ALLIANCE WORLD INCOME TRUST
ANNUAL REPORT
OCTOBER 31, 1997
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE WORLD INCOME TRUST
_______________________________________________________________________________
December 1, 1997
Dear Shareholder:
This annual report provides you with market activity and investment results for
Alliance World Income Trust for the period ended October 31, 1997.
Global bond markets posted solid returns over the past six months. Lower global
bond yields and a convergence in spreads in European and Dollar Bloc markets
pushed bond prices higher and helped non-core markets to outperform core
markets. Data released indicating a slowing U.S. economy, together with a
favorable U.S. budget deficit, fueled a rally in U.S. Treasuries. In October,
financial market turmoil, which started in Southeast Asia, created a ripple
effect that spread to other global bond markets and caused a spike in
volatility. Rate hikes in Europe, budgetary problems in Italy, and potential
European Monetary Union (EMU) participation by the U.K., also contributed to
increased volatility.
INVESTMENT RESULTS
For the six months ended October 31, 1997, your Fund returned 1.72% on a net
asset value (NAV) basis. For comparison, we have shown the performance for the
short maturity U.S. Government bond market, represented by the unmanaged
Merrill Lynch 1-3 Year Government Bond Index, and for the Lipper Short World
Multi-Market Income Funds Average, which reflects the performance of 32 funds
for the 12 month period ended October 31, 1997. The Lipper peer group has
generally similar investment objectives to World Income Trust, although
investment policies for the various funds--particularly the average maturities
of their portfolios--may differ significantly. The Fund's underperformance can
be attributed to the relative poor performance of shorter maturity securities
during a period in which interest rates fell and longer maturity securities
typically outperformed. The Fund may only invest in U.S. Treasuries with a
maturity of one year or less.
INVESTMENT RESULTS*
Period Ended October 31, 1997
TOTAL RETURN
6 MONTHS 12 MONTHS
----------- ----------
ALLIANCE WORLD INCOME TRUST 1.72% 3.47%
MERRILL LYNCH 1-3 YEAR GOVERNMENT
BOND INDEX 4.13% 6.49%
LIPPER SHORT WORLD MULTI-MARKET
INCOME FUNDS AVERAGE 3.00% 5.02%
* TOTAL RETURNS ARE BASED ON THE NET ASSET VALUE AS OF OCTOBER 31, 1997.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THE UNMANAGED MERRILL LYNCH 1-3 YEAR GOVERNMENT BOND INDEX IS COMPOSED OF
U.S. GOVERNMENT AGENCY AND TREASURY SECURITIES WITH MATURITIES OF ONE TO THREE
YEARS. THE LIPPER SHORT WORLD MULTI-MARKET INCOME FUNDS AVERAGE REFLECTS THE
PERFORMANCE OF 32 FUNDS THAT INVEST IN NON-U.S. DOLLAR AND U.S. DOLLAR DEBT
INSTRUMENTS. THE FUNDS TRACKED BY LIPPER ANALYTICAL SERVICES HAVE GENERALLY
SIMILAR INVESTMENT OBJECTIVES TO YOUR FUND, ALTHOUGH SOME OF THE FUNDS MAY HAVE
SOMEWHAT DIFFERENT INVESTMENT POLICIES. AN INVESTOR CANNOT INVEST DIRECTLY IN
THE INDEX OR AVERAGE.
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 4.
As of October 31, 1997, the Fund's total investments based on issuing country
were distributed as follows:
PORTFOLIO DISTRIBUTION BY COUNTRY
COUNTRY PORTFOLIO %
- ------------- -----------
United States 91.12%
Mexico 4.98%
Poland 3.90%
ECONOMIC REVIEW
Throughout the second quarter, economic growth and inflation were well
contained worldwide. U.S. Gross Domestic Product (GDP) growth slowed from the
4.9% robust pace of the first quarter to 3.3% in the second
1
ALLIANCE WORLD INCOME TRUST
_______________________________________________________________________________
quarter. Weakness in consumer spending was the catalyst, as retail and auto
sales declined, and housing activity slowed.
The economy continued at a healthy pace during the third quarter. Although U.S.
growth slowed from its first half level, the economy remained strong, led by
strength in the labor market. In October, the unemployment rate dropped to
4.7%, the lowest level in 24 years, as the economy added a larger-than-expected
284,000 jobs. GDP growth for the third quarter was 3.5%.
During the period, inflation remained well-behaved with consumer prices
advancing 2.2% between October 1996 and October 1997. Wholesale inflation, as
measured by the Producer Price Index (PPI), fell for an unprecedented seven
months in a row before finally showing an increase in the past three months.
Overall, producer prices are down 0.2% on an annual basis through October. The
Federal Reserve made no change to monetary policy during the period despite
growth remaining above trend levels. Improving inflation fundamentals, a strong
dollar, and currency devaluations in Southeast Asia, argued against an increase
in official U.S. interest rates.
In Canada, strong growth and low budget deficits, together with stable U.S.
monetary policy, allowed Canada to delay interest rate hikes. In Australia and
New Zealand, high unemployment, lower Asian demand for their exports, and good
inflation performance, set the stage for the Reserve Banks of Australia and New
Zealand to lower interest rates.
Stronger growth, and the inflationary impact of rising import prices in
Germany, set the tone for European markets. The Bundesbank's continued concern
about inflation resulted in the larger-than-expected rate hike in October. The
Bundesbank raised interest rates 30 basis points, indicating that it was
necessary to move core European official rates in-line with what is expected to
be the necessary European average rate for EMU. This increase led to subsequent
rate increases throughout the other core European countries of France, Denmark
and the Netherlands.
INVESTMENT OUTLOOK
In the U.S., recent slowing in employment gains and soft retail sales suggest
slower growth towards year-end and early 1998. The currency devaluations and
economic slowing in Southeast Asia will also temper U.S. growth. We anticipate
3.5% GDP growth for 1997. We expect interest rates to stabilize at somewhat
higher levels and to settle back into our anticipated 5.75%-6.75% range on the
U.S. 30-year bond. The healthy U.S. economy will continue to cycle gently
between stronger and weaker periods of growth. Given the prolonged period of
strong capacity utilization and employment gains, and the difficulty of
forecasting U.S. inflation in an increasingly global economy, there is a small
but measurable risk that the Federal Reserve will raise interest rates as a
precautionary measure. The U.S. dollar should appreciate against the yen, but
remain range bound against European currencies.
Globally, we do not expect any of the world's three major central banks--the
U.S. Federal Reserve, the Bank of Japan or the German Bundesbank--to increase
rates again before year-end as they assess the impact of the Asian crisis on
future growth. Thus, global government bonds should generate positive returns
through year-end and early 1998.
In Poland, the newly elected Solidarity Government took power in October.
Initial signs are that the new cabinet will continue with the important
economic reforms initiated under the previous leadership. We remain confident
that the new government can weather any pressures resulting from the recent
volatility in emerging markets. The strength of Poland's economic fundamentals
is underscored by the fact that it is clearly acting as a local-currency
safe-haven for investors in the region.
The Mexican economy continues to perform strongly, and attention will focus on
the 1998 budget. Although the Mexican peso fell victim to the currency crisis
prevailing in Southeast Asia, economic fundamentals remain strong, and we
continue to believe that Mexico will grow 5%-6% annually through 2000.
In Southeast Asia, the near-term outlook is bleak. The unfolding adjustments
for these countries involve much weaker currencies, higher interest rates,
lower stock prices, numerous bankruptcies, banking-sector consolidation and
slower growth. Financial markets in this region will remain under intense
pressure as policy makers grapple with appropriate responses to the economic
crisis. The International Monetary Fund's decision to
2
ALLIANCE WORLD INCOME TRUST
_______________________________________________________________________________
step in and provide funds to shore up the shaky Thai and Indonesian financial
sectors should eventually help to provide needed stability to this region.
Long-term, we are optimistic about the investment value in this region since
favorable fundamentals are still in place. We will be monitoring developments
in this region for opportunities in the upcoming periods.
Thank you for your continued interest and investment in Alliance World Income
Trust. We look forward to reporting to you again on market activity and the
Fund's investment results in coming periods.
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 WORLD INCOME TRUST
_______________________________________________________________________________
Alliance World Income Trust seeks the highest level of current income through
investment in a portfolio of high-quality debt securities having remaining
maturities of not more than one year. It invests primarily in a non-diversified
portfolio of debt securities denominated in the U.S. dollar and selected
foreign currencies. While the Fund normally will maintain a substantial portion
of its assets in debt securities denominated in foreign currencies, the Fund
will invest at least 35% of its net assets in U.S. dollar-denominated
securities.
INVESTMENT RESULTS
AVERAGE ANNUAL TOTAL RETURNS AS OF OCTOBER 31, 1997
One Year 3.47%
Five Years 2.07%
Since Inception* 2.51%
SEC Yield** 3.15%
The average annual total returns reflect reinvestment of dividends and/or
capital gains distributions in additional shares. 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: 12/90.
** Yield is for the 30 days ended October 31, 1997.
4
ALLIANCE WORLD INCOME TRUST
_______________________________________________________________________________
ALLIANCE WORLD INCOME TRUST
GROWTH OF A $10,000 INVESTMENT
12/31/90* TO 10/31/97
$16,000
$15,000
$14,000
$13,000
$12,000
$11,000
$10,000
12/31/90 10/31/91 10/31/92 10/31/93
10/31/94 10/31/95 10/31/96 10/31/97
MERRILL LYNCH 1-3 YEAR GOVERNMENT BOND INDEX: $15,507
LIPPER SHORT-WORLD MULTI-MARKET INCOME FUNDS AVERAGE: $13,360
WORLD INCOME TRUST: $11,849
This chart illustrates the total value of an assumed $10,000 investment in
Alliance World Income Trust (from 12/31/90 to 10/31/97) as compared to the
performance of an appropriate broad-based index. The chart assumes the
reinvestment of dividends and capital gains. Past performance is not indicative
of future results, and is not representative of future gain or loss in capital
value or dividend income.
The Merrill Lynch 1-3 Year Government Bond Index is composed of U.S. Government
agency and Treasury securities with maturities of one to three years.
The Lipper Short-World Multi-Market Income Funds Average reflects performance
of 33 funds. These funds have generally similar investment objectives to
Alliance World Income Trust, although the investment policies of some funds
included in the average may vary.
When comparing Alliance World Income Trust to the index and average shown
above, you should note that no charges or expenses are reflected in the
performance of the index. Lipper results include fees and expenses.
World Income Trust
Merrill Lynch 1-3 Year Government Bond Index
Lipper Short-World Multi-Market Income Funds Average
* Month-end nearest to Fund's inception date of 12/3/90.
5
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997 ALLIANCE WORLD INCOME TRUST
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
MEXICO-8.8%
GOVERNMENT OBLIGATION-8.8%
Mexican Treasury Bill
22.85%, 6/04/98 (a)(b)
(cost $2,040,617) MXP 18,159 $ 1,898,230
POLAND-6.9%
GOVERNMENT OBLIGATION-6.9%
Government of Poland Treasury Bill
23.05%, 9/30/98 (a)(b)
(cost $1,526,166) PLN 6,300 1,486,330
UNITED STATES-161.3%
CERTIFICATES OF DEPOSIT-27.9%
Canadian Imperial Bank of Commerce
5.72%, 5/27/98 (a) US$ 1,500 1,500,000
Deutsche Bank AG
5.75%, 7/29/98 (a) 1,500 1,500,000
Morgan Guaranty Trust Co.
5.87%, 8/06/98 1,500 1,501,034
Westdeutsche Landesbank
5.72%, 8/26/98 (a) 1,500 1,500,000
------------
6,001,034
COMMERCIAL PAPER-41.2%
Abbey National PLC
5.55%, 4/27/98 (a) US$ 1,500 1,459,069
Banque Internationale de Luxembourg
5.55%, 1/23/98 1,500 1,480,806
BBV Finance Delaware
5.57%, 3/20/98 (a) 1,500 1,467,740
Societe Generale
5.53%, 12/22/97 (a) 1,500 1,488,249
Toronto Dominion Bank
5.57%, 1/26/98 (a) 1,500 1,480,041
Union Bank of Switzerland
5.52%, 11/24/97 (a) 1,500 1,494,710
------------
8,870,615
GOVERNMENT OBLIGATION-90.4%
United States Treasury Bill
4.92%, 11/20/97 (b) 19,500 19,455,794
TIME DEPOSIT-1.8%
Bank of New York
5.25%, 11/03/97 400 400,000
Total United States Securities
(cost $34,722,249) 34,727,443
TOTAL INVESTMENTS-177.0%
(cost $38,289,032) 38,112,003
Other assets less liabilities-(77.0%) (16,582,771)
NET ASSETS-100% $ 21,529,232
(a) Securities, or portion thereof, with an aggregate market value of
$15,274,369 have been segregated to collateralize forward exchange currency
contracts.
(b) Annualized yield to maturity at purchase date.
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997 ALLIANCE WORLD INCOME TRUST
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $38,289,032) $ 38,112,003
Cash 36,160
Interest receivable 25,163
Receivable for capital stock sold 2,375
Total assets 38,175,701
LIABILITIES
Payable for capital stock redeemed 16,454,664
Dividend payable 71,816
Distribution fee payable 21,549
Advisory fee payable 16,304
Unrealized depreciation of forward exchange
currency contracts 6,128
Accrued expenses 76,008
Total liabilities 16,646,469
NET ASSETS $ 21,529,232
COMPOSITION OF NET ASSETS
Capital stock, at par $ 26,583
Additional paid-in capital 25,991,457
Distributions in excess of net investment income (65,686)
Accumulated net realized loss on investments and foreign
currency transactions (4,239,965)
Net unrealized depreciation of investments and foreign
currency denominated assets and liabilities (183,157)
$ 21,529,232
NET ASSET VALUE PER SHARE (based on 13,291,525
shares outstanding) $1.62
See notes to financial statements.
7
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997 ALLIANCE WORLD INCOME TRUST
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 2,726,054
EXPENSES
Advisory fee $ 268,583
Distribution fee 371,885
Administrative 126,531
Custodian 119,128
Audit and legal 97,596
Transfer agency 45,142
Directors' fees 21,869
Registration 18,480
Printing 11,750
Miscellaneous 4,701
Total expenses 1,085,665
Less: Fees waived and assumed by Adviser
and Distributor (157,020)
Net expenses 928,645
Net investment income 1,797,409
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss on investment transactions (80,140)
Net realized gain on foreign
currency transactions 11,179
Net change in unrealized appreciation
(depreciation) of:
Investments (222,185)
Foreign currrency denominated assets
and liabilities (79,540)
Net loss on investments and foreign
currency transactions (370,686)
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,426,723
See notes to financial statements.
8
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE WORLD INCOME TRUST
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 1,797,409 $ 2,612,380
Net realized gain (loss) on investments
and foreign currency transactions (68,961) 475,207
Net change in unrealized appreciation
(depreciation) of investments and foreign
currency denominated assets and liabilities (301,725) 206,348
Net increase in net assets from operations 1,426,723 3,293,935
DIVIDENDS ANDDISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,502,762) (3,023,315)
Tax return of capital (1,092,302) -0-
CAPITAL STOCK TRANSACTIONS
Net decrease (22,192,637) (11,158,351)
Total decrease (23,360,978) (10,887,731)
NET ASSETS
Beginning of year 44,890,210 55,777,941
End of year $ 21,529,232 $ 44,890,210
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997 ALLIANCE WORLD INCOME TRUST
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance World Income Trust, Inc. (the "Fund"), was incorporated in the State
of Maryland on October 29, 1990 as a non-diversified, open-end management
investment company. 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. However, readily marketable portfolio securities may
be valued on the basis of prices provided by a pricing service when such prices
are believed by the Adviser to reflect the fair value of such securities.
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
using methods determined by the Board of Directors.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward 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 on the valuation date. 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 earned or accrued.
Net realized gain on foreign currency transactions represents foreign exchange
gains and losses from sales and maturities of securities and forward exchange
currency contracts, holdings of foreign currencies, exchange gains and losses
realized between the trade and settlement dates on investment 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. 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.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Investment transactions are accounted for on
the date securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. The Fund accretes discounts as an
adjustment to interest income.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. 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 foreign currency gains and a tax return of capital
distribution, resulted in a net decrease in distributions in excess of net
investment income, an increase in accumulated net realized loss on investments
and foreign currency transactions and a corresponding decrease in additional
paid-in capital. This reclassification had no effect on net assets.
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 1% of the average daily net assets of the Fund. Such fee is
10
ALLIANCE WORLD INCOME TRUST
_______________________________________________________________________________
accrued daily and paid monthly. For the year ended October 31, 1997, the
Adviser agreed to waive a portion of its advisory fee. The amount of such fee
waiver was $66,114.
Pursuant to the advisory agreement, the Fund paid $126,531 to the Adviser
representing reimbursement of the cost of certain legal and accounting services
provided to the Fund by the Adviser for the year ended October 31, 1997.
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 $32,192 for the year ended October 31, 1997.
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 .90 of 1% of the average daily net assets of the Fund. The fees
are accrued daily and paid monthly. For the year ended October 31, 1997, the
Distributor agreed to waive a portion of its distribution fee. The amount of
such fee waiver was $90,906. The Agreement provides that the Distributor will
use the payments in their entirety for distribution assistance and promotional
activities. 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
At October 31, 1997, the cost of investments for federal income tax purposes
was the same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation of investments was $5,194 and gross unrealized
depreciation of investments was $182,223, resulting in net unrealized
depreciation of $177,029 (excluding foreign currency transactions).
For federal income tax purposes, the Fund had a capital loss carryforward at
October 31, 1997 of $4,239,965 of which $293,011 expires in the year 1998,
$104,550 expires in the year 1999, $833,703 expires in the year 2000, $240,553
expires in the year 2001, $2,640,608 expires in the year 2002, $47,400 expires
in the year 2004, and $80,140 expires in the year 2005.
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Fund enters into forward exchange currency contracts to hedge its exposure
to changes in foreign currency exchange rates on its foreign portfolio
holdings, to hedge certain firm purchase and sale commitments denominated in
foreign currencies and for investment purposes. A forward exchange currency
contract is a commitment to purchase or sell a foreign currency at a future
date at a negotiated forward rate. The gain or loss arising from the difference
between the original contracts and the closing of such contracts is included in
realized gains or losses from foreign currency transactions.
Fluctuations in the value of forward exchange currency contracts are recorded
for financial reporting purposes as unrealized gains or losses by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or other liquid assets in a separate account of the Fund having a value equal
to the aggregate amount of the Fund's commitments under forward exchange
currency contracts entered into with respect to position hedges.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, as reflected in the following table, reflects the total exposure the
Fund has in that particular currency contract.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE WORLD INCOME TRUST
_______________________________________________________________________________
At October 31, 1997, the Fund had outstanding forward exchange currency
contracts, as follows:
CONTRACT U.S.$ VALUE ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION
(000) DATE VALUE (DEPRECIATION)
-------- ------------ ------------ ------------
FORWARD EXCHANGE
CURRENCY BUY CONTRACTS
Deutsche Marks,
expiring 11/07/97 2,700 $ 1,537,918 $ 1,565,997 $ 28,079
FORWARD EXCHANGE
CURRENCY SALE CONTRACTS
Deutsche Marks,
expiring 11/07/97 2,700 1,531,790 1,565,997 (34,207)
$ (6,128)
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 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, 1997.
12
ALLIANCE WORLD INCOME TRUST
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 3,000,000,000 shares of $.002 par value capital stock authorized.
Transactions in capital stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
------------ ------------ -------------- --------------
Shares sold 1,098,101 592,826 $ 1,819,549 $ 987,152
Shares issued in
reinvestment of
dividends and
distributions 632,580 798,519 1,041,737 1,327,317
Shares redeemed (15,377,403) (8,120,965) (25,053,923) (13,472,820)
Net decrease (13,646,722) (6,729,620) $(22,192,637) $(11,158,351)
13
FINANCIAL HIGHLIGHTS ALLIANCE WORLD INCOME TRUST
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.67 $ 1.66 $ 1.88 $ 1.90 $ 1.91
INCOME FROM INVESTMENT OPERATIONS
Net investment income .07(a) .09(a) .11(a) .18 .22
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions (.01) .02 (.23) (.12) (.16)
Net increase (decrease) in net asset
value from operations .06 .11 (.12) .06 .06
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.06) (.10) -0- (.05) (.07)
Tax return of capital (.05) -0- (.10) (.03) -0-
Total dividends and distributions (.11) (.10) (.10) (.08) (.07)
Net asset value, end of year $ 1.62 $ 1.67 $ 1.66 $ 1.88 $ 1.90
TOTAL RETURN:
Total investment return based on
net asset value (b) 3.47% 6.98% (6.35)% 3.27% 3.51%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $21,529 $44,890 $55,778 $103,310 $149,623
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 2.25% 2.10% 1.97% 1.70% 1.54%
Expenses, before waivers/reimbursements 2.63% 2.48% 2.35% 2.08% 1.92%
Net investment income 4.35% 5.37% 6.46% 3.96% 5.14%
</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.
14
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE WORLD INCOME TRUST
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE WORLD INCOME TRUST, INC.
We have audited the accompanying statement of assets and liabilities of
Alliance World Income Trust, Inc. (the "Fund"), including the portfolio of
investments, as of October 31, 1997, and the related statement of operations
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 years 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
October 31, 1997, 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 World Income Trust, Inc. at October 31, 1997, the results of its
operations 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 years, in conformity with generally accepted accounting
principles.
New York, New York
December 10, 1997
15
ALLIANCE WORLD INCOME TRUST
_______________________________________________________________________________
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
DOUGLAS J. PEEBLES, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER AND CHIEF FINANCIAL OFFICER
JUAN J. RODRIGUEZ, CONTROLLER
CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.
40 Water Street
Boston, MA 02109
PRINCIPAL UNDERWRITERS
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)-221-5692
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
_______________________________________________________________________________
FIXED INCOME
Alliance Bond Fund
U.S. Government Portfolio
Corporate Bond Portfolio
Alliance Global Dollar Government Fund
Alliance Global Strategic Income Trust
Alliance High Yield Fund
Alliance Mortgage Securities Income Fund
Alliance Limited Maturity Government Fund
Alliance Multi-Market Strategy Trust
Alliance North American Government Income Trust
Alliance Short-Term Multi-Market Trust
Alliance Short-Term U.S. Government Fund
Alliance World Income Trust
TAX-FREE INCOME
Alliance Municipal Income Fund
California Portfolio
Insured California Portfolio
Insured National Portfolio
National Portfolio
New York Portfolio
Alliance Municipal Income Fund II
Arizona Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
MONEY MARKET
AFD Exchange Reserves
GROWTH
The Alliance Fund
Alliance Global Environment Fund
Alliance Global Small Cap Fund
Alliance Growth Fund
Alliance Premier Growth Fund
Alliance/Regent Sector Opportunity Fund
GROWTH & INCOME
Alliance Strategic Balanced Fund
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Income Builder Fund
Alliance Real Estate Investment Fund
Alliance Utility Income Fund
AGGRESSIVE GROWTH
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance Greater China '97 Fund
Alliance International Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage Fund
ACM Government Income Fund
ACM Government Opportunity Fund
ACM Government Securities Fund
ACM Government Spectrum Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
Alliance World Dollar Government Fund
Alliance World Dollar Government Fund II
The Austria Fund
The Korean Investment Fund
The Spain Fund
The Southern Africa Fund
CASH MANAGEMENT SERVICES
ACM Institutional Reserves
Government Portfolio
Prime Portfolio
Tax-Free Portfolio
Trust Portfolio
Alliance Capital Reserves
Alliance Government Reserves
Alliance Insured Account
Alliance Money Reserves
Alliance Municipal Trust
California Portfolio
Connecticut Portfolio
Florida Portfolio
General Portfolio
Massachusetts Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
17
ALLIANCE WORLD INCOME TRUST
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCE CAPITAL
THIS REPORT IS INTENDED SOLELY FOR DISTRIBUTION TO CURRENT SHAREHOLDERS
OF THE FUND.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER,
ALLIANCE CAPITAL MANAGEMENT L.P.
WITAR
