreciation/
depreciation of investments ............ (4,608,543)
Accretion of bond discount ................ (2,894,887)
Increase in interest payable .............. 45,953
Decrease in accrued expenses .............. (11,158)
-------------
Total adjustments ......................... (2,987,894)
-------------
Net increase in Cash From Operating
Activities ............................. $ 7,669,965
=============
See notes to financial statements.
--------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 15
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTES TO FINANCIAL STATEMENTS
July 31, 2000
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 accounting principles generally accepted in the United States, 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, securities listed on a foreign
securities exchange 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 market
value of such securities. Mortgage backed and asset backed securities may be
valued at prices obtained from a bond pricing service or at a price obtained
from one or more of the major broker/dealers in such securities. In cases where
broker/dealer quotes are obtained, the Adviser may establish procedures whereby
changes in market yields or spreads are used to adjust, on a daily basis, a
recently obtained quoted bid price on a security. 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.
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16 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
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 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
period end exchange rates are reflected as a component of net unrealized
appreciation (depreciation) 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. Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
accounting principles generally accepted in the United States. 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.
During the current fiscal year, permanent differences, primarily due to the tax
treatment of foreign currency losses and distribution reclasses, resulted in a
net decrease in undistributed net investment income, and a corresponding
decrease in accumulated net realized loss on investments and foreign currency
transactions. This reclassification had no effect on net assets.
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 affili-
--------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 17
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
ate of the Adviser, the Fund reimburses AFS for costs related to servicing phone
inquiries for the Fund. During the year ended July 31, 2000, the Fund reimbursed
AFS $1,155.
Under the terms of an Administrative Agreement, the Fund pays Alliance Capital
Management L.P. 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 $59,815,736 and $55,341,713,
respectively, for the year ended July 31, 2000. There were purchases of
$87,472,934 and sales of $78,053,691 of U.S. government and government agency
obligations for the year ended July 31, 2000.
At July 31, 2000, the cost of investments for federal income tax purposes was
$130,228,350. Accordingly, gross unrealized appreciation of investments was
$2,258,299 and gross unrealized depreciation of investments was $10,176,488
resulting in net unrealized depreciation of $7,918,189 (excluding foreign
currency transactions).
For federal income tax purposes, the Fund had a capital loss carryforward at
July 31, 2000 of $1,546,112 expiring in 2008.
The Fund incurred and elected to defer post-October currency and capital losses
of $458,263 and $1,155,754, respectively, for the year ended July 31, 2000.
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 follow-
--------------------------------------------------------------------------------
18 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
ing table, reflects the total exposure the Fund has in that particular currency
contract.
At July 31, 2000, 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
Euro,
settling 8/21/00 1,880 $1,737,065 $1,745,052 $ 7,987
Forward Exchange
Currency Sale
Contracts
Polish Zloty,
settling 8/21/00 7,550 1,717,041 1,728,410 (11,369)
--------
$ (3,382)
========
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 than 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. In writing an option,
the Fund bears the market risk of an unfavorable change in the price of the
currency underlying the written option. Exercise of an option written by the
Fund could result in the Fund selling or buying a currency at a price different
from the current market value.
--------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 19
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
There were no options written for the year ended July 31, 2000.
NOTE D
Capital Stock
There are 300,000,000 shares of $.01 par value common stock authorized, of which
12,425,781 shares were outstanding at July 31, 2000. On January 26, 2000 the
Fund initiated a share repurchase program. For the year ended July 31, 2000,
646,091 shares were repurchased at a cost of $4,845,549 representing 4.94% of
the 13,071,872 shares outstanding at January 26, 2000. This includes $38,765 in
commissions paid to Paine Webber Group, Inc. The average discount of market
price to net asset value of shares repurchased over the period of January 26,
2000 to July 31, 2000 was 6.52%.
NOTE E
Reverse Repurchase Agreements
Under a reverse repurchase agreement, the Fund sells securities and agrees to
repurchase them at a mutually agreed upon date and price. At the time the Fund
enters into a reverse repurchase agreement, it will establish a segregated
account with the custodian containing liquid assets having a value at least
equal to the repurchase price.
For the year ended July 31, 2000, the maximum amount of reverse repurchase
agreements outstanding was $44,218,495, the average amount outstanding was
approximately $18,725,283, and the daily weighted average interest rate was
5.22%.
As of July 31, 2000, the Fund had no reverse repurchase agreements outstanding.
NOTE F
Security Lending
The Fund may make secured loans of portfolio securities to brokers, dealers and
financial institutions, provided that cash, liquid high-grade debt securities or
bank letters of credit equal to at least 102% of the market value of the
securities loaned is deposited and maintained by the borrower with the Fund.
For the year ended July 31, 2000, the maximum amount of security lending
agreements outstanding was $48,197,958, the average amount outstanding was
approximately $26,461,418 and the daily weighted average interest rate was
6.09%.
The risks in lending portfolio securities, as with other extensions of credit,
consist of possible loss of rights in the collateral should the borrower fail
financially. In determining whether to lend securities to a particular borrower,
the Adviser will consider all relevant facts and circumstances, including the
creditworthiness of the borrower. While securities are on loan, the borrower
will pay the Fund any income earned thereon and the Fund may invest any cash
collateral in portfolio securities, thereby earning additional income, or
receive an agreed upon amount of income from a borrower who has delivered
equivalent collateral. When such securities are borrowed against cash, the Fund
agrees to pay
--------------------------------------------------------------------------------
20 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
the borrower of such securities a "rebate rate" for the use of the cash the
borrower has pledged as collateral.
As of July 31, 2000, the Fund had entered into the following security lending
agreements:
Amount Counterparty Interest Rate Maturity
----------- ----------------------------- ------------- --------------
$ 1,992,625 Merrill Lynch & Co., Inc. 5.00% August 1, 2000
$ 2,018,750 Merrill Lynch & Co., Inc. 5.10% August 4, 2000
$ 6,007,500 Lehman Brothers 6.35% August 4, 2000
$13,830,000 Deutsche Morgan Grenfell, Inc. 6.42% August 4, 2000
$ 3,062,500 Deutsche Morgan Grenfell, Inc. 6.45% August 9, 2000
NOTE G
Concentration of Risk
Investing in securities of foreign governments involves special risks which
include changes in foreign exchange rates and the possibility of future adverse
political and economic developments which could adversely affect the value of
such securities. Moreover, securities of many foreign governments and their
markets may be less liquid and their prices more volatile than those of the
United States Government.
NOTE H
Subsequent Event
On July 20, 2000, the Fund's Directors approved the acquisition of the Fund's
assets by the ACM Government Income Fund. The proposed acquisition is subject to
stockholder approval and is described in detail in the proxy statement for a
special stockholder meeting scheduled for November 14, 2000. A proxy statement
relating to this meeting will be mailed to all stockholders of record in the
upcoming weeks. If the acquisition receives stockholder approval, the
acquisition is expected to be completed during the fourth quarter of this year.
--------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 21
<PAGE>
--------------------
FINANCIAL HIGHLIGHTS
--------------------
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Year Ended July 31,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 7.76 $ 8.44 $ 8.56 $ 8.00 $ 7.92
-----------------------------------------------------------------
Income From Investment Operations
Net investment income .................... .80(a) .61 .59 .58 .53
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions ........................... .05 (.64) (.08) .58 .13
-----------------------------------------------------------------
Net increase (decrease) in net asset value
from operations ........................ .85 (.03) .51 1.16 .66
-----------------------------------------------------------------
Less: Dividends and Distributions
Dividends from net investment income ..... (.69) (.61) (.59) (.58) (.56)
Distributions in excess of net investment
income ................................. -0- (.02) (.04) (.02) -0-
Distributions from net realized gains .... (.02) (.02) -0- -0- -0-
Tax return of capital distribution ....... -0- -0- -0- -0- (.02)
-----------------------------------------------------------------
Total dividends and distributions ........ (.71) (.65) (.63) (.60) (.58)
-----------------------------------------------------------------
Net asset value, end of period ........... $ 7.90 $ 7.76 $ 8.44 $ 8.56 $ 8.00
=================================================================
Market value, end of period .............. $7.1875 $ 7.125 $ 7.9375 $ 7.875 $ 7.00
=================================================================
Total Return
Total investment return based on:(b)
Market value ........................... 11.21% (2.46)% 8.90% 21.95% 1.08%
Net asset value ........................ 12.22% (.09)% 6.52% 15.99% 9.40%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $98,137 $101,445 $110,315 $111,905 $104,546
Ratio of expenses to average net assets .. 2.10% 1.19% 1.18% 1.27% 1.28%
Ratio of expenses to average net assets,
excluding interest expense(c) ......... 1.31% 1.19% 1.18% 1.27% 1.28%
Ratio of net investment income to
average net assets ..................... 10.21% 7.48% 6.89% 7.00% 6.42%
Portfolio turnover rate .................. 120% 211% 230% 407% 375%
</TABLE>
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each period reported. Dividends and distributions, if any, are assumed
for purposes of this calculation, to be reinvested at prices obtained
under the Fund's dividend reinvestment plan. Generally, total investment
return based on net asset value will be higher than total investment
return based on market value in periods where there is an increase in the
discount or a decrease in the premium of the market value to the net asset
value from the beginning to the end of such periods. Conversely, total
investment return based on 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 investment return calculated for a period of less than one year is
not annualized.
(c) Net of interest expense of .79% on borrowings (see Notes E & F).
--------------------------------------------------------------------------------
22 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
------------------------------
REPORT OF INDEPENDENT AUDITORS
------------------------------
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of ACM Government Opportunity Fund,
Inc.
We have audited the accompanying statement of assets and liabilities of ACM
Government Opportunity Fund, Inc., including the portfolio of investments, as of
July 31, 2000, and the related statements of operations and cash flows for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of July 31, 2000, by correspondence with the
custodian and others. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of ACM
Government Opportunity Fund, Inc. at July 31, 2000, the results of its
operations and its cash flows for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated periods, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
New York, New York
September 8, 2000
TAX INFORMATION
(unaudited)
In order to meet certain requirements of the Internal Revenue Code we are
advising you that the tax basis long term capital gain distributions paid by the
Fund during the fiscal year July 31, 2000 was $221,753.
Shareholders should not use the above information to prepare their tax returns.
The information necessary to complete your income tax returns will be included
with your Form 1099 DIV which will be sent to you separately in January 2001.
--------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 23
<PAGE>
----------------------
ADDITIONAL INFORMATION
----------------------
ADDITIONAL INFORMATION
Shareholders whose shares are registered in their own names may elect to be
participants in the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
pursuant to which dividends and capital gain distributions to shareholders will
be paid in or reinvested in additional shares of the Fund. PFPC, Inc. (the
"Agent") will act as agent for participants under the Plan. Shareholders whose
shares are held in the name of a broker or nominee should contact such broker or
nominee to determine whether or how they may participate in the Plan.
If the Board declares an income distribution or determines to make a capital
gain distribution payable either in shares or in cash, as holders of the Common
Stock may have elected, non-participants in the Plan will receive cash and
participants in the Plan will receive the equivalent in shares of Common Stock
of the Fund valued as follows:
(i) If the shares of Common Stock are trading at net asset value or at a
premium above net asset value at the time of valuation, the Fund will
issue new shares at the greater of net asset value or 95% of the then
current market price.
(ii) If the shares of Common Stock are trading at a discount from net
asset value at the time of valuation, the Agent will receive the dividend
or distribution in cash and apply it to the purchase of the Fund's shares
of Common Stock in the open market on the New York Stock Exchange or
elsewhere, for the participants' accounts. Such purchases will be made on
or shortly after the payment date for such dividend or distribution and in
no event more than 30 days after such date except where temporary
curtailment or suspension of purchase is necessary to comply with Federal
securities laws. If, before the Agent has completed its purchases, the
market price exceeds the net asset value of a share of Common Stock, the
average purchase price per share paid by the Agent may exceed the net
asset value of the Fund's shares of Common Stock, resulting in the
acquisition of fewer shares than if the dividend or distribution had been
paid in shares issued by the Fund.
The Agent will maintain all shareholders' accounts in the Plan and furnish
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Agent in non-certificate form in the name of the
participant, and each shareholder's proxy will include those shares purchased or
received pursuant to the Plan.
There will be no charges with respect to shares issued directly by the Fund to
satisfy the dividend reinvestment requirements. However, each participant will
pay a pro rata share of brokerage commissions incurred with respect to the
Agent's open market purchases of shares. In each case, the cost per share of
shares purchased for each shareholder's account will be the average cost,
including brokerage commissions, of any shares purchased in the open market plus
the cost of any shares issued by the Fund.
--------------------------------------------------------------------------------
24 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
----------------------
ADDITIONAL INFORMATION
----------------------
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payments made and any dividend or distribution paid subsequent to
written notice of the change sent to participants in the Plan at least 90 days
before the record date for such dividend or distribution. The Plan may also be
amended or terminated by the Agent on at least 90 days' written notice to
participants in the Plan. All correspondence concerning the Plan should be
directed to the Agent at PFPC, Inc., P.O. Box 8030, Boston, MA 02266-8030.
Since the filing of the most recent amendment to the Fund's registration
statement with the Securities and Exchange Commission, there have been (i) no
material changes in the Fund's investment objectives or policies, (ii) no
changes to the Fund's charter or by-laws that would delay or prevent a change of
control of the Fund, (iii) no material changes in the principal risk factors
associated with investment in the Fund, and (iv) no change in the person
primarily responsible for the day-to-day management of the Fund's portfolio, who
is Wayne D. Lyski, the President of the Fund.
Supplemental Proxy Information
The Annual Meeting of Shareholders of the ACM Government Opportunity Fund, Inc.
was held on March 28, 2000. The description of each proposal and number of
shares voted at the meeting are as follows:
Voted
Voted For Against/Abstain
--------------------------------------------------------------------------------
1. To elect directors: Class Three Directors
(Term expires in 2003)
Ruth Block 7,712,761 4,833,928
John D. Carifa 7,712,279 4,834,410
Robert C. White 7,711,771 4,834,918
Voted For Voted Against Withheld/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, 2000: 12,343,583 48,621 154,485
Voted For Voted Against Withheld/Abstain
--------------------------------------------------------------------------------
3. Proposal pursuant to the
Fund's Articles of
Incorporation to amend the
Articles of Incorporation
to convert the Fund to an
open-end investment company: 5,331,254 3,638,650 3,576,785
Accordingly, proposal 3, which
required the affirmative vote of
two-thirds of the Fund's outstanding
shares for approval, was disapproved.
--------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 25
<PAGE>
----------------------------
GLOSSARY OF INVESTMENT TERMS
----------------------------
GLOSSARY OF INVESTMENT TERMS
basis point (bp)
One basis point equals 0.01%.
benchmark
A standard by which a fund's performance can be measured. A benchmark is usually
an unmanaged index, such as the Standard & Poor's 500 Stock Index or the Lehman
Brothers Aggregate Bond Index.
bond
Bonds are issued by governments or corporations when they need to raise cash.
Bonds are sold, or issued, to investors and have a maturity date, which is the
date the issuer is obligated to repay the investor for the principal, or face
amount, of the bond. Bonds also pay interest until maturity. Bonds are also
called fixed-income securities.
Federal Reserve Board
The seven-member board that oversees Federal Reserve Banks, establishes monetary
policy and monitors the country's economic state.
government bond
A bond that is issued by a government or its agencies.
index
A compilation of securities of similar types of companies that is used to
measure the investment performance of securities within that specific market. An
index is often used as a benchmark for a mutual fund. An investor cannot invest
directly in an index.
investment-grade bond
A bond that is rated BBB or higher by a credit agency.
portfolio
The collection of securities that make up a Fund's or an investor's investments.
Treasuries
Negotiable U.S. government debt obligations, backed by the full faith and credit
of the U.S. government. Treasuries are issued either as bills, notes or bonds
depending on the maturity. Treasuries are exempt from state and local taxes.
yield
The rate of return on an asset, usually referring to dividend or interest
payments, expressed as a percentage of current market price.
--------------------------------------------------------------------------------
26 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
----------------
ALLIANCE CAPITAL
----------------
ALLIANCE CAPITAL
The Investment Professional's Choice
Alliance Capital is a leading global investment management firm with nearly $388
billion in assets under management. In recognition of our far-reaching
investment capabilities, Alliance Capital has been selected by employee benefit
plans for 29 of the FORTUNE 100 companies and public retirement funds in 33
states as well as by hundreds of foundations, endowments and foreign
institutions. By sharing this institutional money management experience with
millions of mutual fund investors as well, Alliance stands out as a "manager of
choice" for thousands of investment professionals around the world.
At Alliance Capital, we place a premium on investment research. We carefully
select securities based on our proprietary research, conducted by over 282
investment professionals in 22 investment offices worldwide. Our commitment to
this process means that our mutual fund shareholders have their portfolios
managed by the same experienced analysts and portfolio managers who manage the
pension funds of some of America's largest institutional investors.
All information on Alliance Capital is as of 6/30/00.
--------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 27
<PAGE>
------------------
BOARD OF DIRECTORS
------------------
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)
Donald J. Robinson(1)
Robert C. White(1)
OFFICERS
Wayne D. Lyski, Senior Vice President
Kathleen A. Corbet, Senior Vice President
Bruce W. Calvert, Senior Vice President
Paul J. DeNoon, Vice President
Thomas J. Bardong, Vice President
Christian G. Wilson, Vice President
Michael Mon, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Vincent S. Noto, Controller
Administrator
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, NY 10105
Dividend Paying Agent, Transfer Agent and Registrar
PFPC, Inc.
P.O. Box 8030
Boston, MA 02266-8030
Legal Counsel
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
Custodian
Bank of New York
One 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.
--------------------------------------------------------------------------------
28 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
--------------------------------
ALLIANCE CAPITAL FAMILY OF FUNDS
--------------------------------
ALLIANCE CAPITAL FAMILY OF FUNDS
Domestic Equity Funds
Balanced Shares
Conservative Investors Fund
Disciplined Value Fund
Growth & Income Fund
Growth Fund
Growth Investors Fund
Health Care Fund
Premier Growth Fund
Quasar Fund
Real Estate Investment Fund
Technology Fund
The Alliance Fund
Utility Income Fund
Global & International Equity Funds
All-Asia Investment Fund
Global Small Cap Fund
Greater China '97 Fund
International Fund
International Premier Growth Fund
New Europe Fund
Worldwide Privatization Fund
Select Investor Series
Biotechnology Portfolio
Premier Portfolio
Technology Portfolio
Fixed Income Funds
Corporate Bond Portfolio
Global Dollar Government Fund
Global Strategic Income Trust
High Yield Fund
Multi-Market Strategy Trust
North American Government Income Trust
Quality Bond Portfolio
U.S. Government Portfolio
Municipal Income Funds
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
Closed-End Funds
The Spain Fund
ACM Municipal Securities Income Fund
Alliance All-Market Advantage Fund
ACM Government Income Fund
ACM Government Securities Fund
ACM Government Spectrum Fund
ACM Government Opportunity Fund
ACM Managed Income Fund
The Southern Africa Fund
The Austria Fund
Alliance World Dollar Government Fund
ACM Managed Dollar Income Fund
The Korean Investment Fund
Alliance World Dollar Government Fund II
Alliance also offers AFD Exchange Reserves, which serves as the money market
fund exchange vehicle for the Alliance mutual funds.
To obtain a prospectus for any Alliance Capital fund, call your investment
professional, or call Alliance at (800) 227-4618.
--------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 29
<PAGE>
------------------------------
SUMMARY OF GENERAL INFORMATION
------------------------------
SUMMARY OF GENERAL INFORMATION
Shareholder Information
The daily net asset value of the Fund's shares is available from the Fund's
Transfer Agent by calling 800-331-1710. The Fund also distributes its daily net
asset value to various financial publications or independent organizations such
as Lipper, Inc., Morningstar, Inc. and Bloomberg.
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 PFPC, Inc. at
(800)-331-1710.
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30 o ACM GOVERNMENT OPPORTUNITY FUND
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ACM GOVERNMENT OPPORTUNITY FUND o 31
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32 o ACM GOVERNMENT OPPORTUNITY FUND
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ACM Government Opportunity Fund
1345 Avenue of the Americas
New York, NY 10105
Alliance Capital [LOGO](R)
The Investment Professional's Choice
(R) These registered service marks used under license from the owner, Alliance
Capital Management L.P.
OPPAR700
