ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
500 PLAZA DRIVE, SECAUCUS, NJ 07094, (201) 319-4000
SEMI-ANNUAL REPORT
APRIL 30, 1996
(UNAUDITED)
LETTER TO SHAREHOLDERS ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
June 3, 1996
Dear Shareholder:
We are pleased to provide Alliance Global Strategic Income Trust's first report
to shareholders. The Trust seeks to provide high current monthly income and,
secondarily, capital appreciation from a portfolio investing in a wide variety
of fixed income markets. The following pages include information that covers
the period from January 9, 1996, when operations for the Trust began, through
April 30, the end of its fiscal half year.
Despite the very short time frame we have in which to measure the Trust's
performance, Class A shares gained +5.48% through April 30 based on the net
asset value. Over the same period, the overall U.S. bond market, represented by
the Lehman Brothers Aggregate Bond Index, returned -2.33%, and the average
return for Lipper's universe of Multi-Sector Income Funds was +1.70%. This peer
group, which reflects performance of 38 funds, has generally similar investment
objectives to Global Strategic Income Trust though investment policies for the
various funds may differ. While the Trust is permitted to invest outside the
U.S., we have chosen the Aggregate Bond Index as an appropriate broad-based
comparison for Global Strategic Income Trust due to the Trust's ability to
hedge foreign currency risk. (Additional investment results for the Trust
appear on page 5.)
As of April 30, 1996 the Fund's holdings based on market value were distributed
as follows:
PORTFOLIO DISTRIBUTION BY COUNTRY:
U.S. - 47.4%
Australia - 9.5%
Germany - 6.5%
Sweden - 5.9%
Argentina - 5.3%
Spain - 5.3%
Denmark - 5.1%
Italy - 4.5%
France - 3.1%
Belgium - 2.8%
Ireland - 2.3%
Mexico - 2.3%
MARKET OVERVIEW
The U.S. bond market enjoyed a sustained broad-based rally throughout most of
1995 and into early 1996, though economic news led to a setback in February.
The market reacted negatively to the stronger-than-expected job growth in the
U.S. and doubts about whether the Federal Reserve would lower interest rates
again. Outside the U.S., emerging market and other foreign debt prices rose
sharply as positive developments in Latin America and Central Europe encouraged
foreign investors.
INVESTMENT OUTLOOK
The U.S. economy appears to be healthy, with modest growth expected in the
period ahead and falling into the 2%-2.5% range by year end. With a gradually
strengthening economy and steady inflation, we expect no Federal Reserve action
on interest rates over the medium term. If our forecast proves correct, the
result should be steady U.S. bond prices.
We continue to have a favorable outlook for emerging market debt securities.
Moderate growth in the U.S., stable inflation and steady bond prices provide a
strong positive environment for this area of fixed income investing. One of the
significant factors that could affect emerging market bond prices in the coming
months is ongoing resolution of the banking system problems in Mexico. We also
continue to believe that Argentina has a very good risk/return profile.
Argentina has held steady to the economic policies designed to keep inflation
at around 2.0%, and bank deposits and international reserves have returned to
levels existing prior to the Mexican peso devaluation in December 1994.
The U.S. economy survived an inventory scare in 1995 and entered 1996 in a
relatively balanced and healthy condition. The latest economic data show the
U.S. economy's 'soft landing' is still intact. February's shocking payroll gain
grabbed headlines, but the 12-month comparisons were all numbers that support a
soft landing. Consumer confidence has bounced back, debt service burdens are
still manageable, and February retail sales had their best showing since last
summer, climbing 5% on a year-on-year basis. Manufacturing is likely to remain
a soft spot, although new orders for durable goods are showing hidden strength
and unfilled orders continue to rise. Revised data show the much-feared
slowdown in capital spending has already occurred. We expect a gradual
re-strengthening in the U.S. economy over the next six to twelve months.
1
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
Measured inflation at the consumer and producer levels remains well behaved and
the U.S. economy continues to operate in the inflation 'safe zone.' However,
recent increases in unit labor costs and commodity prices warn against
complacency. Federal Reserve policy has moved into a holding pattern, and
chances for a meaningful deficit reduction plan have receded as politicians
increasingly turn their attention to the 1996 election campaign.
In the following pages is a discussion with Douglas Peebles, your Fund's
portfolio manager. Mr. Peebles provides an outlook for the Fund's current
investments and potential new areas of opportunity. Thank you for your
investment in Alliance Global Strategic Income Trust. We look forward to
reporting to you again on market activity and the Trust's investment results
later in the year.
Sincerely,
John D. Carifa
Chairman and President
2
INTERVIEW WITH PORTFOLIO MANAGER
DOUGLAS J. PEEBLES, VICE PRESIDENT
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
Q. IS THERE ONE MAIN, OVERRIDING CONCEPT DRIVING THIS NEW FUND?
MR. PEEBLES: No. There is not one particular strategy or policy directing the
investments in this fund. We believe that in a rapidly changing world,
particularly the fast-paced, modern culture in which we live, a fund that is
flexible and capable of adapting to a constantly-shifting environment offers
the best potential for solid, long-term results.
Q. WHAT ARE THE GENERAL INVESTMENT THEMES ON WHICH YOU ARE TRYING TO FOCUS?
MR. PEEBLES: The Global Strategic Income Trust's investment approach is to
follow the major economic and credit trends throughout the world and direct the
Fund's strategic asset allocation accordingly. Of course, these movements will
change in response to a variety of conditions and we will likewise adapt our
investment strategies to these changes.
Q. WHAT LONG-TERM TRENDS CAN CURRENTLY BE DISCERNED IN THE FIXED INCOME ARENA?
MR. PEEBLES: Economic growth and inflation are two of the most important
variables in any consideration of fixed-income investing. Fortunately, the
long-term outlook for both are quite favorable to bond investing, particularly
in the geographical areas in which the Fund is active. Established countries
are being forced to reverse a long-term trend of increased government spending,
a policy that will serve to inhibit global gross domestic product growth.
Furthermore, as a result of competition from emerging markets and the rise of
capital spending at the expense of labor, wages should stay subdued. Wage
containment is one of the most important factors in warding off inflationary
pressures. Low gross domestic product growth combined with low inflation create
an extremely favorable environment for bond investments.
Q. WHERE ARE THE BEST OPPORTUNITIES IN THE GLOBAL FIXED INCOME MARKETS RIGHT
NOW?
MR. PEEBLES: We believe the best opportunities currently can be found in
Europe. Fiscal policy throughout this region is in a contradictory mode that
tends to favor fixed-income investing. Total debt and budget deficit targets
are established by the Maastricht treaty for European Monetary Union. At the
present time, these numbers are creating a tight fiscal policy for member
countries. Without the ability to manipulate fiscal policy, the governments of
Europe can only stimulate their sluggish economies by regulating monetary
policy. Loose monetary policy coupled with tight fiscal policy is a positive
mixture for fixed income securities.
Q. ARE THERE ANY OTHER ESTABLISHED MARKETS THAT APPEAR FAVORABLE FOR BOND
INVESTMENT?
MR. PEEBLES: Yes. We believe the risk premium on Australian Government Bonds is
still too high. Spread levels to U.S. Treasuries have narrowed recently, but we
believe the marketplace has yet to reward the restructuring that has taken
place in Australia. Much lower inflation, a virtually balanced budget and a new
government are all positive factors for Aussie bonds. Also, as a large exporter
of natural resources, Australia is positioned to take advantage of the rapidly
growing East and Southeast Asian region.
Q. THE GSIT CAN HAVE 35% OF ITS TOTAL ASSETS INVESTED IN NON-INVESTMENT GRADE
SECURITIES. ARE YOU CURRENTLY TAKING ADVANTAGE OF THIS LATITUDE?
Yes, primarily by investing in the debt of emerging markets. The emerging
market economies as a whole have survived the Mexican devaluation without any
of the countries' defaulting or reversing the trends toward more open economic
systems. These markets have performed quite well for the first four months of
1996, as the Mexican devaluation risk premium has receded. We believe further
risk premium reduction is very likely and therefore expect these regions' bond
markets to continue their good showing.
Q. WHAT IS YOUR CURRENT OUTLOOK FOR THE U.S. DOLLAR?
MR. PEEBLES: We remain U.S. dollar positive versus the two other major world
currencies: the Japanese Yen and the German Deutschemark. The driving force
behind the Yen's long-term appreciation, the disproportionate trade surplus
with the U.S., has begun to correct itself. This increasing trade balance,
combined with the Japanese authorities' determination to revive the economy
with a very low interest rate policy, should open the way for further U.S.
Dollar gains.
3
INTERVIEW WITH PORTFOLIO MANAGER
DOUGLAS J. PEEBLES, VICE PRESIDENT (CONTINUED)
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
In terms of the Deutschemark, the tight fiscal/loose monetary policy atmosphere
we discussed above, is, as we indicated, currently operative in Germany. This
contradictory mode, although still positive for bond investment, is negative
for currency. Additionally, the long-term appreciation of the mark, along with
a very high wage structure, have left Germany at a disadvantage compared to the
U.S. in the fiercely competitive world marketplace. For these reasons, we
expect the Dollar to appreciate versus the Deutschemark.
4
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
OBJECTIVE AND POLICIES
Alliance Global Strategic Income Trust seeks to provide high current monthly
income and, secondarily, capital appreciation. The Trust invests in a wide
variety of fixed income markets including U.S. government and agency
securities, U.S. corporate securities, U.S. dollar-denominated government bonds
of emerging countries and non-U.S. dollar-denominated bonds of developed and
emerging markets.
INVESTMENT RESULTS
_______________________________________________________________________________
TOTAL RETURN AS OF APRIL 30, 1996
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. Since Inception* +5.48% +1.03%
SEC Yield 8.08%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. Since Inception* +2.75% -.25%
SEC Yield 7.72%
CLASS C SHARES
. Since Inception* +2.75%
SEC Yield 7.75%
The total returns reflect investment of dividends and/or capital gains
distributions in additional shares-with and without the effect of the 4.25%
maximum front-end sales charge for Class A or applicable contingent deferred
sales charge for Class B (3% year 1, 2% year 2, 1% year 3, 0% year 4); Class C
shares are not subject to front-end or contingent deferred sales charges. 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: January 9, 1996, Class A; March 26, 1996, Class B & C.
5
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED) ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $VALUE
- --------------------------------------------------------------------
ARGENTINA5.4%
GOVERNMENT OBLIGATION5.4%
Republic of Argentina
Pensioner-Bocon Series 1
3.89%, 4/01/07 FRN (a)
(cost $89,873) ARS 161 $ 91,806
AUSTRALIA9.6%
GOVERNMENT OBLIGATION9.6%
Commonwealth of Australia
8.75%, 8/15/08 (a)
(cost $159,125) AU$ 210 164,192
BELGIUM2.8%
GOVERNMENT OBLIGATION2.8%
Kingdom of Belgium
6.50%, 3/31/05 (a)
(cost $50,530) BEF 1,500 47,620
DENMARK5.2%
GOVERNMENT OBLIGATION5.2%
Kingdom of Denmark
8.00%, 3/15/06 (a)
(cost $95,327) DKK 500 89,249
FRANCE3.1%
GOVERNMENT OBLIGATION3.1%
Government of France
Principal Strip
Zero coupon, 4/25/23 (a)
(cost $56,301) FRF 2,000 52,967
GERMANY6.6%
GOVERNMENT OBLIGATION6.6%
Government of Germany
6.00%, 1/05/06 (a)
(cost $119,136) DEM 175 113,496
IRELAND2.4%
GOVERNMENT OBLIGATION2.4%
Republic of Ireland
8.00%, 8/18/06 (a)
(cost $41,521) IEP 25 40,331
ITALY4.6%
GOVERNMENT OBLIGATION4.6%
Republic of Italy
9.50%, 2/01/01 (a)
(cost $76,246) ITL 120,000 78,255
MEXICO2.2%
GOVERNMENT OBLIGATION2.2%
Mexican Treasury Bill
41.00%, 8/29/96 (a) (b)
(cost $37,315) MXP 315 38,013
SPAIN5.3%
GOVERNMENT OBLIGATION5.3%
Government of Spain
10.15%, 1/31/06 (a)
(cost $94,209) ESP 11,000 91,848
SWEDEN6.0%
GOVERNMENT OBLIGATION6.0%
Government of Sweden
11.00%, 1/21/99 (a) SEK 300 48,566
13.00%, 6/15/01 (a) 300 54,217
Total Swedish Securities
(cost $103,893) 102,783
UNITED STATES47.9%
SOVEREIGN DEBT OBLIGATIONS-22.5%
BRAZIL-3.6%
Republic of Brazil Discount Bonds
6.50%, 4/15/24 (a)
(cost $60,251) US$ 90 60,919
BULGARIA-7.9%
Bulgaria FLIRB A
2.00%, 7/28/12 FRN (a) 200 60,000
Republic of Bulgaria
IAB PDI
6.25%, 7/28/11 FRN (a) 170 76,287
Total Bulgarian Securities
(cost $155,262) 136,287
ECUADOR-3.7%
Republic of Ecuador
6.0625%, 2/17/15 FRN (c)(d)
(cost $58,525) 146 63,914
POLAND-7.3%
Republic of Poland PDI
3.75%, 10/27/14 (a)
(cost $122,087) 165 126,142
Total Sovereign Debt Obligations
(cost $396,125) 387,262
6
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
PRINCIPAL OR
SHARE
AMOUNT
COMPANY (000) U.S. $VALUE
- --------------------------------------------------------------------
OTHER SOVEREIGN DEBT OBLIGATIONS-2.8%
National Bank of Hungary
8.875%,11/01/13 (a)
(cost $47,112) US$ 50 $ 48,599
PREFERRED STOCK-9.1%
Credit Lyonnais Capital
SCA, pfd.
9.00% (d) 2000 45,250
Santander Finance Ltd., pfd.
8.125% (a) 1700 41,863
Time Warner Inc. Ser. K, pfd.
10.25% (d) 70 70,350
Total Preferred Stock
(cost $155,858) 157,463
U.S. GOVERNMENT OBLIGATIONS-5.4%
U.S. Treasury Note
5.625%, 2/15/06 (a)
(cost $93,989) 100 92,719
CORPORATE DEBT OBLIGATIONS-5.1%
Home Holdings Inc.
7.75%, 12/15/98 (a) 50 46,500
8.625%, 12/15/03 (a) 50 41,250
Total Corporate Debt Obligations
(cost $88,101) 87,750
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $VALUE
- --------------------------------------------------------------------
OTHER SOVEREIGN DEBT RELATED-2.9%
Morgan Guaranty Trust
Indexed to Poland Treasury Bill
21.35%, 01/08/97 (a)(e)
(cost $52,889) US$ 60 $ 49,992
CALL OPTION PURCHASED-0.1%
United Mexican States Par Bonds
expiring October 1996
@ 70.3125
(cost $1,800) 100 1,150
PUT OPTION PURCHASED0.1%
Brazil Real
expiring November 1996
@ 0.91
(cost $142) 100 110
Total United States Securities
(cost $836,016) 825,045
TOTAL INVESTMENTS101.1%
(cost $1,759,492) 1,735,605
Other assets less liabilities(1.1%) (18,176)
NET ASSETS100% $1,717,429
(a) Security, or portion thereof, has been segregated to collateralize forward
exchange currency contracts. This collateral has a total market value of
approximately $1,554,831.
(b) Annualized yield to maturity at purchase date.
(c) Coupon consists of 3.00% cash payment and 3.0625% paid in kind.
(d) 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 April 30, 1996,
these securities amounted to $179,514 or 10.5% of net assets.
(e) The redemption value of this security is indexed to the spread between the
referenced treasury yield and the referenced emerging market debt yield.
Glossary of Terms:
FLIRB - Front Loaded Interest Reduction Bond.
FRN - Floating Rate Note.
IAB - Interest Arrears Bond.
PDI - Past Due Interest.
See notes to financial statements.
7
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996 (UNAUDITED) ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $1,759,492 ) $1,735,605
Cash 10,573
Receivable for investment securities sold 65,514
Receivable from investment adviser 31,888
Interest receivable 31,807
Unrealized appreciation of forward exchange currency contracts 12,956
Deferred organization expenses 127,985
Total assets 2,016,328
LIABILITIES
Payable for investment securities purchased 60,488
Organization expenses payable 136,600
Dividend payable 4,720
Distribution fee payable 440
Accrued expenses and other liabilities 96,651
Total liabilities 298,899
NET ASSETS $1,717,429
COMPOSITION OF NET ASSETS
Capital stock, at par $ 168
Additional paid-in capital 1,682,831
Distributions in excess of net investment income (5,318)
Accumulated net realized gain on investments, options,
and foreign currency transactions 51,447
Net unrealized depreciation of investments, options,
and foreign currency denominated assets and liabilities (11,699)
$1,717,429
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($1,643,833/
160,752 shares of capital stock issued and outstanding) $10.23
Sales Charge-4.25% of public offering price .45
Maximum offering price $10.68
CLASS B SHARES
Net asset value and offering price per share ($73,494/7,186
shares of capital stock issued and outstanding) $10.23
CLASS C SHARES
Net asset value, redemption and offering price per share ($102/
10 shares of capital stock issued and outstanding) $10.22
See notes to financial statements.
8
STATEMENT OF OPERATIONS
JANUARY 9, 1996* TO APRIL 30, 1996 (UNAUDITED)
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
INVESTMENT INCOME
Interest (net of foreign taxes withheld of $72) $ 47,915
EXPENSES
Advisory fee $3,306
Distribution fee - Class A 1,301
Distribution fee - Class B 71
Distribution fee - Class C -0-
Custodian 63,263
Audit and legal 26,115
Amortization of organization expenses 8,615
Transfer agency 6,800
Printing 6,407
Directors' fees 6,272
Registration 5,128
Miscellaneous 3,024
Total expenses 130,302
Less expenses waived and assumed by adviser(see Note B) (121,876)
Net expenses 8,426
Net investment income 39,489
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions 33,831
Net realized gain on purchased options and foreign
currency transactions 17,616
Net change in unrealized appreciation (depreciation) of:
Investment transactions (23,887)
Foreign currency denominated assets and liabilities 12,188
Net gain on investments 39,748
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 79,237
* Commencement of operations.
See notes to financial statements.
9
STATEMENT OF CHANGES IN NET ASSETS
JANUARY 9, 1996* TO APRIL 30, 1996 (UNAUDITED)
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 39,489
Net realized gain on investments, options and foreign
currency transactions 51,447
Net change in unrealized appreciation (depreciation) of
investments, options and foreign currency denominated
assets and liabilities (11,699)
Net increase in net assets from operations 79,237
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (44,172)
Class B (634)
Class C (1)
CAPITAL STOCK TRANSACTIONS
Net increase 1,582,999
Total increase 1,617,429
NET ASSETS
Beginning of period 100,000
End of period $1,717,429
* Commencement of operations.
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 (UNAUDITED) ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Global Strategic Income Trust, Inc. (the 'Fund'), was incorporated in
the State of Maryland on October 25, 1995 as a non-diversified, open-end
investment company. Prior to commencement of operations on January 9, 1996, the
Fund had no operations other than the sale to Alliance Capital Management L.P.
(the 'Adviser') of 10,000 shares of Class A common stock for the aggregate
amount of $100,000 on December 18, 1995.
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%. Class B shares are sold with a
contingent deferred sales charge which declines from 3.0% to zero depending on
the period of time the shares are held. Class B shares will automatically
convert to Class A shares six years after the end of the calendar month of
purchase. Class C shares are sold without an initial or contingent deferred
sales charge. All three classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that
each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan. The following is a summary of
significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Investments are stated at value. Investments for which market quotations are
readily available are valued at the closing price on the day of valuation or,
if no such closing price is available, at the mean of the last bid and ask
price quoted on such day. Options are valued at market value or fair value
using methods determined by the Board of Directors. Securities for which market
quotations are not readily available are valued in good faith at fair value
using methods determined by the Board of Directors. Securities which mature in
60 days or less are valued at amortized cost, which approximates market value,
unless this method does not represent fair value. Restricted securities are
valued at fair value as determined by the Board of Directors. In determining
fair value, consideration is given to cost, operating and other financial data.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward foreign exchange currency contracts are translated into U.S. dollars at
the mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated at the rates
of exchange prevailing when such securities were acquired or sold. Income and
expenses are translated at rates of exchange prevailing when accrued.
Net realized gains on options and foreign currency transactions represent
foreign exchange gains and losses from sales and maturities of securities,
holdings of foreign currencies, options on foreign currencies, exchange gains
and losses realized between the trade and settlement dates on security
transactions, and the difference between the amounts of interest recorded on
the Fund's books and the U.S. dollar equivalent amounts actually received or
paid. Net change in unrealized appreciation (depreciation) of foreign currency
denominated assets and liabilities represents net currency gains and losses
from valuing foreign currency denominated assets and liabilities at period end
exchange rates.
3. ORGANIZATION EXPENSES
Organization expenses of approximately $136,600 have been deferred and are
being amortized on a straight-line basis through January 2001.
4. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
5. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Interest income is accrued daily. Security transactions are accounted for on
the date the securities are purchased or sold. Security gains and losses are
determined on the identified cost basis. The Fund accretes discounts as
adjustments to interest income.
6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
11
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
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
.75 of 1% of the average daily net assets of the Fund. Such fee is accrued
daily and paid monthly.
The Adviser has agreed under the terms of the advisory agreement, to reimburse
the Fund to the extent that its aggregate expenses (exclusive of interest,
taxes, brokerage, distribution fees, and extraordinary expenses) exceed the
limits prescribed by any state in which the Fund's shares are qualified for
sale. The Fund believes that the most restrictive expense ratio limitation
currently imposed by any state is 2 1/2% of the first $30 million of the Fund's
average daily net assets, 2% of the next $70 million of the Fund's average
daily net assets and 1 1/2% of its average daily net assets in excess of $100
million. For the period ended April 30, 1996, the Adviser has reimbursed the
Fund for $121,876 of its expenses incurred. Pursuant to the advisory agreement,
the Fund may reimburse the Adviser for certain legal and accounting services
provided to the Fund by the Adviser.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $6,800 for the period ended April 30, 1996.
For the six months ended April 30, 1996, the distributor received no front-end
sales charges for Class A shares and no contingent deferred sales charges on
redemptions of Class B shares.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the 'Agreement')
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30 of 1% of the average daily net assets attributable to the
Class A shares and up to 1% of the average daily net assets attributable to
both Class B and Class C shares. Such fee is accrued daily and paid monthly.
The Agreement provides that the Distributor will use such payments in their
entirety for distribution assistance and promotional activities. The
Distributor has incurred expenses in excess of the distribution costs
reimbursed by the Fund in the amount of $4,106 for Class B shares; such costs
may be recovered from the Fund in future periods so long as the agreement is in
effect. In accordance with the Agreement, there is no provision for recovery of
unreimbursed distribution costs, incurred by the Distributor, beyond the
current fiscal year for Class A shares. The Agreement also provides that the
Adviser may use its own resources to finance the distribution of the Fund's
shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. Government obligations) aggregated $3,602,475 and $1,970,942,
respectively, for the period ended April 30, 1996. There were purchases of
$382,649 and sales of $288,849 of U.S. Government and government agency
obligations for the period ended April 30, 1996.
The Fund enters into forward exchange currency contracts for investment
purposes and to hedge its exposure to changes in foreign currency exchange
rates on its foreign portfolio holdings and to hedge certain firm purchase and
sales commitments denominated in foreign currencies. A forward exchange
currency contract is a commitment to purchase or sell a foreign currency at a
future date at a negotiated forward rate. The gain or loss arising from the
difference between the original contracts and the closing of such contracts is
included in realized gains or losses from foreign currency transactions.
Fluctuations in the value of forward exchange currency contracts are recorded
for financial reporting purposes as unrealized gains or losses by the Fund.
12
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
The Fund's custodian will place and maintain cash not available for investment
other liquid high quality debt securities in a separate account of the Fund
having a value equal to the aggregate amount of the Fund's commitments under
forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, as reflected in the following table, reflects the total exposure of
the Fund in that particular currency contract.
At April 30, 1996, the Fund had outstanding forward exchange currency
contracts, as follows:
<TABLE>
<CAPTION>
CONTRACT VALUE ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION
(000) DATE VALUE (DEPRECIATION)
--------- ----------- --------- --------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY BUY CONTRACTS
Indonesia Rupiah, expiring 5/06/96 137,430 $ 58,574 $ 58,927 $ 353
Japanese Yen, expiring 6/27/96 6,000 56,610 57,806 1,196
FOREIGN CURRENCY SALE CONTRACTS
Australian Dollars, expiring 5/31/96-7/18/96 75 59,366 58,810 556
Belgian Francs, expiring 7/17/96 1,593 51,730 50,905 825
Deutsche Marks, expiring 5/22/96-1/08/97 574,277 384,513 377,103 7,410
French Franc, expiring 5/23/96-5/25/96 736,997 144,419 142,685 1,734
Irish Punt, expiring 6/12/96 26,800 41,837 41,753 84
Japanese Yen, expiring 1/12/98 10,485 108,822 108,332 490
Swedish Krona, expiring 5/31/96 730 107,856 107,548 308
--------
$12,956
</TABLE>
For hedging purposes, the Fund purchases and writes (sells) put and call
options on U.S. and foreign government securities and foreign currencies 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 Fund pays a premium
whether or not the option is exercised. Additionally, the Fund 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 Fund writes an option, the premium received by the Fund 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 Fund on the expiration date as realized gains from option
transactions. The difference between the premium and the amount paid on
13
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium is less than the amount paid
for the closing purchase transaction, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security or currency in determining whether the Fund has realized a gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security or currency purchased by the Fund. In writing an option, the Fund
bears the market risk of an unfavorable change in the price of the security or
currency underlying the written option. Exercise of an option written by the
Fund could result in the Fund selling or buying a security or currency at a
price different from the current market value.
At April 30, 1996, the cost of securities for federal income tax purposes was
$1,763,464. Accordingly, gross unrealized appreciation of investments was
$21,243 and gross unrealized depreciation of investments was $49,102 resulting
in net unrealized depreciation of $27,859 (excluding foreign currency
transactions).
NOTE F: CAPITAL STOCK
There are 9,000,000 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 authorized shares. Transactions in capital stock were as
follows:
SHARES AMOUNT
--------------- ---------------
JAN. 9,1996* JAN. 9,1996*
TO TO
APRIL 30,1996 APRIL 30,1996
(UNAUDITED) (UNAUDITED)
--------------- ---------------
CLASS A
Shares sold 149,904 $1,502,116
Shares issued in reinvestment of dividends 848 8,561
Net increase 150,752 $1,510,677
MARCH 25,1996** MARCH 25,1996**
TO TO
APRIL 30,1996 APRIL 30,1996
(UNAUDITED) (UNAUDITED)
--------------- ---------------
CLASS B
Shares sold 7,185 $72,209
Shares issued in reinvestment of dividends 1 13
Net increase 7,186 $72,222
CLASS C
Shares sold 10 $ 100
Net increase 10 $ 100
* Commencement of operations.
** Commencement of distribution.
14
FINANCIAL HIGHLIGHTS ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A CLASS B CLASS C
-------------- ------------ ------------
JANUARY 9, MARCH 25, MARCH 25,
1996(C) 1996(F) 1996(F)
TO TO TO
APR. 30,1996 APR. 30,1996 APR. 30,1996
(UNAUDITED) (UNAUDITED) (UNAUDITED)
-------------- ------------ ------------
Net asset value, beginning of period $10.00 $ 9.97 $ 9.97
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a)(d) .27 .09 .09
Net realized and unrealized gain
on investments and foreign
currency transactions (a) .27 .27 .27
Net increase in net asset value
from operations .54 .36 .36
LESS: DISTRIBUTIONS
Dividends from net investment income(a) (.31) (.10) (.11)
Total distributions (.31) (.10) (.11)
Net asset value, end of period $10.23 $10.23 $10.22
TOTAL RETURN
Total investment return based on
net asset value (b) 5.47% 2.75% 2.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $1,643,833 $73,494 $102
Ratio to average net assets of:
Expenses, net of reimbursements 1.90%(e) 2.60%(e) 2.60%(e)
Net investment income, net of
waivers/reimbursements 8.97%(e) 8.14%(e) 8.14%(e)
Portfolio turnover rate 179% 179% 179%
(a) Based on average weighted shares outstanding.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(c) Commencement of operations.
(d) Net of expenses reimbursed by the Adviser.
(e) Annualized.
(f) Commencements of distribution.
15
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
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)
ROBERT C. WHITE (1)
OFFICERS
WAYNE D. LYSKI, SENIOR VICE PRESIDENT
DOUGLAS J. PEEBLES, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
JUAN J. RODRIGUEZ, CONTROLLER
CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.
40 Water Street
Boston, MA 02109
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.
16
THE ALLIANCE FAMILY
OF MUTUAL FUNDS ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
FIXED INCOME
Alliance Bond Fund
U.S. Government Portfolio
Corporate Bond Portfolio
Alliance Global Dollar Government Fund
Alliance Global Strategic Income Trust
Alliance Mortgage Securities Income Fund
Alliance Limited Maturity Government Fund
Alliance Multi-Market Strategy Trust
Alliance North American Government Income Trust
Alliance Short-Term Multi-Market Trust
Alliance Short-Term U.S. Government Fund
Alliance World Income Trust
TAX-FREE INCOME
Alliance Municipal Income Fund
California Portfolio
Insured California Portfolio
Insured National Portfolio
National Portfolio
New York Portfolio
Alliance Municipal Income Fund II
Arizona Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
MONEY MARKET
AFD Exchange Reserves
GROWTH
The Alliance Fund
Alliance Global Small Cap Fund
Alliance Growth Fund
Alliance Premier Growth Fund
GROWTH & INCOME
Alliance Strategic Balanced Fund
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Income Builder Fund
Alliance Utility Income Fund
AGGRESSIVE GROWTH
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance International Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage Fund
Alliance Global Environment Fund
ACM Government Income Fund
ACM Government Opportunity Fund
ACM Government Securities Fund
ACM Government Spectrum Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
Alliance World Dollar Government Fund
Alliance World Dollar Government Fund II
The Austria Fund
The Korean Investment Fund
The Spain Fund
The Southern Africa Fund
CASH MANAGEMENT SERVICES
ACM Institutional Reserves
Government Portfolio
Prime Portfolio
Tax-Free Portfolio
Trust Portfolio
Alliance Capital Reserves
Alliance Government Reserves
Alliance Insured Account
Alliance Money Reserves
Alliance Municipal Trust
California Portfolio
Connecticut Portfolio
Florida Portfolio
General Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
17
