ALLIANCE LIMITED MATURITY GOVERNMENT FUND
SEMI-ANNUAL REPORT
MAY 31, 1998
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
July 27, 1998
Dear Shareholder:
We are pleased to report to you on our strategy, performance and outlook of the
Alliance Limited Maturity Government Fund, for the semi-annual reporting period
ended May 31, 1998. The Fund is designed for investors who seek high 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. The Fund
confines maturities to 10 years or less with durations not exceeding that of a
10-year Treasury note.
INVESTMENT RESULTS
The following table provides investment results for the Alliance Limited
Maturity Government Fund for the six and 12-month periods ended May 31, 1998.
For comparison, we have included the Lipper Intermediate U.S. Government Funds
(IUG) Average, a universe of 125 funds with investment objectives similar to
that of the Alliance Limited Maturity Government Fund.
For the six and 12-month periods ended May 31, 1998, your Fund trailed somewhat
the Lipper IUG Average. The performance of your Fund was enhanced over the
period by its allocation in fixed rate mortgage-backed securities. However,
with the yield curve flat to inverted, prepayments in adjustable rate mortgages
caused primarily by refinancing dampened performance. Your Fund's yield curve
concentration in the five-year sector also detracted from returns.
INVESTMENT RESULTS*
Periods Ended May 31, 1998
TOTAL RETURNS
6 MONTHS 12 MONTHS
-------- ---------
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
Class A 2.78% 7.33%
Class B 2.52% 6.69%
Class C 2.53% 6.70%
LIPPER INTERMEDIATE U.S. GOVERNMENT FUNDS
(IUG) AVERAGE 3.57% 9.32%
* THE FUND'S INVESTMENT RESULTS ARE TOTAL RETURNS FOR THE PERIODS AND ARE
BASED ON THE NET ASSET VALUES OF EACH CLASS OF SHARES. 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 EACH PERIOD. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THE UNMANAGED LIPPER INTERMEDIATE U.S. GOVERNMENT FUNDS (IUG) AVERAGE IS
BASED ON THE PERFORMANCE OF A UNIVERSE OF 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 FIVE TO 10 YEARS.
FOR THE SIX AND 12-MONTH PERIODS ENDED MAY 31, 1998, THE LIPPER IUG AVERAGE
CONSISTED OF 124 AND 116 FUNDS, RESPECTIVELY. AN INVESTOR CANNOT INVEST
DIRECTLY IN AN AVERAGE.
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 3.
INVESTMENT STRATEGY
During the period we maintained the portfolio's asset weighting consistent with
the investment objectives of the Fund, while seeking a high level of current
income. The portfolio continued to be invested primarily in U.S. Treasuries and
agencies.
ECONOMIC OVERVIEW
Over the six-month period ended May 31, 1998, the U.S. economy continued its
healthy expansion coupled with low inflation, in spite of economic turmoil in
Asia. Fueled by strong domestic demand, first quarter Gross Domestic Product
(GDP), a standard measure of economic growth, expanded 5.4%, a significant
increase from the fourth quarter of 1997. Second quarter 1998 GDP growth has
shown signs of slowing, with continued
1
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
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strong domestic demand offset by weakening industrial production. The Consumer
Price Index (CPI), a measure of inflation, recorded a 1.7% increase
year-over-year for the period ended May 31, 1998, despite the tightest labor
market in 28 years. In May, the unemployment rate rose slightly to 4.5%, after
attaining record lows during the period. Helped by strong economic fundamentals
and uncertainty overseas, the U.S. dollar continued to strengthen against the
major currencies. Citing low inflation and slowing demand from Asia, the
Federal Reserve left interest rates unchanged.
MARKET OVERVIEW
Through the six-month period ended May 31, 1998, the U.S. bond market continued
to climb as investors, concerned about events in the emerging markets, sought
the relative safety of U.S. Treasuries. The U.S. Treasury market posted solid
returns with longer-term Treasuries outperforming shorter-term Treasuries. When
overseas markets stabilized at the beginning of the calendar year, following
the volatility in the fourth quarter of 1997, investors' focus shifted to
short-term expectations regarding U.S. monetary policy. In May, renewed
volatility in Asia, weakness in the yen, and fiscal problems in Russia caused a
rally in the Treasury market and pushed bond yields lower. The rally was
compounded by the strong U.S. dollar which attracted overseas investors,
reflecting a flight-to-quality. These factors combined to create favorable
demand for longer-term Treasury securities, which led to a flattening of the
yield curve. Treasury yields fell across the maturity spectrum with longer-term
maturities falling most. The two-year Treasury fell 23 basis points, to 5.53%,
and the 10-year Treasury yield dropped 30 basis points, to 5.55%.
The mortgage sector performed relatively well during the period as interest
rates remained in a trading range. However, the sector's performance
deteriorated towards the end of the period as the decline in interest rates
renewed prepayment fears. Particularly affected were adjustable-rate mortgages
which experienced higher levels of prepayments as interest rates declined and
the yield curve flattened. In this environment, adjustable-rate mortgage
holders are inclined to refinance into a fixed-rate mortgage at a similar low
rate. As a result, prepayments accelerated and spreads widened in the
adjustable-rate mortgage sector.
OUTLOOK
We anticipate slowing global growth and continued benign inflation as Asia
exports cheaper goods to the world and imports less from abroad. With inflation
subdued, we expect monetary policy in the U.S. to remain substantially
unchanged for most of 1998. Growth is expected to slow from its torrid pace
during the first quarter 1998, to a more moderate sustainable pace with
continued strong domestic demand but weakening industrial production. We
anticipate that U.S. interest rates will remain low as the U.S. fixed-income
markets continue to provide a safe haven for investors during periods of
volatility overseas.
In the fixed-income markets, we currently see more value in the Treasury and
asset-backed sectors due to their protection from prepayment risk as interest
rates are expected to remain low and the yield curve remains relatively flat.
Thank you for your continued interest and investment in the Alliance Limited
Maturity Government Fund. We look forward to reporting to you again in the
coming months.
Sincerely,
John D. Carifa
Chairman
Patricia Young
Senior Vice President
Jeffrey S. Phlegar
Senior Vice President
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
NAV AND SEC AVERAGE ANNUAL TOTAL RETURNS AS OF MAY 31, 1998
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 7.33% 2.80%
Five Years 4.62% 3.72%
Since Inception* 4.90% 4.15%
SEC Yield** 4.64%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 6.69% 3.69%
Five Years 3.89% 3.89%
Since Inception* 4.18% 4.18%
SEC Yield** 4.13%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 6.70% 5.70%
Five Years 3.90% 3.90%
Since Inception* 3.89% 3.89%
SEC Yield** 4.15%
SEC AVERAGE ANNUAL TOTAL RETURNS
AS OF THE MOST RECENT QUARTER-END (MARCH 31, 1998)
CLASS A CLASS B CLASS C
------- ------- -------
1 Year 3.78% 4.63% 6.64%
5 Years 3.74% 3.90% n/a
Since Inception* 4.13% 4.16% 3.85%
The Fund's investment results represent Average Annual Total Returns. The NAV
and SEC returns reflect reinvestment of dividends and/or capital gains
distributions in additional shares without (NAV) and with (SEC) 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
** SEC yield is for the 30 days ended May 31, 1998.
n/a: not applicable.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
3
PORTFOLIO OF INVESTMENTS
MAY 31, 1998 (UNAUDITED) ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS-71.2%
U.S. TREASURY NOTES-63.6%
5.375%, 1/31/00 $18,050 $ 17,993,505
5.50%, 3/31/00-3/31/03 (a) 17,600 17,549,730
6.125%, 8/15/07 (a) 6,000 6,191,220
6.25%, 6/30/02 4,850 4,959,901
------------
46,694,356
U.S. TREASURY BOND-7.6%
11.875%, 11/15/03 4,350 5,602,669
Total U.S. Government Obligations
(cost $52,441,845) 52,297,025
MORTGAGE-RELATED SECURITIES-44.7%
COLLATERALIZED MORTGAGE OBLIGATIONS-26.0%
ADJUSTABLE RATE-15.6%
Donaldson, Lufkin & Jenrette
Series 1994-QE1 Cl. A1
7.978%, 4/25/24 (b) 2,819 2,812,291
Housing Security, Inc.
Series 1995-B Cl. A1A
7.466%, 11/25/28 3,920 3,993,567
Prudential Home Mortgage Securities, Inc.
Series 1993-56 Cl. A1
8.229%, 1/25/24 1,217 1,240,784
Sears Mortgage Securities Corp.
Series 1992-18A Cl. A1
7.778%, 9/25/22 3,404 3,443,574
------------
11,490,216
FIXED RATE-10.4%
Allied Capital Commercial Mortgage Trust
Series 1998-1 Cl. A
6.31%, 9/25/03 (b) 3,124 3,099,653
Federal National Mortgage Association
Series 1997-M8 Cl. A1
6.94%, 1/25/22 1,468 1,520,042
Money Store Home Equity Trust
Series 1997-D Cl. AV2
6.49%, 10/15/26 2,400 2,407,128
Residential Funding Mortgage Security I
Series 1993-S11 Cl. A5
7.250%, 3/25/23 595 596,671
------------
7,623,494
Total Collateralized Mortgage
Obligations
(cost $19,090,363) 19,113,710
FEDERAL NATIONAL MORTGAGE
ASSOCIATION-12.8%
6.50%, 1/01/99 3,800 3,777,428
7.50%, 4/01/08 (c) 1 1,016
9.00%, 2/01/20 3,891 4,163,372
11.25%, 2/01/16 1,282 1,449,148
Total Federal National Mortgage
Association
(cost $9,379,775) 9,390,964
STRIPPED MORTGAGE BACKED SECURITY-2.5%
Mortgage Capital Funding, Inc.
Series 1996-MC2 Cl. X, I/O
8.50%, 12/21/26 (d)
(cost $1,843,393) 1,843 1,847,661
4
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.-1.9%
11.00%, 1/01/11-9/01/20
(cost $1,370,141) $1,226 $ 1,390,299
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION-1.5%
11.25%, 7/15/13-1/15/16
GPM 780 859,643
11.50%, 4/15/13 BD 25 28,616
11.50%, 2/15/13-6/15/13
GPM 176 197,704
11.75%, 1/20/16 GPM 14 15,747
Total Government National Mortgage
Association
(cost $1,095,641) 1,101,710
Total Mortgage-Related Securities
(cost $32,779,313) 32,844,344
REPURCHASE AGREEMENT-17.5%
State Street Bank and Trust Co.
5.57%, dated 5/29/98, due 6/01/98,
collateralized by $12,975,000,
FNMA, 5.80%, 3/10/00
(cost $12,872,000) 12,872 12,872,000
TOTAL INVESTMENTS-133.4%
(cost $98,093,158) 98,013,369
Other assets less liabilities-(33.4%) (24,542,913)
NET ASSETS-100% $ 73,470,456
(a) Securities, or portions thereof, with an aggregate market value of
$20,618,777 have been segregated to collateralize reverse repurchase agreements.
(b) 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, 1998,
these securities amounted to $5,911,944 or 8.0% of net assets.
(c) 15 year mortgage.
(d) Interest rate represents yield to maturity and principal amount represents
amortized cost.
Glossary of Terms:
BD - Builder Buydown
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, 1998 (UNAUDITED) ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $98,093,158) $ 98,013,369
Cash 827
Receivable for investment securities sold 12,817,337
Interest receivable 983,965
Receivable for capital stock sold 225,266
Total assets 112,040,764
LIABILITIES
Reverse repurchase agreement 20,520,385
Payable for investment securities purchased 17,564,168
Payable for capital stock redeemed 162,751
Dividends payable 110,087
Distribution fee payable 52,858
Advisory fee payable 41,133
Accrued expenses and other liabilities 118,926
Total liabilities 38,570,308
NET ASSETS $73,470,456
COMPOSITION OF NET ASSETS
Capital stock, at par $ 7,786
Additional paid-in capital 95,199,572
Distributions in excess of net investment income (308,464)
Accumulated net realized loss on investment transactions (21,348,649)
Net unrealized depreciation of investments (79,789)
$ 73,470,456
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($17,153,822/
1,818,135 shares of capital stock issued and outstanding) $9.43
Sales charge--4.25% of public offering price .42
Maximum offering price $9.85
CLASS B SHARES
Net asset value and offering price per share ($32,294,483/
3,422,373 shares of capital stock issued and outstanding) $9.44
CLASS C SHARES
Net asset value and offering price per share ($24,022,151/
2,545,791 shares of capital stock issued and outstanding) $9.44
See notes to financial statements.
6
STATEMENT OF OPERATIONS
SIXMONTHS ENDED MAY 31, 1998 (UNAUDITED)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 3,081,022
EXPENSES
Advisory fee $ 251,619
Distribution fee - Class A 25,876
Distribution fee - Class B 164,216
Distribution fee - Class C 136,637
Administrative 69,664
Transfer agency 63,518
Custodian 46,492
Audit and legal 40,918
Registration 17,960
Directors' fees 11,436
Printing 10,102
Miscellaneous 7,092
Total expenses before interest 845,530
Interest expense 437,134
Less: expense offset arrangement (see Note B) (3,994)
Net expenses 1,278,670
Net investment income 1,802,352
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain on investment transactions 559,397
Net change in unrealized appreciation
of investments (360,565)
Net gain on investments 198,832
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 2,001,184
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 1,802,352 $ 4,582,494
Net realized gain (loss) on
investment transactions 559,397 (250,987)
Net change in unrealized appreciation
of investments (360,565) (55,810)
Net increase in net assets from
operations 2,001,184 4,275,697
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A (493,893) (884,292)
Class B (821,252) (1,988,935)
Class C (685,093) (1,706,319)
Tax return of capital
Class A -0- (40,988)
Class B -0- (92,191)
Class C -0- (79,091)
CAPITAL STOCK TRANSACTIONS
Net decrease (5,078,380) (31,026,939)
Total decrease (5,077,434) (31,543,058)
NET ASSETS
Beginning of year 78,547,890 110,090,948
End of period $ 73,470,456 $ 78,547,890
See notes to financial statements.
8
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
INCREASE (DECREASE) IN CASH FROM:
OPERATING ACTIVITIES:
Interest received $ 2,952,394
Interest expense paid (437,134)
Operating expenses paid (872,575)
Net increase in cash from operating activities $ 1,642,685
INVESTING ACTIVITIES:
Proceeds from disposition of long-term
portfolio investments 142,652,018
Purchase of long-term portfolio investments (138,379,120)
Purchase of short-term portfolio
investments, net (8,334,000)
Net decrease in cash from investing activities (4,061,102)
FINANCING ACTIVITIES*:
Net increase in reverse repurchase agreements 9,357,316
Net redemptions from capital stock transactions (6,314,393)
Cash dividends paid (623,438)
Net increase in cash from financing activities 2,419,485
Net increase in cash 1,068
Due to custodian at beginning of year (241)
Cash at end of period $ 827
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 $ 2,001,184
ADJUSTMENTS:
Increase in interest receivable $ (113,392)
Net realized gain on investment transactions (559,397)
Net change in unrealized appreciation
of investments 360,565
Accretion of bond discount (15,236)
Decrease in accrued expenses (31,039)
Total adjustments (358,499)
NET INCREASE IN CASH FROM OPERATING ACTIVITIES $ 1,642,685
* Non-cash financing activities not included herein consist of reinvestment
of dividends.
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 (UNAUDITED) 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 financial statements have
been prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities in the financial statements and
amounts of income and expenses during the reporting period. Actual results
could differ from those estimates. The following is a summary of significant
accounting policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange are valued at the
last sale price on such exchange on the day of valuation 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 market value of such securities.
2. 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.
3. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Investment transactions are accounted for on
the date 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.
4. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each settled 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.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income dividends 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.
10
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
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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 Fund's average daily net assets. The fee is accrued daily and paid
monthly.
Pursuant to the advisory agreement, the Fund paid $69,664 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, 1998.
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 $46,696 for the six months ended May 31, 1998.
In addition, for the six months ended May 31, 1998, the Fund's expenses were
reduced by $3,994 under an expense offset arrangement with Alliance Fund
Services. Transfer agency fees reported in the statement of operation exclude
these credits.
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 front-end sales charges of $2,257 from the sales of Class A shares and
$13,019 and $9,433 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, 1998.
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 Fund's average daily net assets attributable to 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 $402,644 and $2,964,874 for Class B and Class C shares,
respectively; such costs may be recovered from the Fund in future periods as
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 $145,377,724 and $140,754,947,
respectively, for the six months ended May 31, 1998. There were purchases of
$10,565,564 and sales of $13,614,965 of U.S. government and government agency
obligations for the six months ended May 31, 1998.
At May 31, 1998, 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 $355,890 and gross unrealized
depreciation of investments was $435,679 resulting in net unrealized
depreciation of $79,789.
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.
1. 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.
11
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
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. 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 May 31, 1998, 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
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30, MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997 (UNAUDITED) 1997
------------ ------------ -------------- --------------
CLASS A
Shares sold 2,114,043 12,567,555 $ 20,005,133 $117,268,204
Shares issued in
reinvestment of
dividends and
distributions 33,744 58,760 319,382 549,654
Shares converted
from Class B 66,516 353,816 630,755 3,315,573
Shares redeemed (2,112,701) (12,982,766) (20,002,508) (121,071,651)
Net increase
(decrease) 101,602 (2,635) $ 952,762 $ 61,780
CLASS B
Shares sold 2,209,848 2,084,994 $ 20,893,870 $ 19,497,685
Shares issued in
reinvestment of
dividends and
distributions 53,573 137,401 507,144 1,284,843
Shares converted
to Class A (66,516) (353,816) (630,755) (3,315,573)
Shares redeemed (2,336,567) (3,639,461) (22,095,208) (34,015,979)
Net decrease (139,662) (1,770,882) $ (1,324,949) $(16,549,024)
CLASS C
Shares sold 228,315 647,676 $ 2,162,602 $ 6,051,461
Shares issued in
reinvestment of
dividends and
distributions 58,174 141,389 550,765 1,322,376
Shares redeemed (786,098) (2,343,438) (7,419,560) (21,913,532)
Net decrease (499,609) (1,554,373) $ (4,706,193) $(14,539,695)
12
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 liquid assets having a value at least
equal to the repurchase price.
As of May 31, 1998, the Fund had entered into the following reverse repurchase
agreements:
AMOUNT BROKER INTEREST RATE MATURITY
----------- --------------- ------------- ------------
$12,872,000 Lehman Brothers 5.00% June 4, 1998
$6,292,500 Morgan Stanley 5.30% June 3, 1998
$1,308,125 Morgan Stanley 5.30% June 4, 1998
For the six months ended May 31, 1998, the maximum amount of reverse repurchase
agreements outstanding was $37,060,837, the average amount outstanding was
approximately $18,058,905, and the daily weighted average interest rate was
4.85%.
13
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
ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 1998 ---------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.44 $ 9.45 $ 9.52 $ 9.51 $ 9.94 $ 9.84
INCOME FROM INVESTMENT OPERATIONS
Net investment income .25(a) .51(a) .51(a) .52(a) .42 .57
Net realized and unrealized gain (loss)
on investment transactions .01 .02 (.04) .02 (.32) .11
Net increase in net asset value from
operations .26 .53 .47 .54 .10 .68
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.27) (.52) (.51) (.50) (.48) (.58)
Tax return of capital -0- (.02) (.03) (.03) (.04) -0-
Distributions from net realized gains -0- -0- -0- -0- (.01) -0-
Total dividends and distributions (.27) (.54) (.54) (.53) (.53) (.58)
Net asset value, end of period $ 9.43 $ 9.44 $ 9.45 $ 9.52 $ 9.51 $ 9.94
TOTAL RETURN
Total investment return based on net
asset value (b) 2.78% 5.79% 5.11% 5.91% 1.03% 7.02%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $17,154 $16,197 $16,248 $27,887 $43,173 $59,215
Ratio of expenses to average net assets 2.79%(c)(d) 2.41% 2.22% 2.14% 1.34% 1.54%
Ratio of expenses to average net assets
excluding interest expense (e) 1.64%(c) 1.65% 1.58% 1.41% 1.20% 1.33%
Ratio of net investment income to
average net assets 5.21%(c) 5.52% 5.44% 5.53% 4.78% 5.66%
Portfolio turnover rate 176% 249% 159% 293% 375% 499%
</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
------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 1998 ---------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.44 $ 9.45 $ 9.52 $ 9.52 $ 9.94 $ 9.84
INCOME FROM INVESTMENT OPERATIONS
Net investment income .21(a) .45(a) .44(a) .46(a) .39 .49
Net realized and unrealized gain (loss)
on investment transactions .03 .01 (.04) .01 (.35) .12
Net increase in net asset value from
operations .24 .46 .40 .47 .04 .61
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.24) (.45) (.44) (.44) (.42) (.51)
Tax return of capital -0- (.02) (.03) (.03) (.03) -0-
Distributions from net realized gains -0- -0- -0- -0- (.01) -0-
Total dividends and distributions (.24) (.47) (.47) (.47) (.46) (.51)
Net asset value, end of period $ 9.44 $ 9.44 $ 9.45 $ 9.52 $ 9.52 $ 9.94
TOTAL RETURN
Total investment return based on net
asset value (b) 2.52% 5.04% 4.36% 5.05% .42% 6.27%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $32,294 $33,613 $50,386 $84,362 $136,458 $168,157
Ratio of expenses to average net assets 3.47%(c)(d) 3.14% 2.94% 2.85% 2.08% 2.26%
Ratio of expenses to average net assets
excluding interest expense (e) 2.35%(c) 2.39% 2.30% 2.11% 1.91% 2.07%
Ratio of net investment income to
average net assets 4.49%(c) 4.80% 4.73% 4.83% 4.12% 4.98%
Portfolio turnover rate 176% 249% 159% 293% 375% 499%
</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
------------------------------------------------------------------------------
SIX MONTHS MAY 3, 1993(F)
ENDED YEAR ENDED NOVEMBER 30, TO
MAY 31, 1998 -------------------------------------------------- NOVEMBER 30,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.44 $ 9.45 $ 9.52 $ 9.52 $ 9.94 $ 9.98
INCOME FROM INVESTMENT OPERATIONS
Net investment income .21(a) .45(a) .45(a) .46(a) .37 .27
Net realized and unrealized gain (loss)
on investment transactions .03 .01 (.05) .01 (.33) (.03)
Net increase in net asset value from
operations .24 .46 .40 .47 .04 .24
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.24) (.45) (.45) (.44) (.42) (.28)
Tax return of capital -0- (.02) (.02) (.03) (.03) -0-
Distributions from net realized gains -0- -0- -0- -0- (.01) -0-
Total dividends and distributions (.24) (.47) (.47) (.47) (.46) (.28)
Net asset value, end of period $ 9.44 $ 9.44 $ 9.45 $ 9.52 $ 9.52 $ 9.94
TOTAL RETURN
Total investment return based on net
asset value (b) 2.53% 5.05% 4.38% 5.06% .42% 2.40%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $24,022 $28,738 $43,457 $68,459 $141,838 $228,703
Ratio of expenses to average net assets 3.45%(c)(d) 3.13% 2.92% 2.85% 2.04% 1.74%(c)
Ratio of expenses to average net assets
excluding interest expense (e) 2.33%(c) 2.37% 2.29% 2.10% 1.89% 1.58%(c)
Ratio of net investment income to
average net assets 4.50%(c) 4.82% 4.75% 4.84% 4.10% 3.70%(c)
Portfolio turnover rate 176% 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) Annualized.
(d) Ratio reflects expenses grossed up for expense offset arrangement with the
Transfer Agent. For the six month ended May 31, 1998, the ratios of expenses to
average net assets were 2.78%, 3.46% and 3.44%, for Class A, B and C shares,
respectively.
(e) Net of interest expense of 1.15%, .76%, .64%, .73%, .14% and .21%,
respectively, on reverse repurchase agreements (see Note F).
(f) Commencement of distribution.
16
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 & 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.
17
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 Environment 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 Global Small Cap Fund
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance Greater China '97 Fund
Alliance International Fund
Alliance International Premier Growth Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage 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
18
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
