[GRAPHIC OMITTED]
ACM Government
Opportunity Fund
Semi-Annual Report
January 31, 2000 (unaudited)
<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
March 22, 2000
Dear Shareholder:
We are pleased to report to you on our performance, investment strategy and
outlook for the ACM Government Opportunity Fund (the "Fund").
Investment Results
The following table shows how your Fund performed over the six- and 12-month
periods ended January 31, 2000. For comparison, we have also included
performance for the Fund's benchmark, as represented by the Lehman Brothers
Aggregate Bond Index.
During the six- and 12-month periods ended January 31, 2000, your Fund
outperformed its benchmark as a result of our allocation to the emerging market
debt sector. During both time periods, emerging market debt outperformed the
other sectors of the bond market as global growth improved and commodity
prices, oil in particular, rose. The benchmark holds no emerging market debt.
- -------------------------------------------------------------------------------
INVESTMENT RESULTS*
Periods Ended January 31, 2000
-----------------------
Total Returns
-----------------------
6 Months 12 Months
- -------------------------------------------------------------------------------
ACM
Government
Opportunity
Fund 3.98% 0.71%
- -------------------------------------------------------------------------------
Lehman
Brothers
Aggregate
Bond Index 0.66% -1.85%
- -------------------------------------------------------------------------------
* The Fund's investment results are total returns for the periods and are
based on the Fund's net asset value. 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 ("LB") Aggregate Bond Index is composed of the LB
Mortgage-Backed Securities Index, the LB Asset-Backed Securities Index and
the LB Government/Corporate Bond Index. An investor cannot invest directly
in an index.
Please see page 4 for additional performance information.
- --------------------------------------------------------------------------------
Market Review
During the six-month period, global economic growth improved and continued to
broaden as Europe, Asia and Latin America showed signs of strengthening. U.S.
economic growth remained strong, while inflation and unemployment stayed low.
With economic activity remaining strong and global liquidity concerns abating,
the U.S. Federal Reserve continued
- --------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 1
<PAGE>
- ----------------------
LETTER TO SHAREHOLDERS
- ----------------------
to increase official interest rates, reversing the three interest rate cuts
enacted late last year in response to the global liquidity crisis.
In aggregate, the U.S. bond market, as measured by the Lehman Brothers U.S.
Aggregate Bond Index, posted a modest return of 0.66% for the six-month period.
Performance of fixed-income securities in general was dampened throughout 1999
as central banks around the world increased interest rates in response to
strengthening economic growth.
Among the traditional sectors of the U.S. bond market, asset-backed securities
posted the strongest performance followed by mortgage-backed securities and
commercial mortgage-backed securities. The prepayment risk embedded in many of
these securities, as well as their generally shorter durations, helped cushion
their price declines in 1999's rising interest rate environment.
Among the non-traditional sectors of the U.S. bond market, emerging market debt
posted the strongest performance, returning 14% (as measured by the JP Morgan
Emerging Markets Bond Index-Plus) during the six-month period. Improving global
growth and rising commodity prices, notably oil, helped improve the outlook for
most emerging markets in 1999.
Most individual country returns were positive during the period with Russia
posting the largest gain. Rising oil prices, along with progress in
restructuring Soviet-era debt, helped the performance of Russian debt. While in
Latin America, Brazil exceeded investor expectations for fiscal reform after
devaluing its currency at the beginning of the year, and Mexico improved its
chances of moving from below investment grade to investment grade. Ecuador's
debt posted the worst performance after the government defaulted on its debt,
becoming the first-ever default by a Brady bond issuer. However, Ecuador's
default in August did not have a dramatic impact on emerging market prices.
Investment Strategy
Over the six-month period ended January 31, 2000, we maintained 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. The Fund continued to hold the
government debt of Mexico, Brazil, Argentina, Colombia, Panama, Turkey, Russia
and New Zealand. We also increased exposure in Turkey due to diligent fiscal
reforms and the increased possibility of membership in the European Union. We
initiated positions in the Philippines, Poland and Bulgaria as the outlook for
these countries improved.
Outlook
Our near-term outlook for the fixed-income market assumes that the U.S. economy
will stay relatively strong and that the global economy will continue to
recover. Higher bond yields are cooling overheated U.S. domestic demand, and we
believe further increases will help to restore a more balanced domestic/foreign
mix over the next six months. We expect tighter monetary policy measures with
additional interest rate hikes in 2000.
- -------------------------------------------------------------------------------
2 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
[PHOTO OMITTED]
John D. Carifa
[PHOTO OMITTED]
Wayne D. Lyski
Portfolio Manager, Wayne D. Lyski, oversees fixed-income investment at Alliance
and manages assets in both domestic and international markets.
Mr. Lyski has over 26 years of investment experience.
Higher official rates should begin to slow the interest rate sensitive sectors
enough to remove some of the future inflation risk. As this happens, bond
markets will begin to discount the peaking of the current global growth cycle.
Thank you for your continued interest and investment in the ACM Government
Opportunity Fund. We look forward to reporting its progress to you in the
coming months.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman and President
/s/ Wayne D. Lyski
Wayne D. Lyski
Senior Vice President
- --------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 3
<PAGE>
- ------------------
PERFORMANCE UPDATE
- ------------------
PERFORMANCE UPDATE
ACM GOVERNMENT OPPORTUNITY FUND
HISTORY OF RETURNS
o ACM Government Opportunity Fund (NAV)
o LB Aggregate Index
[GRAPHIC OMITTED]
Past performance is no guarantee of future results. This chart represents
performance for the Fund's fiscal years. Data for 2000 is through January 31,
2000. The Fund's investment results are total returns for the periods and are
based on the Fund's net asset value. 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. 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/Corporate Bond Index. An investor cannot invest directly in an
index, and its returns are not indicative of any specific investment, including
ACM Government Opportunity Fund.
- -------------------------------------------------------------------------------
4 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
-----------------
PORTFOLIO SUMMARY
-----------------
PORTFOLIO SUMMARY
INCEPTION DATE PORTFOLIO STATISTICS
8/26/88 Assets ($mil): $100.7
SECURITY TYPE BREAKDOWN
o 61.10% Treasury
o 22.49% Sovereign
o 7.31% Brady Bonds
o 5.83% FNMA [GRAPHIC OMITTED]
o 2.16% GNMA
o 0.90% Other Short Term
o 0.21% Time Deposit
COUNTRY BREAKDOWN
o 69.31% United States
o 5.31% Turkey
o 4.25% Mexico
o 3.86% Bulgaria
o 3.45% Brazil
o 2.65% Philippines [GRAPHIC OMITTED]
o 2.39% Panama
o 2.14% South Africa
o 1.85% Argentina
o 1.69% Russia
o 1.67% Poland
o 1.43% Colombia
All data as of January 31, 2000. Security type and country breakdown are
expressed as a percentage of total investments and may vary over time.
- ------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 5
<PAGE>
- ------------------------
PORTFOLIO OF INVESTMENTS
- ------------------------
PORTFOLIO OF INVESTMENTS
January 31, 2000 (unaudited)
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
U.S. Government and Agency
Obligations-79.6%
U.S. Treasury Bonds-46.1%
6.125%, 8/15/29........................... US$ 2,400 $ 2,285,251
8.125%, 8/15/19(a)........................ 7,875 9,066,094
10.75%, 8/15/05(a)........................ 4,000 4,717,500
12.375%, 5/15/04(a)....................... 1,150 1,385,031
12.75%, 11/15/10(a)....................... 3,250 4,160,000
13.25%, 5/15/14(a)........................ 1,350 1,936,035
13.75%, 8/15/04(a)........................ 6,620 8,397,060
14.00%, 11/15/11(a)....................... 10,500 14,529,375
------------
46,476,346
------------
U.S. Treasury Notes-15.5%
5.50%, 5/15/09............................ 1,800 1,650,938
5.875%, 11/30/01.......................... 3,000 2,961,564
6.00%, 8/15/09............................ 3,500 3,337,033
6.875%, 5/15/06(a)........................ 4,090 4,114,286
7.875%, 11/15/04(a)....................... 3,350 3,502,844
------------
15,566,665
------------
Mortgage Related Securities-9.2%
Federal National Mortgage Association
7.50%, TBA................................ 4,900 4,848,056
8.00%, 6/01/28............................ 1,924 1,917,799
Government National Mortgage
Association
6.50%, 2/15/29............................ 2,707 2,502,556
------------
9,268,411
------------
U.S. Treasury Strip-7.5%
Zero coupon, 5/15/15...................... 21,000 7,589,883
------------
U.S. Treasury Bill-1.3%
Zero coupon, 2/03/00(a)................... 1,300 1,299,640
------------
Total U.S. Government and Agency
Obligations
(cost $85,069,123)........................ 80,200,945
------------
Sovereign Debt Obligations-27.0%
Argentina-2.1%
Republic of Argentina
11.00%, 12/04/05.......................... 2,250 2,146,500
------------
Colombia-1.7%
Republic of Colombia
8.625%, 4/01/08........................... 2,000 1,660,000
------------
- -------------------------------------------------------------------------------
6 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Mexico-4.9%
Mexican Treasury Bill
19.406%, 9/07/00(b) ..................... MXP 11,129 $1,043,380
United Mexican States
10.375%, 2/17/09 ........................ US$ 3,850 3,893,312
----------
4,936,692
----------
Panama-2.8%
Republic of Panama
9.375%, 4/01/29 ......................... 3,000 2,775,000
----------
Philippines-3.1%
Republic of Philippines
9.50%, 10/21/24 ......................... 2,000 1,985,000
9.875%, 1/15/19 ......................... 1,150 1,092,500
----------
3,077,500
----------
Poland-1.9%
Poland Government Bond
10.00%, 6/12/04 ......................... PLZ 9,000 1,942,216
----------
Russia-1.9%
Russian Ministry of Finance
3.00%, 5/14/03 .......................... US$ 3,800 1,325,440
Russian Principal Loans FRN
6.906%, 12/15/20(c) ..................... 4,000 620,000
Russian IAN FRN
6.906%, 12/15/15(c) ..................... 67 12,292
----------
1,957,732
----------
South Africa-2.5%
Development Bank of South Africa
Zero coupon, 12/31/27 ................... ZAR 120,000 476,758
European Bank for Reconstruction
and Development
Zero coupon, 4/07/27 .................... 43,730 229,335
International Bank for Reconstruction
and Development
Zero coupon, 12/31/25 ................... 120,000 636,949
Zero coupon, 2/17/26 .................... 110,000 596,106
Zero coupon, 7/14/27 .................... 107,725 547,827
----------
2,486,975
----------
- --------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 7
<PAGE>
- ------------------------
PORTFOLIO OF INVESTMENTS
- ------------------------
Principal
Amount
(000) U.S. $ Value
- --------------------------------------------------------------------------------
Turkey-6.1%
Republic of Turkey
11.875%, 1/15/30 ................. US$ 3,075 $ 3,148,031
Turkey Government Bond
72.00%, 10/03/01 ................. TRL 580,000,000 1,407,116
Turkey Treasury Bill
Zero coupon, 8/23/00 ............. 1,170,000,000 1,613,925
---------------
6,169,072
---------------
Total Sovereign Debt Obligations
(cost $29,977,135) ............... 27,151,687
---------------
Non-Collateralized Brady Bond-7.2%
Brazil-4.0%
Republic of Brazil C-Bonds
8.00%, 4/15/14(d) ................ US$ 5,763 4,005,110
---------------
Bulgaria-3.2%
Republic of Bulgaria
IAB FRN
7.063%, 7/28/11 .................. 4,200 3,297,000
---------------
Total Non-Collaterized Brady Bonds
(cost $7,275,046) ................ 7,302,110
---------------
Collateralized Brady Bond-1.2%
Bulgaria-1.2%
Republic of Bulgaria
Discount Bonds FRN
Series A
7.063%, 7/28/24(e)
(cost $1,189,529) ................ 1,500 1,181,250
---------------
Time Deposit-0.2%
Bank of New York
5.00%, 2/01/00
(cost $246,000) .................. 246 246,000
---------------
Total Investments-115.2%
(cost $123,756,833) .............. 116,081,992
Other assets less liabilities-(15.2%) (15,335,667)
---------------
Net Assets-100% ..................... $ 100,746,325
===============
See footnote summary on page 9.
- --------------------------------------------------------------------------------
8 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
(a) Securities, or portion thereof, with an aggregate market value of
$53,107,865, have been segregated to collateralize forward exchange
currency contracts.
(b) Interest rate represents annualized yield to maturity at purchase date.
(c) Security is in default and is non-income producing.
(d) Coupon consists of 5.00% cash payment and 3.00% paid-in-kind.
(e) Sovereign debt obligations issued as part of debt restructuring that are
collateralized in full as to principal due at maturity by U.S. Treasury
zero coupon obligations which have the same maturity as the Brady Bond.
Glossary of Terms:
FRN - Floating Rate Note.
IAB - Interest Arrears Bond.
IAN - Interest Arrears Note.
TBA - To Be Announced.
See notes to financial statements.
- --------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 9
<PAGE>
- ---------------------------------
STATEMENT OF ASSETS & LIABILITIES
- ---------------------------------
STATEMENT OF ASSETS & LIABILITIES
January 31, 2000 (unaudited)
Assets
Investments in securities, at value (cost $123,756,833) ... $ 116,081,992
Cash ...................................................... 179,957
Interest receivable ....................................... 2,633,483
Receivable for investment securities sold ................. 1,380,575
Other assets .............................................. 600
-------------
Total assets .............................................. 120,276,607
-------------
Liabilities
Reverse repurchase agreements ............................. 10,398,375
Payable for investment securities purchased ............... 8,881,783
Payable for capital stock redeemed ........................ 95,442
Advisory fee payable ...................................... 47,294
Administration fee payable ................................ 37,807
Net unrealized depreciation of forward exchange
currency contracts ..................................... 4,601
Interest payable on reverse repurchase agreements ......... 11,068
Accrued expenses .......................................... 53,912
-------------
Total liabilities ......................................... 19,530,282
-------------
Net Assets ................................................ $ 100,746,325
=============
Composition of Net Assets
Capital stock, at par ..................................... $ 130,585
Additional paid-in capital ................................ 112,875,380
Undistributed net investment income ....................... 923,516
Accumulated net realized loss on investment and foreign
currency transactions .................................. (4,264,948)
Net unrealized depreciation of investments and foreign
currency denominated assets and liabilities ............ (8,918,208)
-------------
$ 100,746,325
=============
Net Asset Value Per Share
(based on 13,058,472 shares outstanding) ............... $ 7.72
=============
See notes to financial statements.
- --------------------------------------------------------------------------------
10 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
-----------------------
STATEMENT OF OPERATIONS
-----------------------
STATEMENT OF OPERATIONS
Six Months Ended January 31, 2000 (unaudited)
Investment Income
Interest .................................. $ 5,942,944
Expenses
Advisory fee .............................. $ 382,776
Administrative fee ........................ 76,555
Custodian ................................. 55,846
Audit and legal ........................... 26,178
Transfer agency ........................... 23,084
Printing .................................. 18,412
Directors' fees ........................... 17,916
Miscellaneous ............................. 15,501
-----------
Total expenses before interest ............ 616,268
Interest expense .......................... 29,479
-----------
Total expenses ............................ 645,747
-----------
Net investment income ..................... 5,297,197
-----------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions
Net realized loss on investment
transactions ........................... (1,855,644)
Net realized loss on foreign currency
transactions ........................... (733,721)
Net change in unrealized
appreciation/depreciation of:
Investments ............................ 2,469,972
Foreign currency denominated assets
and liabilities ...................... (1,238,766)
-----------
Net loss on investments and foreign
currency transactions .................. (1,358,159)
-----------
Net Increase in Net Assets
from Operations ........................ $ 3,939,038
===========
See notes to financial statements.
- -------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 11
<PAGE>
- ----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------
STATEMENT OF CHANGES
IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year Ended
January 31, 2000 July 31,
(unaudited) 1999
================ =============
<S> <C> <C>
Increase (Decrease) in Net Assets
from Operations
Net investment income ..................... $ 5,297,197 $ 8,031,801
Net realized gain (loss) on investments and
foreign currency transactions .......... (2,589,365) 793,091
Net change in unrealized depreciation of
investments and foreign currency
denominated assets and liabilities ..... 1,231,206 (9,177,968)
------------- -------------
Net increase (decrease) net assets
from operations ........................ 3,939,038 (353,076)
Dividends and Distributions to
Shareholders from:
Net investment income ..................... (4,313,724) (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 decrease ............................ (603,444) (8,869,426)
Capital Stock Transactions
Net decrease .............................. (95,442) -0-
Net Assets
Beginning of year ......................... 101,445,211 110,314,637
------------- -------------
End of period (including undistributed
net investment income of $923,516
at January 31, 2000) ................... $ 100,746,325 $ 101,445,211
============= =============
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
12 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTES TO FINANCIAL STATEMENTS
January 31, 2000 (unaudited)
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, 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 share
holders. Therefore, no provision for federal income or excise taxes is required.
3. Investment Income and Investment Transactions
Interest income is accrued daily. Dividend income is recorded on the ex-dividend
date. Investment transactions
- --------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 13
<PAGE>
- -----------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
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
year 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
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. During the six months
ended January 31, 2000, the Fund reimbursed AFS $535.
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 securi-
- -------------------------------------------------------------------------------
14 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
ties) aggregated $29,730,429 and $27,659,297, respectively, for the six months
ended January 31, 2000. There were purchases of $68,987,049 and sales of
$63,001,809 of U.S. government and government agency obligations for the six
months ended January 31, 2000.
At January 31, 2000, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes.
Accordingly, gross unrealized appreciation of investments was $2,054,007 and
gross unrealized depreciation of investments was $9,728,848 resulting in net
unrealized depreciation of $7,674,841 (excluding foreign currency transactions).
The Fund elected to treat foreign currency losses from November 1, 1998 through
July 31, 1999 as having occurred in the current fiscal year.
1. Forward Exchange Currency Contracts
The Fund enters into forward exchange currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings and to hedge certain firm purchase and sale commitments denominated in
foreign currencies. A forward exchange currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The gain or loss arising from the difference between the original contract
and the closing of such contract is included in net realized gain or loss on
foreign currency transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized gains or losses by the
Fund.
The Fund's custodian will place and maintain liquid assets in a separate account
of the Fund having a value at least equal to the aggregate amount of the Fund's
commitments under forward exchange currency contracts entered into with respect
to position hedges.
Risks may arise from the potential inability of a counterparty to meet the terms
of a contract and from unanticipated movements in the value of foreign
currencies relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, as reflected in the following table, reflects the total exposure the
Fund has in that particular currency contract.
At January 31, 2000, the Fund had outstanding forward exchange currency
contracts as follows:
- --------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 15
<PAGE>
- -----------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
<TABLE>
<CAPTION>
Value on Contract Origination Current
Unrealized U.S.$ Appreciation/ (000)
(Depreciation) Amount Date Value
-------------------------------------------------------
<S> <C> <C> <C> <C>
Forward Exchange
Currency Buy
Contracts
Euro,
settling 3/16/00 1,975 $2,015,770 $1,938,057 $ (77,713)
Forward Exchange
Currency Sale
Contracts
Euro,
settling 3/16/00 1,975 2,011,169 1,938,057 73,112
- ----------------------------------------------------------------------------------
$ (4,601)
==================================================================================
</TABLE>
2. Options Transactions
For hedging purposes, the Fund pur chases 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.
There were no options written for the six months ended January 31, 2000.
NOTE D
Capital Stock
There are 300,000,000 shares of $.01 par
- -------------------------------------------------------------------------------
16 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
value common stock authorized, of which 13,058,472 shares were outstanding at
January 31, 2000. On January 26, 2000 the Fund initiated a share repurchase
program. For the period ended January 31, 2000, 13,400 shares were repurchased
at a cost of $95,442 representing 0.10% of the 13,071,872 shares outstanding at
January 26, 2000. This includes $978 in commissions paid to Paine Webber
Incorporated. The average discount of market price to net asset value of shares
repurchased over the period of January 26, 2000 to January 31, 2000 was 7.81%.
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.
As of January 31, 2000, the Fund had entered into the following reverse
repurchase agreements:
Amount Broker Interest Rate Maturity
------ ------ ------------- --------
$2,298,000 Greenwich Capital Markets, Inc. 2.70% February 15, 2000
$1,678,500 C.S. First Boston Corp. 4.75% February 15, 2000
$3,425,625 Merrill Lynch & Co., Inc. 3.55% February 28, 2000
$2,996,250 Lehman Brothers, Inc. 5.67% April 25, 2000
For the six months ended January 31, 2000, the maximum amount of reverse
repurchase agreements outstanding was $13,819,625, the average amount
outstanding was approximate ly $4,866,683, and the daily weighted average
interest rate was 4.30%.
NOTE F
Year 2000
With respect to the Year 2000 issue, the Fund has been advised by Alliance and
by its major service providers that there is no indication that they have had or
will experience significant system interruptions.
- --------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 17
<PAGE>
- --------------------
FINANCIAL HIGHLIGHTS
- --------------------
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Six
Months
Ended
January 31, Year Ended July 31,
2000 --------------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year .......... $ 7.76 $ 8.44 $ 8.56 $ 8.00 $ 7.92 $ 8.12
-------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment income ........ .41 .61 .59 .58 .53 .59
-------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ............... (.10) (.64) (.08) .58 .13 -0-
-------------------------------------------------------------------------------------
Net increase (decrease) in
net asset value from
operations ................. .31 (.03) .51 1.16 .66 .59
-------------------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income .......... (.33) (.61) (.59) (.58) (.56) (.48)
Distributions in excess of
net investment income ...... -0- (.02) (.04) (.02) -0- -0-
Distributions from net
realized gains ............. (.02) (.02) -0- -0- -0- -0-
Tax return of capital
distribution ............... -0- -0- -0- -0- (.02) (.31)
-------------------------------------------------------------------------------------
Total dividends and
distributions .............. (.35) (.65) (.63) (.60) (.58) (.79)
-------------------------------------------------------------------------------------
Net asset value,
end of period .............. $ 7.72 $ 7.76 $ 8.44 $ 8.56 $ 8.00 $ 7.92
=====================================================================================
Market value,
end of period .............. $ 7.13 $ 7.125 $ 7.9375 $ 7.875 $ 7.00 $ 7.50
=====================================================================================
Total Return
Total investment return
based on:(a)
Market value ............. 4.59% (2.46)% 8.90% 21.95% 1.08% 2.85%
Net asset value .......... 3.98% (.09)% 6.52% 15.99% 9.40% 8.67%
Ratios/Supplemental
Data
Net assets, end of period
(000's omitted) ............ $100,746 $101,445 $110,315 $111,905 $104,546 $103,558
Ratio of expenses to
average net assets ......... 1.27%(b) 1.19% 1.18% 1.27% 1.28% 1.18%
Ratio of expenses to
average net assets,
excluding interest expense . 1.21%(b) -0- -0- -0- -0- -0-
Ratio of net investment income
to average net assets ...... 10.38%(b) 7.48% 6.89% 7.00% 6.42% 7.62%
Portfolio turnover rate ...... 86% 211% 230% 407% 375% 228%
</TABLE>
See footnote summary on page 19.
- --------------------------------------------------------------------------------
18 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
--------------------
FINANCIAL HIGHLIGHTS
--------------------
(a) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each period reported. Dividends and distributions, if any, are assumed
for purposes of this calculation, to be reinvested at prices obtained
under the Fund's dividend reinvestment plan. Generally, total investment
return based on net asset value will be higher than total investment
return based on market value in periods where there is an increase in the
discount or a decrease in the premium of the market value to the net asset
value from the beginning to the end of such periods. Conversely, total
investment return based on the net asset value will be lower than total
investment return based on market value in periods where there is a
decrease in the discount or an increase in the premium of the market value
to the net asset value from the beginning to the end of such periods.
Conversely, total investment return based on net asset value will be lower
than total investment return based on market value in years 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.
Total investment return calculated for a period of less than one year is
not annualized.
(b) Annualized.
- --------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 19
<PAGE>
- ----------------------------
GLOSSARY OF INVESTMENT TERMS
- ----------------------------
GLOSSARY OF INVESTMENT TERMS
asset-backed securities
A security where certain assets or accounts receivable serve as the primary
source for the payment of principal and interest on the security. Asset-backed
securities may be issued by banks, or non-bank entities, such as credit card
companies. Mortgage-related securities are a type of asset-backed security.
Brady bonds
U.S. dollar-denominated bonds that are issued by emerging market countries,
particularly markets in Latin America, and collateralized by U.S. Treasury
zero-coupon bonds.
government bond / government debt
A bond that is issued by the U.S. government or its agencies.
investment-grade bond
A bond that is rated BBB or higher by a credit agency.
liquidity
The ability of an asset to be quickly converted into cash and without penalty.
monetary policy
The regulation of the money supply and interest rates by a country's central
bank with the purpose of controlling inflation and stabilizing currency.
mortgage-related security
A security representing an interest in a pool of mortgage loans made to
homeowners. In a mortgage-related security, an issuer's obligation to repay
principal or pay interest on the security is secured by a large pool of
mortgages or mortgage-backed securities. To create a mortgage-related security,
an issuer (such as the government or a private company) will "package" or
assemble a large number of mortgage loans and issue securities which represent
an interest in the income generated by the payments on these mortgages. As the
underlying homeowners on the mortgages in the pool pay interest on their loans
or repay their principal, these payments flow through to the holders of the
mortgage-related security. Mortgage-related securities can bear interest at
either fixed rates or adjustable rates.
prepayment risk
The risk to a holder of a mortgage-related security that homeowners will
refinance their mortgages at lower rates. When this happens, the higher interest
rate loans in the mortgage pool are replaced by lower interest rate loans,
reducing the value of the mortgage-related security.
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.
- --------------------------------------------------------------------------------
20 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 over $368
billion in assets under management. In recognition of our far-reaching
investment capabilities, Alliance Capital has been selected by employee benefit
plans for 31 of the FORTUNE 100 companies and public retirement funds in 31
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 277
investment professionals in 21 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 12/31/99.
- --------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 21
<PAGE>
- --------------------------------
ALLIANCE CAPITAL AT YOUR SERVICE
- --------------------------------
ALLIANCE CAPITAL AT YOUR SERVICE
At Alliance Capital, shareholder satisfaction is among our top priorities.
That's why we provide our shareholders with a wide variety of products and
time-saving services to meet their needs.
o Low Minimum Investments
You can begin investing in Alliance Capital funds with as little as $250
(except for Alliance Select Investor Series Premier Portfolio and Alliance
Select Investor Series Technology Portfolio, which generally have a
$10,000 minimum initial investment) and may make subsequent investments of
$50 or more.
o Automatic Reinvestment
You may choose to reinvest fund dividend and capital-gains distributions
automatically at no charge.
o Automatic Investment Program
Build your investment account by having money automatically transferred
from your bank account on a regular basis.
o Dividend Direction Plans
You may cross-invest dividends from one fund into the same class of shares
in any other fund without incurring a sales charge. This can be a good way
to diversify your assets.
o The Alliance Advance
A quarterly newsletter discussing investment strategies, economic news and
other matters that could affect your mutual fund investment.
o Auto Exchange
You may choose to automatically exchange money from one Alliance Capital
fund to another on a regular basis. This can be a good way to dollar cost
average*, helping you to invest with discipline.
o Systematic Withdrawals
Regular checks for specified amounts can be sent to you or to your
brokerage or bank account.
o A Choice of Purchase Plans
Most funds are available in A, B, and C Class shares. Many funds are also
available in Advisor Class shares.
o Telephone Transaction
Purchases, transfers and redemptions can be made by calling (800)
221-5672. Our knowledgeable representatives are available to assist you
Monday through Friday from 8:30 a.m. to 8:00 p.m. Eastern Standard Time.
o Alliance Answer: 24-Hour Information
For your convenience, our computerized audio response system is available
to you 24-hours a day by calling (800) 251-0539. Using any touch tone
phone, you can hear share prices, get account balances, review details of
your last transaction, obtain dividend information, order
statements/checkbooks, review fund objectives, literature and Watchlist
information, order additional copies of statements and request additional
year-end tax forms (available from February 1 to May 31).
o Alliance Capital on the World Wide Web at www.alliancecapital.com. Here,
you can access updated account information, make additional investments,
request more information, exchange between Alliance funds and view fund
performance, press releases and articles.
* Dollar cost averaging does not assure a profit nor protect against loss
in a declining market. Since this strategy involves continuous investments
in securities, regardless of fluctuating prices, investors should consider
their financial ability to invest during periods of low price levels.
- --------------------------------------------------------------------------------
22 o ACM GOVERNMENT OPPORTUNITY FUND
<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 Bardong, Vice President
Christian G. Wilson, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Juan J. Rodriguez, 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.
53 State Street
Boston, MA 02109
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.
- ---------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 23
<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
Premier Portfolio
Technology Portfolio
Fixed Income Funds
Corporate Bond Portfolio
Global Dollar Government Fund
Global Strategic Income Trust
High Yield Fund
Limited Maturity Government Fund
Mortgage Securities Income 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
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.
- -------------------------------------------------------------------------------
24 o ACM GOVERNMENT OPPORTUNITY FUND
<PAGE>
This page intentionally blank
- ------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 25
<PAGE>
ACM Government Opportunity Fund
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
(R) These registered service marks used under license from the owner, Alliance
Capital Management L.P.
OPPSR0100
