ALLIANCE LIMITED MATURITY GOVERNMENT FUND
SEMI-ANNUAL REPORT
MAY 31, 1999
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
July 27, 1999
Dear Shareholder:
We are pleased to report to you on the performance, strategy, and outlook for
the Alliance Limited Maturity Government Fund (the "Fund") for the six-month
period ended May 31, 1999. 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. At
all times, however, each security held by the Fund has either a remaining
maturity of not more than ten years or a duration not exceeding that of a
ten-year Treasury note.
INVESTMENT RESULTS
The following table provides the investment results for the Alliance Limited
Maturity Government Fund for the six- and twelve-month periods ended May 31,
1999. For comparison, we have also included performance for the Lipper
Intermediate U.S. Government ("IUG") Funds Average.
For the six-month period under review, your Fund's Class A shares outperformed
the Lipper IUG Funds Average. The Fund's allocation to the mortgage sector
supported performance during the period as rising interest rates dampened
prepayment risk. However, the Fund's U.S. Treasury holdings hurt performance as
that sector performed poorly in the rising interest rate environment.
INVESTMENT RESULTS*
Periods Ended May 31, 1999
TOTAL RETURNS
6 MONTHS 12 MONTHS
-------- ---------
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
Class A -0.69% 3.32%
Class B -1.15% 2.48%
Class C -1.15% 2.50%
LIPPER INTERMEDIATE U.S. GOVERNMENT
FUNDS AVERAGE -1.12% 3.44%
* 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 ("IUG") FUNDS 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 TEN
YEARS. FOR THE SIX- AND TWELVE-MONTH PERIODS ENDED MAY 31, 1999, THE LIPPER IUG
AVERAGE CONSISTED OF 128 AND 126 FUNDS, RESPECTIVELY. AN INVESTOR CANNOT INVEST
DIRECTLY IN AN AVERAGE.
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 3.
INVESTMENT STRATEGY
Over the six-month period ended May 31, 1999, as interest rates rose, we
increased our allocation within the mortgage and asset-backed sectors and
decreased our exposure to the U.S. Treasury sector. Throughout the period, we
also opportunistically utilized higher yielding commercial mortgage-backed
securities and London Interbank Offered Rate adjustable-rate mortgages as we
expected these securities to have superior performance in a rising rate
environment.
MARKET OVERVIEW
During the six-month period ended May 31, 1999, the overall performance of the
U.S. bond market lagged as strong U.S. economic growth and rising inflation
concerns increased the likelihood that the Federal Reserve would increase
interest rates.
During the period, the Federal Open Market Committee (the "FOMC") emphasized
its concerns that the ongoing strength of consumer demand was outstripping
productivity gains. The U.S. economy grew a robust 4.1% in the first quarter of
1999, following an exceptional fourth quarter 1998 growth rate of 6.0%. Though
inflation remained low, inflation concerns were heightened when a sharp
increase in oil prices caused the Consumer Price Index to jump from 1.7% in
March, to 2.3% in April. Ultimately, the FOMC stopped short of raising official
interest rates during the period ended May 31, 1999, but indicated their bias
to raise rates in the near future. (Sub-
1
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
sequently, on June 30, 1999, the FOMC raised official interest rates by 25
basis points.) Also during the period, the yield curve shifted outward and
flattened as short-term rates increased more than long-term rates. Two-year
Treasury yields increased from 4.52%, to 5.40%, and thirty-year Treasury yields
increased from 5.07%, to 5.82%.
Among the sectors of the U.S. bond market, the mortgage sector performed
strongly while the U.S. Treasury market lagged. As credit markets continued to
stabilize from the turmoil in 1998 and the threat of higher interest rates
surfaced, investors moved out of U.S. Treasuries and back into higher-yielding
sectors in search of higher returns. The mortgage sector was the main
beneficiary of the change in interest rate expectations. When interest rates
rose, mortgage refinancing slowed and mortgage prepayments fell, making
mortgage-backed securities more attractive.
OUTLOOK
U.S. economic activity is expected to moderate from the robust rate of the
first quarter, with 1999 growth estimated around 3.9%. The slowing in
industrial production appears to be abating and consumption should moderate
slightly from the robust level in 1998. We expect inflation will remain benign,
and U.S. interest rates will remain low with the thirty-year Treasury centered
around 6.00%.
Given the strong demand within the short duration sector, our outlook remains
constructive. Higher interest rates have led to diminishing supply and
moderating prepayment speeds. New issue asset-backed securities should be well
absorbed by the market in the weeks ahead. In light of the recent change in
bond market sentiment, investors are likely to begin focusing on the extension
risk of prepayment-sensitive securities.
Thank you for your continued interest and investment in the Alliance Limited
Maturity Government Fund. We look forward to reporting to you in the coming
months.
Sincerely,
John D. Carifa
Chairman
Jeffrey S. Phlegar
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
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. At all times, however, each security held by the Fund
has either a remaining maturity of not more than ten years or a duration not
exceeding that of a ten-year Treasury note.
INVESTMENT RESULTS
_______________________________________________________________________________
NAV AND SEC AVERAGE ANNUAL TOTAL RETURNS AS OF MAY 31, 1999
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 3.32% -1.08%
Five Years 4.72% 3.81%
Since Inception* 4.68% 4.03%
SEC Yield** 4.33%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 2.48% -0.45%
Five Years 3.98% 3.98%
Since Inception* (a) 4.04% 4.04%
SEC Yield** 3.86%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 2.50% 1.52%
Five Years 3.99% 3.99%
Since Inception* 3.66% 3.66%
SEC Yield** 3.88%
SEC AVERAGE ANNUAL TOTAL RETURNS AS OF THE MOST RECENT QUARTER-END (MARCH 31,
1999)
CLASS A CLASS B CLASS C
------------ ------------ ------------
1 Year 0.50% 1.25% 3.25%
5 Years 3.88% 4.06% 4.07%
Since Inception* 4.25% 4.25% (a) 3.92%
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 Class C.
** SEC yields are for the 30 days ended May 31, 1999.
(a) Assumes conversion of Class B shares into Class A shares after six years.
3
PORTFOLIO OF INVESTMENTS
MAY 31, 1999 (UNAUDITED) ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------------
MORTGAGE-RELATED SECURITIES-62.5%
FEDERAL NATIONAL MORTGAGE ASSOCIATION-27.2%
6.00%, 12/01/99 (a) $ 9,200 $ 8,975,704
6.50%, 12/01/99 (a) 9,360 9,319,003
6.50%, 12/01/99 5,000 4,885,900
7.50%, 4/01/08 (a) 1 627
11.25%, 2/01/16 963 1,064,030
Total Federal National
Mortgage Association
(cost $24,441,620) 24,245,264
COLLATERALIZED MORTGAGE OBLIGATIONS-21.4%
FIXED RATE-19.1%
Allied Capital Commercial
Mortgage Trust
Series 1998-1 Cl. A
6.31%, 9/25/03 (b) 1,790 1,776,528
Amresco Residential
Securities
Series 1998-3 Cl. A8
5.94%, 3/25/15 2,500 2,479,700
Government Lease Trust
Series 1999 C1-A Cl. B1
4.00%, 5/18/29 (b) 2,450 1,874,250
Green Tree Home
Improvement Loan Trust
Series 1998-D Cl. A4
6.25%, 8/15/29 3,000 2,977,500
LB Commercial Conduit
Mortgage Trust
Series 1999 C1 Cl. A2
6.79%, 10/01/30 3,000 3,028,863
Morgan Stanley Capital, Inc.
Series 1998-XL2 Cl. A2
6.17%, 10/03/08 2,000 1,907,820
The Money Store Home
Equity Loan Trust
Series 1994-A Cl. A5
6.725%, 6/15/24 3,000 3,022,020
------------
17,066,681
ADJUSTABLE RATE-2.3%
Prudential Home Mortgage
Securities, Inc.
Series 1993-56 Cl. A1
7.419%, 1/25/24 435 434,932
Sears Mortgage Securities
Corp.
Series 1992-18A Cl. A1
7.012%, 9/25/22 1,590 1,600,384
------------
2,035,316
Total Collateralized
Mortgage Obligations
(cost $19,233,584) 19,101,997
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION-11.2%
8.00%, 4/15/26-12/15/27
(cost $10,060,447) 9,666 10,043,055
STRIPPED MORTGAGE BACKED SECURITIES-1.7%
Mortgage Capital Funding, Inc.
Series 1996-MC2 Cl. X, I/O
2.092%, 12/21/26 (c)
(cost $1,632,305) 18,113 1,503,368
4
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.-1.0%
11.00%, 9/01/13-1/01/16
(cost $940,248) $ 828 $ 912,196
Total Mortgage-Related
Securities
(cost $56,308,204) 55,805,880
U.S. GOVERNMENT OBLIGATIONS-57.0%
U.S TREASURY BOND-6.0%
11.875%, 11/15/03 4,350 5,379,036
U.S. TREASURY NOTES-51.0%
4.875%, 3/31/01 (d) 21,800 21,595,516
5.25%, 5/15/04 (d) 14,350 14,143,647
6.125%, 12/31/01 9,600 9,737,952
------------
45,477,115
Total U.S. Government
Obligations
(cost $51,948,816) 50,856,151
REPURCHASE AGREEMENT-25.0%
State Street Bank & Trust Co.
4.85%, dated 5/28/99,
due 6/01/99, collateralized
by $20,575,000, FNMA,
4.85%, 11/20/00 and
$2,370,000, FFCB,
4.9%, 11/16/00
(cost $22,304,000) 22,304 22,304,000
TOTAL INVESTMENTS-144.5%
(cost $130,561,020) 128,966,031
Other assets less
liabilities-(44.5%) (39,703,137)
NET ASSETS-100% $ 89,262,894
(a) 15 year mortgage.
(b) 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 May 31, 1999, this security
amounted to $3,650,778 or 4.1% of net assets.
(c) Interest rate represents yield to maturity and principal amount represents
amortized cost.
(d) Securities, or portions thereof, with an aggregate market value of
$18,710,500 have been segregated to collateralize reverse repurchase agreements.
Glossary of Terms:
FFCB - Federal Farm Credit Bank
FNMA - Federal National Mortgage Association
I/O - Interest Only
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999 (UNAUDITED) ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $130,561,020) $ 128,966,031
Cash 4,971,641
Interest receivable 874,455
Receivable for capital stock sold 192,285
Receivable for investment securities sold 22,655
Prepaid expenses 3,450
Total assets 135,030,517
LIABILITIES
Payable for investment securities purchased 26,468,458
Reverse repurchase agreement 18,727,200
Payable for capital stock redeemed 201,055
Dividends payable 128,897
Distribution fee payable 58,738
Advisory fee payable 49,683
Accrued expenses and other liabilities 133,592
Total liabilities 45,767,623
NET ASSETS $ 89,262,894
COMPOSITION OF NET ASSETS
Capital stock, at par $ 9,683
Additional paid-in capital 112,473,230
Distributions in excess of net investment income (456,233)
Accumulated net realized loss on investment transactions (21,168,797)
Net unrealized depreciation of investments (1,594,989)
$ 89,262,894
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($29,452,445/3,194,846 shares of capital stock issued
and outstanding) $9.22
Sales charge--4.25% of public offering price .41
Maximum offering price $9.63
CLASS B SHARES
Net asset value and offering price per share
($31,605,159/3,428,262 shares of capital stock issued
and outstanding) $9.22
CLASS C SHARES
Net asset value and offering price per share
($28,205,290/3,060,285 shares of capital stock issued
and outstanding) $9.22
See notes to financial statements.
6
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1999 (UNAUDITED)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 3,427,058
EXPENSES
Advisory fee $ 296,281
Distribution fee - Class A 45,130
Distribution fee - Class B 166,342
Distribution fee - Class C 139,041
Transfer agency 71,340
Custodian 57,953
Administrative 56,616
Audit and legal 33,019
Registration 23,590
Printing 19,779
Directors' fees 12,404
Miscellaneous 6,588
Total expenses before interest 928,083
Interest expense 548,500
Net expenses 1,476,583
Net investment income 1,950,475
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized loss on investment transactions (1,786,120)
Net realized loss on written options
transactions (30,586)
Net realized gain on futures transactions 5,851
Net change in unrealized depreciation of
investments (1,073,034)
Net loss on investments (2,883,889)
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (933,414)
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1999 NOVEMBER 30,
(UNAUDITED) 1998
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 1,950,475 $ 3,517,530
Net realized gain (loss) on investments,
options and futures transactions (1,810,855) 2,550,104
Net change in unrealized appreciation
(depreciation) of investments (1,073,034) (802,731)
Net increase (decrease) in net assets
from operations (933,414) 5,264,903
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A (825,400) (1,077,771)
Class B (785,450) (1,330,682)
Class C (659,622) (1,109,077)
Distributions in excess of net investment
income
Class A -0- (224,185)
Class B -0- (276,414)
Class C -0- (230,283)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (11,179,314) 24,081,713
Total increase (decrease) (14,383,200) 25,098,204
NET ASSETS
Beginning of year 103,646,094 78,547,890
End of period $ 89,262,894 $ 103,646,094
See notes to financial statements.
8
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED MAY 31, 1999 (UNAUDITED)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
INCREASE (DECREASE) IN CASH FROM:
OPERATING ACTIVITIES:
Interest received $ 3,622,231
Interest paid (548,500)
Operating expenses paid (1,015,018)
Net increase in cash from operating
activities $ 2,058,713
INVESTING ACTIVITIES:
Proceeds from disposition of long-term
portfolio investments 254,414,345
Purchase of long-term portfolio investments (223,233,254)
Sales of short-term portfolio investments,
net (22,281,305)
Net increase in cash from investing
activities 8,899,786
FINANCING ACTIVITIES:*
Net increase in reverse repurchase
agreements 1,204,503
Net redemptions from capital stock
transactions (6,564,502)
Cash dividends paid (752,026)
Net decrease in cash from financing
activities (6,112,025)
Net increase in cash 4,846,474
Cash at beginning of year 125,167
Cash at end of period $ 4,971,641
- -------------------------------------------------------------------------------
RECONCILIATION OF NET INCREASE IN NET ASSETS
FROM OPERATIONS TO NET INCREASE IN CASH
FROM OPERATING ACTIVITIES:
Net decrease in net assets resulting from
operations $ (933,414)
ADJUSTMENTS:
Decrease in interest receivable $ 238,585
Net realized loss on investment transactions 1,810,855
Net change in unrealized depreciation of
investments 1,073,034
Accretion of bond discount (43,412)
Decrease in accrued expenses (86,935)
Total adjustments 2,992,127
NET INCREASE IN CASH FROM OPERATING ACTIVITIES $ 2,058,713
* Non-cash financing activities not included herein consist of reinvestment
of dividends.
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999 (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 may 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 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.
5. 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. Based on the operations of the Fund
as of the semi-annual date, and its distribution policy, the Fund may have a
tax return of capital at year end. At this time, the amount of this tax return
of capital is not estimable.
10
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 Fund's average daily net assets. The fee is accrued daily and paid
monthly.
Pursuant to the advisory agreement, the Fund paid $56,616 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, 1999.
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 $52,255 for the six months ended May 31, 1999.
For the six months ended May 31, 1999, the Fund's expenses were reduced by
$3,899 under an expense offset arrangement with Alliance Fund Services.
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 $6,115 from the sales of Class A shares and
$220, $49,299 and $6,882 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class A, Class B and Class C shares,
respectively, for the six months ended May 31, 1999.
Brokerage Commissions paid on investment transactions for the six months ended
May 31, 1999 amounted to $1,098, none of which was paid to Donaldson, Lufkin
&Jenrette Securities Corp., an affiliate of the Adviser.
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 $660,525 and $3,333,422 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 $8,746,289 and $8,548,716,
respectively, for the six months ended May 31, 1999. There were purchases of
$238,918,548 and sales of $240,103,083 of U.S. government and government agency
obligations for the six months ended May 31, 1999.
At May 31, 1999, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes.
Accordingly, gross unrealized appreciation of investments was $15,788 and gross
unrealized depreciation of investments was $1,610,777 resulting in net
unrealized depreciation of $1,594,989.
At November 30, 1998, the Fund had a net capital loss carryforward of
$19,294,001 of which $9,645,919 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
11
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
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. 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, 1999, the Fund had no outstanding futures
contracts.
2. INTEREST RATE SWAP AGREEMENTS
The Fund enters into interest rate swaps to protect itself from interest rate
fluctuations on the underlying debt instruments. A swap is an agreement that
obligates two parties to exchange a series of cash flows at specified intervals
based upon or calculated by reference to changes in specified prices or rates
for a specified amount of an underlying asset. The payment flows are usually
netted against each other, with the difference being paid by one party to the
other.
Risks may arise as a result of the failure of the counterparty to the swap
contract to comply with the terms of the swap contract. The loss incurred by
the failure of a counterparty is generally limited to the net interest payment
to be received by the Fund, and/or the termination value at the end of the
contract. Therefore, the Fund considers the creditworthiness of each
counterparty to a swap contract in evaluating potential credit risk.
Additionally, risks may arise from unanticipated movements in interest rates or
in the value of the underlying securities.
The Fund records a net receivable or payable on a daily basis for the net
interest income or expense expected to be received or paid in the interest
period. Net interest received or paid on these contracts is recorded as
interest income (or as an offset to interest income). Fluctuations in the value
of investments are recorded for financial statement purposes as unrealized
appreciation or depreciation of investments. Realized gains and losses from
terminated swaps are included in net realized gains on investment transactions.
There were no outstanding interest rate swap contracts at May 31, 1999.
3. OPTIONS TRANSACTIONS
For hedging and investment purposes, the Portfolio purchases and writes (sells)
put and call options on debt securities that are traded on U.S. and foreign
securities exchanges and over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from writing options which
expire unexercised are recorded by the Portfolio on the expiration date as
realized gains from option transactions. The difference between the premium
received and the amount paid on effecting a closing purchase transaction,
including brokerage commissions, is also treated as a realized gain, or if the
premium received is less than the amount paid for the closing purchase
transaction, as a realized loss. If a call option is exercised, the premium
received is added to the proceeds from the sale of the underlying security in
determining whether the Portfolio has realized a gain or loss. If a put option
is exercised, the premium received reduces the cost basis of the security
purchased by the Portfolio. The risk involved in writing an option is that, if
the option was exercised the underlying security could then be purchased or
sold by the Portfolio at a disadvantageous price.
12
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
Transactions in written options for the six months ended May 31, 1999 were as
follows:
NUMBER OF
CONTRACTS PREMIUMS
--------- ----------
Options oustanding at beginning of year -0- $ -0-
Options written 41 56,068
Options terminated in closing purchase transactions (41) (56,068)
Options outstanding at May 31, 1999 -0- $ -0-
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, 1999 NOVEMBER 30, MAY 31, 1999 NOVEMBER 30,
(UNAUDITED) 1998 (UNAUDITED) 1998
------------ ------------ -------------- --------------
CLASS A
Shares sold 9,557,867 10,880,057 $ 90,105,153 $103,443,782
Shares issued in
reinvestment of
dividends and
distributions 54,059 84,454 509,853 802,978
Shares converted
from Class B 353,430 906,354 3,320,911 8,638,581
Shares redeemed (11,118,279) (9,239,629) (104,908,781) (87,992,978)
Net increase
(decrease) (1,152,923) 2,631,236 $(10,972,864) $ 24,892,363
CLASS B
Shares sold 1,552,881 6,265,395 $ 14,643,981 $ 59,605,093
Shares issued in
reinvestment of
dividends and
distributions 56,941 107,647 536,315 1,022,249
Shares converted
to Class A (353,430) (906,010) (3,320,911) (8,638,581)
Shares redeemed (1,346,053) (5,511,144) (12,684,785) (52,344,955)
Net decrease (89,661) (44,112) $ (825,400) $ (356,194)
CLASS C
Shares sold 1,650,958 1,687,166 $ 15,564,728 $ 16,129,568
Shares issued in
reinvestment of
dividends and
distributions 50,938 109,292 479,617 1,037,674
Shares redeemed (1,633,073) (1,850,396) (15,425,395) (17,621,698)
Net increase
(decrease) 68,823 (53,938) $ 618,950 $ (454,456)
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 liquid assets having a value at least
equal to the repurchase price.
As of May 31, 1999, the Fund had entered into the following reverse repurchase
agreements:
AMOUNT BROKER INTEREST RATE MATURITY
- ----------- --------------------------------- ------------- ------------
$18,212,375 Morgan Stanley, Dean Witter & Co. 4.50% June 1, 1999
$ 498,125 Morgan Stanley, Dean Witter & Co. 4.60% June 3, 1999
For the six months ended May 31, 1999, the maximum amount of reverse repurchase
agreements outstanding was $45,258,063, the average amount outstanding was
approximately $29,070,153, and the daily weighted average interest rate was
3.73%.
NOTE G: BANK BORROWING
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $750 million revolving credit facility (the "Facility")
intended to provide short-term financing if necessary, subject to certain
restrictions, in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
the miscellaneous expenses in the statement of operations. The Fund did not
utilize the Facility during the six months ended May 31, 1999.
14
FINANCIAL HIGHLIGHTS ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 1999 ---------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.54 $ 9.44 $ 9.45 $ 9.52 $ 9.51 $ 9.94
INCOME FROM INVESTMENT OPERATIONS
Net investment income .21(a) .47(a) .51(a) .51(a) .52(a) .42
Net realized and unrealized gain (loss)
on investment transactions (.27) .17 .02 (.04) .02 (.32)
Net increase (decrease) in net asset
value from operations (.06) .64 .53 .47 .54 .10
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.26) (.47) (.52) (.51) (.50) (.48)
Distributions in excess of net
investment income -0- (.07) -0- -0- -0- -0-
Tax return of capital -0- -0- (.02) (.03) (.03) (.04)
Distributions from net realized gains -0- -0- -0- -0- -0- (.01)
Total dividends and distributions (.26) (.54) (.54) (.54) (.53) (.53)
Net asset value, end of period $ 9.22 $ 9.54 $ 9.44 $ 9.45 $ 9.52 $ 9.51
TOTAL RETURN
Total investment return based on net
asset value (b) (.69)% 6.94% 5.79% 5.11% 5.91% 1.03%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $29,452 $41,493 $16,197 $16,248 $27,887 $43,173
Ratio of expenses to average net assets 2.75%(c) 3.27% 2.41% 2.22% 2.14% 1.34%
Ratio of expenses to average net assets
excluding interest expense 1.55%(c) 1.68% 1.65% 1.58% 1.41% 1.20%
Ratio of net investment income to
average net assets 4.74%(c) 4.74% 5.52% 5.44% 5.53% 4.78%
Portfolio turnover rate 239% 500% 249% 159% 293% 375%
</TABLE>
See footnote summary on page 17.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 1999 ---------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.55 $ 9.44 $ 9.45 $ 9.52 $ 9.52 $ 9.94
INCOME FROM INVESTMENT OPERATIONS
Net investment income .19(a) .39(a) .45(a) .44(a) .46(a) .39
Net realized and unrealized gain (loss)
on investment transactions (.30) .19 .01 (.04) .01 (.35)
Net increase (decrease) in net asset
value from operations (.11) .58 .46 .40 .47 .04
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.22) (.39) (.45) (.44) (.44) (.42)
Distributions in excess of net
investment income -0- (.08) -0- -0- -0- -0-
Tax return of capital -0- -0- (.02) (.03) (.03) (.03)
Distributions from net realized gains -0- -0- -0- -0- -0- (.01)
Total dividends and distributions (.22) (.47) (.47) (.47) (.47) (.46)
Net asset value, end of period $ 9.22 $ 9.55 $ 9.44 $ 9.45 $ 9.52 $ 9.52
TOTAL RETURN
Total investment return based on net
asset value (b) (1.15)% 6.30% 5.04% 4.36% 5.05% .42%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $31,605 $33,591 $33,613 $50,386 $84,362 $136,458
Ratio of expenses to average net assets 3.48%(c) 3.84% 3.14% 2.94% 2.85% 2.08%
Ratio of expenses to average net assets
excluding interest expense 2.28%(c) 2.39% 2.39% 2.30% 2.11% 1.91%
Ratio of net investment income to
average net assets 4.05%(c) 4.10% 4.80% 4.73% 4.83% 4.12%
Portfolio turnover rate 239% 500% 249% 159% 293% 375%
</TABLE>
See footnote summary on page 17.
16
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 1999 ---------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.55 $ 9.44 $ 9.45 $ 9.52 $ 9.52 $ 9.94
INCOME FROM INVESTMENT OPERATIONS
Net investment income .19(a) .39(a) .45(a) .45(a) .46(a) .37
Net realized and unrealized gain (loss)
on investment transactions (.30) .19 .01 (.05) .01 (.33)
Net increase (decrease) in net asset
value from operations (.11) .58 .46 .40 .47 .04
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.22) (.39) (.45) (.45) (.44) (.42)
Distributions in excess of net
investment income -0- (.08) -0- -0- -0- -0-
Tax return of capital -0- -0- (.02) (.02) (.03) (.03)
Distributions from net realized gains -0- -0- -0- -0- -0- (.01)
Total dividends and distributions (.22) (.47) (.47) (.47) (.47) (.46)
Net asset value, end of period $ 9.22 $ 9.55 $ 9.44 $ 9.45 $ 9.52 $ 9.52
TOTAL RETURN
Total investment return based on net
asset value (b) (1.15)% 6.30% 5.05% 4.38% 5.06% .42%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $28,205 $28,562 $28,738 $43,457 $68,459 $141,838
Ratio of expenses to average net assets 3.47%(c) 3.84% 3.13% 2.92% 2.85% 2.04%
Ratio of expenses to average net assets
excluding interest expense 2.27%(c) 2.38% 2.37% 2.29% 2.10% 1.89%
Ratio of net investment income to
average net assets 4.05%(c) 4.11% 4.82% 4.75% 4.84% 4.10%
Portfolio turnover rate 239% 500% 249% 159% 293% 375%
</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 for a period of less than one year is not
annualized.
(c) Annualized.
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)
OFFICERS
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
WAYNE D. LYSKI, SENIOR VICE PRESIDENT
JEFFREY S. PHLEGAR, 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 LLP
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 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 U.S. Government Fund
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
Select Investors Series - Premier Portfolio
GROWTH & INCOME
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors 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
INSTITUTIONAL
Premier Growth
Quasar
Real Estate Investment
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
Alliance Capital Reserves
Alliance Government Reserves
Alliance Institutional Reserves
Prime Portfolio
Government Portfolio
Tax-Free Portfolio
Treasury Portfolio
Trust Portfolio
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
General Municipal Portfolio
Government Portfolio
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.
LMGSR599
