ALLIANCE LIMITED MATURITY GOVERNMENT FUND
ANNUAL REPORT
NOVEMBER 30, 1996
LETTER TO SHAREHOLDERS
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
January 15, 1997
Dear Shareholder:
Throughout most of 1996, U.S. bond market returns have been subdued. The market
has reacted negatively to stronger-than-expected job growth and uncertainty
about whether the Federal Reserve would raise rates to slow economic growth.
Across all major sectors of the bond market, shorter-duration securities have
outperformed longer-duration securities as interest rates for all maturities
have increased. Year-to-date returns on mortgage-backed securities continued to
outpace those of Treasuries as higher interest rates slowed mortgage prepayment
expectations.
INVESTMENT RESULTS
As outlined in the May 31, 1996 semi-annual report, this has been a year of
transition for Limited Maturity Government. In March, we began to restructure
the Fund's portfolio in accordance with the new investment policies approved by
the Fund's shareholders on February 22, 1996.
The table on this page provides the investment returns for Alliance Limited
Maturity Government Fund for the six and 12-month periods ended November 30,
1996. The table also compares that performance with the unmanaged Merrill Lynch
1-3 Year U.S. Treasury Index and the Lipper Intermediate Government Funds (IUG)
Average, a universe of 124 funds with investment objectives similar to that of
Alliance Limited Maturity Government Fund. If you recall from our last letter,
we indicated that we would begin using the Lipper IUG benchmark in the future
because it more closely parallels your Fund's new focus.
We are pleased to report that over the past twelve months, your Fund's Class A
shares returned 5.11% versus 4.77% for the Lipper IUG universe. This
outperformance is due primarily to strong relative performance of
mortgage-backed securities over the past year. The range-bound trading
environment throughout most of the year was favorable for the mortgage-backed
securities sector. In addition, mortgage-backed securities benefited from low
supply during a period of high investor demand for yield.
TOTAL RETURN
PERIOD ENDED NOVEMBER 30, 1996
6 MONTHS 12 MONTHS
-------- ---------
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
Class A 5.13% 5.11%
Class B 4.76% 4.36%
Class C 4.76% 4.38%
MERRILL LYNCH 1-3 YEAR U.S. TREASURY INDEX 4.33% 5.78%
LIPPER INTERMEDIATE U.S. GOV'T. FUNDS (IUG) AVERAGE 6.26% 4.77%
TOTAL RETURNS ARE BASED ON THE NET ASSET VALUES OF EACH CLASS OF SHARES AS OF
NOVEMBER 30, 1996. ADDITIONAL RESULTS APPEAR ON PAGE 3. 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 FUND'S BENCHMARKS ARE UNMANAGED.
THE MERRILL LYNCH 1-3 YEAR U.S. TREASURY INDEX DOES NOT REFLECT FEES AND
EXPENSES. IT IS A MEASURE OF THE OVERALL U.S. SHORT-TERM BOND MARKET. THE
LIPPER INTERMEDIATE GOVERNMENT FUNDS (IUG) AVERAGE IS BASED ON THE PERFORMANCE
OF A UNIVERSE OF 124 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.
ECONOMIC REVIEW
Rebounding from a slowdown at the end of 1995, the U.S. economy gathered steam
as 1996 progressed. Following first quarter's growth of 2%, as measured by the
Gross Domestic Product (GDP), the economic resurgence gained strength during
the second quarter, led by a rapidly improving labor market. Employment gains
averaged 272,000 per month and total hours worked climbed by an annualized 5.7%
Consumer confidence remained strong and real household spending continued to
grow at a healthy clip. These factors combined to produce GDP growth for the
second quarter of 4.7%.
However, the most recent data points to an economy that has slowed sharply from
its strong second quarter pace. Third quarter GDP growth declined to a more
moderate 2.1%, dragged down by a dramatic deceleration in con-
1
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
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sumer spending. The annualized gain in retail sales measured only 0.4% during
the third quarter while construction spending dropped 5.8% from the prior
quarter. On the production side, industrial production growth slowed to an
annualized 4.3% (from second quarter's 6.6%), total hours worked grew by only
2.8%, and non-farm payroll growth slowed to 145,000 new jobs per month.
On the inflation front, the Commerce Department's price index for the key gross
domestic purchases aggregate, which measures prices paid on all purchases by
U.S. residents, decelerated for the second quarter in a row. The index rose at
a seasonally adjusted annual rate of only 1.8% in the third quarter versus 2.1%
in the second quarter and 2.3% in the first quarter. At this broadest level of
economic coverage, inflation remains very well-behaved. As a result, the
Federal Reserve has been in a holding pattern since January and is expected to
maintain that stance for the foreseeable future.
LIMITED MATURITY MARKET REVIEW
Throughout the summer, the mortgage-backed securities market outperformed
Government bonds on both an absolute and duration-adjusted basis.
Mortgage-backed securities benefited from the narrow trading range of the
market and low supply during a period of high investor demand for
yield-oriented securities.
Beginning in September, the Treasury market rallied. Economic reports
indicating slow to moderate growth and benign inflation, and the Fed's decision
not to raise interest rates, helped push Treasury returns into positive
territory for the first time since January. As interest rates dropped,
prepayment expectations for mortgages reappeared, limiting gains in this sector
and helping Treasuries to outperform mortgages over the most recent three
months.
PORTFOLIO ACTIVITY
Since our last report to you, portfolio allocations have remained relatively
stable. Expecting no sustained movement in interest rates, we increased the
portfolio's yield-oriented position by trading lower coupon mortgage-backed
securities for premium mortgages. In response to strong performance during the
period, we sold adjustable rate mortgages in favor of Treasury securities and
15-year mortgage-backed securities. Treasury securities were used to maintain
portfolio duration.
INVESTMENT OUTLOOK
Our outlook for the U.S. economy assumes that while economic growth may
temporarily bounce higher during the fourth quarter of 1996, it will moderate
again during the first half of 1997. As this occurs, any upward pressures on
inflation should dissipate. Until clear signs of a slowing economy emerge,
concerns about inflation will keep U.S. interest rates within their recent
ranges.
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 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.
2
INVESTMENT OBJECTIVE AND POLICIES
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
Alliance Limited Maturity Government Fund is an open-end, diversified
management 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 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 NOVEMBER 30, 1996
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 5.11% 0.67%
Since Inception* 4.63% 3.63%
SEC Yield** 5.67%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 4.36% 1.39%
Since Inception* 3.89% 3.89%
SEC Yield** 5.21%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 4.38% 3.38%
Since Inception* 3.40% 3.40%
SEC Yield** 5.22%
Average annual total returns reflect reinvestment 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 A(1% year 1 for purchases exceeding
$1,000,000); Class B (3% year 1, 2% year 2, 1% year 3); and for Class C shares
(1% year 1).
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 November 30, 1996.
3
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
$10,000 INVESTMENT OVER LIFE OF FUND:
6/30/92* TO 11/30/96
$13,000
$12,500
$12,000
$11,500
$11,000
$10,500
$10,000
$9,500
LIPPER INTERMEDIATE
GOVERNMENTFUNDS (IUG) AVERAGE: $12,871
ML 1-3 YEAR
TREASURY: $12,744
LIMITED MATURITY GOVERNMENT
CLASS A: $11,700
12/31/93
11/30/96
6/30/92
12/31/92
12/31/94
12/31/95
This chart illustrates the total value of an assumed $10,000 investment in
Alliance Limited Maturity Government Fund Class A shares (since inception) as
compared to the performance of an appropriate broad-based index. The chart
reflects the deduction of the maximum 4.25% sales charge from the initial
$10,000 investment in the Fund and assumes the reinvestment of dividends and
capital gains. Performance for Class B and Class C shares will vary from the
results shown above due to differences in expenses charged to those classes.
Results should not be considered representative of future gain or loss in
capital value or dividend income.
The unmanaged Merrill Lynch 1-3 Year U.S. Treasury Bond Index is composed of
U.S. Treasury securities with maturities between one and three years.
The Lipper Intermediate U.S. Government Funds Average (IUG) is based on the
performance of a universe of 124 funds that invest at least 65% of their assets
in securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities with dollar-weighted average maturities of 5 to 10 years.
When comparing Alliance Limited Maturity Government Fund to the Merrill Lynch
1-3 Year U.S. Treasury Bond Index, you should note that no charges or expenses
are reflected in the performance of the index. Lipper results include fees and
expenses.
Limited Maturity Government
ML 1-3 Year Treasury
Lipper Intermediate Government Funds (IUG) Average
* Month end nearest to Fund's inception date of 6/1/92.
4
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------
MORTGAGE-RELATED SECURITIES-71.6%
COLLATERALIZED MORTGAGE OBLIGATIONS-34.1%
ADJUSTABLE RATE-20.7%
Housing Security, Inc.
Series 1995-RFCI-A1
7.030%, 10/30/18 (a) $ 2,197 $ 2,224,088
Series 1995-B A1A
7.284%, 11/25/28 6,745 6,852,134
Prudential Home Mortgage Securities
Series 1993-56 Cl. A1
8.033%, 1/25/24 2,951 3,018,152
Series 1993-46 Cl. A1
8.172%, 11/25/23 5,084 5,200,174
Sears Mortgage Securities Corp.
Series 1992-18A Cl. A1
7.441%, 9/25/22 5,436 5,548,198
------------
22,842,746
FIXED RATE-13.4%
Chase Commercial Mortgage Securities Corp.
Series 1996 Cl. B1
7.60%, 4/18/06 4,500 4,702,500
Donaldson, Lufkin & Jenrette
Series 1994-QE1 A1
7.854%, 4/25/24 (a) 5,570 5,584,148
Federal Home Loan Mortgage Corp.
Series 1302 Cl. PE
7.50%, 12/15/15 792 790,351
Federal National Mortgage Association
Series 1990 Cl. J
7.00%, 5/25/14 1,811 1,818,859
Residential Funding Mortgage Securities I
Series 1993-S37 Cl. A1
7.00%, 10/25/23 1,887 1,883,087
------------
14,778,945
Total Collateralized Mortgage Obligations
(cost $37,389,118) 37,621,691
FEDERAL HOME LOAN MORTGAGE CORP.-22.3%
7.00%, 11/01/10-12/01/10 973 982,691
7.00%, 6/01/09-12/01/10 (GOLD) 21,378 21,558,096
11.00%, 1/01/11-9/01/20 1,768 1,989,949
Total Federal Home Loan Mortgage Corp.
(cost $24,648,080) 24,530,736
FEDERAL NATIONAL MORTGAGE ASSOCIATION-8.0%
7.00%, 5/01/03-7/01/03 6,742 6,817,838
7.50%, 4/01/08 (b) 1 1,434
11.25%, 2/01/16 1,754 1,974,330
Total Federal National Mortgage Association
(cost $8,659,973) 8,793,602
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION-7.2%
8.00%, 1/15/99
(TBA) 6,100 6,286,782
11.25%, 7/15/13-1/15/16
(GPM) 1,032 1,175,217
11.50%, 2/15/13-6/15/13
(BD) 376 437,186
11.75%, 1/20/16
(BD) 19 22,026
Total Government National Mortgage Association
(cost $7,839,856) 7,921,211
5
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------
Total Mortgage-Related Securities
(cost $78,537,027) $ 78,867,240
U.S. GOVERNMENT OBLIGATIONS-32.2%
U.S. TREASURY NOTES-20.0%
5.50%, 12/31/00 $ 9,100 9,004,723
5.625%, 11/30/00 1,500 1,491,330
6.25%, 10/31/01 (c) 5,000 5,085,150
6.625%, 6/30/01 6,200 6,397,594
21,978,797
U.S. TREASURY BOND-12.2%
11.875%, 11/15/03 10,100 13,450,372
Total U.S. Government Obligations
(cost $35,418,159) 35,429,169
ASSET BACKED SECURITY-5.1%
Student Loan Funding Corp., Inc. FRN
Series 1993-A Cl. A1
6.237%, 1/01/99
(cost $5,564,637) 5,560 5,560,000
REPURCHASE AGREEMENT-1.0%
Prudential-Bache Securities, Inc.
5.90%, dated 11/29/96,
due 12/02/96, collateralized
by $1,075,950 FN#312031,
8.50%, 9/01/25
(cost $1,085,000) 1,085 1,085,000
TOTAL INVESTMENTS-109.9%
(cost $120,604,823) 120,941,409
Other assets less liabilities-(9.9%) (10,850,461)
NET ASSETS-100% $110,090,948
(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 November 30, 1996,
the securities amounted to $7,808,236 or 7.09% of net assets.
(b) 15 year mortgage.
(c) Securities segregated to collateralize reverse repurchase agreements with
an aggregate market value of approximately $5,113,217, including accrued
interest.
Glossary of Terms:
BD - Builder buydown.
FRN - Floating rate note.
GPM - Graduated payment mortgage.
TBA - To be announced.
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $120,604,823) $120,941,409
Cash 564
Interest receivable 1,126,501
Receivable for investment securities sold 236,127
Receivable for capital stock sold 184,628
Deferred organization expenses 41,356
Total assets 122,530,585
LIABILITIES
Payable for investment securities purchased 6,288,888
Reverse repurchase agreement 5,101,643
Payable for capital stock redeemed 539,403
Dividends payable 154,882
Distribution fee payable 81,658
Advisory fee payable 59,280
Accrued expenses and other liabilities 213,883
Total liabilities 12,439,637
NET ASSETS $110,090,948
COMPOSITION OF NET ASSETS
Capital stock, at par $ 11,652
Additional paid-in capital 131,554,804
Distributions in excess of net investment income (155,035)
Accumulated net realized loss on investments (21,657,059)
Net unrealized appreciation of investments 336,586
$110,090,948
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share($16,248,313/
1,719,168 shares of capital stock issued and outstanding) $9.45
Sales charge--4.25% of public offering price .42
Maximum offering price $9.87
CLASS B SHARES
Net asset value and offering price per share($50,385,663/
5,332,917 shares of capital stock issued and outstanding) $9.45
CLASS C SHARES
Net asset value and offering price per share($43,456,972/
4,599,773 shares of capital stock issued and outstanding) $9.45
See notes to financial statements.
7
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1996
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $10,714,846
EXPENSES
Advisory fee $ 908,425
Distribution fee - Class A 62,028
Distribution fee - Class B 646,988
Distribution fee - Class C 543,828
Transfer agency 199,496
Audit and legal 161,053
Administrative 152,027
Custodian 127,476
Printing 115,204
Registration 55,516
Amortization of organization expenses 55,453
Directors' fees 24,135
Miscellaneous 12,098
Total expenses before interest 3,063,727
Interest expense 884,582
Total expenses 3,948,309
Net investment income 6,766,537
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments (1,648,824)
Net change in unrealized appreciation of investments 220,055
Net loss on investments (1,428,769)
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 5,337,768
See notes to financial statements.
8
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 6,766,537 $ 11,879,331
Net realized loss on investments (1,648,824) (7,748,271)
Net change in unrealized appreciation
(depreciation) of investments 220,055 7,402,773
Net increase in net assets from operations 5,337,768 11,533,833
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (1,099,192) (1,884,462)
Class B (3,020,671) (5,150,507)
Class C (2,547,881) (4,464,679)
Tax return of capital
Class A (80,449) (109,742)
Class B (221,079) (299,940)
Class C (186,476) (260,000)
CAPITAL STOCK TRANSACTIONS
Net decrease (68,798,912) (140,125,516)
Total decrease (70,616,892) (140,761,013)
NET ASSETS
Beginning of year 180,707,840 321,468,853
End of year $110,090,948 $180,707,840
See notes to financial statements.
9
STATEMENT OF CASH FLOWS
YEAR ENDED NOVEMBER 30, 1996
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
INCREASE (DECREASE) IN CASH FROM:
OPERATING ACTIVITIES:
Interest received $ 11,473,097
Interest paid (884,582)
Operating expenses paid (3,125,217)
Net increase in cash from operating activities $ 7,463,298
INVESTING ACTIVITIES:
Proceeds from disposition of long-term
portfolio investments 309,447,508
Purchases of long-term portfolio investments (238,732,874)
Purchases of short-term portfolio investments,
net (563,000)
Net increase in cash from investing activities 70,151,634
FINANCING ACTIVITIES*:
Increase in reverse repurchase agreements, net (1,138,115)
Net redemptions from capital stock transactions (72,689,732)
Cash dividends paid (3,788,097)
Net decrease in cash from financing activities (77,615,944)
Net decrease in cash (1,012)
Cash at beginning of year 1,576
Cash at end of year $ 564
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 $ 5,337,768
ADJUSTMENTS:
Decrease in interest receivable $ 788,843
Net realized loss on investments 1,648,824
Net change in unrealized appreciation (220,055)
Accretion of bond discount (30,592)
Decrease in deferred organization expense 55,453
Decrease in accrued expenses (116,943)
Total adjustments 2,125,530
NET INCREASE IN CASH FROM OPERATING ACTIVITIES $ 7,463,298
* Non-cash financing activities not included herein consist of reinvestment of
dividends.
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
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% 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 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
Interest income is accrued daily. Investment transactions are accounted for on
the date the securities are purchased or sold. The Fund 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.
6. RECLASSIFICATION OF COMPONENTS OF NET ASSETS
As of November 30, 1996 the Fund reclassified certain components of net assets.
The reclassifications resulted in net decreases to distributions in excess of
net investment income and additional paid-in capital of $488,004. These
reclassifications were the result of permanent book to tax differences
primarily resulting from tax return of capital distributions. Net assets were
not affected by the change.
11
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
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
$152,027 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 $127,476 for the year ended November 30, 1996.
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 $2,444 from the sale of Class A shares and $87,323
and $2,744 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B and Class C shares respectively for the year ended
November 30, 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 $472,895 and $2,672,214 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 $14,140,316 and $53,003,704,
respectively, for the year ended November 30, 1996. There were purchases of
$222,346,483 and sales of $245,895,129 of U.S. government and government agency
obligations for the year ended November 30, 1996.
At November 30, 1996, 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 $913,710 and gross unrealized
depreciation of investments was $577,124 resulting in net unrealized
appreciation of $336,586.
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.
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
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 1995 1996 1995
------------ ------------ -------------- --------------
Shares sold 2,218,089 854,241 $ 20,814,961 $ 8,085,552
Shares issued in
reinvestment of
dividends 66,439 97,452 622,936 922,047
Shares converted
from Class B 231,530 -0- 2,158,178 -0-
Shares redeemed (3,727,280) (2,559,958) (34,954,990) (24,225,739)
Net decrease (1,211,222) (1,608,265) $(11,358,915) $(15,218,140)
CLASS B
Shares sold 1,169,061 2,656,458 $ 10,938,822 $ 25,126,058
Shares issued in
reinvestment of
dividends 171,299 262,019 1,606,681 2,480,720
Shares converted
to Class A (231,530) -0- (2,158,178) -0-
Shares redeemed (4,640,656) (8,392,989) (43,509,656) (79,485,822)
Net decrease (3,531,826) (5,474,512) $(33,122,331) $(51,879,044)
CLASS C
Shares sold 1,443,550 2,193,838 $ 13,565,512 $ 20,770,913
Shares issued in
reinvestment of
dividends 131,894 251,819 1,236,980 2,383,642
Shares redeemed (4,169,294) (10,156,950) (39,120,158) (96,182,887)
Net decrease (2,593,850) (7,711,293) $(24,317,666) $(73,028,332)
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 November 30, 1996, the Fund had held the following reverse repurchase
agreement:
AMOUNT BROKER INTEREST RATE MATURITY
- ----------------- ---------------- ---------------- ----------------
$5,100,000 Morgan Stanley 5.80% December 2, 1996
For the year ended November 30, 1996, the maximum amount of reverse repurchase
agreements outstanding was $92,478,750, the average amount outstanding was
approximately $17,801,755, and the daily weighted average interest rate was
4.97%.
13
FINANCIAL HIGHLIGHTS
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------
JUNE 1,1992(A)
YEAR ENDED NOVEMBER 30, TO
-------------------------------------------------- NOVEMBER 30,
1996 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 .51(b) .52(b) .42 .57 .35(c)
Net realized and unrealized gain (loss)
on investments (.04) .02 (.32) .11 (.17)
Net increase in net asset value from
operations .47 .54 .10 .68 .18
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.51) (.50) (.48) (.58) (.34)
Tax return of capital (.03) (.03) (.04) -0- -0-
Distributions from net realized gains -0- -0- (.01) -0- -0-
Total dividends and distributions (.54) (.53) (.53) (.58) (.34)
Net asset value, end of period $9.45 $9.52 $9.51 $9.94 $9.84
TOTAL RETURN
Total investment return based on net
asset value (d) 5.11% 5.91% 1.03% 7.02% 1.84%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $16,248 $27,887 $43,173 $59,215 $24,186
Ratio of expenses to average net assets 2.22% 2.14% 1.34% 1.54% 1.44%(e)(f)
Ratio of expenses to average net assets
excluding interest expense (g) 1.58% 1.41% 1.20% 1.33% 1.42%(e)
Ratio of net investment income to
average net assets 5.44% 5.53% 4.78% 5.66% 6.58%(e)
Portfolio turnover rate 159% 293% 375% 499% 101%
</TABLE>
See footnote summary on page 16.
14
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------
JUNE 1,1992(A)
YEAR ENDED NOVEMBER 30, TO
--------------------------------------------------- NOVEMBER 30,
1996 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 .44(b) .46(b) .39 .49 .31(c)
Net realized and unrealized gain (loss)
on investments (.04) .01 (.35) .12 (.17)
Net increase in net asset value from
operations .40 .47 .04 .61 .14
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.44) (.44) (.42) (.51) (.30)
Tax return of capital (.03) (.03) (.03) -0- -0-
Distributions from net realized gains -0- -0- (.01) -0- -0-
Total dividends and distributions (.47) (.47) (.46) (.51) (.30)
Net asset value, end of period $9.45 $9.52 $9.52 $9.94 $9.84
TOTAL RETURN
Total investment return based on net
asset value (d) 4.36% 5.05% .42% 6.27% 1.50%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $50,386 $84,362 $136,458 $168,157 $149,188
Ratio of expenses to average net assets 2.94% 2.85% 2.08% 2.26% 2.13%(e)(f)
Ratio of expenses to average net assets
excluding interest expense (g) 2.30% 2.11% 1.91% 2.07% 2.10%(e)
Ratio of net investment income to
average net assets 4.73% 4.83% 4.12% 4.98% 6.01%(e)
Portfolio turnover rate 159% 293% 375% 499% 101%
</TABLE>
See footnote summary on page 16.
15
FINANCIAL HIGHLIGHTS (CONTINUED)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------------
MAY 3,1993(H)
YEAR ENDED NOVEMBER 30, TO
------------------------------------- NOVEMBER 30,
1996 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 .45(b) .46(b) .37 .27
Net realized and unrealized gain (loss)
on investments (.05) .01 (.33) (.03)
Net increase in net asset value from
operations .40 .47 .04 .24
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.45) (.44) (.42) (.28)
Tax return of capital (.02) (.03) (.03) -0-
Distributions from net realized gains -0- -0- (.01) -0-
Total dividends and distributions (.47) (.47) (.46) (.28)
Net asset value, end of period $9.45 $9.52 $9.52 $9.94
TOTAL RETURN
Total investment return based on net
asset value (d) 4.38% 5.06% .42% 2.40%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $43,457 $68,459 $141,838 $228,703
Ratio of expenses to average net assets 2.92% 2.85% 2.04% 1.74%(e)
Ratio of expenses to average net assets
excluding interest expense (g) 2.29% 2.10% 1.89% 1.58%(e)
Ratio of net investment income to
average net assets 4.75% 4.84% 4.10% 3.70%(e)
Portfolio turnover rate 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 .64% on reverse repurchase agreements (see
Note F).
(h) Commencement of distribution.
16
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE LIMITED MATURITY GOVERNMENT FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Alliance Limited Maturity Government Fund, Inc. (formerly Alliance Mortgage
Strategy Trust), including the portfolio of investments, as of November 30,
1996, and the related statements of operations and cash flows for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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. Our procedures included confirmation of securities
owned as of November 30, 1996, 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
Alliance Limited Maturity Government Fund, Inc. at November 30, 1996, the
results of its operations and its cash flows for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for each of the indicated periods, in conformity
with generally accepted accounting principles.
New York, New York
January 9, 1997
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)
DONALD J. ROBINSON (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
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
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.
LMGAR
