ALLIANCE
----------------------
LIMITED MATURITY
----------------------
GOVERNMENT
----------------------
FUND
Annual Report
November 30, 1998
Alliance Capital[LOGO](R)
<PAGE>
LETTER TO SHAREHOLDERS Alliance Limited Maturity Government Fund
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January 27, 1999
Dear Shareholder:
We are pleased to report to you on our investment strategy, performance and
outlook of Alliance Limited Maturity Government Fund, for the six-month period
ended November 30, 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
invests only in securities with either a remaining maturity of less than 10
years or a duration not exceeding that of a 10-year Treasury note.
INVESTMENT RESULTS
The following table provides the investment results for Alliance Limited
Maturity Government Fund for the six- and 12-month periods ended November 30,
1998. For comparison, we have included the Lipper Intermediate U.S. Government
(IUG) Funds Average, a universe of funds with investment objectives similar to
that of the Alliance Limited Maturity Government Fund.
For the six-month period under review, your Fund trailed the Lipper IUG Funds
Average. The Fund's allocation to the mortgage sector dampened performance
during the period as record low interest rates renewed prepayment risk. The
Fund's U.S. Treasury holdings however, helped the Fund's performance as that
sector benefited from investors' flight to quality.
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INVESTMENT RESULTS*
Periods Ended November 30, 1998
Total Returns
6 Months 12 Months
------------- -------------
Alliance Limited
Maturity
Government Fund
Class A 4.05% 6.94%
Class B 3.68% 6.30%
Class C 3.69% 6.30%
Total Returns
6 Months 12 Months
------------- -------------
Lipper Intermediate
U.S. Government
Funds Average 4.59% 8.31%
* 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 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 November 30, 1998, the
Lipper IUG Average consisted of 129 and 127 funds, respectively. An
investor cannot invest directly in an average.
Additional investment results appear on page 3.
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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 Fund continued to be invested primarily in U.S. Treasuries and
agencies.
MARKET OVERVIEW
Despite an unprecedented wave of financial shocks both at home and abroad during
the six-month period, overall U.S. economic growth remained strong, while
inflation, interest rates and unemployment remained at historic lows. Strong
consumer demand continued to be the driving force behind the expansion. However,
the manufacturing sector continued to be negatively affected by weaker exports,
as economies outside the U.S. continued to slow. The Federal Reserve cut
interest rates toward the end of the period as the risk of an economic slow down
outweighed the risk of inflation.
During the six-month period, the U.S. bond market continued to climb, as
investor sentiment became more risk averse due to global economic turmoil. The
U.S. Treasury market benefited as a safe haven and posted solid
1
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Alliance Limited Maturity Government Fund
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returns with short-term Treasuries outperforming long-term Treasuries. The
flight to quality gained momentum in August when the Russian government's
decision to devalue the ruble and default on its debt heightened investor
concerns about all higher-yielding assets. Treasury yields fell across the
maturity spectrum with short-term maturities falling more than longer-term
maturities. The two-year Treasury fell one hundred basis points to 4.52%, and
the 10-year Treasury yield dropped eighty-three basis points to 4.72%. The
mortgage sector posted moderate returns for the period in spite of falling
interest rates and the subsequent increase in prepayment levels.
OUTLOOK
In 1999, we anticipate slowing global growth and low inflation. Economic
activity in the U.S. is expected to slow with growth estimates centered around
2% for 1999. Further interest rate reductions to sustain growth by the Federal
Reserve are likely in 1999, but are not expected to be imminent. U.S. interest
rates, as well as inflation, should remain low.
In the U.S. fixed-income markets, spread sectors will provide opportunities as
economic and financial markets stabilize in response to the Federal Reserve's
pre-emptive attempts to sustain the economic expansion. We expect the safe-haven
premium on Treasuries to diminish somewhat, but Treasuries should continue to
perform well given their attractiveness to foreign investors, a low inflationary
environment and investor sentiment to constrain risk. We expect the
mortgage-backed sector will provide benefits due to their attractive valuations
and slower pre-payment levels as mortgage rates have risen slightly and we enter
a period of slower refinancing.
Thank you for your continued interest and investment in Alliance Limited
Maturity Government Fund. We look forward to reporting to you in the coming
months.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman
/s/ Jeffrey S. Phlegar
Jeffrey S. Phlegar
Senior Vice President
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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.
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2
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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 November 30, 1998
----------------------------
CLASS A SHARES
----------------------------
Without With
Sales Charge Sales Charge
----------------------------
One Year 6.94% 2.38%
Five Years 4.93% 4.03%
Since Inception* 5.16% 4.46%
SEC Yield** 4.25%
----------------------------
CLASS B SHARES
----------------------------
Without With
Sales Charge Sales Charge
----------------------------
One Year 6.30% 3.30%
Five Years 4.21% 4.21%
Since Inception* (a) 4.52% 4.52%
SEC Yield** 3.70%
----------------------------
CLASS C SHARES
----------------------------
Without With
Sales Charge Sales Charge
----------------------------
One Year 6.30% 5.30%
Five Years 4.22% 4.22%
Since Inception* 4.21% 4.21%
SEC Yield** 3.68%
SEC Average Annual Total Returns as of the most recent quarter-end (September
30, 1998)
Class A Class B Class C
-------- --------- ---------
1 Year 4.53% 5.55% 7.45%
5 Years 4.23% 4.38% 4.39%
Since Inception* 4.71% 4.77%(a) 4.49%
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.
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* Inception: 6/1/92 Class A and Class B; 5/3/93 Class C.
** SEC yield is for the 30 days ended November 30, 1998.
(a) Assumes conversion of Class B shares into Class A shares after six years.
3
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Alliance Limited Maturity Government Fund
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ALLIANCE LIMITED MATURITY GOVERNMENT FUND
GROWTH OF A $10,000 INVESTMENT
6/30/92* TO 11/30/98
[GRAPHIC OMITTED]
[The following information was depicted as a chart in the printed material.]
Lipper Intermediate U.S. Government (IUG) Funds Average:
$14,885
Limited Maturity Government Fund Class A:
$13,235
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
11/30/98). 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 (IUG) Funds Average is based on
the performance of a universe of 43 funds (based on the number of funds in the
average from 6/30/92 to 11/30/98) 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.
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* Month-end nearest to Fund's Class A share inception date of 6/1/92.
4
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PORTFOLIO OF INVESTMENTS
November 30, 1998 Alliance Limited Maturity Government Fund
================================================================================
Principal
Amount
(000) Value
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U.S. GOVERNMENT
OBLIGATIONS-70.2%
U.S. TREASURY
NOTES-64.7%
4.25%, 11/15/03 (a)......... $10,060 $ 9,949,943
4.75%, 11/15/08 (a)......... 5,600 5,608,736
5.13%, 8/31/00 (a).......... 35,600 35,900,464
5.75%, 8/15/03.............. 4,500 4,704,615
6.13%, 8/15/07.............. 5,250 5,727,435
6.25%, 4/30/01.............. 5,000 5,181,250
------------
67,072,443
------------
U.S. TREASURY
BOND-5.5%
11.88%, 11/15/03............ 4,350 5,699,196
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Total U.S. Government
Obligations
(cost $73,030,207) ......... 72,771,639
------------
MORTGAGE-RELATED
SECURITIES-38.1%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION-19.0%
6.50%, 6/01/13-10/01/28..... 16,213 16,385,908
7.00%, 9/01/09-4/01/13...... 2,020 2,066,074
7.50%, 4/01/08 (b).......... 1 832
11.25%, 2/01/16............. 1,087 1,215,521
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Total Federal National
Mortgage Association
(cost $19,745,873) ......... 19,668,335
------------
COLLATERALIZED MORTGAGE
OBLIGATIONS-16.5%
ADJUSTABLE RATE-9.5%
Amresco Residential Securities
Series 1998-3 Cl. A8
5.94%, 3/25/15 ............. 2,500 2,469,525
Donaldson, Lufkin & Jenrette
Series 1994-QE1 Cl. A1
7.82%, 4/25/24 (c) ......... 2,380 2,366,415
Prudential Home Mortgage
Securities, Inc.
Series 1993-27 Cl. M
7.50%, 7/25/23 ............. 1,997 2,011,771
Series 1993-56 Cl. A1
7.79%, 1/25/24 ............. 714 714,641
Sears Mortgage Securities
Corp.
Series 1992-18A Cl. A1
7.74%, 9/25/22 ............. 2,216 2,223,885
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9,786,237
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FIXED RATE-7.0%
Allied Capital Commercial
Mortgage Trust
Series 1998-1 Cl. A
6.31%, 9/25/03 (c)......... 2,236 2,243,799
Green Tree Home
Improvement Loan Trust
Series 1998-D Cl. HEA4
6.25%, 8/15/29............. 3,000 3,007,860
Morgan Stanley Capital, Inc.
Series 1998-XL2 Cl. A2
6.17%, 10/03/08 ............ 2,000 2,022,500
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7,274,159
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Total Collateralized
Mortgage Obligations
(cost $17,134,014) ......... 17,060,396
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5
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PORTFOLIO OF INVESTMENTS (continued) Alliance Limited Maturity Government Fund
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Principal
Amount
(000) Value
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STRIPPED MORTGAGE
BACKED SECURITY-1.6%
Mortgage Capital Funding, Inc.
Series 1996-MC2 Cl. X, I/O
1.97%, 12/21/26 (d)
(cost $1,750,888).......... $ 1,750 $ 1,649,415
------------
FEDERAL HOME LOAN
MORTGAGE CORP.-1.0%
11.00%, 1/01/11-9/01/20
(cost $1,082,318)........... 953 1,071,560
------------
Total Mortgage-Related
Securities
(cost $39,713,093) ......... 39,449,706
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TOTAL INVESTMENTS-108.3%
(cost $112,743,300)......... 112,221,345
Other assets less
liabilities-(8.3%).......... (8,575,251)
------------
NET ASSETS-100%................ $103,646,094
============
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(a) Securities, or portions thereof, with an aggregate market value of
$17,575,560 have been segregated to collateralize reverse repurchase
agreements.
(b) 15 year mortgage.
(c) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At November 30,
1998, these securities amounted to $4,610,214 or 4.4% of net assets.
(d) Interest rate represents yield to maturity and principal amount represents
amortized cost.
Glossary:
I/O - Interest Only.
See notes to financial statements.
6
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1998 Alliance Limited Maturity Government Fund
================================================================================
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $112,743,300)...................... $112,221,345
Cash ........................................................................ 125,167
Receivable for capital stock sold............................................ 8,660,679
Receivable for investment securities sold.................................... 2,042,320
Interest receivable.......................................................... 1,113,040
------------
Total assets................................................................. 124,162,551
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LIABILITIES
Reverse repurchase agreement................................................. 17,522,697
Payable for capital stock redeemed........................................... 2,528,576
Dividends payable............................................................ 136,236
Distribution fee payable..................................................... 58,643
Advisory fee payable......................................................... 50,382
Accrued expenses and other liabilities....................................... 219,923
------------
Total liabilities............................................................ 20,516,457
------------
NET ASSETS...................................................................... $103,646,094
============
COMPOSITION OF NET ASSETS
Capital stock, at par........................................................ $ 10,857
Additional paid-in capital................................................... 123,651,370
Distributions in excess of net investment income............................. (136,236)
Accumulated net realized loss on investment transactions..................... (19,357,942)
Net unrealized depreciation of investments................................... (521,955)
------------
$103,646,094
============
CALCULATION OF MAXIMUM OFFERING PRICE
Class A Shares
Net asset value and redemption price per share
($41,493,412 / 4,347,769 shares of capital stock issued and outstanding)... $9.54
Sales charge--4.25% of public offering price................................. .42
-----
Maximum offering price....................................................... $9.96
=====
Class B Shares
Net asset value and offering price per share
($33,591,152 / 3,517,923 shares of capital stock issued and outstanding)... $9.55
=====
Class C Shares
Net asset value and offering price per share
($28,561,530 / 2,991,462 shares of capital stock issued and outstanding)... $9.55
=====
</TABLE>
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See notes to financial statements.
7
<PAGE>
STATEMENT OF OPERATIONS
Year Ended November 30, 1998 Alliance Limited Maturity Government Fund
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest................................................. $6,541,008
Dividends................................................ 2,322 $6,543,330
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EXPENSES
Advisory fee............................................. 534,064
Distribution fee - Class A............................... 68,430
Distribution fee - Class B............................... 324,140
Distribution fee - Class C............................... 269,397
Transfer agency.......................................... 138,982
Administrative........................................... 129,494
Custodian................................................ 102,701
Audit and legal.......................................... 92,651
Printing................................................. 45,969
Registration............................................. 45,937
Directors' fees.......................................... 28,625
Miscellaneous............................................ 16,842
----------
Total expenses before interest........................... 1,797,232
Interest expense......................................... 1,228,568
----------
Net expenses............................................. 3,025,800
----------
Net investment income.................................... 3,517,530
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions............. 2,593,102
Net realized loss on futures transactions................ (42,998)
Net change in unrealized appreciation of investments..... (802,731)
----------
Net gain on investments.................................. 1,747,373
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $5,264,903
==========
</TABLE>
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See notes to financial statements.
8
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS Alliance Limited Maturity Government Fund
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
November 30, November 30,
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income................................................ $ 3,517,530 $ 4,582,494
Net realized gain (loss) on investments and futures transactions..... 2,550,104 (250,987)
Net change in unrealized appreciation of investments................. (802,731) (55,810)
------------ ------------
Net increase in net assets from operations........................... 5,264,903 4,275,697
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A............................................................ (1,077,771) (884,292)
Class B............................................................ (1,330,682) (1,988,935)
Class C............................................................ (1,109,077) (1,706,319)
Distributions in excess of net investment income
Class A............................................................ (224,185) -0-
Class B............................................................ (276,414) -0-
Class C............................................................ (230,283) -0-
Tax return of capital
Class A............................................................ -0- (40,988)
Class B............................................................ -0- (92,191)
Class C............................................................ -0- (79,091)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease).............................................. 24,081,713 (31,026,939)
------------ ------------
Total increase (decrease)............................................ 25,098,204 (31,543,058)
NET ASSETS
Beginning of year.................................................... 78,547,890 110,090,948
------------ ------------
End of year.......................................................... $103,646,094 $ 78,547,890
============ ============
</TABLE>
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See notes to financial statements.
9
<PAGE>
STATEMENT OF CASH FLOWS
Year Ended November 30, 1998 Alliance Limited Maturity Government Fund
================================================================================
<TABLE>
<S> <C> <C>
INCREASE (DECREASE) IN CASH FROM:
OPERATING ACTIVITIES:
Interest received................................................ $ 6,272,918
Interest paid.................................................... (1,228,568)
Operating expenses paid.......................................... (1,712,240)
-------------
Net increase in cash from operating activities................... $ 3,332,110
INVESTING ACTIVITIES:
Proceeds from disposition of long-term portfolio investments..... 465,619,894
Purchase of long-term portfolio investments...................... (493,654,873)
Proceeds from short-term portfolio investments, net.............. 4,538,000
-------------
Net decrease in cash from investing activities................... (23,496,979)
FINANCING ACTIVITIES*:
Net increase in reverse repurchase agreements.................... 6,359,628
Net subscriptions from capital stock transactions................ 15,290,502
Cash dividends paid.............................................. (1,359,853)
-------------
Net increase in cash from financing activities................... 20,290,277
------------
Net increase in cash............................................. 125,408
Due to custodian at beginning of year............................ (241)
------------
Cash at end of year.............................................. $ 125,167
============
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RECONCILIATION OF NET INCREASE IN NET ASSETS
FROM OPERATIONS TO NET INCREASE IN CASH
FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations............. $ 5,264,903
ADJUSTMENTS:
Increase in interest receivable.................................. $ (242,467)
Net realized gain on investment transactions..................... (2,550,104)
Net change in unrealized appreciation of investments............. 802,731
Accretion of bond discount....................................... (27,945)
Increase in accrued expenses..................................... 84,992
-------------
Total adjustments................................................ (1,932,793)
------------
NET INCREASE IN CASH FROM OPERATING ACTIVITIES...................... $ 3,332,110
============
</TABLE>
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* Non-cash financing activities not included herein consist of reinvestment
of dividends.
See notes to financial statements.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
November 30, 1998 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 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. During the current fiscal year, permanent differences,
primarily due to distributions in excess of investment company taxable income,
resulted in a net decrease in additional paid-in capital and a corresponding
decrease in distributions in excess of net investment income. This
reclassification had no effect on net assets.
11
<PAGE>
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 Fund's average daily net assets. The fee is accrued daily and paid
monthly.
Pursuant to the advisory agreement, the Fund paid $129,494 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, 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 $97,494 for the year ended November 30, 1998.
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 $6,673 from the sales of Class A shares and
$41,677 and $14,934 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class B and Class C shares, respectively, for the
year ended November 30, 1998.
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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 $565,272 and $3,124,725 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.
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NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $22,748,742 and $26,285,128,
respectively, for the year ended November 30, 1998. There were purchases of
$470,906,131 and sales of $437,284,476 of U.S. government and government agency
obligations for the year ended November 30, 1998.
At November 30, 1998, the cost of investments for federal income tax purposes
was $112,807,240. Accordingly, gross unrealized appreciation of investments was
$395,078 and gross unrealized depreciation of investments was $980,973 resulting
in net unrealized depreciation of $585,895.
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 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
12
<PAGE>
Alliance Limited Maturity Government Fund
================================================================================
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, 1998, 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 November 30, 1998.
- --------------------------------------------------------------------------------
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:
<TABLE>
<CAPTION>
--------------------------------- ---------------------------------
SHARES AMOUNT
--------------------------------- ---------------------------------
Year Ended Year Ended Year Ended Year Ended
November 30, November 30, November 30, November 30,
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Class A
Shares sold....................... 10,880,057 12,567,555 $ 103,443,782 $ 117,268,204
Shares issued in reinvestment of
dividends and distributions.... 84,454 58,760 802,978 549,654
Shares converted from Class B..... 906,354 353,816 8,638,581 3,315,573
Shares redeemed................... (9,239,629) (12,982,766) (87,992,978) (121,071,651)
-------------- -------------- -------------- --------------
Net increase (decrease)........... 2,631,236 (2,635) $ 24,892,363 $ 61,780
============== ============== ============== ==============
Class B
Shares sold....................... 6,265,395 2,084,994 $ 59,605,093 $ 19,497,685
Shares issued in reinvestment of
dividends and distributions.... 107,647 137,401 1,022,249 1,284,843
Shares converted to Class A....... (906,010) (353,816) (8,638,581) (3,315,573)
Shares redeemed................... (5,511,144) (3,639,461) (52,344,955) (34,015,979)
-------------- -------------- -------------- --------------
Net decrease...................... (44,112) (1,770,882) $ (356,194) $ (16,549,024)
============== ============== ============== ==============
</TABLE>
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (cont.) Alliance Limited Maturity Government Fund
================================================================================
<TABLE>
<CAPTION>
--------------------------------- ---------------------------------
SHARES AMOUNT
--------------------------------- ---------------------------------
Year Ended Year Ended Year Ended Year Ended
November 30, November 30, November 30, November 30,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Class C
Shares sold....................... 1,687,166 647,676 $ 16,129,568 $ 6,051,461
Shares issued in reinvestment of
dividends and distributions.... 109,292 141,389 1,037,674 1,322,376
Shares redeemed................... (1,850,396) (2,343,438) (17,621,698) (21,913,532)
-------------- -------------- -------------- --------------
Net decrease...................... (53,938) (1,554,373) $ (454,456) $ (14,539,695)
============== ============== ============== ==============
</TABLE>
- --------------------------------------------------------------------------------
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 November 30, 1998, the Fund had entered into the following reverse
repurchase agreements:
Amount Broker Interest Rate Maturity
- --------------- --------------- -------------- ---------------
$5,730,113 PaineWebber, Inc. 5.15% December 1, 1998
$5,558,000 PaineWebber, Inc. 4.25% December 1, 1998
$2,465,625 PaineWebber, Inc. 5.15% December 1, 1998
$2,040,000 PaineWebber, Inc. 5.25% December 1, 1998
$1,721,562 PaineWebber, Inc. 4.65% December 2, 1998
For the year ended November 30, 1998, the maximum amount of reverse repurchase
agreements outstanding was $52,351,362, the average amount outstanding was
approximately $25,547,642, and the daily weighted average interest rate was
4.73%.
- --------------------------------------------------------------------------------
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 year ended November 30, 1998.
14
<PAGE>
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,
-------------------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ...................... $ 9.44 $ 9.45 $ 9.52 $ 9.51 $ 9.94
------- ------- ------- ------- -------
Income From Investment Operations
Net investment income ................................... .47(a) .51(a) .51(a) .52(a) .42
Net realized and unrealized gain (loss) on investment
transactions ......................................... .17 .02 (.04) .02 (.32)
------- ------- ------- ------- -------
Net increase in net asset value from operations ......... .64 .53 .47 .54 .10
------- ------- ------- ------- -------
Less: Dividends and Distributions
Dividends from net investment income .................... (.47) (.52) (.51) (.50) (.48)
Distributions in excess of net investment income ........ (.07) -0- -0- -0- -0-
Tax return of capital ................................... -0- (.02) (.03) (.03) (.04)
Distributions from net realized gains ................... -0- -0- -0- -0- (.01)
------- ------- ------- ------- -------
Total dividends and distributions ....................... (.54) (.54) (.54) (.53) (.53)
------- ------- ------- ------- -------
Net asset value, end of year ............................ $ 9.54 $ 9.44 $ 9.45 $ 9.52 $ 9.51
======= ======= ======= ======= =======
Total Return
Total investment return based on net asset value (b) .... 6.94% 5.79% 5.11% 5.91% 1.03%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) ................. $41,493 $16,197 $16,248 $27,887 $43,173
Ratio of expenses to average net assets ................. 3.27% 2.41% 2.22% 2.14% 1.34%
Ratio of expenses to average net assets excluding
interest expense ..................................... 1.68% 1.65% 1.58% 1.41% 1.20%
Ratio of net investment income to average net assets .... 4.74% 5.52% 5.44% 5.53% 4.78%
Portfolio turnover rate ................................. 500% 249% 159% 293% 375%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page 17.
15
<PAGE>
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,
--------------------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ...................... $ 9.44 $ 9.45 $ 9.52 $ 9.52 $ 9.94
------- ------- ------- ------- --------
Income From Investment Operations
Net investment income ................................... .39(a) .45(a) .44(a) .46(a) .39
Net realized and unrealized gain (loss) on investment
transactions ......................................... .19 .01 (.04) .01 (.35)
------- ------- ------- ------- --------
Net increase in net asset value from operations ......... .58 .46 .40 .47 .04
------- ------- ------- ------- --------
Less: Dividends and Distributions
Dividends from net investment income .................... (.39) (.45) (.44) (.44) (.42)
Distributions in excess of net investment income ........ (.08) -0- -0- -0- -0-
Tax return of capital ................................... -0- (.02) (.03) (.03) (.03)
Distributions from net realized gains ................... -0- -0- -0- -0- (.01)
------- ------- ------- ------- --------
Total dividends and distributions ....................... (.47) (.47) (.47) (.47) (.46)
------- ------- ------- ------- --------
Net asset value, end of year ............................ $ 9.55 $ 9.44 $ 9.45 $ 9.52 $ 9.52
======= ======= ======= ======= ========
Total Return
Total investment return based on net asset value (b) .... 6.30% 5.04% 4.36% 5.05% .42%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) ................. $33,591 $33,613 $50,386 $84,362 $136,458
Ratio of expenses to average net assets ................. 3.84% 3.14% 2.94% 2.85% 2.08%
Ratio of expenses to average net assets excluding
interest expense ..................................... 2.39% 2.39% 2.30% 2.11% 1.91%
Ratio of net investment income to average net assets .... 4.10% 4.80% 4.73% 4.83% 4.12%
Portfolio turnover rate ................................. 500% 249% 159% 293% 375%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page 17.
16
<PAGE>
Alliance Limited Maturity Government Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Year
<TABLE>
<CAPTION>
--------------------------------------------------------------
CLASS C
--------------------------------------------------------------
Year Ended November 30,
--------------------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ...................... $ 9.44 $ 9.45 $ 9.52 $ 9.52 $ 9.94
------- ------- ------- ------- --------
Income From Investment Operations
Net investment income ................................... .39(a) .45(a) .45(a) .46(a) .37
Net realized and unrealized gain (loss) on investment
transactions ......................................... .19 .01 (.05) .01 (.33)
------- ------- ------- ------- --------
Net increase in net asset value from operations ......... .58 .46 .40 .47 .04
------- ------- ------- ------- --------
Less: Dividends and Distributions
Dividends from net investment income .................... (.39) (.45) (.45) (.44) (.42)
Distributions in excess of net investment income ........ (.08) -0- -0- -0- -0-
Tax return of capital ................................... -0- (.02) (.02) (.03) (.03)
Distributions from net realized gains ................... -0- -0- -0- -0- (.01)
------- ------- ------- ------- --------
Total dividends and distributions ....................... (.47) (.47) (.47) (.47) (.46)
------- ------- ------- ------- --------
Net asset value, end of year ............................ $ 9.55 $ 9.44 $ 9.45 $ 9.52 $ 9.52
======= ======= ======= ======= ========
Total Return
Total investment return based on net asset value (b) .... 6.30% 5.05% 4.38% 5.06% .42%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) ................. $28,562 $28,738 $43,457 $68,459 $141,838
Ratio of expenses to average net assets ................. 3.84% 3.13% 2.92% 2.85% 2.04%
Ratio of expenses to average net assets excluding
interest expense ..................................... 2.38% 2.37% 2.29% 2.10% 1.89%
Ratio of net investment income to average net assets .... 4.11% 4.82% 4.75% 4.84% 4.10%
Portfolio turnover rate ................................. 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.
17
<PAGE>
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, 1998, 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, 1998, 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, 1998, 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.
/s/ Ernst & Young LLP
New York, New York
January 4, 1999
18
<PAGE>
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
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
<PAGE>
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
Alliance Capital[LOGO](R)
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
