ALLIANCE LIMITED MATURITY GOVERNMENT FUND
SEMI-ANNUAL REPORT
MAY 31, 1997
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
July 7, 1997
Dear Shareholder:
Since our last report dated November 30, 1996, the U.S. bond market has posted
modest returns. After rallying at the end of 1996, the market reversed
direction in early 1997 and gave up some of its earlier gains. During the first
quarter, data indicating resurgent strength in the economy, particularly within
the labor market, renewed concerns about inflation and pushed the bond market
lower. In response to continued strong growth and potential inflationary
imbalances, the Federal Reserve raised interest rates in March, further eroding
bond market returns. More recently, however, the bond market has been able to
recapture most of its earlier 1997 losses. The market rallied as expectations
of additional interest rate increases by the Federal Reserve waned with
economic releases showing signs of slower growth and well-behaved inflation.
Year-to-date returns on mortgage-backed securities continued to outpace
Treasury returns as higher interest rates stabilized mortgage prepayment
expectations. Mortgage performance was further enhanced by declining interest
rate volatility.
INVESTMENT RESULTS
The following table provides the investment returns for Alliance Limited
Maturity Government Fund for the six and twelve month periods ended May 31,
1997. The table also compares that performance with the Lipper Intermediate
U.S. Government Funds (IUG) Average, a universe of 123 funds with investment
objectives similar to that of Alliance Limited Maturity Government Fund.
We are pleased to report that over the past six months, your Fund's Class A
shares returned 1.30% versus 0.58% for the Lipper IUG universe. This
outperformance is due primarily to strong relative performance of
mortgage-backed securities over the past six months.
INVESTMENT RESULTS*
Period Ended May 31, 1997
TOTAL RETURN
6 MONTHS 12 MONTHS
---------- -----------
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
Class A 1.30% 6.50%
Class B 0.94% 5.74%
Class C 0.94% 5.75%
LIPPER INTERMEDIATE U.S. GOVERNMENT
FUNDS (IUG) AVERAGE 0.58% 6.94%
* TOTAL RETURNS ARE BASED ON THE NET ASSET VALUES OF EACH CLASS OF SHARES AS
OF MAY 31, 1997. 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 INCLUDE THE
REINVESTMENT OF ANY DISTRIBUTIONS PAID DURING THE PERIOD.
THE UNMANAGED LIPPER INTERMEDIATE GOVERNMENT FUNDS (IUG) AVERAGE IS BASED ON
THE PERFORMANCE OF A UNIVERSE OF 123 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.
ADDITIONAL RESULTS APPEAR ON PAGE 3.
ECONOMIC REVIEW
The U.S. economy finished 1996 on a strong note. After moderating in the third
quarter, the economy picked up speed as the year came to a close, led by a
rebound in consumer spending. The annualized gain in retail sales jumped to
4.8% in the fourth quarter, up from only 0.9% in the third quarter. An
unexpected surge in export growth also added to year-end growth. In all, growth
in aggregate output, as measured by Gross Domestic Product (GDP), accelerated
to 3.8% during the final three months of 1996.
The economy continued its strong performance in the first quarter of 1997,
buoyed by continued growth in the labor market. The production side of the
economy showed considerable strength with first quarter industrial production
up by 4.9% from a year earlier and total hours worked up by 3.8% for the same
time period. Overall, GDP growth jumped to 5.9% during the first three months
of 1997--its fastest rate of increase in nearly 10 years.
1
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
During April and May, the bond market rallied as data showing a slowing economy
and benign inflation were released and expectations for a Federal Reserve
tightening abated. The rally was fueled by a weak retail sales report, together
with favorable Employment Cost Index (ECI) and durable goods reports that were
weaker than expected. Consumer confidence remained elevated and real personal
income grew strongly at 4.5% year-on-year through April. The unemployment rate
edged down to 4.8% in May, its lowest level for 23 years, and wages continued
to climb. Retail sales moved lower in May, indicating that the consumer was
finally taking a breather after the first quarter spending spree.
Despite the strong growth, inflation news continues to be generally favorable.
After moving slightly higher late in 1996, consumer and producer price gains
both retreated in 1997. Consumer prices advanced through May at a 2.2% annual
rate (a three year low) and producer prices were up just 0.3% for the same
period.
LIMITED MATURITY MARKET REVIEW
Fixed income returns were subdued for the first five months of the year, as
positive returns in January and February were generally erased by higher
interest rates in March.
The market traded off as expectations heightened around a Federal Reserve
preemptive rate hike. Among the investment grade sectors, mortgage-backed
securities were among the best performing sectors, posting moderate gains.
Mortgage-backed securities continued to benefit from stable interest rates and
declining implied volatilities.
PORTFOLIO ACTIVITY
Over the past six months, we generally increased our allocation to mortgage
related securities. Commercial mortgage-backed securities, rated AAA, were
purchased to provide yield and call protection. We increased our exposure to
Adjustable Rate Mortgages (ARMs) and traded up in coupon as the market became
range bound. In May, we temporarily reduced our exposure to mortgage-backed
securities in favor of Treasuries in anticipation of an increase in volatility
surrounding the Federal Open Market Committee meeting.
INVESTMENT OUTLOOK
U.S. economic growth has continued at a pace considered above the long-term,
non-inflationary rate. However, recent data indicate signs of a slowdown. We
expect the U.S. economy to gradually slow during the next several quarters to a
more sustainable 2.0% to 2.5% growth rate. We anticipate this slowing will
occur before any substantial inflationary pressures materialize. Given the
Federal Reserve's vigilance against rising inflation, the market will be
particularly vulnerable to daily economic news which may put upward pressure on
yields. In contrast to recent periods of rising rates, the relative lack of
leverage in the U.S. financial system suggests that interest rates and
volatility will be less substantial than in 1994. While we expect the Federal
Reserve to be preemptive in its fight against inflation, we do not expect the
Federal Reserve to step ahead of the market by increasing rates.
Thank you for your continued interest and investment in Alliance Limited
Maturity Government Fund. We look forward to reporting to you again on market
activity and the Fund's investment results in coming periods.
Sincerely,
John D. Carifa
Chairman
Patricia Young
Senior Vice President
Jeffrey Phlegar
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.
2
INVESTMENT OBJECTIVE AND POLICIES
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
Alliance Limited Maturity Government Fund is an open-end, diversified
investment management 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 investments 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 RETURN AS OF MAY 31, 1997
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 6.50% 1.98%
Since Inception* 4.43% 3.53%
SEC Yield** 5.22%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 5.74% 2.74%
Since Inception* 3.69% 3.69%
SEC Yield** 4.71%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 5.75% 4.75%
Since Inception* 3.22% 3.22%
SEC Yield** 4.72%
Average annual total returns reflect reinvestment of dividends and/or capital
gains 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 (3% year 1, 2% year 2, 1% year 3, 0% year 4);
and for Class C shares (1% year 1). Returns for Class A shares do not reflect
the imposition of the 1 year 1% contingent deferred sales charge for accounts
over $1,000,000.
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.
** SEC Yield is for the 30 days ended May 31, 1997.
3
PORTFOLIO OF INVESTMENTS
MAY 31, 1997 (UNAUDITED)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------
MORTGAGE-RELATED SECURITIES-74.2%
COLLATERALIZED MORTGAGE OBLIGATIONS-36.6%
ADJUSTABLE RATE-24.9%
Donaldson, Lufkin & Jenrette
Series 1994-QE1 Cl. A1
7.756 %, 4/25/24 (a) $ 4,321 $ 4,326,424
Housing Security, Inc.
Series 1995-B Cl. A1A
7.507 %, 11/25/28 5,890 5,974,193
Prudential Home Mortgage Securities, Inc.
Series 1993-56 Cl. A1
8.412 %, 1/25/24 2,323 2,373,590
Resolution Trust Corp..
Series 1991-M4 Cl. A1
6.28 %, 2/25/20 2,764 2,714,151
Sears Mortgage Securities Corp.
Series 1992-18A Cl. A1
7.56 %, 9/25/22 5,072 5,173,443
Somerset Commercial Mortgage Corp.
Series 1997-1 Cl. A1
7.209 %, 2/15/07 (a) 3,000 2,992,500
------------
23,554,301
FIXED RATE-11.7%
Federal Home Loan Mortgage Corp.
Series 1350 Cl. E
6.70 %, 1/15/15 4,683 4,686,946
Federal National Mortgage Association
Series 1990 Cl. J
7.00 %, 5/25/14 1,110 1,108,776
Series 1997-8 Cl. D
7.00 %, 12/18/24 4,700 4,512,000
Residential Funding Mortgage Securities I
Series 1993-S37 Cl. A1
7.00 %, 10/25/23 738 735,056
------------
11,042,778
Total Collateralized Mortgage Obligations
(cost $34,558,737) 34,597,079
FEDERAL NATIONAL MORTGAGE ASSOCIATION-15.1%
6.107%, 3/25/27 (b) 4,818 4,806,240
7.50%, 4/01/08 (c) 1 1,308
7.583%, 6/01/25 (b) 3,751 3,807,058
7.602%, 6/01/25 (b) 3,794 3,851,342
11.25%, 2/01/16 1,624 1,794,225
Total Federal National Mortgage Association
(cost $14,289,490) 14,260,173
FEDERAL HOME LOAN MORTGAGE CORP.-12.3%
7.50%, 1/01/12 9,684 9,796,284
11.00%, 1/01/11-9/01/20 1,605 1,785,250
Total Federal Home Loan Mortgage Corp.
(cost $11,638,087) 11,581,534
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION-8.0%
8.00%, 5/15/26-12/15/26 6,009 6,113,937
11.25%, 7/15/13-1/15/16
GPM 983 1,085,744
11.50%, 2/15/13-6/15/13
BD 305 344,501
11.75%, 1/20/16 BD 14 16,073
Total Government National Mortgage Association
(cost $7,607,373) 7,560,255
4
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------
STRIPPED MORTGAGE BACKED SECURITY-2.2%
Mortgage Capital Funding, Inc.
Series 1996-MC2 Cl. X, I/O
1.972 %, 12/21/26 (d)
(cost $2,051,831) $2,052 $ 2,067,039
Total Mortgage-Related Securities
(cost $70,145,518) 70,066,080
U.S. GOVERNMENT OBLIGATIONS-20.8%
U.S. TREASURY NOTES-14.9%
6.125%, 12/31/01 6,900 6,799,743
6.25%, 2/28/02 (e) 7,400 7,323,706
------------
14,123,449
U.S. TREASURY BOND-5.9%
11.875%, 11/15/03 4,350 5,541,508
Total U.S. Government Obligations
(cost $20,081,886) 19,664,957
REPURCHASE AGREEMENT-11.8%
Goldman Sachs & Co.
5.50%, dated 5/30/97, due 6/02/97,
collateralized by $5,363,895 FNMA,
6.00%, 5/01/09 5,000 5,000,000
Prudential-Bache Securities, Inc.
5.53%, dated 5/30/97, due 6/02/97,
collateralized by $6,125,747 FHLMC,
8.016%, 10/01/23 6,175 6,175,000
Total Repurchase Agreement
(cost $11,175,000) 11,175,000
TOTAL INVESTMENTS-106.8%
(cost $101,402,404) 100,906,037
Other assets less liabilities-(6.8%) (6,386,311)
NET ASSETS-100% $ 94,519,726
(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, 1997,
these securities amounted to $7,318,924 or 7.7% of net assets.
(b) Adjustable rate securities.
(c) 15 year mortgage.
(d) Interest rate represents yield to maturity and principal amount represents
amortized cost.
(e) Security segregated to collateralize reverse repurchase agreements with an
aggregate market value of approximately $6,750,000.
Glossary of Terms:
BD - Builder buydown.
FHLMC - Federal home loan mortgage Corp.
FNMA - Federal national mortgage association.
GPM - Graduated payment mortgage.
I/O - Interest only.
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997 (UNAUDITED)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $101,402,404) $100,906,037
Cash 261
Interest receivable 824,945
Receivable for capital stock sold 109,778
Deferred organization expenses 13,782
Prepaid expenses 1,797
Total assets 101,856,600
LIABILITIES
Reverse repurchase agreement 6,755,109
Payable for capital stock redeemed 151,565
Dividends payable 139,938
Distribution fee payable 69,681
Advisory fee payable 51,149
Accrued expenses and other liabilities 169,432
Total liabilities 7,336,874
NET ASSETS $ 94,519,726
COMPOSITION OF NET ASSETS
Capital stock, at par $ 10,168
Additional paid-in capital 117,783,207
Distributions in excess of net investment income (162,510)
Accumulated net realized loss on investments and
futures transactions (22,614,772)
Net unrealized depreciation of investments (496,367)
$ 94,519,726
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($18,100,129/
1,946,483 shares of capital stock issued and outstanding) $9.30
Sales charge--4.25% of public offering price .41
Maximum offering price $9.71
CLASS B SHARES
Net asset value and offering price per share ($40,861,783/
4,395,896 shares of capital stock issued and outstanding) $9.30
CLASS C SHARES
Net asset value and offering price per share ($35,557,814/
3,825,213 shares of capital stock issued and outstanding) $9.30
See notes to financial statements.
6
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1997 (UNAUDITED)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 4,150,862
EXPENSES
Advisory fee $ 329,578
Distribution fee - Class A 25,697
Distribution fee - Class B 227,287
Distribution fee - Class C 194,098
Transfer agency 94,777
Administrative 67,509
Audit and legal 45,778
Custodian 44,331
Registration 31,262
Printing 28,353
Amortization of organization expenses 27,574
Directors' fees 9,994
Miscellaneous 6,353
Total expenses before interest 1,132,591
Interest expense 381,654
Total expenses 1,514,245
Net investment income 2,636,617
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investment transactions (905,257)
Net realized loss on futures transactions (52,456)
Net change in unrealized appreciation of investments (832,953)
Net loss on investments and futures (1,790,666)
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 845,951
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30,
(UNAUDITED) 1996
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 2,636,617 $ 6,766,537
Net realized loss on investment and
futures transactions (957,713) (1,648,824)
Net change in unrealized appreciation
of investments (832,953) 220,055
Net increase in net assets from operations 845,951 5,337,768
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (502,907) (1,099,192)
Class B (1,153,153) (3,020,671)
Class C (988,032) (2,547,881)
Tax return of capital
Class A -0- (80,449)
Class B -0- (221,079)
Class C -0- (186,476)
CAPITAL STOCK TRANSACTIONS
Net decrease (13,773,081) (68,798,912)
Total decrease (15,571,222) (70,616,892)
NET ASSETS
Beginning of year 110,090,948 180,707,840
End of period $ 94,519,726 $110,090,948
See notes to financial statements.
8
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED MAY 31, 1997 (UNAUDITED)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
INCREASE (DECREASE) IN CASH FROM:
OPERATING ACTIVITIES:
Interest received $ 4,435,918
Interest expense paid (381,654)
Operating expenses paid (1,171,373)
Net increase in cash from operating activities $ 2,882,891
INVESTING ACTIVITIES:
Proceeds from disposition of long-term
portfolio investments 99,343,467
Purchase of long-term portfolio investments (76,992,565)
Purchase of short-term portfolio investments, net (10,090,000)
Loss on closed futures contracts (52,457)
Net increase in cash from investing activities 12,208,445
FINANCING ACTIVITIES*:
Increase in reverse repurchase agreements 1,653,466
Net redemptions from capital stock transactions (15,697,767)
Cash dividends paid (1,047,338)
Net decrease in cash from financing activities (15,091,639)
Net decrease in cash (303)
Cash at beginning of year 564
Cash at end of period $ 261
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 $ 845,951
ADJUSTMENTS:
Decrease in interest receivable $ 301,556
Net realized loss on investment and futures
transactions 957,713
Net change in unrealized appreciation of
investments 832,953
Accretion of bond discount (16,500)
Decrease in deferred and other assets 27,574
Decrease in accrued expenses (66,356)
Total adjustments 2,036,940
NET INCREASE IN CASH FROM OPERATING ACTIVITIES $ 2,882,891
* Non-cash financing activities not included herein consist of reinvestment
of dividends.
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997 (UNAUDITED)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Limited Maturity Government Fund, Inc. (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% for purchases not exceeding $1,000,000.
With respect to purchases of $1,000,000 or more, Class A shares redeemed within
one year of purchase will be subject to a contingent deferred sales charge of
1%. Class B shares are currently 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 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 restricted 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, unless this method does not represent fair 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 INVESTMENT TRANSACTIONS
Investment transactions are accounted for on the date the securities are
purchased or sold. The Fund amortizes premium and accretes discounts as
adjustments to interest income. Investment 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.
For federal income tax purposes, the Fund's distributions of income and capital
gains are subject to recharacterization, which may include a tax return of
capital, at the end of the year to reflect the final investment results for
that year.
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. Pursuant to the advisory agreement, the Fund paid
$67,509 to the Adviser representing the cost of certain legal and accounting
services provided to the Fund by the Adviser for the six months ended May 31,
1997.
10
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
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 $57,865 for the six months ended May 31, 1997.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
$23,091 and $11,572 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class B and Class C shares respectively for the
six months ended May 31, 1997.
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 both
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 $418,764 and $2,790,820 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 $8,257,597 and $22,200,392,
respectively, for the six months ended May 31, 1997. There were purchases of
$62,446,081 and sales of $74,529,849 of U.S. government and government agency
obligations for the six months ended May 31, 1997.
At May 31, 1997, the cost of securities for federal income tax purposes was the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation of investments was $272,109 and gross unrealized
depreciation of investments was $768,476 resulting in net unrealized
depreciation of $496,367.
At November 30, 1996, for federal income tax purposes the Fund had a capital
loss carryforward of $21,657,059 of which $219,463 expires in the year 2000,
$177,358 expires in the year 2001, $11,863,143 expires in the year 2002,
$7,728,928 expires in the year 2003 and $1,668,167 expires in the year 2004.
11
NOTES TO FINANCIAL STATEMENTS (CONT.)
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, 1997 NOVEMBER 30, MAY 31, 1997 NOVEMBER 30,
(UNAUDITED) 1996 (UNAUDITED) 1996
------------- ------------ -------------- --------------
Shares sold 10,614,930 2,218,089 $ 98,901,276 $ 20,814,961
Shares issued in
reinvestment of
dividends and
distributions 28,861 66,439 268,824 622,936
Shares converted
from Class B 115,924 231,530 1,078,890 2,158,178
Shares redeemed (10,532,400) (3,727,280) (98,063,297) (34,954,990)
Net increase
(decrease) 227,315 (1,211,222) $ 2,185,693 $(11,358,915)
CLASS B
Shares sold 961,790 1,169,061 $ 8,946,020 $ 10,938,822
Shares issued in
reinvestment of
dividends and
distributions 73,124 171,299 681,435 1,606,681
Shares converted
to Class A (115,924) (231,530) (1,078,890) (2,158,178)
Shares redeemed (1,856,011) (4,640,656) (17,281,304) (43,509,656)
Net decrease (937,021) (3,531,826) $ (8,732,739) $(33,122,331)
CLASS C
Shares sold 338,828 1,443,550 $ 3,154,230 $ 13,565,512
Shares issued in
reinvestment of
dividends and
distributions 70,988 131,894 661,438 1,236,980
Shares redeemed (1,184,376) (4,169,294) (11,041,703) (39,120,158)
Net decrease (774,560) (2,593,850) $ (7,226,035) $(24,317,666)
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 liquid assets having a value at least
equal to the repurchase price.
On May 31, 1997, the Fund held the following reverse repurchase agreement:
AMOUNT BROKER INTEREST RATE MATURITY
- -------------- -------------- -------------- --------------
$6,750,000 Morgan Stanley 5.45% June 3, 1997
For the six months ended May 31, 1997, the maximum amount of reverse repurchase
agreements outstanding was $32,333,875, the average amount outstanding was
approximately $14,384,224, and the daily weighted average interest rate was
5.38%.
12
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(A)
ENDED YEAR ENDED NOVEMBER 30, TO
MAY 31, 1997 -------------------------------------------------- NOVEMBER 30,
(UNAUDITED) 1996 1995 1994 1993 1992
------------ ----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.45 $9.52 $9.51 $9.94 $9.84 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .26(b) .51(b) .52(b) .42 .57 .35(c)
Net realized and unrealized gain (loss)
on investment transactions (.14) (.04) .02 (.32) .11 (.17)
Net increase in net asset value from
operations .12 .47 .54 .10 .68 .18
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.27) (.51) (.50) (.48) (.58) (.34)
Tax return of capital -0- (.03) (.03) (.04) -0- -0-
Distributions from net realized gains -0- -0- -0- (.01) -0- -0-
Total dividends and distributions (.27) (.54) (.53) (.53) (.58) (.34)
Net asset value, end of period $9.30 $9.45 $9.52 $9.51 $9.94 $ 9.84
TOTAL RETURN
Total investment return based on net
asset value (d) 1.30% 5.11% 5.91% 1.03% 7.02% 1.84%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $18,100 $16,248 $27,887 $43,173 $59,215 $24,186
Ratio of expenses to average net assets 2.38%(e) 2.22% 2.14% 1.34% 1.54% 1.44%(e)(f)
Ratio of expenses to average net assets
excluding interest expense (g) 1.62%(e) 1.58% 1.41% 1.20% 1.33% 1.42%(e)
Ratio of net investment income to
average net assets 5.38%(e) 5.44% 5.53% 4.78% 5.66% 6.58%(e)
Portfolio turnover rate 67% 159% 293% 375% 499% 101%
</TABLE>
See footnote summary on page 15.
13
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(A)
ENDED YEAR ENDED NOVEMBER 30, TO
MAY 31, 1997 -------------------------------------------------- NOVEMBER 30,
(UNAUDITED) 1996 1995 1994 1993 1992
------------ ----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.45 $9.52 $9.52 $9.94 $9.84 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .24(b) .44(b) .46(b) .39 .49 .31(c)
Net realized and unrealized gain (loss)
on investment transactions (.15) (.04) .01 (.35) .12 (.17)
Net increase in net asset value from
operations .09 .40 .47 .04 .61 .14
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.24) (.44) (.44) (.42) (.51) (.30)
Tax return of capital -0- (.03) (.03) (.03) -0- -0-
Distributions from net realized gains -0- -0- -0- (.01) -0- -0-
Total dividends and distributions (.24) (.47) (.47) (.46) (.51) (.30)
Net asset value, end of period $9.30 $9.45 $9.52 $9.52 $9.94 $9.84
TOTAL RETURN
Total investment return based on net
asset value (d) .94% 4.36% 5.05% .42% 6.27% 1.50%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $40,862 $50,386 $84,362 $136,458 $168,157 $149,188
Ratio of expenses to average net assets 3.12%(e) 2.94% 2.85% 2.08% 2.26% 2.13%(e)(f)
Ratio of expenses to average net assets
excluding interest expense (g) 2.36%(e) 2.30% 2.11% 1.91% 2.07% 2.10%(e)
Ratio of net investment income to
average net assets 4.64%(e) 4.73% 4.83% 4.12% 4.98% 6.01%(e)
Portfolio turnover rate 67% 159% 293% 375% 499% 101%
</TABLE>
See footnote summary on page 15.
14
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, 1997 ------------------------------------- NOVEMBER 30,
(UNAUDITED) 1996 1995 1994 1993
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.45 $9.52 $9.52 $9.94 $9.98
INCOME FROM INVESTMENT OPERATIONS
Net investment income .24(b) .45(b) .46(b) .37 .27
Net realized and unrealized gain (loss)
on investment transactions (.15) (.05) .01 (.33) (.03)
Net increase in net asset value from
operations .09 .40 .47 .04 .24
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.24) (.45) (.44) (.42) (.28)
Tax return of capital -0- (.02) (.03) (.03) -0-
Distributions from net realized gains -0- -0- -0- (.01) -0-
Total dividends and distributions (.24) (.47) (.47) (.46) (.28)
Net asset value, end of period $9.30 $9.45 $9.52 $9.52 $9.94
TOTAL RETURN
Total investment return based on net
asset value (d) .94% 4.38% 5.06% .42% 2.40%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $35,558 $43,457 $68,459 $141,838 $228,703
Ratio of expenses to average net assets 3.10%(e) 2.92% 2.85% 2.04% 1.74%(e)
Ratio of expenses to average net assets
excluding interest expense (g) 2.34%(e) 2.29% 2.10% 1.89% 1.58%(e)
Ratio of net investment income to
average net assets 4.66%(e) 4.75% 4.84% 4.10% 3.70%(e)
Portfolio turnover rate 67% 159% 293% 375% 499%
</TABLE>
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Net of expenses waived by the Adviser.
(d) 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.
(e) Annualized.
(f) 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.
(g) Net of interest expense of .76%, .64%, .74%, .14%, .21%, .02%,
respectively, on reverse repurchase agreements (see Note F).
(h) Commencement of distribution.
15
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)
DONALD J. ROBINSON (1)
OFFICERS
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
WAYNE D. LYSKI, SENIOR VICE PRESIDENT
JEFFREY S. PHLEGAR, 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.
16
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 High Yield Fund
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
Alliance/Regent Sector Opportunity 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 Real Estate Investment 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
Massachusetts Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
17
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCE CAPITAL
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
