United States
Securities and Exchange Commission
Washington, D.C. 20549
Form N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-5595
ACM GOVERNMENT OPPORTUNITY FUND, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Mark R. Manley
Alliance Capital Management, L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: July 31, 2004
Date of reporting period: July 31, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
[LOGO] AllianceBernstein(SM)
Investment Research and Management
ACM Government Opportunity Fund
Closed End
Annual Report--July 31, 2004
Investment Products Offered
- ---------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
- ---------------------------
You may obtain a description of the Fund's proxy voting policies and
procedures, and information regarding how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30,
without charge. Simply visit Alliance Capital's web site at
www.alliancebernstein.com (click on Investors, then the "Proxy voting policies"
link or "Proxy voting records" link on the left side of the page), or go to the
Securities and Exchange Commission's, (The "Commission") web site at
www.sec.gov, or call Alliance Capital at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800)-SEC-0330.
AllianceBernstein Investment Research and Management, Inc., is an affiliate of
Alliance Capital Management L.P., the manager of the funds, and is a member of
the NASD.
September 24, 2004
Annual Report
This report provides management's discussion of fund performance for ACM
Government Opportunity Fund (the "Fund") for the annual reporting period ended
July 31, 2004.
Investment Objectives and Policies
This closed-end fund is designed to provide high current income consistent with
preservation 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 table on page 4 shows the Fund's performance compared to its benchmark, the
Lehman Brothers (LB) U.S. Aggregate Index, for the six- and 12-month periods
ended July 31, 2004.
For the 12-month period ended July 31, 2004, the Fund outperformed its
benchmark, the LB U.S. Aggregate Index. For the six-month period ended July 31,
2004, the Fund underperformed the LB U.S. Aggregate Index.
For the 12-month period under review, the Fund's emerging market holdings
contributed positively to performance, relative to the Index, while Treasury
holdings modestly detracted from performance. The Fund's earlier holdings in
Treasury Inflation Protection Securities (TIPS) also contributed positively to
performance as earlier fears of deflation diminished.
Within the emerging market sector, most of the Fund's individual holdings
outperformed for the annual period relative to the Index, which consists of
only U.S. investment grade securities. Specifically, the Fund's holdings in
Brazil, Ecuador and Venezuela contributed positively to the Fund's performance
and ranked as the best performers, according to the J.P. Morgan Emerging
Markets Bond Index Plus (JPM EMBI+), a broad measure of emerging market debt
performance. As measured by the JPM EMBI+, Brazil returned 20.54%, Ecuador
returned 36.98% and Venezuela returned 24.37%. The Fund's ability to leverage
its emerging market debt holdings augmented the Fund's outperformance during
the annual period.
The Fund underperformed for the six-month period ended July 31, 2004 relative
to the LB U.S. Aggregate Index. The primary reason for the Fund's
underperformance was its emerging market holdings and, to a lesser extent, its
Treasury allocation as both underperformed during that period. Bond markets,
particularly the emerging markets and Treasuries, suffered in the broad based
sell-off in April.
Market Review and Investment Strategy
Emerging market securities posted strong returns in the first half of the
reporting period as the emerging debt market benefited from ample global
liquidity and a low global interest rate environment. U.S. Treasury securities
also fared well due to a weak domestic employment environment and an
_______________________________________________________________________________
ACM GOVERNMENT OPPORTUNITY FUND o 1
accommodative monetary policy by the U.S. Federal Reserve. Early in April,
however, bond markets sold off dramatically on a surprisingly strong gain in
March U.S. payroll employment, dampening annual returns for both the emerging
markets and U.S. Treasury securities. Late in the period, soft consumer
confidence readings and disappointing payroll numbers allowed the market to
regain some ground as investors came to believe that the U.S. Federal Reserve's
pace of rate increases was likely to be gradual. In July, the U.S. Federal
Reserve raised rates by 25 basis points to 1.25%--the first official rate
increase in four years. For the 12-month period, emerging market debt outpaced
the Fund's benchmark, returning 12.17%, according to the JPM EMBI+, while
Treasury securities, as represented by the LB Treasury Index, returned 3.85%,
and underperformed the Fund's benchmark.
During the annual reporting period, we reduced the Fund's Treasury exposure due
to prospects for an improving economy and eventual interest rate hikes. Within
the Fund's emerging market holdings, we maintained allocations to its core
emerging market countries (Brazil, Russia, Ecuador, Mexico, Peru, Turkey,
Venezuela and the Ukraine); however, we reduced the Fund's overall duration
exposure later in the period as global liquidity tightened. Within the Fund's
emerging market debt allocation, we generally maintained an overweight position
in Russian debt throughout most of the period as credit statistics continued to
improve and Russia benefited from higher oil prices. Late in the period,
however, we reduced the Fund's Russian holdings as positive economic
fundamentals were offset by recent administrative paralysis and the Yukos
affair. Russia's Justice Ministry has seized the assets of Yukos, which is the
country's largest oil producer, and is preparing to sell its main oil-producing
unit in Siberia to recover payment of back taxes. Early in the period, we
increased the Fund's exposure to Brazil as President Lula da Silva continued to
exceed market expectations in his ability to push forward crucial tax and
social security reforms. Economic activity continued to improve in Brazil,
bolstered by the gradual recovery in domestic consumption and investment. Lower
interest rates, increasing reserves and an ability to reduce dollar-linked debt
were all positives. Late in the period, however, we reduced the Fund's exposure
to Brazil due to concerns regarding a possible change in interest rate policy
and its effect on economic growth. As these concerns have begun to subside, we
have begun to add back to the Fund's Brazilian holdings.
_______________________________________________________________________________
2 o ACM GOVERNMENT OPPORTUNITY FUND
HISTORICAL PERFORMANCE
An Important Note About the Value of Historical Performance
The performance shown on the following page represents past performance and
does not guarantee future results. Current performance may be lower or higher
than the performance information shown. Returns are annualized for periods
longer than one year. All fees and expenses related to the operation of the
Fund have been deducted. Performance assumes reinvestment of distributions and
does not account for taxes.
ACM Government Opportunity Fund 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.
Benchmark Disclosure
The unmanaged Lehman Brothers (LB) U.S. Aggregate Index does not reflect fees
and expenses associated with the active management of a mutual fund portfolio.
The Index covers the U.S. investment-grade fixed-rate bond market, including
government and credit securities, agency mortgage passthrough securities,
asset-backed securities and commercial mortgage-backed securities. Investors
cannot invest directly in an index, and its results are not indicative of any
particular investment, including the Fund.
A Word About Risk
Price fluctuations in the Fund's securities may be caused by changes in the
general level of interest rates or changes in bond credit quality ratings.
Changes in interest rates have a greater effect on bonds with longer maturities
than on those with shorter maturities. Treasury securities provide fixed rates
of return as well as principal guarantees if held to maturity. The Fund's
investments in foreign securities are subject to risks not associated with
investing in U.S. government securities, such as the risk of adverse changes in
currency exchange rates, exchange control regulations and the application of
foreign tax laws. While the Fund invests principally in bonds and other
fixed-income securities, in order to achieve its investment objectives, the
Fund may at times use certain types of investment derivatives, such as options,
futures, forwards and swaps. These instruments involve risks different from and
in certain cases, greater than, the risks presented by more traditional
investments.
(Historical Performance continued on next page)
_______________________________________________________________________________
ACM GOVERNMENT OPPORTUNITY FUND o 3
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE FUND VS. ITS BENCHMARKS -------------------------
PERIODS ENDED JULY 31, 2004 6 Months 12 Months
- -------------------------------------------------------------------------------
ACM Government Opportunity Fund (NAV) -1.38% 5.90%
- -------------------------------------------------------------------------------
Lehman Brothers U.S. Aggregate Index 0.34% 4.84%
- -------------------------------------------------------------------------------
The Fund's Market Price per share on July 31, 2004 was $8.29. For additional
Financial Highlights, please see page 22.
GROWTH OF A $10,000 INVESTMENT IN THE FUND
7/31/94 TO 7/31/04
[Mountain chart omitted]
ACM Government Opportunity Fund (NAV): $24,466
Lehman Brothers U.S. Aggregate Index: $20,196
ACM Government Lehman Brothers
Opportunity Fund (NAV) U.S. Aggregate Index
- -------------------------------------------------------------------------------
7/31/94 $ 10000 $ 10000
7/31/95 $ 10862 $ 11011
7/31/96 $ 11883 $ 11621
7/31/97 $ 13783 $ 12871
7/31/98 $ 14682 $ 13884
7/31/99 $ 14669 $ 14230
7/31/00 $ 16461 $ 15080
7/31/01 $ 18272 $ 16993
7/31/02 $ 19971 $ 18273
7/31/03 $ 23103 $ 19263
7/31/04 $ 24466 $ 20196
This chart illustrates the total value of an assumed $10,000 investment in ACM
Government Opportunity Fund at net asset value (NAV) (from 7/31/94 to 7/31/04)
as compared to the performance of the Fund's benchmark.
_______________________________________________________________________________
4 o ACM GOVERNMENT OPPORTUNITY FUND
PORTFOLIO SUMMARY
July 31, 2004
PORTFOLIO STATISTICS
Net Assets ($mil): $107.0
SECURITY TYPE*
68.7% U.S. Government and Government
Sponsored Agency Obligations
26.4% Sovereign Debt Obligations [PIE CHART OMITTED]
2.1% Supranational
2.8% Short-Term
*All data is as of July 31, 2004. The Fund's security type breakdown is
expressed as a percentage of total investments and may vary over time.
- -------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 5
PORTFOLIO OF INVESTMENTS
July 31, 2004
Principal
Amount
(000) U.S. $ Value
- ---------------------------------------------------------------------------
U.S. GOVERNMENT AND
GOVERNMENT SPONSORED
AGENCY OBLIGATIONS-81.0%
U.S. Treasury Bonds-39.6%
5.375%, 2/15/31 US$ 5,000 $ 5,121,095
6.25%, 5/15/30 10,700 12,145,335
12.75%, 11/15/10 3,250 3,673,387
13.25%, 5/15/14 5,250 7,435,108
14.00%, 11/15/11 11,250 14,033,935
-----------
42,408,860
-----------
U.S. Treasury Notes-36.8%
2.25%, 2/15/07 3,600 3,541,360
3.125%, 5/15/07(a) 17,800 17,855,624
5.75%, 11/15/05(b) 1,040 1,085,541
6.50%, 2/15/10 10,000 11,319,140
6.75%, 5/15/05 2,050 2,125,914
7.875%, 11/15/04 3,350 3,410,066
-----------
39,337,645
-----------
Mortgage Related Securities-4.6%
Federal National Mortgage Association
6.50%, TBA 3,500 3,652,032
7.50%, 11/01/29 345 369,350
8.00%, 6/01/28 269 293,893
Government National Mortgage
Association
6.50%, 2/15/29 598 627,253
-----------
4,942,528
-----------
Total U.S. Government and Government
Sponsored Agency Obligations
(cost $88,079,041) 86,689,033
-----------
SOVEREIGN DEBT
OBLIGATIONS-31.1%
Argentina-2.3%
Republic of Argentina FRN
1.234%, 8/03/12 3,625 2,439,624
-----------
Brazil-7.0%
Federal Republic of Brazil
7.31%, 6/29/09 FRN 399 413,464
11.00%, 8/17/40 1,925 1,889,388
C-Bonds
8.00%, 4/15/14 4,603 4,338,442
DCB FRN
Series L
2.125%, 4/15/12 941 817,698
-----------
7,458,992
-----------
- ----------------------------------------------------------------------------
6 o ACM GOVERNMENT OPPORTUNITY FUND
Principal
Amount
(000) U.S. $ Value
- ---------------------------------------------------------------------------
Bulgaria-1.5%
Republic of Bulgaria
8.25%, 1/15/15(c) US$ 1,370 $ 1,620,025
--------------
Colombia-0.9%
Republic of Colombia
10.75%, 1/15/13 650 725,725
11.75%, 2/25/20 220 253,000
------------
978,725
------------
Ecuador-1.1%
Republic of Ecuador
7.00%, 8/15/30(c)(d) 1,525 1,130,788
--------------
Hungary-0.9%
Hungary Government Bond
9.00%, 4/12/07 HUF 210,000 992,588
--------------
Mexico-5.0%
Mexican Bonos
8.00%, 12/24/08-12/07/23(e) MXP 51,145 3,676,126
9.00%, 12/20/12(e) 20,583 1,692,392
--------------
5,368,518
--------------
Panama-0.3%
Republic of Panama
9.375%, 4/01/29 US$ 255 281,775
--------------
Peru-1.6%
Republic of Peru
8.375%, 5/03/16 375 358,125
9.125%, 2/21/12 480 503,640
9.875%, 2/06/15 815 874,088
--------------
1,735,853
--------------
Russia-2.6%
Russian Ministry of Finance
Series V
3.00%, 5/14/08 3,145 2,767,599
--------------
Turkey-1.8%
Turkey Government Bond
Zero Coupon, 8/24/05 TRL3,759,000,000 1,971,056
--------------
Ukraine-4.4%
Government of Ukraine
7.65%, 6/11/13(c) US$ 3,000 2,895,000
11.00%, 3/15/07(c) 1,680 1,807,712
--------------
4,702,712
--------------
- -------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 7
Principal
Amount
(000) U.S. $ Value
- ---------------------------------------------------------------------------
Venezuela-1.7%
Republic of Venezuela
2.633%, 4/20/11 FRN US$ 350 $ 283,063
9.25%, 9/15/27 1,775 1,574,425
--------------
1,857,488
--------------
Total Sovereign Debt Obligations
(cost $32,676,022) 33,305,743
--------------
SUPRANATIONAL DEBT
OBLIGATIONS-2.5%
International Bank for Reconstruction
and Development
Zero Coupon, 2/17/26(e)
(cost $1,241,148) ZAR 110,000 2,641,404
--------------
SHORT-TERM INVESTMENT-3.3%
Time Deposit-3.3%
Societe Generale
1.313%, 8/02/04
(cost $3,500,000) US$ 3,500 3,500,000
-------------
Total Investments-117.9%
(cost $125,496,211) 126,136,180
Other assets less liabilities-(17.9%) (19,146,070)
-------------
Net Assets-100% $ 106,990,110
=============
FINANCIAL FUTURES CONTRACTS SOLD (see Note C)
Value at
Number of Expiration Original July 31, Unrealized
Type Contracts Month Value 2004 Depreciation
- -------------------------------------------------------------------------------
U.S.Treasury Note September
10 Yr Futures 37 2004 $4,047,453 $4,096,594 $(49,141)
FORWARD EXCHANGE CURRENCY CONTRACTS (see Note C)
U.S. $
Contract Value on U.S. $ Unrealized
Amount Origination Current Appreciation/
(000) Date Value (Depreciation)
- -----------------------------------------------------------------------------
Sale Contracts
Mexican Peso,
settling 8/13/04 34,743 $3,011,577 $3,037,300 $ (25,723)
South African Rand,
settling 8/23/04 17,096 2,875,521 2,715,980 159,541
REVERSE REPURCHASE AGREEMENTS (see Note C)
Interest
Broker Rate Maturity Amount
Deutsche Banc Alex Brown, Inc. 0.90% 8/05/04 $13,545,836
Deutsche Banc Alex Brown, Inc. 1.15 8/05/04 3,961,106
------------
$17,506,942
- -------------------------------------------------------------------------------
8 o ACM GOVERNMENT OPPORTUNITY FUND
(a) Position, or portion thereof, with an aggregate market value of
$17,855,624 has been segregated to collateralize reverse repurchase
agreements.
(b) Position with a market value of $1,085,541 has been segregated to
collateralize margin requirement for the open futures contracts.
(c) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At July 31, 2004, the aggregate market value of these securities
amounted to $7,453,525 or 7.0% of net assets.
(d) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at July 31, 2004.
(e) Position, or portion thereof, with an aggregate market value of
$8,009,922 has been segregated to collateralize forward exchange currency
contracts.
Currency Abbreviations:
HUF - Hungary Forint
MXP - Mexican Peso
TRL - Turkish Lira
US$ - United States Dollar
ZAR - South African Rand
Glossary of Terms:
DCB - Debt Conversion Bonds
FRN - Floating Rate Note
TBA - (To Be Assigned)-Securities are purchased on a forward commitment
with an approximate principal amount (generally +/- 1.0%) and no definite
maturity date. The actual principal amount and maturity date will be
determined upon settlement when the specific mortgage pools are assigned.
See notes to financial statements.
- -------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 9
STATEMENT OF ASSETS & LIABILITIES
July 31, 2004
Assets
Investments in securities, at value (cost $125,496,211) $126,136,180
Cash 1,205,403
Unrealized appreciation of forward exchange
currency contracts 159,541
Interest receivable 1,989,268
Receivable for investment securities sold 121,540
-----------
Total assets 129,611,932
-----------
Liabilities
Unrealized depreciation of forward exchange
currency contracts 25,723
Reverse repurchase agreements 17,506,942
Payable for investment securities purchased 4,860,337
Advisory fee payable 78,890
Payable for variation margin on futures contracts 39,313
Administrative fee payable 15,777
Accrued expenses 94,840
Total liabilities 22,621,822
-----------
Net Assets $106,990,110
=============
Composition of Net Assets
Capital stock, at par $128,907
Additional paid-in capital 110,537,832
Distributions in excess of net investment income (4,135,174)
Accumulated net realized loss on investment and
foreign currency transactions (265,404)
Net unrealized appreciation of investments and
foreign currency denominated assets and liabilities 723,949
-----------
$106,990,110
=============
Net Asset Value Per Share
(based on 12,890,686 shares outstanding) $8.30
========
See notes to financial statements.
- -------------------------------------------------------------------------------
10 o ACM GOVERNMENT OPPORTUNITY FUND
STATEMENT OF OPERATIONS
Year Ended July 31, 2004
Investment Income
Interest $ 9,032,863
Expenses
Advisory fee $ 827,555
Administrative 165,511
Custodian 157,660
Audit 74,707
Printing 53,552
Transfer agency 48,545
Directors' fees 30,918
Registration 24,207
Legal 22,625
Miscellaneous 11,039
------------
Total expenses before interest and
reimbursement 1,416,319
Interest expense 280,408
Less: expenses reimbursed by the
Adviser (see Note B) (1,125)
------------
Net expenses 1,695,602
------------
Net investment income 7,337,261
------------
Realized and Unrealized Gain (Loss)
on Investment and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment transactions 8,514,801
Futures contracts 1,044,264
Written options 36,781
Foreign currency transactions (1,029,778)
Net change in unrealized
appreciation/depreciation of:
Investments (8,539,135)
Futures contracts (1,285,204)
Foreign currency denominated assets
and liabilities 370,589
------------
Net loss on investment and foreign
currency transactions (887,682)
------------
Net Increase in Net Assets
from Operations $ 6,449,579
=============
See notes to financial statements.
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ACM GOVERNMENT OPPORTUNITY FUND O 11
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
July 31, July 31,
2004 2003
============= =============
Increase (Decrease) in Net Assets
from Operations
Net investment income $7,337,261 $8,505,123
Net realized gain (loss) on investment and
foreign currency transactions 8,566,068 (1,063,806)
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities (9,453,750) 8,144,192
----------- -----------
Net increase in net assets
from operations 6,449,579 15,585,509
Dividends and Distributions to
Shareholders from
Net investment income (7,715,522) (9,173,007)
Net realized gain on investment and
foreign currency transactions (771,065) -0-
Capital Stock Transactions
Reinvestment of dividends resulting in
the issuance of common stock 687,980 1,372,607
----------- -----------
Total increase (decrease) (1,349,028) 7,785,109
Net Assets
Beginning of period 108,339,138 100,554,029
----------- -----------
End of period (including distributions
in excess of net investment income
of $4,135,174 and $8,535,161,
respectively) $106,990,110 $108,339,138
============= =============
See notes to financial statements.
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12 o ACM GOVERNMENT OPPORTUNITY FUND
STATEMENT OF CASH FLOWS
Year Ended July 31, 2004
Increase (Decrease) in Cash from
Operating Activities:
Interest received $8,663,600
Interest expense paid (294,720)
Operating expenses paid (1,453,003)
Net increase in cash from operating
activities $ 6,915,877
Investing Activities:
Proceeds from disposition of long-term
investments 205,078,752
Purchase of long-term
investments (178,813,483)
Proceeds from disposition of short-term
investments, net 1,841,980
Decrease in variation margin on futures
contracts 230,688
------------
Net increase in cash from investing
activities 28,337,937
Financing Activities:*
Decrease in reverse repurchase
agreements (26,098,350)
Cash dividends paid (8,567,336)
------------
Net decrease in cash from financing
activities (34,665,686)
------------
Net increase in cash 588,128
Cash at beginning of period 617,275
------------
Cash at end of period $ 1,205,403
============
- ------------------------------------------------------------------------------
Reconciliation of Net Increase in
Net Assets from Operations to
Net Increase in Cash from Operating
Activities:
Net increase in net assets resulting from
operations $ 6,449,579
Adjustments:
Decrease in interest receivable $932,394
Net realized gain on investment
and foreign currency transactions (8,566,068)
Net change in unrealized
appreciation/depreciation of investments
and foreign currency denominated
assets and liabilities 9,453,750
Accretion of bond discount and
amortization of bond premium (1,301,657)
Decrease in interest payable (14,312)
Decrease in accrued expenses (37,809)
------------
Total adjustments 466,298
------------
Net increase in cash from operating
activities $ 6,915,877
============
* Non-cash financing activities not included herein consist of reinvestment
of dividends.
See notes to financial statements.
- -------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 13
NOTES TO FINANCIAL STATEMENTS
July 31, 2004
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 U.S. 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
In accordance with Pricing Policies adopted by the Board of Directors of the
Fund (the "Pricing Policies") and applicable law, portfolio securities are
valued at current market value or at fair value. The Board of Directors has
delegated to Alliance Capital Management, L.P. (the "Adviser"), subject to the
Board's continuing oversight, certain responsibilities with respect to the
implementation of the Pricing Policies. Pursuant to the Pricing Policies,
securities for which market quotations are readily available are valued at
their current market value. In general, the market value of these securities is
determined as follows:
Securities listed on a national securities exchange or on a foreign securities
exchange are valued at the last sale price at the close of the exchange or
foreign securities exchange. If there has been no sale on such day, the
securities are valued at the mean of the closing bid and asked prices on such
day. If no bid or asked prices are quoted on such day, then the security is
valued in good faith at fair value in accordance with the Pricing Policies.
Securities listed on more than one exchange are valued by reference to the
principal exchange on which the securities are traded; securities not listed on
an exchange but traded on The Nasdaq Stock Market, Inc. ("NASDAQ") are valued
in accordance with the NASDAQ Official Closing Price; listed put or call
options 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; open
futures contracts and options thereon are valued using the closing settlement
price or, in the absence of such a price, the most recent quoted bid price. If
there are no quotations available for the day of valuations, the last available
closing settlement price is used; securities traded in the over-the-counter
market, (but excluding securities traded on NASDAQ) are valued at the mean of
the current bid and asked prices as reported by the National Quotation Bureau
or other comparable sources; U.S. Government securities and other debt
instruments having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or by amortizing
their fair value as of the 61st day prior to maturity if their original term to
maturity exceeded 60 days; fixed-income securities, including mortgage backed
and asset backed securities, may be valued on the basis of prices provided by a
pricing service or at a price obtained from one or more of the major
broker/dealers. In cases where broker/dealer quotes are obtained, the Pricing
Policies provide that
- -------------------------------------------------------------------------------
14 o ACM GOVERNMENT OPPORTUNITY FUND
the Adviser may establish procedures whereby changes in market yields or
spreads are used to adjust, on a daily basis, a recently obtained quoted price
on a security; and OTC and other derivatives are valued on the basis of a
quoted bid price or spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available are valued at
fair value in accordance with the Pricing Policies. The Fund fair values a
security that it holds when a significant event (e.g., an earthquake or a major
terrorist attack) occurs after the time that the latest market quotation was
established, and, as a result, such market quotation cannot be said to
represent the current market value of the security as of the time the Fund
prices its shares. Fair valuing securities is imprecise, and there is no
assurance that the Fund could dispose of the security at the price used for
determining the Fund's net asset value.
2. 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 prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates 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 fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent amounts actually received or paid.
Net unrealized 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 and depreciation of investments
and foreign currency denominated assets and liabilities.
3. 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 provisions for federal income or excise taxes are
required. The Fund may be subject to taxes imposed by countries in which it
invests. Such taxes are generally based on income and/or capital gains earned
or repatriated. Taxes are accrued and applied to net investment income, net
realized gains and net unrealized appreciation/depreciation as such income
and/or gains are earned.
4. 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 the date
securities are pur-
- -------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 15
chased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discount as adjustments to interest income.
Additionally, the Fund amortizes premium on debt securities for financial
statement reporting purposes only.
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
U.S. 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 Fee and Other Transactions with Affiliates
Under the terms of an investment advisory agreement, the Fund pays the Adviser
a monthly advisory fee equal to .0625% of the Fund's average weekly net assets
during the month (equal to an annual fee of approximately .75% of the average
weekly net assets). Such fee is accrued daily and paid monthly.
For the year ended July 31, 2004, the Adviser voluntarily agreed to reimburse
certain audit fees related to the investigations described under "Legal
Proceedings" below in the amount of $1,125.
Under the terms of a Shareholder Inquiry Agency Agreement with Alliance Global
Investor Services, Inc. (AGIS), a wholly-owned subsidiary of the Adviser, the
Fund reimburses AGIS for costs related to servicing phone inquiries on behalf
of the Fund. During the year ended July 31, 2004, the Fund reimbursed AGIS$360
for such costs.
Under the terms of an administrative agreement, the Fund pays the Adviser an
administrative fee at an annual rate of .15% of the Fund's average weekly net
assets. Such fee is accrued daily and paid monthly.
NOTE C
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the year ended July 31, 2004, were as follows:
Purchases Sales
============== ==============
Investment securities (excluding
U.S. government securities) $ 50,582,763 $ 61,591,710
U.S. government securities 120,983,251 135,128,451
- -------------------------------------------------------------------------------
16 o ACM GOVERNMENT OPPORTUNITY FUND
The cost of investments for federal income tax purposes, gross unrealized
appreciation and unrealized depreciation (excluding futures and foreign
currency transactions) are as follows:
Cost $ 129,222,350
==============
Gross unrealized appreciation $ 2,773,051
Gross unrealized depreciation (5,859,221)
--------------
Net unrealized appreciation $ (3,086,170)
==============
1. Financial Futures Contracts
The Fund may buy or sell financial futures contracts for the purpose of hedging
its portfolio against adverse effects of anticipated movements in the market.
The Fund bears the market risk that arises from changes in the value of these
financial instruments and the imperfect correlation between movements in the
price of the futures contracts and movements in the price of the securities
hedged or used for cover.
At the time the Fund enters into a futures contract, the Fund deposits and
maintains as collateral an initial margin as required by the exchange on which
the transaction is affected. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the time it was closed.
2. Forward Exchange Currency Contracts
The Fund may enter into forward exchange currency contracts in order to hedge
its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings, to hedge certain firm purchase and sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on 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 would be 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 appreciation and
depreciation by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or other 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.
- -------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 17
Risks may arise from the potential inability of the counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars reflects the total exposure the Fund has in that particular currency
contract.
3. Option Transactions
For hedging and investment purposes, the Fund may purchase and write (sell) put
and call options on U.S. and foreign government securities and foreign
currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk
of loss of premium and change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired
through the exercise of call options is increased by premiums paid. The
proceeds from securities sold through the exercise of put options are decreased
by the premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from written options which expire unexercised
are recorded by the Fund on the expiration date as realized gains from options
written. 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 security or currency in determining whether the Fund has
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 security or currency underlying the written option. Exercise
of an option written by the Fund could result in the Fund selling or buying a
security or currency at a price different from the current market value.
Transactions in written options for the year ended July 31, 2004, were as
follows:
Number of Premiums
Contracts Received
============ ============
Options outstanding at July 31, 2003 -0- $ -0-
Options written 31,654,200 47,301
Options terminated in closing purchase
transactions (11,500,000) (17,127)
Options expired (20,154,200) (30,174)
------------ ------------
Options outstanding at July 31, 2004 -0- $ -0-
============ ============
- -------------------------------------------------------------------------------
18 o ACM GOVERNMENT OPPORTUNITY FUND
4. 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, 2004, the average amount of reverse repurchase
agreements outstanding was $33,554,853 and the daily weighted average interest
rate was .97%.
NOTE D
Capital Stock
There are 300,000,000 shares of $.01 par value common stock authorized, of
which 12,890,686 shares were outstanding at July 31, 2004. During the years
ended July 31, 2004 and July 31, 2003, the Fund issued 78,528 shares and
159,517 shares, respectively, in connection with the Fund's dividend
reinvestment plan.
NOTE E
Risks Involved in Investing in the Fund
Interest Rate Risk and Credit Risk--Interest rate risk is the risk that changes
in interest rates will affect the value of the Fund's investments in
fixed-income debt securities such as bonds or notes. Increases in interest
rates may cause the value of the Fund's investments to decline. Credit risk is
the risk that the issuer or guarantor of a debt security, or the counterparty
to a derivative contract, will be unable or unwilling to make timely principal
and/or interest payments, or to otherwise honor its obligations. The degree of
risk for a particular security may be reflected in its credit risk rating.
Credit risk is greater for medium quality and lower-rated securities.
Lower-rated debt securities and similar unrated securities (commonly known as
"junk bonds") have speculative elements or are predominantly speculative risks.
Concentration of Risk--Investing in securities of foreign companies or foreign
governments involves special risks which include changes in foreign exchange
rates and the possibility of future political and economic developments which
could adversely affect the value of such securities. Moreover, securities of
many foreign companies or foreign governments and their markets may be less
liquid and their prices more volatile than those of comparable United States
companies or of the United States government.
In the ordinary course of business, the Fund enters into contracts that contain
a variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown. However, the Fund has not had prior claims or losses
pursuant to these indemnification provisions and expects the risk of loss
thereunder to be remote.
- -------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 19
NOTE F
Distributions To Shareholders
The tax character of distributions paid during the fiscal years ended July 31,
2004 and July 31, 2003 were as follows:
2004 2003
============== ==============
Distributions paid from:
Ordinary income $ 7,715,522 $ 9,173,007
Net long-term capital gains 771,065 -0-
------------ --------------
Total taxable distributions 8,486,587 9,173,007
------------ --------------
Total distributions paid $ 8,486,587 $ 9,173,007
============== ==============
As of July 31, 2004, the components of accumulated earnings/(deficit) on a tax
basis were as follows:
Accumulated capital and other losses $ (589,762)(a)
Unrealized appreciation/(depreciation) (3,086,867)(b)
-----------------
Total accumulated earnings/(deficit) $ (3,676,629)
=================
(a) During the fiscal year, the fund utilized capital loss carryforwards of
$1,984,268. Net capital losses incurred after October 31, and within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. For the year ended July 31, 2004, the Fund deferred to August 1,
2004 post October currency losses of $589,762.
(b) The differences between book-basis and tax-basis unrealized
appreciation/(depreciation) are attributable primarily to the tax deferral of
losses on wash sales, the realization for tax purposes of unrealized gains or
losses on certain derivative instruments and the difference between book and
tax amortization methods for premium.
During the current fiscal year, permanent differences primarily due to the tax
treatment of foreign currency transactions, tax character of paydown losses,
tax reclassification of distributions, tax treatment of bond premium and tax
distribution in excess of current year income, resulted in a net decrease in
distributions in excess of net investment income, a net increase in accumulated
net realized loss on investment and foreign currency transactions and a
decrease in additional paid-in capital. This reclassification had no effect on
net assets.
NOTE G
Legal Proceedings
As has been previously reported in the press, the staff of the U.S. Securities
and Exchange Commission ("SEC") and the Office of the New York Attorney General
("NYAG") have been investigating practices in the mutual fund industry
identified as "market timing" and "late trading" of mutual fund shares. Certain
other regulatory authorities have also been conducting investigations into
these practices within the industry and have requested that the Adviser provide
information to them. The Adviser has been cooperating and will continue to
cooperate with all of these authorities. The shares of the Fund are not
redeemable by the Fund, but are traded on an exchange at prices established by
the market. Accordingly, the Fund and its shareholders are not subject to the
market timing
- -------------------------------------------------------------------------------
20 o ACM GOVERNMENT OPPORTUNITY FUND
and late trading practices that are the subject of the investigations mentioned
above or the lawsuits described below. Please see below for a description of
the agreements reached by the Adviser and the SEC and NYAG in connection with
the investigations mentioned above.
Numerous lawsuits have been filed against the Adviser and certain other
defendants in which plaintiffs make claims purportedly based on or related to
the same practices that are the subject of the SEC and NYAG investigations
referred to above. Some of these lawsuits name the Fund as a party. Management
of the Adviser believes that these private lawsuits are not likely to have a
material adverse effect on the results of operations or financial condition of
the Fund.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuation dated September 1, 2004 ("NYAGOrder"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from some
of the AllianceBernstein long-term, open-end retail funds, commencing January
1, 2004, for a period of at least five years; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order contemplates that the
Adviser's registered investment company clients, including the Fund, will
introduce governance and compliance changes.
The shares of the Fund are not redeemable by the Fund, but are traded on an
exchange at prices established by the market. Accordingly, the Fund and its
shareholders are not subject to the market timing practices described in the
SEC Order and are not expected to participate in the Reimbursement Fund. Since
the Fund is a closed-end fund, it will not have its advisory fee reduced
pursuant to the terms of the agreements mentioned above.
- -------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 21
The Adviser and approximately twelve other investment management firms were
publicly mentioned in connection with the settlement by the SEC of charges that
Morgan Stanley violated federal securities laws relating to its receipt of
compensation for selling specific mutual funds and the disclosure of such
compensation. The SEC has indicated publicly that, among other things, it is
considering enforcement action in connection with mutual funds' disclosure of
such arrangements and in connection with the practice of considering mutual
fund sales in the direction of brokerage commissions from fund portfolio
transactions. The SEC has issued subpoenas to the Adviser in connection with
this matter and the Adviser has provided documents and other information to the
SEC and is cooperating fully with its investigation.
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Capital Management Holding L.P., Alliance Capital
Management Corporation, AXA Financial, Inc., AllianceBernstein Investment
Research & Management, Inc., certain current and former directors of the
AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin
Complaint names certain of the AllianceBernstein Mutual Funds as nominal
defendants. The Aucoin Complaint was filed in the United States District Court
for the Southern District of New York by an alleged shareholder of the
AllianceBernstein Growth & Income Fund. The Aucoin Complaint alleges, among
other things, (i) that certain of the defendants improperly authorized the
payment of excessive commissions and other fees from AllianceBernstein Fund
assets to broker-dealers in exchange for preferential marketing services, (ii)
that certain of the defendants misrepresented and omitted from registration
statements and other reports material facts concerning such payments, and (iii)
that certain defendants caused such conduct as control persons of other
defendants. The Aucoin Complaint asserts claims for violation of Sections
34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of
the Advisers Act, breach of common law fiduciary duties, and aiding and
abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all AllianceBernstein
Fund-related fees, commissions and soft dollar payments, and restitution of all
unlawfully or discriminatorily obtained fees and expenses.
Since June 22, 2004, numerous additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants, and others may be filed.
It is possible that these matters and/or other developments resulting from
these matters could have adverse consequences to the Fund. However, the Adviser
believes that these matters are not likely to have a material adverse effect on
the Fund or its ability to perform advisory services relating to the Fund.
- -------------------------------------------------------------------------------
22 o ACM GOVERNMENT OPPORTUNITY FUND
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
Year Ended July 31,
---------------------------------------------------
2004 2003 2002(a) 2001 2000
-------- --------- -------- ------- -------
Net asset value,
beginning of period $8.46 $7.95 $7.99 $7.90 $7.76
Income From Investment
Operations
Net investment income(b) .57 .67 .61 .69 .80
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions (.07) .56 .13 .12 .05
Net increase in net asset
value from operations .50 1.23 .74 .81 .85
Less: Dividends and
Distributions
Dividends from net investment
income (.60) (.72) (.61) (.64) (.69)
Tax return of capital -0- -0- (.02) (.08) -0-
Distributions in excess of
net investment income -0- -0- (.15) -0- -0-
Distributions from net realized
gain on investments (.06) -0- -0- -0- (.02)
Total dividends and
distributions (.66) (.72) (.78) (.72) (.71)
Net asset value, end of period $8.30 $8.46 $7.95 $7.99 $7.90
Market value, end of period $8.29 $8.50 $9.20 $8.67 $7.19
Premium/(Discount) (.12)% .47% 15.72% 8.51% (8.99)%
Total Return
Total investment return based on:(c)
Market value 5.28% .43% 16.45% 32.38% 11.21%
Net asset value 5.90% 15.68% 9.30% 11.00% 12.22%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $106,990 $108,339 $100,554 $99,888 $98,137
Ratio to average net assets of:
Expenses 1.54%(d) 1.83% 1.92% 2.88% 2.10%
Expenses, excluding
interest expense 1.28% 1.35% 1.33% 1.45% 1.31%
Net investment income 6.65% 7.88% 7.58% 8.69% 10.21%
Portfolio turnover rate 124% 100% 173% 98% 120%
See footnote summary on page 24.
- -------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 23
(a) As required, effective August 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide, Audits of Investment Companies, and
began amortizing premium on debt securities for financial reporting purposes
only.The effect of this change for the year ended July 31, 2002 was to decrease
net investment income per share by $0.13, increase net realized and unrealized
gain on investment transactions per share by $0.13, and decrease the ratio of
net investment income to average net assets from 9.16% to 7.58%. Per share,
ratios and supplemental data for periods prior to August 1, 2001 have not been
restated to reflect this change in presentation.
(b) Based on average shares outstanding.
(c) 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.
(d) Reflects a $1,125 waiver by the Adviser which had no effect to the ratio.
- -------------------------------------------------------------------------------
24 o ACM GOVERNMENT OPPORTUNITY FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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. (the "Fund"), including the portfolio of
investments, as of July 31, 2004, 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 five years in the period then ended. 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 the standards of the Public Company
Accounting Oversight Board (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, 2004, by correspondence with the custodian and brokers. 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, 2004, 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 five years in the period then ended, in conformity
with U.S. generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
New York, New York
September 10, 2004
- -------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 25
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.
The automatic reinvestment of dividends and distributions will not relieve
- -------------------------------------------------------------------------------
26 o ACM GOVERNMENT OPPORTUNITY FUND
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.
Supplemental Proxy Information
The Annual Meeting of Shareholders of the ACMGovernment Opportunity Fund, Inc.
was held on March 25, 2004. The description of each proposal and number of
shares voted at the meeting are as follows:
Abstain/
Authority
Voted For Withheld
_______________________________________________________________________________
1. To elect directors: Class One Directors
(Term expires in 2007)
John H. Dobkin 12,223,591 11,416
Clifford L. Michel 12,223,591 11,416
Donald J. Robinson 12,222,372 12,634
Class Three Director
(Term expires in 2006)
Marc O. Mayer 12,220,815 14,192
- -------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 27
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Marc O. Mayer, President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
Dr. James M. Hester(1)
Clifford L. Michel(1)
Donald J. Robinson(1)
OFFICERS
Paul J. DeNoon(2), Vice President
Michael L. Mon(2), Vice President
Douglas J. Peebles(2), Vice President
Mark R. Manley, 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 Registered Public Accounting Firm
Ernst & Young LLP
5 Times Square
New York, NY 10036
(1) Member of the Audit Committee.
(2) Messrs. DeNoon, Mon and Peebles are the persons primarily responsible for
the day-to-day management of the Fund's investment portfolio.
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
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the
Board of Directors. Certain information concerning the Fund's Directors is set
forth below.
INTERESTED DIRECTOR
PORTFOLIOS
IN FUND OTHER
NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIPS
ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY
(YEARS OF SERVICE) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- ----------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS
Marc O. Mayer,**, 46 Executive Vice President 66 None
1345 Avenue of the of ACMC since 2001; prior
Americas thereto, Chief Executive Officer
New York, NY 10105 of Sanford C. Bernstein & Co.,
(Elected November 18, LLC and its predecessor since
2003) prior to 1999.
DISINTERESTED DIRECTORS
William H. Foulk, Jr.,#+, 72 Investment Adviser and an 113 None
2 Sound View Drive independent consultant. He was
Suite 100 formerly Senior Manager of Barrett
Greenwich, CT 06830 Associates, Inc., a registered
(6) investment adviser, with which he
(Chairman of the Board) had been associated since prior to
1999. He was formerly Deputy
Comptroller and Chief Investment
Officer of the State of New York
and, prior thereto, Chief Investment
Officer of the New York Bank for
Savings.
Ruth Block,#+, 73 Formerly Executive Vice 94 None
500 S.E. Mizner Blvd. President and Chief
Boca Raton, FL 33432 Insurance Officer of The
(16) Equitable Life Assurance Society
of the United States; Chairman
and Chief Executive Officer of
Evlico; Director of Avon, BP
(oil and gas), Ecolab Incorporated
(specialty chemicals), Tandem
Financial Group, and Donaldson,
Lufkin & Jenrette Securities
Corporation; former Governor
at Large, National Association
of Securities Dealers, Inc.
David H. Dievler,#+, 74 Independent consultant. Until 98
P.O. Box 167 December 1994 he was Senior
Spring Lake, NJ 07762 Vice President of ACMC responsible
(16) for mutual fund administration.
Prior to joining ACMC in 1984,
he was Chief Financial Officer of
Eberstadt Asset Management since
1968. Prior to that, he was Senior
Manager at Price Waterhouse & Co.
Member of American Institute of
Certified Public Accountants
since 1953.
- -------------------------------------------------------------------------------
29 o ACM GOVERNMENT OPPORTUNITY FUND
PORTFOLIOS
IN FUND OTHER
NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIPS
ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY
(YEARS OF SERVICE) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- ----------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
John H. Dobkin,#+, 62 Consultant. He was formerly 96 None
P.O. Box 12, President of Save Venice, Inc.
Annandale, NY 12504 (preservation organization) from
(6) 2001-2002, Senior Advisor from
June 1999 - June 2000 and
President of Historic Hudson Valley
(historic preservation) from
December 1989 - May 1999.
Previously, Director of the National
Academy of Design and during
1988-1992, he was Director and
Chairman of the Audit Committee
of ACMC.
Dr. James M. Hester, #+, 80 Formerly President of the Harry Frank 11 None
25 Clevland Lane Guggenheim Foundation. President
Princeton, NJ 08540 of New York University and the
(16) New York Botanical Garden. Rector
of the United Nations University and
Vice Chairman of the Board of the
Federal Reserve Bank of New York.
Clifford L. Michel,#+, 65 Senior Counsel to the law firm of 96 Placer Dome,
15 St. Bernard's Road Cahill Gordon & Reindel since Inc.
Gladstone, NJ 07934 February 2001 and a partner of
(16) that firm for more than twenty-five
years prior thereto. He is President
and Chief Executive Officer of
Wenonah Development Company
(investments) and a Director of
the Placer Dome Inc. (mining).
Donald J. Robinson,#+ 70 Senior Counsel to the law firm of 95 None
98 Hell's Peak Road Orrick, Herrington & Sutcliffe LLP
Weston, VT 05161 since prior to 1999. Formerly a
(9) senior partner and a member of
the Executive Committee of that
firm. He was also a member and
Chairman of the Municipal Securities
Rulemaking Board and a Trustee
of the Museum of the City of
New York.
** Mr. Mayer is an "interested person", as defined in the 1940 Act, due to his
position as Executive Vice President of ACMC, the Fund's investment adviser.
# Member of the Audit Committee.
+ Member of the Nominating Committee.
- -------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 30
Officer Information
Certain information concerning the Fund's Officers is listed below.
NAME, POSITION(S) PRINCIPAL OCCUPATION
ADDRESS,* AND AGE HELD WITH FUND DURING PAST 5 YEARS**
- --------------------------------------------------------------------------------------------------------------
Marc O. Mayer, 46 President See biography above.
Paul J. DeNoon, 42 Vice President Senior Vice President of ACMC**, with which he
has been associated since prior to 1999.
Michael L. Mon, 35 Vice President Vice President of ACMC**, with which he has
been associated since prior to June 1999.
Douglas J. Peebles, 39 Vice President Executive Vice President of ACMC** with which
he has been associated since prior to 1999.
Mark R. Manley, 41 Secretary Senior Vice President and Chief Compliance
Officer of ACMC, with which he has been
associated since prior to 1999.
Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of AGIS** and
Financial Officer Vice President of ABIRM**, with which he has
been associated since prior to 1999.
Vincent S. Noto, 39 Controller Vice President of AGIS**, with which he has
been associated since prior to 1999.
* The address for each of the Fund's Officers is 1345 Avenue of the Americas,
New York,
NY 10105.
** ACMC, ABIRM and AGIS are affiliates of the Fund.
- -------------------------------------------------------------------------------
31 o ACM GOVERNMENT OPPORTUNITY FUND
ALLIANCEBERNSTEIN FAMILY OF FUNDS
- --------------------------------------------
Wealth Strategies Funds
- --------------------------------------------
Balanced Wealth Strategy
Wealth Appreciation Strategy
Wealth Preservation Strategy
Tax-Managed Balanced Wealth Strategy*
Tax-Managed Wealth Appreciation Strategy
Tax-Managed Wealth Preservation Strategy**
- --------------------------------------------
Blended Style Funds
- --------------------------------------------
U.S. Large Cap Portfolio
International Portfolio
Tax-Managed International Portfolio
- --------------------------------------------
Growth Funds
- --------------------------------------------
Domestic
Growth Fund
Health Care Fund
Mid-Cap Growth Fund
Premier Growth Fund
Small Cap Growth Fund
Technology Fund
Global & International
All-Asia Investment Fund
Global Research Growth Fund
Global Small Cap Fund
Greater China '97 Fund
International Premier Growth Fund
New Europe Fund
Worldwide Privatization Fund
Select Investor Series
Biotechnology Portfolio
Premier Portfolio
Technology Portfolio
- --------------------------------------------
Value Funds
- --------------------------------------------
Domestic
Balanced Shares
Disciplined Value Fund
Growth & Income Fund
Real Estate Investment Fund
Small Cap Value Fund
Utility Income Fund
Value Fund
Global & International
Global Value Fund
International Value Fund
- --------------------------------------------
Taxable Bond Funds
- --------------------------------------------
Americas Government Income Trust
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Multi-Market Strategy Trust
Quality Bond Portfolio
Short Duration Portfolio
U.S. Government Portfolio
- --------------------------------------------
Municipal Bond Funds
- --------------------------------------------
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
- --------------------------------------------
Intermediate Municipal Bond Funds
- --------------------------------------------
Intermediate California
Intermediate Diversified
Intermediate New York
- --------------------------------------------
Closed-End Funds
- --------------------------------------------
All-Market Advantage Fund
ACM Income Fund
ACM Government Opportunity Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
California Municipal Income Fund
National Municipal Income Fund
New York Municipal Income Fund
The Spain Fund
World Dollar Government Fund
World Dollar Government Fund II
We also offer Exchange Reserves,+ which serves as the money market fund
exchange vehicle for the AllianceBernstein mutual funds.
For more complete information on any AllianceBernstein mutual fund, including
investment objectives and policies, sales charges, expenses, risks and other
matters of importance to prospective investors, visit our web site at
www.alliancebernstein.com or call us at (800) 227-4618 for a current
prospectus. Please read the prospectus carefully before you invest or send
money.
* Formerly Growth Investors Fund.
** Formerly Conservative Investors Fund.
+ An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
- -------------------------------------------------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND o 32
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.
- -------------------------------------------------------------------------------
33 o ACM GOVERNMENT OPPORTUNITY FUND
ACM GOVERNMENT OPPORTUNITY FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO] ALLIANCEBERNSTEIN (SM)
Investment Research and Management
(SM) This service mark used under license from
the owner, Alliance Capital Management L.P.
OPPAR0704
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer and principal accounting officer.
A copy of the registrant's code of ethics is filed herewith as Exhibit 11(a)(1).
(b) During the period covered by this report, no amendments were made to the
provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers to
the provisions of the code of ethics adopted in 2(a) above were granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors has determined that independent
directors David H. Dievler and William H. Foulk, Jr. qualify as audit committee
financial experts.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table sets forth the aggregate fees billed by the
independent auditors for the Fund's last two fiscal years for professional
services rendered for: (i) the audit of the Fund's annual financial statements
included in the Fund's annual report to stockholders; (ii) assurance and related
services that are reasonably related to the performance of the audit of the
Fund's financial statements and are not reported under (i), which include advice
and education on accounting and auditing issues, quarterly press release review
and preferred stock maintenance testing (for those Funds that issue preferred
stock); (iii) tax compliance, tax advice and tax return preparation; and (iv)
aggregate non-audit services provided to the Fund, the Fund's Adviser and
entities that control, are controlled by or under common control with the
Adviser that provide ongoing services to the Fund ("Service Affiliates"), which
include conducting an annual internal control report pursuant to Statement on
Auditing Standards No. 70. No other services were provided to the Fund during
this period.
All Fees for
Non-Audit Services
Provided to the
Audit-Related Fund, the Adviser
Audit Fees Fees Tax Fees and Service Affiliates
- ---------------------------------------------------------------------------------------------
2003: $44,000 $11,360 $17,500 $719,375
2004: $47,000 $ 9,544 $17,038 $867,438
Beginning with audit and non-audit service contracts entered into on or
after May 6, 2003, the Fund's Audit Committee policies and procedures require
the pre-approval of all audit and non-audit services provided to the Fund by the
Fund's independent auditors. The Fund's Audit Committee policies and procedures
also require pre-approval of all audit and non-audit services provided to the
Adviser and Service Affiliates to the extent that these services are directly
related to the operations or financial reporting of the Fund. Accordingly, all
of the amounts in the table for Audit Fees, Audit-Related Fees and Tax Fees for
2004 are for services pre-approved by the Fund's Audit Committee. The amounts of
the Fees for Non-Audit Services provided to the Fund, the Adviser and Service
Affiliates in the table for the Fund, that were subject to pre-approval by the
Audit Committee were $276,582 (comprising $259,544 of audit related fees and
$17,038 of tax fees) for 2004 and $315,860 (comprising $298,360 of audit related
fees and $17,500 for tax fees) for the entire period ended 2003. The Audit
Committee of the Fund has considered whether the provision of any non-audit
services not pre-approved by the Audit Committee provided by the Fund's
independent auditor to the Adviser and Service Affiliates is compatible with
maintaining the auditor's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934.
The audit committee members are as follows:
Ruth Block Dr. James M. Hester
David H. Dievler Clifford L. Michel
John H. Dobkin Donald J. Robinson
William H. Foulk, Jr.
ITEM 6. SCHEDULE OF INVESTMENTS.
Please see Schedule of Investments contained in the Report to Shareholders
included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The registrant has adopted the following proxy voting policies and procedures of
its investment adviser, Alliance Capital Management L.P.
July 2003
ALLIANCE CAPITAL MANAGEMENT L.P.
Statement of Policies and Procedures for
Voting Proxies on Behalf of Discretionary Client Accounts
Introduction
As a registered investment adviser, Alliance Capital Management L.P. ("Alliance
Capital", "we" or "us") has a fiduciary duty to act solely in the best interests
of our clients. As part of this duty, we recognize that we must vote client
securities in a timely manner and make voting decisions that are in the best
interests of our clients.
This statement is intended to comply with Rule 206(4)-6 of the Investment
Advisers Act of 1940. It sets forth our policies and procedures for voting
proxies for our discretionary investment advisory clients, including investment
companies registered under the Investment Company Act of 1940. This statement is
applicable to Alliance Capital's growth and value investment groups investing on
behalf of clients in both US and global securities.
PROXY POLICIES
This statement is designed to be responsive to the wide range of subjects that
can have a significant effect on the investment value of the securities held in
our clients' accounts. These policies are not exhaustive due to the variety of
proxy voting issues that we may be required to consider. Alliance Capital
reserves the right to depart from these guidelines in order to avoid voting
decisions that we believe may be contrary to our clients' best interests. In
reviewing proxy issues, we will apply the following general policies:
Elections of Directors: Unless there is a proxy fight for seats on the Board or
we determine that there are other compelling reasons for withholding votes for
directors, we will vote in favor of the management proposed slate of directors.
That said, we believe that directors have a duty to respond to shareholder
actions that have received significant shareholder support. We may withhold
votes for directors that fail to act on key issues such as failure to implement
proposals to declassify boards, failure to implement a majority vote
requirement, failure to submit a rights plan to a shareholder vote and failure
to act on tender offers where a majority of shareholders have tendered their
shares. In addition, we will withhold votes for directors who fail to attend at
least seventy-five percent of board meetings within a given year without a
reasonable excuse. Finally, we may withhold votes for directors of non-U.S.
issuers where there is insufficient information about the nominees disclosed in
the proxy statement.
Appointment of Auditors: Alliance Capital believes that the company remains in
the best position to choose the auditors and will generally support management's
recommendation. However, we recognize that there may be inherent conflicts when
a company's independent auditor performs substantial non-audit related services
for the company. Therefore, we may vote against the appointment of auditors if
the fees for non-audit related services are disproportionate to the total audit
fees paid by the company or there are other reasons to question the independence
of the company's auditors.
Changes in Capital Structure: Changes in a company's charter, articles of
incorporation or by-laws are often technical and administrative in nature.
Absent a compelling reason to the contrary, Alliance Capital will cast its votes
in accordance with the company's management on such proposals. However, we will
review and analyze on a case-by-case basis any non-routine proposals that are
likely to affect the structure and operation of the company or have a material
economic effect on the company. For example, we will generally support proposals
to increase authorized common stock when it is necessary to implement a stock
split, aid in a restructuring or acquisition or provide a sufficient number of
shares for an employee savings plan, stock option or executive compensation
plan. However, a satisfactory explanation of a company's intentions must be
disclosed in the proxy statement for proposals requesting an increase of greater
than one hundred percent of the shares outstanding. We will oppose increases in
authorized common stock where there is evidence that the shares will be used to
implement a poison pill or another form of anti-takeover device, or if the
issuance of new shares could excessively dilute the value of the outstanding
shares upon issuance.
Corporate Restructurings, Mergers and Acquisitions: Alliance Capital believes
proxy votes dealing with corporate reorganizations are an extension of the
investment decision. Accordingly, we will analyze such proposals on a
case-by-case basis, weighing heavily the views of the research analysts that
cover the company and the investment professionals managing the portfolios in
which the stock is held.
Proposals Affecting Shareholder Rights: Alliance Capital believes that certain
fundamental rights of shareholders must be protected. We will generally vote in
favor of proposals that give shareholders a greater voice in the affairs of the
company and oppose any measure that seeks to limit those rights. However, when
analyzing such proposals we will weigh the financial impact of the proposal
against the impairment of shareholder rights.
Corporate Governance: Alliance Capital recognizes the importance of good
corporate governance in ensuring that management and the board of directors
fulfill their obligations to the shareholders. We favor proposals promoting
transparency and accountability within a company. For example, we will vote for
proposals providing for equal access to proxies, a majority of independent
directors on key committees, and separating the positions of chairman and chief
executive officer.
Anti-Takeover Measures: Alliance Capital believes that measures that impede
takeovers or entrench management not only infringe on the rights of shareholders
but may also have a detrimental effect on the value of the company. We will
generally oppose proposals, regardless of whether they are advanced by
management or shareholders, the purpose or effect of which is to entrench
management or dilute shareholder ownership. Conversely, we support proposals
that would restrict or otherwise eliminate anti-takeover measures that have
already been adopted by corporate issuers. For example, we will support
shareholder proposals that seek to require the company to submit a shareholder
rights plan to a shareholder vote. We will evaluate, on a case-by-case basis,
proposals to completely redeem or eliminate such plans. Furthermore, we will
generally oppose proposals put forward by management (including blank check
preferred stock, classified boards and supermajority vote requirements) that
appear to be intended as management entrenchment mechanisms.
Executive Compensation: Alliance Capital believes that company management and
the compensation committee of the board of directors should, within reason, be
given latitude to determine the types and mix of compensation and benefit awards
offered. Whether proposed by a shareholder or management, we will review
proposals relating to executive compensation plans on a case-by-case basis to
ensure that the long-term interests of management and shareholders are properly
aligned. We will analyze the proposed plans to ensure that shareholder equity
will not be excessively diluted, the option exercise price is not below market
price on the date of grant and an acceptable number of employees are eligible to
participate in such programs. We will generally oppose plans that permit
repricing of underwater stock options without shareholder approval. Other
factors such as the company's performance and industry practice will generally
be factored into our analysis. We will support proposals to submit severance
packages triggered by a change in control to a shareholder vote and proposals
that seek additional disclosure of executive compensation. Finally, we will
support shareholder proposals requiring companies to expense stock options
because we view them as a large corporate expense.
Social and Corporate Responsibility: Alliance Capital will review and analyze on
a case-by-case basis proposals relating to social, political and environmental
issues to determine whether they will have a financial impact on shareholder
value. We will vote against proposals that are unduly burdensome or result in
unnecessary and excessive costs to the company. We may abstain from voting on
social proposals that do not have a readily determinable financial impact on
shareholder value.
Proxy Voting Procedures
Proxy Voting Committees
Our growth and value investment groups have formed separate proxy voting
committees to establish general proxy policies for Alliance Capital and consider
specific proxy voting matters as necessary. These committees periodically review
new types of corporate governance issues, evaluate proposals not covered by
these policies and recommend how we should generally vote on such issues. In
addition, the committees, in conjunction with the analyst that covers the
company, contact management and interested shareholder groups as necessary to
discuss proxy issues. Members of the committees include senior investment
personnel and representatives of the Corporate Legal Department. The committees
may also evaluate proxies where we face a potential conflict of interest (as
discussed below). Finally, the committees monitor adherence to guidelines,
industry trends and review the policies contained in this statement from time to
time.
Conflicts of Interest
Alliance Capital recognizes that there may be a potential conflict of interest
when we vote a proxy solicited by an issuer whose retirement plan we manage,
whose retirement plan we administer, or with whom we have another business or
personal relationship that may affect how we vote on the issuer's proxy. We
believe that centralized management of proxy voting, oversight by the proxy
voting committees and adherence to these policies ensures that proxies are voted
with only our clients' best interests in mind. That said, we have implemented
additional procedures to ensure that our votes are not the product of a conflict
of interests, including: (i) requiring anyone involved in the decision making
process to disclose to the chairman of the appropriate proxy committee any
potential conflict that they are aware of and any contact that they have had
with any interested party regarding a proxy vote; (ii) prohibiting employees
involved in the decision making process or vote administration from revealing
how we intend to vote on a proposal in order to reduce any attempted influence
from interested parties; and (iii) where a material conflict of interests
exists, reviewing our proposed vote by applying a series of objective tests and,
where necessary, considering the views of a third party research service to
ensure that our voting decision is consistent with our clients' best interests.
For example, if our proposed vote is consistent with our stated proxy voting
policy, no further review is necessary. If our proposed vote is contrary to our
stated proxy voting policy but is also contrary to management's recommendation,
no further review is necessary. If our proposed vote is contrary to our stated
proxy voting policy or is not covered by our policy, is consistent with
management's recommendation, and is also consistent with the views of an
independent source, no further review is necessary. If our proposed vote is
contrary to our stated proxy voting policy or is not covered by our policy, is
consistent with management's recommendation and is contrary to the views of an
independent source, the proposal is reviewed by the appropriate proxy committee
for final determination.
Proxies of Certain Non-US Issuers
Proxy voting in certain countries requires "share blocking." Shareholders
wishing to vote their proxies must deposit their shares shortly before the date
of the meeting (usually one-week) with a designated depositary. During this
blocking period, shares that will be voted at the meeting cannot be sold until
the meeting has taken place and the shares are returned to the clients'
custodian banks. Alliance Capital may determine that the value of exercising the
vote does not outweigh the detriment of not being able to transact in the shares
during this period. Accordingly, if share blocking is required we may abstain
from voting those shares. In such a situation we would have determined that the
cost of voting exceeds the expected benefit to the client.
Proxy Voting Records
Clients may obtain information about how we voted proxies on their behalf by
contacting their Alliance Capital administrative representative. Alternatively,
clients may make a written request for proxy voting information to: Mark R.
Manley, Senior Vice President & Assistant General Counsel, Alliance Capital
Management L.P., 1345 Avenue of the Americas, New York, NY 10105.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
There have been no purchases of equity securities by the Fund or by affiliated
parties for the reporting period.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Fund's Board of Directors since the Fund last provided
disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule
14A in its proxy statement filed with the Commission on February 23, 2004.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial officer
have concluded that the registrant's disclosure controls and procedures (as
defined in Rule 30a-2(c) under the Investment Company Act of 1940, as amended)
are effective at the reasonable assurance level based on their evaluation of
these controls and procedures as of a date within 90 days of the filing date of
this document.
(b) There were no significant changes in the registrant's internal controls that
could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
ITEM 11. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
Exhibit No. DESCRIPTION OF EXHIBIT
11 (a) (1) Code of ethics that is subject to the disclosure of Item 2
hereof
11 (a) (3) Not applicable.
11 (b) (1) Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
11 (b) (2) Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
11 (c) Certification of Principal Executive Officer and Principal
Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): ACM Government Opportunity Fund, Inc.
By: /s/ Marc O. Mayer
-------------------------
Marc O. Mayer
President
Date: September 29, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Marc O. Mayer
--------------------------
Marc O. Mayer
President
Date: September 29, 2004
By: /s/ Mark D. Gersten
---------------------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: September 29, 2004