ALLIANCE LIMITED MATURITY GOVERNMENT FUND
SEMI-ANNUAL REPORT
MAY 31, 1996
LETTER TO SHAREHOLDERS ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
June 3, 1996
Dear Shareholder:
Throughout 1995, the U.S. bond market enjoyed a sustained broad-based rally
which lasted into January 1996. Since February 1996, however, domestic
bond-market returns generally have been negative. The market has been reacting
to stronger-than-expected data on the U.S. economy and the belief that the
Federal Reserve may raise interest rates to reduce inflationary pressures.
Treasury and mortgage obligations both posted negative returns, although
mortgage securities did outperform Treasury issues when expectations of
mortgage prepayments dissipated. Across all major sectors of the U.S.
fixed-income market, interest rates for all maturities increased and
shorter-duration securities outperformed longer-duration securities.
INVESTMENT RESULTS
This has been a period of transition for the Fund. In February, we began to
restructure the portfolio to comply with new investment policies, which we
outlined to you in our last report and which received shareholder approval
earlier this year.
The table on this page provides the investment returns for Alliance Limited
Maturity Fund for the six months ended May 31, 1996, and measures that
performance against several relevant benchmarks. For comparison purposes, we
have created a Blended Lipper Fund Average that combines the returns of the
Lipper ARM Funds universe from November 30, 1995, through February 29, 1996,
with the results of the Lipper Intermediate Government Funds universe from
February 29, 1996, through May 31, 1996. The ARM Funds universe consists of
funds whose investment policies are similar to the Fund's investment policies
prior to the changes effected on February 28, 1996. It has been used in our
past reports to you. Since the investment objectives and policies of the funds
in the Lipper Intermediate Government universe more closely parallel the Fund's
new focus, it will be our benchmark in the future.
INVESTMENT RESULTS*
SIX MONTHS ENDED MAY 31, 1996
CUMULATIVE SEC
TOTAL RETURN 30-DAY YIELD
------------ ------------
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
Class A -0.02% 5.34%
Class B -0.38% 4.86%
Class C -0.35% 4.87%
BLENDED LIPPER FUND AVERAGE+ -0.71%
MERRILL LYNCH 1-3 YEAR U.S. TREASURY INDEX 1.40%
LIPPER ARM FUNDS AVERAGE 1.68%
LIPPER INTERMEDIATE GOVERNMENT FUNDS
(IUG)AVERAGE -1.43%
* THE FUND'S INVESTMENT RESULTS ARE CUMULATIVE TOTAL RETURNS FOR THE PERIOD
AND ARE BASED ON THE NET ASSET VALUE OF EACH CLASS OF SHARES AS OF 5/31/96. ALL
FEES AND EXPENSES RELATED TO THE OPERATION OF THE FUND HAVE BEEN DEDUCTED, BUT
NO ADJUSTMENT HAS BEEN MADE FOR SALES CHARGES THAT MAY APPLY WHEN SHARES ARE
PURCHASED OR REDEEMED. RETURNS FOR THE FUND AND ITS COMPARATIVE INDICES INCLUDE
THE REINVESTMENT OF ANY DISTRIBUTIONS PAID DURING THE PERIOD.
THE MERRILL LYNCH 1-3 YEAR U.S. TREASURY INDEX IS UNMANAGED AND DOES NOT
REFLECT FEES AND EXPENSES. IT IS A MEASURE OF THE OVERALL U.S. SHORT-TERM BOND
MARKET. THE LIPPER INTERMEDIATE GOVERNMENT FUNDS AVERAGE IS BASED ON THE
PERFORMANCE OF A UNIVERSE OF 122 FUNDS THAT INVEST AT LEAST 65% OF THEIR ASSETS
IN SECURITIES ISSUED BY THE U.S. GOVERNMENT, ITS AGENCIES OR INSTRUMENTALITIES,
WITH DOLLAR-WEIGHTED AVERAGE MATURITIES OF 5 TO 10 YEARS. THE LIPPER ARM FUNDS
AVERAGE REFLECTS THE AVERAGE RETURN OF FUNDS THAT PRIMARILY INVEST IN
ADJUSTABLE-RATE MORTGAGE SECURITIES OR OTHER SIMILARLY COLLATERALIZED
SECURITIES.
+ THE BLENDED LIPPER FUND AVERAGE COMBINES THE RETURNS OF THE LIPPER ARM FUND
UNIVERSE FROM 11/30/95 THROUGH 2/29/96 WITH THOSE OF THE LIPPER IUG FUND
UNIVERSE FROM 2/29/96 THROUGH 5/31/96. LIPPER RESULTS INCLUDE FEES AND EXPENSES.
THE SEC YIELD IS CALCULATED ON THE 30 DAYS ENDED 5/31/96.
1
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
As the table shows, the Fund outperformed the Blended Lipper Fund Average over
the last six months. The Fund's modestly negative results during this period
can be attributed to increasing interest rates as we were extending maturities
to implement the Fund's new investment strategy. While these changes did subdue
near-term performance, we believe the new policy, which broadens the Fund's
investment opportunities, better positions the Fund to pursue the highest level
of current income consistent with low share-price fluctuation.
ECONOMIC OVERVIEW
The U.S. economy survived an inventory-related slowdown during the second half
of 1995 and entered 1996 in a relatively balanced and healthy condition.
First-quarter gross domestic product rose 2.3%, indicating that the desired
"soft landing" was underway. The bad news for bond investors is that
second-quarter 1996 economic growth appears to be more robust than anticipated.
May's payroll gain of 348,000 new jobs, combined with February's startling
705,000 increase, troubled the fixed-income markets. Twelve-month comparisons
through May 31, 1996larger payrolls, higher employment, longer hours workedall
point to second-quarter growth of more than 4%. In addition, consumer
confidence remains elevated, with retail sales in May 1996 5.5% higher than in
May 1995, despite their third monthly decline in a row. While a decline in the
National Association of Purchasing Managers survey in May suggested a slowdown
in manufacturing, the drop was largely attributable to a fall in its
inventories component.
For the moment, inflation at both the consumer and producer levels remains
generally well-behaved, and the U.S. economy continues to operate in the
inflation "safe zone." However, recent increases in hourly wages and commodity
prices require close monitoring. Federal Reserve policy has been in a holding
pattern during most of 1996, but the possibility that it will raise rates to
ease inflationary pressure has become more likely amid stronger-than-expected
economic news. Additionally, the chances for a meaningful deficit reduction
plan have also receded as politicians focus on the 1996 election campaign.
LIMITED-MATURITY MARKET REVIEW
The mortgage sector performed well during both the market's rally and its
subsequent decline. During the rally, which occurred in the first part of this
reporting period, mortgage-backed securities benefited when rates on long-term
bonds rose more sharply than those on short-term obligations. At this point,
mortgage-prepayment expectations had reached their highest levels since early
1994. Tiering based on mortgage origination occurred within both the fixed- and
adjustable-rate mortgage markets so that securities collateralized by seasoned
mortgages, which had already experienced at least one refinancing cycle, were
insulated from extreme increases in prepayments.
When the market reversed direction, mortgage-backed bonds did well given their
relatively short durations. Continuing demand and a lack of supply caused those
with the shortest durations to do particularly well, even while experiencing
higher volatility. As the market continued to trade lower, higher interest
rates provided mortgages with a more stable prepayment environment, and the
refinancing opportunities for a large portion of the market disappeared.
Additionally, volatility declined, which added support to the mortgage market.
During the last month of the period, securities linked to mortgages with
extension risk underperformed, while those less susceptible to interest-rate
swings performed well.
PORTFOLIO ACTIVITY
In the opening months of this fiscal period, we added to our holdings of
premium mortgage-backed securities to participate in the rally as mortgage
prepayment expectations peaked. Subsequently, the position in mortgage-backed
issues was increased, since higher rates provided better prepayment stability.
The major change to the portfolio during the period reflected the shift from
Alliance Mortgage Strategy Trust to Alliance Limited Maturity Government Fund.
This change took place as of February 28, 1996. The Fund's portfolio was
restructured to reflect new investment guidelines that stress investment in
U.S. Government securities generally rather than adjustable-rate mortgage
issues particularly. We therefore extended the average duration of our holdings
by one year and sold floater and adjustable-rate mortgage securities in favor
of U.S. Treasury notes and fixed-rate mortgage bonds.
INVESTMENT OUTLOOK
We believe the U.S. economy will slow during the second half of 1996 after a
fairly robust second quarter. Our forecast calls for gross domestic product
growth of 2.0%
2
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
to 2.5% in the second half of the year. If the economy does not soon show signs
of the expected slowdown, the Federal Reserve is likely to tighten monetary
policy. Until a clearer picture of the U.S. economy emerges, we expect the
fixed-income market to remain choppy.
Thank you for your continued interest and investment in Alliance Limited
Maturity Government Fund. We look forward to reporting its progress to you in
the coming months.
Sincerely,
John D. Carifa
Chairman and President
Paul A. Ullman
Senior Vice President
Patricia J. Young
Senior Vice President
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
3
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
Alliance Limited Maturity Government Fund is an open-end, diversified
investment company that seeks the highest level of current income, consistent
with low volatility of net asset value. The Fund normally invests at least 65%
of its total assets in U.S. Government securities, including mortgage-related
securities and repurchase agreements related to U.S. Government securities. The
Fund confines investment to obligations with maturities of 10 years or less or
with durations not exceeding that of a 10-year U.S. Treasury note.
INVESTMENT RESULTS
_______________________________________________________________________________
AVERAGE ANNUAL TOTAL RETURNS AS OF MAY 31, 1996
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 3.17% -1.21%
. Since Inception* 3.91% 2.80%
SEC Yield 5.34%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 2.33% -.59%
. Since Inception* 3.18% 3.18%
SEC Yield 4.86%
CLASS C SHARES
. One Year 2.52%
. Since Inception* 2.46%
SEC Yield 4.87%
Average annual total returns reflect investment of dividends and/or capital
gain distributions in additional shares, with and without the effect of the
4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (4%-Year 1; 3%-Year 2; 2%-Year 3; 1%-Year 4);
Class C shares purchased prior to July 1, 1996, are not subject to front-end or
contingent deferred sales charges. Class C shares purchased on or after July 1,
1996, are subject to a contingent deferred sales charge of 1% on redemptions
made within the first year after purchase. SEC Yields are for the 30 days ended
May 31, 1996.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
* Inception: 6/1/92, Class A and Class B; 5/3/93, Class C.
4
PORTFOLIO OF INVESTMENTS
MAY 31, 1996 (UNAUDITED) ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------
MORTGAGE-RELATED SECURITIES-55.7%
COLLATERALIZED MORTGAGE OBLIGATIONS-26.2%
ADJUSTABLE RATE-20.6%
Donaldson, Lufkin & Jenrette
Series 1994-QE1 A1
7.76%, 4/25/24 (a) $ 7,687 $ 7,754,061
Housing Security, Inc.
Series 1995-RFCI-A1
7.109%, 10/30/18 (a) 2,483 2,509,829
Series 1995-B A1A
7.313%, 11/25/28 7,525 7,556,838
Prudential Home Mortgage Securities
Series 1993-56 Cl. A1
8.033%, 1/25/24 3,532 3,601,423
Sears Mortgage Securities Corp.
Series 1992-18A Cl. A1
7.515%, 9/25/22 6,328 6,415,471
-----------
27,837,622
FIXED RATE-5.6%
Federal Home Loan Mortgage Corp.
Series 1302 Cl. PE
7.50%, 12/15/15 3,922 3,928,445
Series 1016 Cl. Y
9.35%, 9/15/05 380 379,364
Residential Funding Mortgage Securities I
Series 1993-S37 Cl. A1
7.00%, 10/25/23 3,246 3,243,664
-----------
7,551,473
Total Collateralized Mortgage Obligations
(cost $35,544,941) 35,389,095
FEDERAL HOME LOAN MORTGAGE CORP.-18.8%
7.00%, 11/01/10-12/01/10 1,004 985,512
7.00%, 6/01/09-12/01/10 (GOLD)(b) 22,581 22,164,541
11.00%, 1/01/11-9/01/20 2,084 2,306,818
Total Federal Home Loan Mortgage Corp.
(cost $26,253,282) 25,456,871
FEDERAL NATIONAL MORTGAGE ASSOCIATION-9.4%
6.50%, 10/01/10-4/01/11(b) 11,059 10,612,637
7.50%, 4/01/08(b) 2 1,519
11.25%, 2/01/16 1,846 2,039,402
Total Federal National Mortgage Association
(cost $12,923,069) 12,653,558
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION-1.3%
11.25%, 7/15/13-1/15/16 (GPM) 1,161 1,300,911
11.50%, 2/15/13-6/15/13 (GPM) 360 412,754
11.50%, 4/15/13 (BD) 26 29,527
11.75%, 1/20/16 (GPM) 25 28,419
Total Government National Mortgage Association
(cost $1,734,635) 1,771,611
Total Mortgage-Related Securities
(cost $76,455,927) 75,271,135
U.S. GOVERNMENT OBLIGATIONS-50.7%
U.S. TREASURY BOND-13.7%
U.S. Treasury Bond
11.875%, 11/15/03 14,400 18,580,464
5
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- ------------------------------------------------------------------------
U.S. TREASURY NOTES-37.0%
U.S. Treasury Notes
5.50%, 12/31/00(c) $16,400 $ 15,685,124
5.625%, 11/30/00 1,500 1,442,580
6.375%, 3/31/01(c) 22,000 21,748,980
8.875%, 11/15/98 10,500 11,092,305
-----------
49,968,989
Total U.S. Government Obligations
(cost $70,819,418) 68,549,453
ASSET BACKED SECURITIES-5.7%
Student Loan Funding Corp.
Series 1993-A Cl. A1
6.238%, 1/01/99
(cost $7,696,634) 7,690 7,690,000
SHORT-TERM INVESTMENTS-15.3%
REPURCHASE AGREEMENTS-15.3%
Prudential-Bache Securities, Inc.
5.38%, dated 5/31/96, due 6/03/96
collateralized by $21,470,000
FHLMC 1847A, 7.500%, 7/15/21
(cost $20,776,000) 20,776 20,776,000
TOTAL INVESTMENTS-127.4%
(cost $175,747,979) 172,286,588
Other assets less liabilities-(27.4%) (37,096,552)
NET ASSETS-100% $135,190,036
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At May 31, 1996,
these securities amounted to $10,263,890 or 7.6% of net assets.
(b) 15 year mortgage.
(c) Securities segregated to collateralize reverse repurchase agreements with
an aggregate market value of approximately $38,349,321.
Glossary of Terms:
BD - Builder Buydown.
FHLMC - Federal Home Loan Mortgage Corp.
GPM - Graduated Payment Mortgage.
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996 (UNAUDITED) ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $175,747,979) $172,286,588
Cash 606,515
Interest receivable 1,317,740
Deferred organization expenses 69,083
Receivable for capital stock sold 54,191
Prepaid expenses 726
Total assets 174,334,843
LIABILITIES
Reverse repurchase agreement 38,328,312
Dividends payable 206,499
Payable for capital stock redeemed 183,196
Distribution fee payable 105,944
Advisory fee payable 76,713
Accrued expenses and other liabilities 244,143
Total liabilities 39,144,807
NET ASSETS $135,190,036
COMPOSITION OF NET ASSETS
Capital stock, at par $ 14,621
Additional paid-in capital 159,645,707
Distributions in excess of net investment income (511,519)
Accumulated net realized loss on investments (20,497,382)
Net unrealized depreciation of investments (3,461,391)
-------------
$135,190,036
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share($19,815,583/
2,142,973 shares of capital stock issued and outstanding) $9.25
Sales charge-4.25% of public offering price .41
Maximum offering price $9.66
CLASS B SHARES
Net asset value and offering price per share($62,109,816/
6,716,979 shares of capital stock issued and outstanding) $9.25
CLASS C SHARES
Net asset value, redemption and offering price per share($53,264,637
/5,760,705 shares of capital stock issued and outstanding) $9.25
See notes to financial statements.
7
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 6,209,083
EXPENSES
Advisory fee $ 516,523
Distribution fee - Class A 35,374
Distribution fee - Class B 370,096
Distribution fee - Class C 306,644
Transfer agency 166,533
Audit and legal 92,419
Administrative 82,726
Custodian 60,909
Printing 57,294
Amortization of organization expenses 27,726
Registration 27,334
Directors' fees 12,576
Miscellaneous 6,226
Total expenses before interest 1,762,380
Interest expense 649,202
Total expenses 2,411,582
Net investment income 3,797,501
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments (489,147)
Net change in unrealized appreciation of investments (3,577,922)
Net loss on investments (4,067,069)
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (269,568)
See notes to financial statements.
8
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
SIX MONTHS ENDED
MAY 31,1996 YEAR ENDED
(UNAUDITED) NOV. 30,1995
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 3,797,501 $ 11,879,331
Net realized loss on investments (489,147) (7,748,271)
Net change in unrealized appreciation
(depreciation) of investments (3,577,922) 7,402,773
Net increase (decrease) in net assets from
operations (269,568) 11,533,833
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (670,789) (1,884,462)
Class B (1,847,299) (5,150,507)
Class C (1,537,104) (4,464,679)
Tax return of capital
Class A -0- (109,742)
Class B -0- (299,940)
Class C -0- (260,000)
CAPITAL STOCK TRANSACTIONS
Net decrease (41,193,044) (140,125,516)
Total decrease (45,517,804) (140,761,013)
NET ASSETS
Beginning of year 180,707,840 321,468,853
End of period $135,190,036 $180,707,840
See notes to financial statements.
9
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
INCREASE (DECREASE) IN CASH FROM:
OPERATING ACTIVITIES:
Interest received $ 6,781,222
Interest expense paid (649,202)
Operating expenses paid (1,780,344)
Net increase in cash from operating activities $ 4,351,676
INVESTING ACTIVITIES:
Proceeds from disposition of long-term portfolio
investments 204,877,862
Purchase of long-term portfolio investments (174,513,595)
Purchase of short-term portfolio investments, net (20,254,000)
Net increase in cash from investing activities 10,110,267
FINANCING ACTIVITIES*:
Increase in reverse repurchase agreements, net 32,088,554
Net redemptions from capital stock transactions (43,784,103)
Cash dividends paid (2,161,455)
Net decrease in cash from financing activities (13,857,004)
Net increase in cash 604,939
Cash at beginning of year 1,576
Cash at end of period $ 606,515
RECONCILIATION OF NET DECREASE IN NET ASSETS
FROM OPERATIONS TO NET INCREASE IN CASH
FROM OPERATING ACTIVITIES:
Net decrease in net assets resulting from operations $ (269,568)
ADJUSTMENTS:
Decrease in interest receivable $597,604
Net realized loss on investments 489,147
Net change in unrealized appreciation 3,577,922
Accretion of bond discount (25,465)
Decrease in deferred and other assets 27,000
Decrease in accrued expenses (44,964)
Total adjustments 4,621,244
NET INCREASE IN CASH FROM OPERATING ACTIVITIES $4,351,676
* Non-cash financing activities not included herein consist of reinvestment of
dividends.
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996 (UNAUDITED) ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Limited Maturity Government Fund (the "Fund"), formerly Alliance
Mortgage Strategy Trust, was incorporated in the state of Maryland on April 8,
1992 as a diversified, open-end management investment company. The Fund
currently offers three classes of shares. Class A shares are sold with a
front-end sales charge of up to 4.25%. Class B shares are sold with a
contingent deferred sales charge which declines from 3.0% to zero depending on
the period of time the shares are held. Class B shares will automatically
convert to Class A shares six years after the end of the calendar month of
purchase. Class C shares are currently sold without an initial or contingent
deferred sales charge. Class C shares purchased on or after July 1, 1996, are
subject to a contingent deferred sales charge of 1% on redemptions made within
the first year after purchase. All three classes of shares have identical
voting, dividend, liquidation and other rights and the same terms and
conditions, except that each class bears different distribution expenses and
has exclusive voting rights with respect to its distribution plan. The
following is a summary of significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Fixed-income securities are valued on the basis of prices provided by a pricing
service and brokers. However, securities which are traded over-the-counter and
on a national securities exchange may be valued according to the broadest and
most representative market. It is expected that, for the fixed-income
securities and options in which the Fund invests, this ordinarily will be the
over-the-counter market. Securities not priced in this manner are valued at the
latest quoted bid price, or when exchange valuations are used, at the latest
quoted sale price on the day of valuation. If there is no such reported sale,
the latest quoted bid price will be used. Other securities for which quotations
are not readily available or illiquid securities are valued in good faith at
fair value using methods determined by the Board of Directors. Securities which
mature in 60 days or less are valued at amortized cost, which approximates
market value.
2. ORGANIZATION EXPENSES
Organization expenses of approximately $276,500 have been deferred and are
being amortized on a straight-line basis through August 1997.
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 applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Interest income is accrued daily. Security transactions are accounted for on
the date the securities are purchased or sold. The Fund accretes discounts as
adjustments to interest income. Security gains and losses are determined on the
identified cost basis.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser"), an advisory fee at an annual rate of
.65 of 1% of the average daily net assets of the Fund. Such fee is accrued
daily and paid monthly.
The Adviser has agreed, under the terms of the investment advisory agreement,
to reimburse the Fund to the extent that its aggregate annual expenses
(exclusive of interest, taxes, brokerage, distribution fees, and extraordinary
expenses) in any year exceed 2.5% of the first $30 million of its average daily
net assets, 2.0% of the next $70 million of its average daily net assets and
1.5% of its average daily net assets in excess of $100 million. No such
reimbursement was required for the six months ended May 31, 1996. Pursuant to
the advisory agreement, the Fund paid $82,726 to the Adviser representing the
cost of certain legal and accounting services provided to the Fund by the
Adviser.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $101,905 for the six months ended May 31, 1996.
11
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $1,279 from the sale of Class A shares and $66,250
in contingent deferred sales charges imposed upon redemptions by shareholders
of Class B shares for the six months ended May 31, 1996.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30 of 1% of the average daily net assets attributable to the
Class A shares and 1% of the average daily net assets attributable to the Class
B and Class C shares. Such fee is accrued daily and paid monthly. The Agreement
provides that the Distributor will use such payments in their entirety for
distribution assistance and promotional activities. The Distributor has
incurred expenses in excess of the distribution costs reimbursed by the Fund in
the amount of $571,930 and $2,490,863 for Class B and C shares, respectively;
such costs may be recovered from the Fund in future periods so long as the
Agreement is in effect. In accordance with the Agreement, there is no provision
for recovery of unreimbursed distribution costs incurred by the Distributor
beyond the current fiscal year for Class A shares. The Agreement also provides
that the Adviser may use its own resources to finance the distribution of the
Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. Government Securities) aggregated $170,233,876 and $203,995,267,
respectively, for the six months ended May 31, 1996.
At May 31, 1996, the cost of securities for federal income tax purposes was
$175,747,979. Accordingly, gross unrealized appreciation of investments was
$151,576 and gross unrealized depreciation of investments was $3,612,967
resulting in net unrealized depreciation of $3,461,391.
At November 30, 1995, for federal income tax purposes the Fund had a capital
loss carryforward of $19,988,892 of which $219,463 expires in the year 2000;
$177,358 expires in the year 2001, $11,863,143 expires in the year 2002 and
$7,728,928 expires in the year 2003.
12
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 9,000,000,000 shares of $.001 par value capital stock authorized,
divided into three classes, designated Class A, Class B and Class C shares.
Each class consists of 3,000,000,000 authorized shares. Transactions in capital
stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MAY 31,1996 NOVEMBER 30, MAY 31,1996 NOVEMBER 30,
(UNAUDITED) 1995 (UNAUDITED) 1995
------------ ------------ -------------- --------------
CLASS A
Shares sold 206,883 854,241 $ 1,967,705 $ 8,085,552
Shares issued in
reinvestment of
dividends 35,986 97,452 339,454 922,047
Shares converted from
Class B to Class A 107,775 -0- 1,003,413 -0-
Shares redeemed (1,138,061) (2,559,958) (10,726,123) (24,225,739)
Net decrease (787,417) (1,608,265) $ (7,415,551) $(15,218,140)
CLASS B
Shares sold 398,353 2,656,458 $ 3,763,463 $ 25,126,058
Shares issued in
reinvestment of
dividends 95,840 262,019 904,230 2,480,720
Shares converted from
Class B to Class A (107,775) -0- (1,003,413) -0-
Shares redeemed (2,534,182) (8,392,989) (23,920,355) (79,485,822)
Net decrease (2,147,764) (5,474,512) $(20,256,075) $(51,879,044)
CLASS C
Shares sold 897,272 2,193,838 $ 8,491,387 $ 20,770,913
Shares issued in
reinvestment of
dividends 73,926 251,819 697,382 2,383,642
Shares redeemed (2,404,116) (10,156,950) (22,710,187) (96,182,887)
Net decrease (1,432,918) (7,711,293) $(13,521,418) $(73,028,332)
13
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
NOTE F: 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 cash, cash equivalents or liquid
high-grade debt securities having a value at least equal to the repurchase
price.
As of May 31, 1996, the Fund had entered into the following reverse repurchase
agreements:
AMOUNT BROKER INTEREST RATE MATURITY
----------- -------------- ------------- ------------
$16,181,462 Morgan Stanley 5.10% June 3, 1996
$22,146,850 Morgan Stanley 5.00% June 3, 1996
For the six months ended May 31, 1996, the maximum amount of reverse repurchase
agreements outstanding was $92,478,750, the average amount outstanding was
approximately $27,054,969, and the daily weighted average interest rate was
4.80%.
14
FINANCIAL HIGHLIGHTS ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------
SIX MONTHS JUNE 1,1992(E)
ENDED YEAR ENDED NOVEMBER 30, TO
MAY 31,1996 ------------------------------------- NOVEMBER 30,
(UNAUDITED) 1995 1994 1993 1992
------------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.52 $9.51 $9.94 $9.84 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .25(d) .52(d) .42 .57 .35(f)
Net realized and unrealized gain (loss)
on investments (.25) .02 (.32) .11 (.17)
Net increase in net asset value from
operations -0- .54 .10 .68 .18
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.27) (.50) (.48) (.58) (.34)
Tax return of capital -0- (.03) (.04) -0- -0-
Distributions from net realized gains -0- -0- (.01) -0- -0-
Total dividends and distributions (.27) (.53) (.53) (.58) (.34)
Net asset value, end of period $9.25 $9.52 $9.51 $9.94 $9.84
TOTAL RETURN
Total investment return based on net
asset value (a) (.02)% 5.91% 1.03% 7.02% 1.84%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $19,816 $27,887 $43,173 $59,215 $24,186
Ratio of expenses to average net assets 2.43%(b) 2.14% 1.34% 1.54% 1.44%(b)(g)
Ratio of expenses to average net
assets excluding interest expense (c) 1.61%(b) 1.41% 1.20% 1.33% 1.42%(b)
Ratio of net investment income to
average net assets 5.36%(b) 5.53% 4.78% 5.66% 6.58%(b)
Portfolio turnover rate 101% 293% 375% 499% 101%
</TABLE>
See footnote summary on page 17.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------------------
SIX MONTHS JUNE 1,1992(E)
ENDED YEAR ENDED NOVEMBER 30, TO
MAY 31,1996 ------------------------------------- NOVEMBER 30,
(UNAUDITED) 1995 1994 1993 1992
------------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.52 $ 9.52 $ 9.94 $ 9.84 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .22(d) .46(d) .39 .49 .31(f)
Net realized and unrealized gain (loss)
on investments (.25) .01 (.35) .12 (.17)
Net increase (decrease) in net asset
value from operations (.03) .47 .04 .61 .14
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.24) (.44) (.42) (.51) (.30)
Tax return of capital -0- (.03) (.03) -0- -0-
Distributions from net realized gains -0- -0- (.01) -0- -0-
Total dividends and distributions (.24) (.47) (.46) (.51) (.30)
Net asset value, end of period $ 9.25 $ 9.52 $ 9.52 $ 9.94 $ 9.84
TOTAL RETURN
Total investment return based on net
asset value (a) (.38)% 5.05% .42% 6.27% 1.50%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $62,110 $84,362 $136,458 $168,157 $149,188
Ratio of expenses to average net assets 3.14%(b) 2.85% 2.08% 2.26% 2.13%(b)(g)
Ratio of expenses to average net assets
excluding interest expense (c) 2.33%(b) 2.11% 1.91% 2.07% 2.10%(b)
Ratio of net investment income to
average net assets 4.67%(b) 4.83% 4.12% 4.98% 6.01%(b)
Portfolio turnover rate 101% 293% 375% 499% 101%
</TABLE>
See footnote summary on page 17.
16
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------
SIX MONTHS MAY 3,1993(H)
ENDED YEAR ENDED NOVEMBER 30, TO
MAY 31,1996 ------------------------ NOVEMBER 30,
(UNAUDITED) 1995 1994 1993
------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $9.52 $9.52 $9.94 $9.98
INCOME FROM INVESTMENT OPERATIONS
Net investment income .22(d) .46(d) .37 .27
Net realized and unrealized gain (loss)
on investments (.25) .01 (.33) (.03)
Net increase (decrease) in net asset
value from operations (.03) .47 .04 .24
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.24) (.44) (.42) (.28)
Tax return of capital -0- (.03) (.03) -0-
Distributions from net realized gains -0- -0- (.01) -0-
Total dividends and distributions (.24) (.47) (.46) (.28)
Net asset value, end of period $9.25 $9.52 $9.52 $9.94
TOTAL RETURN
Total investment return based on net
asset value (a) (.35)% 5.06% .42% 2.40%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $53,265 $68,459 $141,838 $228,703
Ratio of expenses to average net assets 3.13%(b) 2.85% 2.04% 1.74%(b)
Ratio of expenses to average net assets
excluding interest expense (c) 2.32%(b) 2.10% 1.89% 1.58%(b)
Ratio of net investment income to
average net assets 4.69%(b) 4.84% 4.10% 3.70%(b)
Portfolio turnover rate 101% 293% 375% 499%
</TABLE>
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(b) Annualized.
(c) Net of interest expenses on reverse repurchase agreements (see Note F).
(d) Based on average shares outstanding.
(e) Commencement of operations.
(f) Net of expenses waived by the Adviser.
(g) If the Fund had borne all expenses, the expense ratios would have been
1.55% for Class A shares and 2.28% for Class B shares.
(h) Commencement of distribution.
17
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
RUTH BLOCK (1)
DAVID H. DIEVLER (1)
JOHN H. DOBKIN (1)
WILLIAM H. FOULK, JR. (1)
DR. JAMES M. HESTER (1)
CLIFFORD L. MICHEL (1)
ROBERT C. WHITE (1)
OFFICERS
PAUL A. ULLMAN, SENIOR VICE PRESIDENT
PATRICIA J. YOUNG, SENIOR VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
JUAN J. RODRIGUEZ, CONTROLLER
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free 1-(800) 221-5672
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY 10019
(1) Member of the Audit Committee.
18
THE ALLIANCE FAMILY OF MUTUAL FUNDS
_______________________________________________________________________________
FIXED INCOME
Alliance Bond Fund
U.S. Government Portfolio
Corporate Bond Portfolio
Alliance Global Dollar Government Fund
Alliance Global Strategic Income Trust
Alliance Mortgage Securities Income Fund
Alliance Limited Maturity Government Fund
Alliance Multi-Market Strategy Trust
Alliance North American Government Income Trust
Alliance Short-Term Multi-Market Trust
Alliance Short-Term U.S. Government Fund
Alliance World Income Trust
TAX-FREE INCOME
Alliance Municipal Income Fund
California Portfolio
Insured California Portfolio
Insured National Portfolio
National Portfolio
New York Portfolio
Alliance Municipal Income Fund II
Arizona Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
MONEY MARKET
AFD Exchange Reserves
GROWTH
The Alliance Fund
Alliance Global Small Cap Fund
Alliance Growth Fund
Alliance Premier Growth Fund
GROWTH & INCOME
Alliance Strategic Balanced Fund
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Income Builder Fund
Alliance Utility Income Fund
AGGRESSIVE GROWTH
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance International Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage Fund
Alliance Global Environment Fund
ACM Government Income Fund
ACM Government Opportunity Fund
ACM Government Securities Fund
ACM Government Spectrum Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
Alliance World Dollar Government Fund
Alliance World Dollar Government Fund II
The Austria Fund
The Korean Investment Fund
The Spain Fund
The Southern Africa Fund
CASH MANAGEMENT SERVICES
ACM Institutional Reserves
Government Portfolio
Prime Portfolio
Tax-Free Portfolio
Trust Portfolio
Alliance Capital Reserves
Alliance Government Reserves
Alliance Insured Account
Alliance Money Reserves
Alliance Municipal Trust
California Portfolio
Connecticut Portfolio
Florida Portfolio
General Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
19
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCE CAPITAL
INVESTING WITHOUT THE MYSTERY.
THIS REPORT IS INTENDED SOLELY FOR DISTRIBUTION TO CURRENT SHAREHOLDERS
OF THE FUND.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER,
ALLIANCE CAPITAL MANAGEMENT L.P.
LMGSR
