ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
500 PLAZA DRIVE, SECAUCUS, NJ 07094, (201) 319-4000
ANNUAL REPORT
OCTOBER 31, 1996
LETTER TO SHAREHOLDERS
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
December 12, 1996
Dear Shareholder:
Throughout most of 1996, U.S. bond market returns have been subdued. The market
has reacted negatively to stronger-than-expected job growth and uncertainty
about whether the Federal Reserve would raise rates to slow economic growth.
Across all major sectors of the bond market, shorter-duration securities have
outperformed longer-term securities as interest rates for all maturities have
increased. Outside of the U.S., many governments continued to pursue policies
of economic reform which supported higher bond prices.
INVESTMENT RESULTS
In spite of sluggish domestic bond market returns, non-U.S. bond markets
continued their strong performance over the past six months. We are pleased to
report that Alliance Global Strategic Income Trust was well positioned to
capitalize on these gains and posted strong positive returns. For the six
months ended October 31, 1996, Class A shares returned 11.18% on a net asset
value basis, which compares with 5.29% for the unmanaged Lehman Brothers
Aggregate Bond Index, and 7.39% for the Lipper Average of Multi-Sector Income
Funds. The 38 funds in the Lipper peer group have investment objectives that
are generally similar to that of the Global Strategic Income Trust. We are
pleased to report that since inception (January 9, 1996), Class A shares have
had a total return of 17.31%, which compares quite favorably with returns of
both the Lehman and Lipper benchmarks, which returned 5.85% and 12.45%,
respectively from January 1 through October 31.
ECONOMIC REVIEW
Rebounding from a slowdown at the end of 1995, the U.S. economy gathered steam
as 1996 progressed. Following first quarter GDP growth of 2.0%, the economy
gained strength in the second quarter, led by a rapidly improving labor market.
Employment gains averaged 272,000 per month and total hours worked climbed by
an annualized 5.7%. Consumer confidence remained elevated and real household
spending continued to grow at a healthy clip. These factors combined to produce
"overheated" GDP growth for the second quarter of 4.7%.
Recent economic data depicts an economy that has slowed sharply. Overall GDP
growth has declined to a modest 2.0%, dragged down by a deceleration in
consumer spending. The annualized gain in retail sales of merchandise measured
only 0.4% during the third quarter while construction spending dropped 5.8%
from second quarter levels. On the production side, industrial production
growth slowed to an annualized 4.3%, from 6.6% in the second quarter.
The Japanese economy produced what proved to be an unsustainably large growth
rate of 12.2% in the first quarter of 1996. Growth has since slowed
precipitously, and the Japanese authorities have continued their policy of
leaving official interest rates at the extremely low level of 0.50%. To ensure
that the Japanese economic recovery will be sustainable, authorities are
willing to err on the cautious side, potentially leaving rates too low for too
long. Two consequences have arisen in direct response to this policy of
artificially low rates in Japan. First, the Japanese yen has continued to
weaken, falling by another 8.5% over the past six months. Second, these low
rates have created a large build-up of liquidity which has spilled over into
the global markets, improving investment returns in many different asset
classes.
The strong performance of both the Australian and Canadian markets has been
most impressive given the relatively poor performance of the U.S. Treasury
market. Historically, the Australian and Canadian markets have not performed
well in an environment of low Treasury prices. However, lower growth and
inflation rates combined with drastic fiscal tightening and improvements in
their respective trade accounts have allowed for significant interest rate cuts
in Australia and Canada, even though the U.S. Federal Reserve has not lowered
U.S. rates at all. In fact, official rates in Canada are currently more than
2.0% below rates in the U.S. Given the high unemployment rates and large output
gaps in these markets, we believe inflation will remain controlled. Therefore,
Australian and Canadian securities should continue to outperform U.S. debt.
1
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
In Europe, the driving force behind excellent bond market returns has been the
quest for monetary union. This has brought about a period of severe fiscal
retrenchment in Europe, even though many of their economies remain sluggish.
With fiscal policy so restrained, monetary policy, in the form of lower
interest rates, has been the only macroeconomic tool authorities have to
stimulate growth. This combination of tight fiscal policy and loose monetary
policy has led to stronger bond markets and weaker currencies. The U.S. dollar
has performed quite well against the core European currencies over the last six
months and we anticipate a continuation of this for the foreseeable future.
As European nations get closer and closer to forming a single currency, their
bond yields have begun to converge. We believe that monetary union will, in
fact, take place over the next few years and that this convergence will
continue. From time-to-time, market volatility is likely to lead to short-term
divergence in European yield spreads, and we will look to opportunistically add
to the portfolio's positions during these periods.
INVESTMENT OUTLOOK
Overall, we think the non-dollar bond markets will continue to outperform the
U.S. Treasury market into 1997. Thus, the portfolio currently has significant
exposure to the European bond markets. However, if the Clinton Administration
and Congress pass a credible balanced budget for the next several years, the
domestic fixed income market will be revived. If a balanced budget is passed,
the portfolio's exposure to the U.S. market will be increased accordingly.
The economic fundamentals in the U.S., however, continue to be the strongest of
any country in the developed world. Low unemployment, high capacity utilization
rates, and GDP growth very close to potential are restraining bond market
returns in the U.S. European, Australian, and Canadian fixed income markets
offer greater potential for price appreciation at this time.
GEOGRAPHIC DIVERSIFICATION OF PORTFOLIO HOLDINGS
as of October 31, 1996
LATIN/SOUTH AMERICA 13.68%
NORTH AMERICA 33.38%
EASTERN EUROPE/RUSSIA 16.07%
AUSTRALIA 8.61%
WESTERN EUROPE 28.26%
Our outlook for global bond markets includes a positive environment for
developing market debt. In Mexico and Argentina, the success of economic
programs undertaken since the peso devaluation two years ago has led to lower
inflation, improving current account deficits and growing investor confidence.
We believe these factors should support higher bond prices in these markets in
the future.
Current economic indicators are equally encouraging in Russia. Reserves have
increased considerably in the past two years and the current account surplus
continues to grow. We expect the impact of market-oriented reforms to be more
noticeable in 1997 and to produce further price appreciation for Russian
securities.
2
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
Thank you for your continued interest and investment in Alliance Global
Strategic Income Trust. We look forward to reporting to you again on market
activity and investment results.
Sincerely,
John D. Carifa
Chairman and President
Douglas Peebles
Vice President
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
3
INVESTMENT OBJECTIVE AND POLICIES
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
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 RETURNS AND YIELDS AS OF OCTOBER 31, 1996
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. Since Inception* +17.31% +12.33%
. SECYield** +7.22%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. Since Inception* +14.47% +11.47%
. SECYield** +6.82%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. Since Inception* +14.47% +13.47%
. SECYield** +6.82%
The total returns reflect reinvestment of dividends and/or capital gains
distributions in additional shares--with and without the effect of the 4.25%
maximum front-end sales charge for Class A or applicable contingent deferred
sales charge for Class B (3% year 1, 2% year 2, 1% year 3, 0% year 4) and Class
C (1% year 1). 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 25, 1996, Class B & C.
** Yields are for the 30-day period ended October 31, 1996.
4
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
ALLIANCE GLOBAL STRATEGIC INCOME TRUST
$10,000 INVESTMENT OVER LIFE OF FUND:
1/9/96 TO 10/31/96
$11,300
$11,100
$10,900
$10,700
$10,500
$10,300
$10,100
$9,900
$9,700
$9,500
ALLIANCE GLOBAL STRATEGIC INCOME TRUST
CLASS A: $11,232
LIPPER MULTI SECTOR INCOME FUNDS AVERAGE
$10,692
LEHMAN BROS GOV'T BOND INDEX
$10,342
1/9/96 10/31/96
This chart illustrates the total value of an assumed $10,000 investment in
Class A shares as compared to the performance of appropriate broad-based
indices. The chart reflects the deduction of the maximum 4.25% sales charge
from an initial $10,000 investment in the Fund and assumes the reinvestment of
dividends and capital gains. Performance for Class B and C shares will vary
from the results shown above due to differences in expenses charged to those
classes. Results should not be considered representative of future gains or
losses in capital value or dividend income.
The unmanaged Lehman Brothers Aggregate Bond Index is composed of approximately
6,000 publicly traded bonds with an average maturity of approximately 10 years.
The Lipper Multi-Sector Income Funds Average reflects performance of 38 funds
with investment objectives that are generally similar to that of Alliance
Global Strategic Income Trust.
When comparing Alliance Global Strategic Income Trust to the indices shown
above, remember that sales charges and expenses are not reflected in the
performance of the Lehman Brothers index and sales charges are not reflected in
the performance of the Lipper average.
Alliance Global Strategic Income Trust
Lehman Bros Gov't Bond Index
Lipper Multi Sector Income Funds Average
5
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------
ARGENTINA-3.4%
GOVERNMENT OBLIGATION-3.4%
Republic of Argentina
Pensioner-Bocon Series 1 FRN
3.36%, 4/01/07 (a)
(cost $124,792) ARS 204 $ 129,394
AUSTRALIA-9.1%
GOVERNMENT OBLIGATIONS-9.1%
Republic of Australia
8.75%, 8/15/08 (a) AU$ 250 217,528
13.00%, 7/15/00 (a) 140 132,854
Total Australian Securities
(cost $339,950) 350,382
CANADA-4.3%
GOVERNMENT OBLIGATION-4.3%
Government of Canada
8.00%, 6/01/23 (a)
(cost $149,463) CA$ 200 165,927
CZECH REPUBLIC-3.7%
CORPORATE DEBT OBLIGATIONS-3.7%
ING Baring Securities
11.00%, 5/29/97 (b) CZK 1,375 50,943
International Bank For Reconstruction
& Development
11.50%, 10/09/97 (a) 2,500 93,042
Total Czech Republic Securities
(cost $142,472) 143,985
DENMARK-2.0%
GOVERNMENT OBLIGATION-2.0%
Kingdom of Denmark
8.00%, 11/15/01 (a)
(cost $72,214) DKK 400 75,254
FINLAND-5.9%
GOVERNMENT OBLIGATION-5.9%
Republic of Finland
7.25%, 4/18/06 (a)
(cost $212,170) FIM 1,000 228,572
FRANCE-1.5%
GOVERNMENT OBLIGATION-1.5%
Government of France
Principal Strip
7.46%, 4/25/23 (a) (c)
(cost $58,387) FRF 2,000 58,688
ITALY-5.9%
GOVERNMENT OBLIGATIONS-5.9%
Republic of Italy
9.50%, 2/01/01 (a) ITL 200,000 141,824
9.50%, 5/01/01 (a) 120,000 85,419
Total Italian Securities
(cost $217,091) 227,243
MEXICO-2.4%
GOVERNMENT OBLIGATIONS-2.4%
Mexican Treasury Bill
30.75%, 7/31/97 (a) (c) MXP 405 41,458
33.55%, 12/26/96 (a) (c) 440 52,373
Total Mexican Securities
(cost $99,444) 93,831
SPAIN-5.0%
GOVERNMENT OBLIGATION-5.0%
Government of Spain
10.10%, 2/28/01 (a)
(cost $188,879) ESP 22,000 191,771
6
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------
SWEDEN-5.4%
GOVERNMENT OBLIGATION-5.4%
Government of Sweden
10.25%, 5/05/00 (a)
(cost $198,807) SEK 1,200 $ 206,231
UNITED KINGDOM-4.2%
GOVERNMENT OBLIGATION-4.2%
U.K. Treasury Gilts
7.50%, 12/07/06
(cost $160,334) GBP 100 161,326
UNITED STATES-53.0%
CORPORATE DEBT OBLIGATIONS-13.9%
Cemex, S.A.
12.75%, 7/15/06 (a) (d) US$ 100 108,375
Farmers Insurance Exchange
8.63%, 5/01/24 150 152,946
Home Holdings Inc.
7.75%, 12/15/98 (a) 100 73,000
8.625%, 12/15/03 (a) 50 17,250
Mc-Cuernavaca Trust
9.25%, 7/25/01 (a) (d) 203 181,885
-----------
533,456
U.S. GOVERNMENT OBLIGATIONS-9.9%
U.S. Treasury Note
6.25%, 10/31/01 180 181,266
7.00%, 7/15/06 (a) 190 198,550
-----------
379,816
SOVEREIGN DEBT OLIGATIONS-23.7%
BULGARIA-3.4%
Republic of Bulgaria Tranche A FRN
6.69%, 7/28/24 (a) 260 131,544
HUNGARY-2.8%
National Bank of Hungary
8.875%, 11/01/13 US$ 100 107,662
MEXICO-2.6%
United Mexican States FRN
7.69%, 8/06/01 (a) (d) 100 100,030
PANAMA-2.6%
Republic of Panama FRN IRB
3.50%, 7/17/14 (d) 150 98,625
PERU-3.9%
Republic of Peru PDI WI
8.00%, 1/24/97 (d) 250 150,937
RUSSIA-3.8%
Vneshekonombank
3.25%, 12/31/25 200 146,500
VENEZUELA-4.6%
Republic of Venezuela Series A
6.75%, 3/31/20 (a) (e) 250 177,500
-----------
912,798
OTHER SOVEREIGN DEBT OBLIGATIONS-3.3%
Morgan Guaranty Trust Indexed to Poland PDI
8.00%, 1/24/97 (a)(f) 70 71,589
Morgan Guaranty Trust
Indexed to Poland Treasury Bill
21.35%, 1/08/97 (a) (f) 60 52,606
-----------
124,195
7
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
SHARES
COMPANY OR CONTRACTS U.S. $ VALUE
- -------------------------------------------------------------------------
PREFERRED STOCK-2.2%
Connecticut Light & Power Co. (a) 2,000 $ 84,750
PUT OPTION PURCHASED-0.0%
Brazil Real
expiring November 1996 @ 1.09 1 60
Total United States Securities
(cost $1,945,490) 2,035,075
TOTAL INVESTMENTS-105.8%
(cost $3,909,493) $4,067,679
Other assets less liabilities-(5.8%) (223,491)
NET ASSETS-100% $3,844,188
(a) Securities, or portion thereof, with an aggregate market value of
$2,983,163 have been segregated to collateralize forward exchange currency
contracts.
(b) The redemption value of the security is indexed to the spread between the
Czech Crown and the U.S. dollar exchange rate.
(c) Annualized yield to maturity at purchase date.
(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 October 31, 1996,
these securities amounted to $639,852 or 16.6% of net assets.
(e) Security trades with oil warrants expiring 4/15/20.
(f) The redemption value of this security is indexed to the spread between the
referenced treasury yield and the referenced emerging market debt yield.
Glossary:
FRN - Floating Rate Note.
IRB - Interest Reduction Bond.
PDI - Past Due Interest Bond.
WI - When Issued.
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $3,909,493) $4,067,679
Cash 3,442
Receivable for capital stock sold 100,312
Interest receivable 91,593
Receivable for investment securities sold 67,500
Unrealized appreciation of forward exchange currency contracts 7,607
Deferred organization expenses 126,753
Total assets 4,464,886
LIABILITIES
Payable for investment securities purchased 516,903
Advisory fee payable 22,715
Dividend payable 10,159
Distribution fee payable 1,677
Accrued expenses and other liabilities 69,244
Total liabilities 620,698
NET ASSETS $3,844,188
COMPOSITION OF NET ASSETS
Capital stock, at par $ 355
Additional paid-in capital 3,645,058
Distributions in excess of net investment income (22,498)
Accumulated net realized gain on investments and foreign
currency transactions 55,128
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 166,145
$3,844,188
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($2,294,576/
211,946 shares of capital stock issued and outstanding) $10.83
Sales Charge--4.25% of public offering price .48
Maximum offering price $11.31
CLASS B SHARES
Net asset value and offering price per share ($799,774/
73,879 shares of capital stock issued and outstanding) $10.83
CLASS C SHARES
Net asset value and offering price per share ($749,838/
69,263 shares of capital stock issued and outstanding) $10.83
See notes to financial statements.
9
STATEMENT OF OPERATIONS
JANUARY 9, 1996* TO OCTOBER 31, 1996
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
INVESTMENT INCOME
Interest (net of foreign taxes withheld of $903) $ 167,277
Dividends 3,858 $171,135
EXPENSES
Advisory fee 12,613
Distribution fee - Class A 4,196
Distribution fee - Class B 1,483
Distribution fee - Class C 1,346
Custodian 98,981
Administration 89,000
Audit and legal 50,202
Amortization of organization expenses 24,517
Transfer agency 16,098
Directors' fees 15,751
Registration 4,517
Printing 3,302
Miscellaneous 1,838
Total expenses 323,844
Less expenses waived and assumed by Adviser
(see Note B) (289,911)
Net expenses 33,933
Net investment income 137,202
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions 55,128
Net realized gain on foreign currency transactions 5,273
Net change in unrealized appreciation of:
Investment transactions 158,141
Foreign currency denominated assets and liabilities 8,004
Net gain on investments 226,546
NET INCREASE IN NET ASSETS FROM OPERATIONS $363,748
* Commencement of operations.
See notes to financial statements.
10
STATEMENT OF CHANGES IN NET ASSETS
JANUARY 9, 1996* TO OCTOBER 31, 1996
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 137,202
Net realized gain on investments and foreign currency transactions 60,401
Net change in unrealized appreciation of investments and
foreign currency denominated assets and liabilities. 166,145
Net increase in net assets from operations 363,748
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (139,600)
Class B (13,366)
Class C (12,007)
CAPITAL STOCK TRANSACTIONS
Net increase 3,545,413
Total increase 3,744,188
NET ASSETS
Beginning of period 100,000
End of period $3,844,188
* Commencement of operations.
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996
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
management 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 shares 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 purchased on or after July 1, 1996 are subject to a
contingent deferred sales charge of 1.0% on redemptions made within the first
period after purchase. 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 which mature in 60
days or less are valued at amortized cost, which approximates market value,
unless this method does not represent fair value. Securities for which market
quotations are not readily available and restricted securities are valued in
good faith 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 foreign currency transactions represent foreign exchange
gains and losses from sales and maturities of securities, holdings of 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 $151,270 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 INVESTMENT TRANSACTIONS
Interest income is accrued daily. Investment transactions are accounted for on
the date the securities are purchased or sold. Investment 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.
12
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
7. RECLASSIFICATION OF NET ASSETS
As of October 31, 1996, the Fund reclassified certain components of net assets.
The reclassification resulted in a net decrease to accumulated net realized
gain on invest-ments and foreign currency transactions of $5,273 and a net
increase to distributions in excess of net investment income of $5,273. This
reclassification was the result of permanent book to tax differences, primarily
resulting from foreign currency. Net assets were not affected by the
reclassification.
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 investment advisory agreement,
to voluntarily waive its fees and bear certain expenses so that total expenses
do not exceed on an annual basis 1.90%, 2.60% and 2.60% of the daily average
net assets for the Class A, Class B and Class C shares respectively.
For the period ended October 31, 1996, such reimbursement amounted to $174,798.
In addition, the Adviser has waived its fees in the amount of $12,613. Pursuant
to the Advisory Agreement, the Fund may reimburse the Adviser for certain legal
and accounting services provided to the Fund by the Adviser. For the period
ended October 31, 1996, the Adviser agreed to waive administrative fees in the
amount of $89,000.
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. For the period
ended October 31, 1996 the transfer agent agreed to waive fees in the amount of
$13,500.
For the period ended October 31, 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 $7,025 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 period 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 $8,312,023 and $5,134,945
respectively, for the period ended October 31, 1996. There were purchases of
$1,039,489 and sales of $660,779 of U.S. Government and government agency
obligations for the period ended October 31, 1996.
1. FORWARD EXCHANGE CURRENCY CONTRACTS
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.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
Fluctuations in the value of forward exchange currency contracts are recorded
for financial reporting purposes as unrealized gains or losses by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or 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 the
Fund has in that particular currency contract.
At October 31, 1996, the Fund had outstanding forward exchange currency
contracts, as follows:
CONTRACT VALUE ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION
(000) DATE VALUE (DEPRECIATION)
-------- ----------- -------- --------------
FOREIGN CURRENCY BUY CONTRACTS
Canadian Dollars,
expiring 12/16/96 209 $155,953 $155,986 $ 33
Deutsche Marks,
expiring 11/25/96-1/27/97 404 267,935 267,359 (576)
Italian Lira,
expiring 11/4/96 390,000 257,426 257,214 (212)
Japanese Yen,
expiring 1/27/97 10,485 94,036 93,261 (775)
Spanish Pesetas,
expiring 11/4/96 11,682 91,624 91,574 (50)
Swedish Krona,
expiring 11/4/96 1,350 205,517 205,446 (71)
14
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
CONTRACT VALUE ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION
(000) DATE VALUE (DEPRECIATION)
-------- ----------- -------- --------------
FOREIGN CURRENCY SALE CONTRACTS
Australian Dollars,
expiring 11/7/96-11/22/96 452 $358,838 $357,905 $ 933
Canadian Dollars,
expiring 12/16/96 209 152,889 155,986 (3,097)
Deutsche Marks,
expiring 11/25/96-1/27/97 772 517,076 511,316 5,760
Finnish Markka,
expiring 11/21/96 1,005 219,508 221,996 (2,488)
French Francs,
expiring 1/28/97 272 53,033 53,403 (370)
Italian Lira,
expiring 11/4/96-12/4/96 780,000 513,214 513,880 (666)
Japanese Yen,
expiring 1/12/98 10,485 108,822 97,953 10,869
Spanish Paseta,
expiring 11/4/96-11/25/96 36,364 283,824 284,870 (1,046)
Swedish Krona,
expiring 11/4/96-12/4/96 2,700 409,872 410,998 (1,126)
Swiss Franc,
expiring 1/6/97 207 165,235 164,746 489
--------
$ 7,607
2. OPTION TRANSACTIONS
For hedging and investment 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 written options which expire unexercised
are recorded by the Fund on the expiration date as realized gains from options
written. The difference between the premium and the amount paid on 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
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
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. There
were no transactions in written options for the year ended October 31, 1996.
At October 31, 1996, the cost of securities for federal income tax purposes was
$3,909,493. Accordingly, gross unrealized appreciation of investments was
$210,877 and gross unrealized depreciation of investments was $52,691,
resulting in net unrealized appreciation of $158,186 (excluding foreign
currency transactions).
NOTE E: 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
OCT. 31,1996 OCT. 31,1996
--------------- ---------------
CLASS A
Shares sold 253,587 $2,571,898
Shares issued in reinvestment of dividends 4,140 42,969
Shares redeemed (55,781) (570,111)
Net increase 201,946 $2,044,756
MARCH 25,1996** MARCH 25,1996**
TO TO
OCT. 31,1996 OCT. 31,1996
--------------- ---------------
CLASS B
Shares sold 78,358 $822,339
Shares issued in reinvestment of dividends 107 1,138
Shares redeemed (4,586) (47,937)
Net increase 73,879 $775,540
CLASS C
Shares sold 74,590 $781,283
Shares issued in reinvestment of dividends 117 1,225
Shares redeemed (5,444) (57,391)
Net increase 69,263 $725,117
* Commencement of operations.
** Commencement of distribution.
16
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(a) 1996(b) 1996(b)
TO TO TO
OCT. 31,1996 OCT. 31,1996 OCT. 31,1996
------------ ------------ ------------
Net asset value, beginning of period $10.00 $ 9.97 $ 9.97
INCOME FROM INVESTMENT OPERATIONS
Net investment income(c)(d) .69 .41 .39
Net realized and unrealized gain
on investments and foreign
currency transactions .95 1.01 1.03
Net increase in net asset value
from operations 1.64 1.42 1.42
LESS: DIVIDENDS
Dividends from net investment income (.81) (.56) (.56)
Net asset value, end of period $10.83 $10.83 $10.83
TOTAL RETURN
Total investment return based on
net asset value(e) 17.31% 14.47% 14.47%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $2,295 800 750
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.90%(f) 2.60%(f) 2.60%(f)
Expenses, before waivers/
reimbursements 19.20%(f) 19.57%(f) 19.49%(f)
Net investment income 8.36%(f) 7.26%(f) 7.03%(f)
Portfolio turnover rate 282% 282% 282%
(a) Commencement of operations.
(b) Commencement of distribution.
(c) Based on average shares outstanding.
(d) Net of expenses waived/reimbursed by the Adviser.
(e) 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. Total investment return calculated
for a period of less than one year is not annualized.
(f) Annualized.
17
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS ALLIANCE GLOBAL STRATEGIC INCOME
TRUST, INC.
We have audited the accompanying statement of assets and liabilities of
Alliance Global Strategic Income Trust, Inc., (the "Fund"), including the
portfolio of investments, as of October 31, 1996, and the related statements of
operations and changes in net assets and financial highlights for the period
from January 9, 1996 (commencement of operations) to October 31, 1996. 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 audit.
We conducted our audit 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
October 31, 1996, 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 audit provides 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 Global Strategic Income Trust, Inc. at October 31, 1996, and the
results of its operations, the changes in its net assets and the financial
highlights for the period from January 9, 1996 to October 31, 1996, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
December 12, 1996
18
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)
DONALD J. ROBINSON (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.
19
THE ALLIANCE FAMILY OF MUTUAL FUNDS
_______________________________________________________________________________
FIXED INCOME
Alliance Bond Fund
U.S. Government Portfolio
Corporate Bond Portfolio
Alliance Global Dollar Government Fund
Alliance Global Strategic Income Trust
Alliance 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
20
