ALLIANCE LIMITED MATURITY GOVERNMENT FUND
ANNUAL REPORT
NOVEMBER 30, 1997
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
December 22, 1997
Dear Shareholder:
The U.S. bond market posted solid returns since our last report dated May 31,
1997. Data released during the period indicating a slowing U.S. economy,
together with a favorable U.S. budget deficit, fueled a rally in U.S.
Treasuries. In October, financial market turmoil which started in Southeast
Asia, created a ripple effect that spread to other global bond markets and
caused a spike in volatility. The resulting increase in investor demand for
more liquid securities provided additional fuel for the rally in U.S.
Treasuries and drove interest rates to their lowest levels since early 1996.
INVESTMENT RESULTS
The following table provides the investment returns for Alliance Limited
Maturity Government Fund for the six and 12 month periods ended November 30,
1997. The table also compares that performance with the Lipper Intermediate
U.S. Government Funds (IUG) Average, a universe of 125 funds with investment
objectives similar to that of Alliance Limited Maturity Government Fund.
Over the past six months, your Fund's returns trailed those of the Lipper IUG
Average. This underperformance was due to spread widening and an underweighting
in mortgage-backed securities (MBS) with coupons over 7.5%. We have been
concerned about increasing prepayment rates as interest rates fell, and
continue to expect refinancing to increase given that 10-year Treasury yields
are less than 6.00%.
INVESTMENT RESULTS*
Period Ended November 30, 1997
TOTAL RETURN
6 MONTHS 12 MONTHS
---------- ----------
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
Class A 4.43% 5.79%
Class B 4.07% 5.04%
Class C 4.07% 5.05%
LIPPER INTERMEDIATE U.S. GOVERNMENT
FUNDS (IUG) AVERAGE 5.52% 6.17%
* TOTAL RETURNS ARE BASED ON THE NET ASSET VALUES OF EACH CLASS OF SHARES AS
OF NOVEMBER 30, 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. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS.
THE UNMANAGED LIPPER INTERMEDIATE GOVERNMENT FUNDS (IUG) AVERAGE IS BASED
ON THE PERFORMANCE OF A UNIVERSE OF 125 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 INVESTMENT RESULTS APPEAR ON PAGE 3.
ECONOMIC REVIEW
The U.S. economy continued to grow at a healthy pace over the past six months
led by continued strength in the labor market and a strong rebound in consumer
spending. After slowing to a 0.9% annualized growth rate in the second quarter,
consumer spending jumped in the third quarter, up 5.7% on an annual basis.
Automotive purchases, which dropped 16.5% in the second quarter climbed 23.5%
during the third quarter. Business spending remained strong, growing by 18.7%
in the third quarter, following second quarter's strong 14.6% gain.
Additionally, employment growth continued at a rapid pace and the unemployment
rate fell to 4.6% in November, its lowest level in 24 years. Overall, growth in
aggregate output (as measured by Gross Domestic Product) remained robust at
3.3% in the third quarter, equaling second quarter's growth rate.
1
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
In spite of an increase in wage pressures, inflation remained very well behaved
during the period. Wholesale inflation, as measured by the Producer Price Index
(PPI), fell in 8 of the 11 months between January and November of 1997.
Overall, producer prices are down 0.6% on a year-over-year basis through
November. Consumer prices also remained tame and are up 1.8% from the same
period last year. In light of this favorable inflation news, the Federal
Reserve Bank left monetary policy unchanged over the past six months.
LIMITED MATURITY MARKET REVIEW
The U.S. bond market has rallied with little interruption since our last letter
to you. The market was buoyed by tentative evidence of slowing domestic growth,
better-than-expected inflation news, the smallest federal budget deficit in
more than 20 years, and the diminishing likelihood of another Fed tightening.
The prospect of a major slowdown in Southeast Asia, and investors' desire for
more stable investments, also added to the rally in the government bond sector
late in the period.
Mortgage-backed securities (MBS) allow mortgage money to be available for home
financing through certificates issued by agencies such as the Federal Home Loan
Mortgage Corporation and the Federal National Mortgage Association. Recently,
MBS generally underperformed the government and corporate sectors as increased
interest rate volatility and lower interest rates led to expectations for
stronger prepayments. However, in spite of these expectations, there has been
continued support for MBS with coupons greater than 7.5%. We have been
conservative in our exposure to this sector because we expect that refinancings
for these MBS to increase, especially with interest rates at their current
levels.
INVESTMENT OUTLOOK
Our outlook for U.S. financial markets assumes that the U.S. economy will move
onto a slower and more sustainable growth path during the next six to 12
months. The spike in consumer demand in the third quarter of 1997 pushed up
overall growth for the period, but that strength is unlikely to continue given
that real income growth is below 3%. The recent decline in interest rates will
support continued economic expansion, but the dollar's past strength, combined
with weaker demand in the export markets, will be a drag on growth. We look for
growth to slow toward 2% before reaccelerating later in 1998. In light of this
economic slowing and the unsettled conditions in global financial markets, the
Fed is likely to refrain from raising interest rates over the near-term.
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
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 NOVEMBER 30, 1997
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 5.79% 1.28%
Five Years 4.95% 4.04%
Since Inception* 4.84% 4.02%
SEC Yield** 4.89%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 5.04% 2.04%
Five Years 4.21% 4.21%
Since Inception* 4.10% 4.10%
SEC Yield** 4.37%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 5.05% 4.05%
Since Inception* 3.76% 3.76%
SEC Yield** 4.38%
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 November 30, 1997.
3
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
GROWTH OF A $10,000 INVESTMENT
6/30/92* TO 11/30/97
$14,000
$13,000
$12,000
$11,000
$10,000
$9,000
6/30/92 11/30/92 11/30/93 11/30/94 11/30/95 11/30/96 11/30/97
LIPPER INTERMEDIATE U.S. GOVERNMENT FUNDS (IUG) AVERAGE: $13,756
LIMITED MATURITY GOVERNMENT FUND CLASS A: $12,377
This chart illustrates the total value of an assumed $10,000 investment in
Alliance Limited Maturity Government Fund Class A shares (from 6/30/92 to
11/30/97). 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. Past performance is not indicative of future results, and is not
representative of future gain or loss in capital value or dividend income.
The Lipper Intermediate U.S. Government Funds (IUG)Average is based on the
performance of a universe of 42 funds (based on the number of funds in the
average from 6/30/92 to 11/30/97) 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 average shown
above, you should note that the Lipper average includes fees and expenses.
Limited Maturity Government Fund
Lipper Intermediate U.S. Government Funds (IUG)Average
* Month-end nearest to Fund's Class A share inception date of 6/1/92.
4
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------
MORTGAGE-RELATED SECURITIES-54.1%
COLLATERALIZED MORTGAGE OBLIGATIONS-40.4%
ADJUSTABLE RATE-26.9%
Donaldson, Lufkin & Jenrette
Series 1994-QE1 Cl. A1
8.00%, 4/25/24 (a) $3,232 $ 3,235,915
Federal National Mortgage Association
Series 1997-20 Cl. F
6.158%, 3/25/27 4,302 4,289,620
Housing Security, Inc.
Series 1995-B Cl. A1A
7.549%, 11/25/28 4,973 5,072,670
Prudential Home Mortgage Securities, Inc.
Series 1993-56 Cl. A1
8.274%, 1/25/24 1,889 1,939,726
Resolution Trust Corp.
Series 1991-M4 Cl. A1
6.449%, 2/25/20 2,533 2,517,423
Sears Mortgage Securities Corp.
Series 1992-18A Cl. A1
7.86%, 9/25/22 4,016 4,081,677
------------
21,137,031
FIXED RATE-13.5%
Federal Home Loan Mortgage Corp.
Series 1350 Cl. E
6.70%, 1/15/15 2,378 2,374,198
Series 1434 Cl. H
7.00%, 8/15/21 2,500 2,542,200
Federal National Mortgage Association
Series 1997-M8 Cl. A1
6.94%, 1/25/22 1,495 1,531,003
Series 1990-144 Cl. J
7.00%, 5/25/14 316 315,202
First Union Lehman Brothers Commercial
Series 1997 C2 Cl. A1
6.479%, 11/18/29 2,300 2,309,338
Residential Funding Mortgage Security I
Series 1993-S11 Cl. A5
7.25%, 3/25/23 1,526 1,530,594
------------
10,602,535
Total Collateralized Mortgage Obligations
(cost $31,636,653) 31,739,566
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION-7.2%
6.00%, 8/20/27 (b) 4,333 4,368,294
11.25%, 7/15/13-1/15/16
GPM 907 1,001,803
11.50%, 4/15/13 BD 26 29,399
11.50%, 2/15/13-6/15/13
GPM 184 206,661
11.75%, 1/20/16 GPM 14 15,861
Total Government National Mortgage Association
(cost $5,592,578) 5,622,018
STRIPPED MORTGAGE BACKED SECURITY-2.5%
Mortgage Capital Funding, Inc.
Series 1996-MC2 Cl. X, I/O
8.50%, 12/21/26 (c)
(cost $1,946,443) 1,946 2,003,556
FEDERAL HOME LOAN MORTGAGE CORP.-2.0%
11.00%, 1/01/11-9/01/20
(cost $1,586,618) 1,420 1,601,935
FEDERAL NATIONAL MORTGAGE ASSOCIATION-2.0%
7.50%, 4/01/08 (d) 1 1,107
11.25%, 2/01/16 1,355 1,536,780
5
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------
Total Federal National Mortgage Association
(cost $1,527,171) $ 1,537,887
Total Mortgage-Related Securities
(cost $42,289,463) 42,504,962
U.S. GOVERNMENT OBLIGATIONS-53.1%
U.S. TREASURY NOTES-45.9%
5.75%, 12/31/98 (e) $ 2,400 2,400,744
6.00%, 8/15/00 (e) 8,000 8,037,520
6.125%, 12/31/01 600 605,532
6.25%, 2/28/02-6/30/02 12,750 12,936,563
6.875%, 5/15/06 (e) 11,400 12,121,392
------------
36,101,751
U.S. TREASURY BOND-7.2%
11.875%, 11/15/03 $4,350 $ 5,640,036
Total U.S. Government Obligations
(cost $41,676,510) 41,741,787
REPURCHASE AGREEMENT-5.8%
Prudential-Bache Securities, Inc.
5.73%, dated 11/28/97,
due 12/01/97, collateralized by $4,615,000
FHLMC, 7.00%,11/01/27
(cost $4,538,000) 4,538 4,538,000
TOTAL INVESTMENTS-113.0%
(cost $88,503,973) 88,784,749
Other assets less liabilities-(13.0%) (10,236,859)
NET ASSETS-100% $78,547,890
(a) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At November 30, 1997, this security
amounted to $3,235,915 or 4.1% of net assets.
(b) Adjustable rate security.
(c) Interest rate represents yield to maturity and principal amount represents
amortized cost.
(d) 15 year mortgage.
(e) Securities, or portions thereof, with an aggregate market value of
$11,191,113 have been segregated to collateralize reverse repurchase agreements.
Glossary of Terms:
BD - Builder Buydown
FHLMC - Federal Home Loan Mortgage Corp.
GPM - Graduated Payment Mortgage
I/O - Interest Only
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $88,503,973) $ 88,784,749
Receivable for capital stock sold 1,044,557
Interest receivable 870,573
Receivable for investment securities sold 206,619
Total assets 90,906,498
LIABILITIES
Due to custodian 241
Reverse repurchase agreement 11,163,069
Payable for capital stock redeemed 840,764
Dividends payable 110,578
Distribution fee payable 56,234
Advisory fee payable 42,477
Accrued expenses and other liabilities 145,245
Total liabilities 12,358,608
NET ASSETS $ 78,547,890
COMPOSITION OF NET ASSETS
Capital stock, at par $ 8,324
Additional paid-in capital 100,277,414
Distributions in excess of net investment income (110,578)
Accumulated net realized loss on investment transactions (21,908,046)
Net unrealized appreciation of investments 280,776
$ 78,547,890
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($16,196,561 / 1,716,533 shares of capital stock
issued and outstanding) $9.44
Sales charge - 4.25% of public offering price .42
Maximum offering price $9.86
CLASS B SHARES
Net asset value and offering price per share
($33,613,028 / 3,562,035 shares of capital stock
issued and outstanding) $9.44
CLASS C SHARES
Net asset value and offering price per share
($28,738,301 / 3,045,400 shares of capital stock
issued and outstanding) $9.44
See notes to financial statements.
7
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1997
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $7,378,181
EXPENSES
Advisory fee $ 603,635
Distribution fee - Class A 48,346
Distribution fee - Class B 413,725
Distribution fee - Class C 353,792
Transfer agency 151,077
Administrative 138,482
Audit and legal 103,787
Custodian 99,571
Printing 63,681
Registration 44,150
Amortization of organization expenses 41,356
Directors' fees 21,558
Miscellaneous 10,103
Total expenses before interest 2,093,263
Interest expense 702,424
Total expenses 2,795,687
Net investment income 4,582,494
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investment transactions (250,987)
Net change in unrealized appreciation of investments (55,810)
Net loss on investment transactions (306,797)
NET INCREASE IN NET ASSETS FROM OPERATIONS $4,275,697
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,
1997 1996
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 4,582,494 $ 6,766,537
Net realized loss on investment transactions (250,987) (1,648,824)
Net change in unrealized appreciation
of investments (55,810) 220,055
Net increase in net assets from operations 4,275,697 5,337,768
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (884,292) (1,099,192)
Class B (1,988,935) (3,020,671)
Class C (1,706,319) (2,547,881)
Tax return of capital
Class A (40,988) (80,449)
Class B (92,191) (221,079)
Class C (79,091) (186,476)
CAPITAL STOCK TRANSACTIONS
Net decrease (31,026,939) (68,798,912)
Total decrease (31,543,058) (70,616,892)
NET ASSETS
Beginning of year 110,090,948 180,707,840
End of year $ 78,547,890 $110,090,948
See notes to financial statements.
9
STATEMENT OF CASH FLOWS
YEAR ENDED NOVEMBER 30, 1997
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
INCREASE (DECREASE) IN CASH FROM:
OPERATING ACTIVITIES:
Interest received $ 7,604,965
Interest expense paid (702,424)
Operating expenses paid (2,162,774)
Net increase in cash from operating activities $ 4,739,767
INVESTING ACTIVITIES:
Proceeds from disposition of long-term
portfolio investments 281,030,812
Purchase of long-term portfolio investments (251,958,183)
Purchase of short-term portfolio investments,
net (3,453,000)
Net increase in cash from investing activities 25,619,629
FINANCING ACTIVITIES*:
Net decrease in reverse repurchase agreements 6,061,426
Net redemptions from capital stock transactions (34,742,380)
Cash dividends paid (1,679,247)
Net decrease in cash from financing activities (30,360,201)
Net decrease in cash (805)
Cash at beginning of year 564
Due to custodian at end of year $ (241)
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 $ 4,275,697
ADJUSTMENTS:
Decrease in interest receivable $ 255,928
Net realized loss on investment transactions 250,987
Net change in unrealized appreciation of
investments 55,810
Accretion of bond discount (29,144)
Decrease in deferred and other assets 41,356
Decrease in accrued expenses (110,867)
Total adjustments 464,070
NET INCREASE IN CASH FROM OPERATING ACTIVITIES $ 4,739,767
* Non-cash financing activities not included herein consist of reinvestment
of dividends.
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Limited Maturity Government Fund, Inc. (the "Fund") was incorporated
in the state of Maryland on April 8, 1992 as a diversified, open-end management
investment company. The Fund offers Class A, Class B and Class C 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% 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 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, 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
Portfolio securities traded on a national securities exchange are generally
valued at the last reported sale price or if there was no sale on such day, the
last bid price quoted on such day. If no bid prices are quoted, then the
security is valued at the mean of the bid and asked prices as obtained on that
day from one or more dealers regularly making a market in that security.
Securities traded on the over-the-counter market are valued at the mean of the
closing bid and asked prices provided by two or more dealers regularly making a
market in such securities. U.S. government securities and other debt securities
which mature in 60 days or less are valued at amortized cost unless this method
does not represent fair value. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by, or
in accordance with procedures approved by, the Board of Directors. Fixed income
securities may be valued on the basis of prices provided by a pricing service
when such prices are believed to reflect the fair value of such securities.
2. ORGANIZATION EXPENSES
Organization expenses of approximately $276,500 have been deferred and were
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 any, 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 securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. The Fund accretes discount as an
adjustment to interest income.
5. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each settled class of shares, based on the proportionate interest in
the Fund represented by the net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares.
6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences are
permanent, such amounts are reclassified within the capital accounts based on
their federal tax basis treatment; temporary differences do not require such
reclassification. During the current fiscal year, permanent differences,
primarily due to a tax return of capital, resulted in a net decrease in
distribution in excess of net investment income and a corresponding decrease in
additional paid-in capital. This reclassification had no effect on net assets.
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 the average daily net assets of the Fund. The fee is accrued daily and
paid monthly.
Pursuant to the advisory agreement, the Fund paid $138,482 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the year ended November 30, 1997.
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 $107,926 for the year ended November 30, 1997.
Alliance Fund Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary
of the Adviser, serves as the Distributor of the Fund's shares. The Distributor
received $39,451 and $20,202 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class B and Class C shares, respectively, for
the year ended November 30, 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 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. The fees are 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 $356,382 and $2,860,904 for Class B and Class 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 $12,206,934 and $24,205,358,
respectively, for the year ended November 30, 1997. There were purchases of
$233,462,361 and sales of $253,122,296 of U.S. government and government agency
obligations for the year ended November 30, 1997.
At November 30, 1997, the cost of investments for federal income tax purposes
was the same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation of investments was $664,807 and gross unrealized
depreciation of investments was $384,031 resulting in net unrealized
appreciation of $280,776.
At November 30, 1997, the Fund had a net capital loss carryforward of
$21,908,046 of which $219,462 expires in the year 2000, $177,358 expires in the
year 2001, $11,863,144 expires in the year 2002, $7,728,928 expires in the year
2003, $1,668,167 expires in the year 2004 and $250,987 expires in the year 2005.
FINANCIAL FUTURES CONTRACTS
The Fund may buy or sell financial futures contracts for the purpose of hedging
its portfolio against adverse affects of anticipated movements in the market.
The Fund bears the market risk that arises from changes in the value of these
financial instruments.
At the time the Fund enters into a futures contract the Fund deposits and
maintains as collateral an initial margin as required by the exchange on which
the transaction is effected. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract.
12
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
Such receipts or payments are known as variation margin and are recorded by the
Fund as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the time it was closed. At November
30, 1997, the Fund had no outstanding futures contracts.
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,
1997 1996 1997 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 12,567,555 2,218,089 $117,268,204 $ 20,814,961
Shares issued in
reinvestment of
dividends and
distributions 58,760 66,439 549,654 622,936
Shares converted
from Class B 353,816 231,530 3,315,573 2,158,178
Shares redeemed (12,982,766) (3,727,280) (121,071,651) (34,954,990)
Net increase
(decrease) (2,635) (1,211,222) $ 61,780 $(11,358,915)
CLASS B
Shares sold 2,084,994 1,169,061 $ 19,497,685 $ 10,938,822
Shares issued in
reinvestment of
dividends and
distributions 137,401 171,299 1,284,843 1,606,681
Shares converted
to Class A (353,816) (231,530) (3,315,573) (2,158,178)
Shares redeemed (3,639,461) (4,640,656) (34,015,979) (43,509,656)
Net decrease (1,770,882) (3,531,826) $(16,549,024) $(33,122,331)
CLASS C
Shares sold 647,676 1,443,550 $ 6,051,461 $ 13,565,512
Shares issued in
reinvestment of
dividends and
distributions 141,389 131,894 1,322,376 1,236,980
Shares redeemed (2,343,438) (4,169,294) (21,913,532) (39,120,158)
Net decrease (1,554,373) (2,593,850) $(14,539,695) $(24,317,666)
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 November 30, 1997, the Fund had entered into the following reverse
repurchase agreements:
AMOUNT BROKER INTEREST RATE MATURITY
- ---------- -------------- ------------- ----------------
$8,170,000 Morgan Stanley 5.15% December 1, 1997
$2,454,000 Morgan Stanley 5.55% December 1, 1997
$ 532,500 Morgan Stanley 5.60% December 3, 1997
For the year ended November 30, 1997, the maximum amount of reverse repurchase
agreements outstanding was $32,333,875, the average amount outstanding was
approximately $13,335,869, and the daily weighted average interest rate was
5.30%.
14
FINANCIAL HIGHLIGHTS
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $9.45 $9.52 $9.51 $9.94 $9.84
INCOME FROM INVESTMENT OPERATIONS
Net investment income .51(a) .51(a) .52(a) .42 .57
Net realized and unrealized gain (loss)
on investment transactions .02 (.04) .02 (.32) .11
Net increase in net asset value from
operations .53 .47 .54 .10 .68
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.52) (.51) (.50) (.48) (.58)
Tax return of capital (.02) (.03) (.03) (.04) -0-
Distributions from net realized gains -0- -0- -0- (.01) -0-
Total dividends and distributions (.54) (.54) (.53) (.53) (.58)
Net asset value, end of year $9.44 $9.45 $9.52 $9.51 $9.94
TOTAL RETURN
Total investment return based on net
asset value (b) 5.79% 5.11% 5.91% 1.03% 7.02%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $16,197 $16,248 $27,887 $43,173 $59,215
Ratio of expenses to average net assets 2.41% 2.22% 2.14% 1.34% 1.54%
Ratio of expenses to average net assets
excluding interest expense (c) 1.65% 1.58% 1.41% 1.20% 1.33%
Ratio of net investment income to average
net assets 5.52% 5.44% 5.53% 4.78% 5.66%
Portfolio turnover rate 249% 159% 293% 375% 499%
</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 YEAR
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $9.45 $9.52 $9.52 $9.94 $9.84
INCOME FROM INVESTMENT OPERATIONS
Net investment income .45(a) .44(a) .46(a) .39 .49
Net realized and unrealized gain (loss)
on investment transactions .01 (.04) .01 (.35) .12
Net increase in net asset value from
operations .46 .40 .47 .04 .61
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.45) (.44) (.44) (.42) (.51)
Tax return of capital (.02) (.03) (.03) (.03) -0-
Distributions from net realized gains -0- -0- -0- (.01) -0-
Total dividends and distributions (.47) (.47) (.47) (.46) (.51)
Net asset value, end of year $9.44 $9.45 $9.52 $9.52 $9.94
TOTAL RETURN
Total investment return based on net
asset value (b) 5.04% 4.36% 5.05% .42% 6.27%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $33,613 $50,386 $84,362 $136,458 $168,157
Ratio of expenses to average net assets 3.14% 2.94% 2.85% 2.08% 2.26%
Ratio of expenses to average net assets
excluding interest expense (c) 2.39% 2.30% 2.11% 1.91% 2.07%
Ratio of net investment income to
average net assets 4.80% 4.73% 4.83% 4.12% 4.98%
Portfolio turnover rate 249% 159% 293% 375% 499%
</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
----------------------------------------------------------------
MAY 3,1993(D)
YEAR ENDED NOVEMBER 30, TO
-------------------------------------------------- NOVEMBER 30,
1997 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 .45(a) .45(a) .46(a) .37 .27
Net realized and unrealized gain (loss)
on investment transactions .01 (.05) .01 (.33) (.03)
Net increase in net asset value from
operations .46 .40 .47 .04 .24
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.45) (.45) (.44) (.42) (.28)
Tax return of capital (.02) (.02) (.03) (.03) -0-
Distributions from net realized gains -0- -0- -0- (.01) -0-
Total dividends and distributions (.47) (.47) (.47) (.46) (.28)
Net asset value, end of period $9.44 $9.45 $9.52 $9.52 $9.94
TOTAL RETURN
Total investment return based on net
asset value (b) 5.05% 4.38% 5.06% .42% 2.40%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $28,738 $43,457 $68,459 $141,838 $228,703
Ratio of expenses to average net assets 3.13% 2.92% 2.85% 2.04% 1.74%(e)
Ratio of expenses to average net assets
excluding interest expense (c) 2.37% 2.29% 2.10% 1.89% 1.58%(e)
Ratio of net investment income to
average net assets 4.82% 4.75% 4.84% 4.10% 3.70%(e)
Portfolio turnover rate 249% 159% 293% 375% 499%
</TABLE>
(a) Based on average shares outstanding.
(b) 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.
(c) Net of interest expense of .76%, .64%, .73%, .14% and .21%, respectively,
on reverse repurchase agreements (see Note F).
(d) Commencement of distribution.
(e) Annualized.
17
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., including the portfolio of
investments, as of November 30, 1997, and the related statements of operations
and cash flows for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the financial
highlights for each of the 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, 1997, 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, 1997, 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 7, 1998
18
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.
19
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.
LMGAR
