Alliance Multi-Market Strategy Trust
Semi-Annual Report
April 30, 1995
(cover)
LETTER TO SHAREHOLDERS ALLIANCE MULTI-MARKET STRATEGY TRUST, INC.
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June 2, 1995
Dear Shareholder:
In November and December of last year, U.S. bond markets continued to be
negatively affected by higher interest rates. Since January, however, the
market has rebounded, staging an impressive rally across nearly all fixed
income sectors. This rally was sparked, in part, by the belief of many market
participants that the Federal Reserve may be at or near the end of its
tightening cycle. Unfortunately, gains from the domestic bond market rally were
offset by sharp price declines in emerging markets as a result of the economic
crisis in Mexico.
U.S. ECONOMY
Evidence of a substantial slowing in U.S. economic activity has emerged over
the last few months as a result of restrictive Federal Reserve policy and a
slowdown in trade. In the months immediately ahead, the slowdown is expected to
continue as businesses attempt to reduce unwanted inventories by trimming
production schedules and employment.
We have reduced our domestic growth expectations to reflect these trends and
now look for little or no growth in the second and third quarters of 1995. We
do not, however, believe that the economy is headed into recession. The trade
picture seems to be stabilizing, domestic consumers seem able and willing to
spend and, if necessary, the Federal Reserve will lower short-term interest
rates, particularly if inflation fears abate further. The budget debate, which
won't be resolved until September or October, is important in this regard; and
for now we're optimistic that real progress toward deficit reduction will be
made.
UPDATE ON MEXICO
In December, the Mexican government's decision to float the peso led to a
significant devaluation in its currency versus the U.S. dollar and sparked an
economic crisis.
Mexico's problems spilled over to other emerging markets as the prices for all
emerging market debt consequently fell with Mexican bond markets. To halt the
devaluation of its currency, the Mexican government implemented an economic
recovery plan designed to rein in the current account deficit and combat
inflation. While the Mexican economic recovery plan is bitter medicine for the
country's economic ills, preliminary results have been encouraging. From March
9 to May 31, 1995, the Mexican peso gained 21% versus the U.S. dollar and
volatility declined.
INVESTMENT RESULTS
Listed below is Alliance Multi-Market Strategy Trust's performance through its
fiscal semi-annual reporting period ended April 30, 1995. The table shows your
Fund's total returns compared with the short maturity U.S. government bond
market, represented by the unmanaged Merrill Lynch (ML) 1-3 Year Government
Bond Index, and the Lipper Short World Multi-Market Income Funds Average, which
reflects performance of 44 funds. These funds have generally similar investment
objectives to your Fund, although some funds included in the Lipper average may
have somewhat different investment policies.
Six Months Ended April 30, 1995
Total Return Ending NAV
------------ ----------
Alliance Multi-Market Strategy Trust
Class A -11.83% $6.76
Class B -12.09% $6.77
Class C -12.22% $6.76
ML 1-3 Year Index 0.76%
Lipper Short World MM Income Funds Avg. -1.28%
The Fund's total returns are based on the net asset values of each class of
shares as of April 30; additional investment results appear on page 4.
1
ALLIANCE MULTI-MARKET STRATEGY TRUST, INC.
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As of April 30, the Fund's assets were distributed as follows:
PORTFOLIO DISTRIBUTION BY COUNTRY:
Australia - 3.9% Canada - 4.8%
Denmark - 6.3% Germany - 4.2%
Ireland - 3.7% Mexico - 9.3%
New Zealand - 7.5% Spain - 4.0%
United Kingdom - 7.8% U.S. - 53.1%
In the following pages is a discussion with Douglas Peebles, your Fund's
portfolio manager. Mr. Peebles provides his views on the current political and
economic situation in Mexico and on the areas that he expects will provide
future investment opportunities for your Fund. We appreciate your investment in
the Fund and will look forward to updating you on its progress later in the
year.
Sincerely,
John D. Carifa
Chairman and President
2
INTERVIEW WITH PORTFOLIO MANAGERS
DOUGLAS J. PEEBLES, VICE PRESIDENT ALLIANCE MULTI-MARKET STRATEGY TRUST, INC.
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Q: What exactly happened in Mexico?
Mr. Peebles: On December 20, 1994, the newly elected Zedillo government
announced a change in Mexico's monetary policy that would allow the Mexican
peso to depreciate up to 12% versus the U.S. dollar. This change in policy came
as quite a shock to both the Mexican domestic marketplace as well as the
international financial community since this Administration had repeatedly
stated that there would be no change in the exchange rate policy which had been
in place since 1987. The devaluation caused a severe loss of confidence in the
Zedillo Administration among market participants, and the peso fell drastically
lower than the planned 12% devaluation. The peso finally found a bottom on
March 9, 1995-approximately 50% weaker than it was on December 19, 1994.
Q: Was the drop in the peso-to-dollar exchange rate the only way the Fund was
affected by the Mexican crisis?
Mr. Peebles: No. Yields increased substantially and since price has an inverse
relationship to yield, the prices of the Fund's Mexican securities fell. In
fact, the yield on the benchmark two-day Mexican cetes increased from 13.75% on
December 19, 1994, to a peak of 82.65% on March 22, 1995. Yields on
dollar-denominated Tesobonos also increased but to a lesser degree.
Q: What is the current outlook for the Fund's Mexican exposure?
Mr. Peebles: With the help of the Clinton Administration's economic aid
package, the short-term liquidity crisis in Mexico has been alleviated. Prudent
measures have also been adopted within Mexico to assure that previously
implemented policy initiatives will continue to keep it on a path toward a
tier-one industrialized economy. The trade balance in Mexico has already turned
into a surplus; now the investment community will look for a peak in inflation
and signs that the already-wounded banking sector will survive without causing
any further distress to the Mexican economy. If these key factors materialize,
the Mexican peso should continue to strengthen as it has done since its trough
on March 9, 1995.
Q: Do you see opportunities in other areas of the U.S. dollar bloc?
Mr. Peebles: We continue to look favorably on prospects within Canada and New
Zealand. In Canada, the economy continues to grow at a healthy pace and
inflation is below the Bank of Canada's 1-3% target range. Therefore, higher
real interest rates should allow the Canadian dollar to appreciate against the
U.S. dollar. While a long-standing negative for Canada is its large budget
deficit, substantial government spending cuts were announced in the most recent
Budget Statement.
New Zealand continues to have among the best investment potential within the
international arena. Of all countries included in the Organization for Economic
Cooperation and Development (OECD), New Zealand has the largest budget surplus
as a percentage of gross domestic product. We believe this surplus, combined
with the rigorous anti-inflation mandate of the Reserve Bank of New Zealand,
should lead to currency appreciation.
Q: How has the weak U.S. dollar affected the Fund's portfolio?
Mr. Peebles: Historically the Fund has not taken large positions across
different currency blocs, so the direct impact has not been substantial.
However, the dollar's weakness definitely slowed economic recoveries in Europe
and Japan. We have positioned the portfolio with securities issued by European
countries that have effectively tightened monetary policy, such as Germany,
Spain and Denmark. We believe their strong currencies, led by the German mark,
will allow the European Central Banks to let rates drift lower.
3
INVESTMENT RESULTS ALLIANCE MULTI-MARKET STRATEGY TRUST, INC.
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Average Annual Total Return as of April 30, 1995
CLASS A SHARES
Without With
Sales Charge Sales Charge
------------ ------------
. One Year -12.06% -15.77%
. Since Inception* -1.48 -2.56
SEC Yield 9.99%
CLASS B SHARES
Without With
Sales Charge Sales Charge
------------ ------------
. One Year -12.66% -15.08%
. Since Inception* -2.18 -2.18
SEC Yield 9.70%
CLASS C SHARES
. One Year -12.77%
. Since Inception* -5.37
SEC Yield 9.73%
The average annual 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: 5/29/91, Class A and Class B; 5/3/93, Class C.
4
PORTFOLIO OF INVESTMENTS
APRIL 30, 1995 (UNAUDITED) ALLIANCE MULTI-MARKET STRATEGY TRUST, INC.
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Principal
Amount U.S.$
(000) Value
- ----------------------------------------------------------------------------
AUSTRALIA-3.9%
GOVERNMENT OBLIGATION-3.9%
Government of Australia
7.00%, 4/15/00
(cost $7,105,213) AU$ 10,500 $6,939,901
CANADA-4.8%
GOVERNMENT OBLIGATION-2.6%
Canadian Treasury Bill
Zero coupon, 7/06/95 CA$ 6,400 4,641,707
DEBT OBLIGATION-2.2%
Abbey National Plc.
7.50%, 7/16/98 5,500(a) 3,906,032
Total Canadian Securities
(cost $8,775,916) 8,547,739
DENMARK-6.3%
GOVERNMENT OBLIGATIONS-6.3%
Kingdom of Denmark
6.00%, 12/10/99 DKK 20,000 3,788,339
9.00%, 11/15/98 43,000 7,310,687
Total Danish Securities
(cost$10,849,114) 11,099,026
GERMANY-4.2%
GOVERNMENT OBLIGATION-4.2%
Federal Republic of Germany
7.00%, 1/13/00
(cost $7,489,022) DEM 10,000 7,431,911
IRELAND-3.7%
GOVERNMENT OBLIGATION-3.7%
Republic of Ireland
6.25%, 4/01/99
(cost $6,513,220) IEP 4,400 6,557,420
MEXICO-9.3%
BANKING-5.1%
Mexican Nafinsa Pagare
Zero coupon, 5/04/95 MXP 53,870 9,000,852
GOVERNMENT OBLIGATION-4.2%
Mexican Treasury Bill
Zero coupon, 11/09/95 MXP 57,000(a) $7,394,100
Total Mexican Securities
(cost $25,600,851) 16,394,952
NEW ZEALAND-7.5%
GOVERNMENT OBLIGATION-7.5%
Government of New Zealand
8.00%, 11/15/95
(cost $12,059,481) NZD 20,000(a) 13,371,753
SPAIN-4.0%
GOVERNMENT OBLIGATION-4.0%
Government of Spain
7.40%, 7/30/99
(cost $6,974,660) ESP 1,000,000 7,004,806
United Kingdom-7.8%
GOVERNMENT OBLIGATIONS-7.8%
United Kingdom Treasuries
9.00%, 3/03/00 GBP 4,300 7,096,786
9.75%, 1/19/98 3,965 6,621,718
Total United Kingdom Securities
(cost $13,705,700) 13,718,504
UNITED STATES-53.1%
GOVERNMENT OBLIGATION-3.7%
Mexico Tesobonos
Zero coupon, 10/26/95 US$ 7,000(a) 6,508,600
CERTIFICATES OF DEPOSIT-3.6%
Deutsche Bank
Peso linked
8.8125%, 6/01/95 1,000 639,800
9.00%, 6/08/95 9,000 5,654,700
6,294,500
DEBT OBLIGATION-2.9%
ISIS, Ltd. VRN
6.44%, 12/15/95 5,200 5,198,440
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE MULTI-MARKET STRATEGY TRUST, INC.
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Principal
Amount U.S.$
(000) Value
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TIME DEPOSIT-42.9%
Dresdner Bank
5.9375%, 5/01/95 US$ 75,700 $75,700,000
Total United States Securities
(cost $97,631,085) 93,701,540
TOTAL INVESTMENTS-104.6%
(cost $196,704,262) 184,767,552
OUTSTANDING PUT OPTION WRITTEN-(0.0%)
JPY
expiring May 1995
@ 84.55
(Premium received $6,300) JPY 150,000 (6,300)
TOTAL INVESTMENTS NET OF OUTSTANDING OPTION
WRITTEN-(104.6%) $184,761,252
Other assets less liabilities-(4.6%) (8,134,401)
NET ASSETS-100% $176,626,851
(a) Securities segregated to collateralize forward exchange currency contracts
with an aggregate market value of approximately $31,180,485.
Glossary:
VRN - Variable rate note.
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995 (UNAUDITED) ALLIANCE MULTI-MARKET STRATEGY TRUST, INC.
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ASSETS
Investments in securities, at value (cost $196,704,262) $184,767,552
Cash, at value (cost $16,065) 16,330
Receivable for investment securities sold 83,523,353
Interest receivable 2,474,077
Prepaid expenses 112,585
Deferred organization expense and other assets 60,212
Total assets 270,954,109
LIABILITIES
Outstanding put option written, at value (premium received $6,300) 6,300
Payable for investments securities purchased 90,723,459
Unrealized depreciation of forward exchange currency contracts 1,721,949
Payable for capital stock redeemed 840,300
Dividend payable 486,776
Distribution fee payable 126,515
Advisory fee payable 88,086
Loan fee payable 83,424
Accrued expenses and other liabilities 250,449
Total liabilities 94,327,258
NET ASSETS $176,626,851
COMPOSITION OF NET ASSETS
Capital stock, at par $26,111
Additional paid-in capital 243,610,943
Distribution in excess of net investment income (1,560,135)
Accumulated net realized loss on investments, options
and foreign currency transactions (51,901,138)
Net unrealized depreciation of investments and foreign
currency denominated assets and liabilities (13,548,930)
$176,626,851
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($33,987,602/
5,029,036 shares of capital stock issued and outstanding) $6.76
Sales charge-4.25% of public offering price .30
Maximum offering price $7.06
CLASS B SHARES
Net asset value and offering price per share ($141,782,716/
20,954,759 shares of capital stock issued and outstanding) $6.77
CLASS C SHARES
Net asset value, redemption and offering price per share ($856,533/
126,624 shares of capital stock issued issued and outstanding) $6.76
See notes to financial statements.
7
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1995 (UNAUDITED)
ALLIANCE MULTI-MARKET STRATEGY TRUST, INC.
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INVESTMENT INCOME
Interest (net of foreign taxes withheld of $3,287) $10,278,584
EXPENSES
Advisory fee $656,125
Distribution fee-Class A 62,310
Distribution fee-Class B 880,705
Distribution fee-Class C 5,088
Transfer agency 251,610
Custodian 149,548
Administrative 78,376
Loan commitment fees (see Note E) 76,046
Audit and legal 63,332
Amortization of organization expenses 24,073
Loan agreement expense 18,302
Printing 18,002
Registration 13,471
Directors' fees 10,144
Miscellaneous 59,743
Total expenses 2,366,875
Net investment income 7,911,709
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized loss on investment transactions (5,030,719)
Net realized loss on options and foreign currency transactions (28,397,349)
Net change in unrealized depreciation of:
Investments (8,489,191)
Options and foreign currency denominated assets and liabilities 2,291,825
Net loss on investments (39,625,434)
NET DECREASE NET ASSETS FROM OPERATIONS $(31,713,725)
STATEMENT OF CHANGES IN NET ASSETS
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Six Months Ended Year Ended
April 30,1995 October 31,
(unaudited) 1994
-------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $7,911,709 $26,363,866
Net realized loss on investments, options and
foreign currency transactions (33,428,068) (32,781,216)
Net change in unrealized appreciation(depreciation)
of investments, options and foreign currency
denominated assets and liabilities (6,197,366) (8,617,153)
Net decrease in net assets from operations (31,713,725) (15,034,503)
DIVIDENDS AND DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income and other sources
Class A (1,945,473) (745,254)
Class B (7,482,839) (3,347,613)
Class C (43,532) (21,444)
Return of capital
Class A -0- (4,555,064)
Class B -0- (20,460,937)
Class C -0- (131,070)
CAPITAL STOCK TRANSACTIONS
Net decrease (69,721,459) (183,051,132)
Total decrease (110,907,028) (227,347,017)
NET ASSETS
Beginning of year 287,533,879 514,880,896
End of period $176,626,851 $287,533,879
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1995 (UNAUDITED) ALLIANCE MULTI-MARKET STRATEGY TRUST, INC.
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NOTE A: Significant Accounting Policies
Alliance Multi-Market Strategy Trust, Inc. (the "Fund"), was incorporated in
the State of Maryland on March 7, 1991 as a non-diversified, open-end
investment company.
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge of up to 4.25%. 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. Distribution of Class C shares
commenced on May 3, 1993. 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 day of valuation.
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. Option Writing
When the Fund writes an option, an amount equal to 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. The difference between the premium and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also recorded 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 unfavorable changes in the price of the security
or currency underlying the 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.
3. 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 prices 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 foreign exchange losses of $28,397,349 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 of the amounts actually received or paid. Net currency gains and
losses from valuing foreign currency denominated assets and liabilities at
period end exchange rates are reflected as a component of unrealized
appreciation of investments and foreign currency denominated assets and
liabilities.
9
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE MULTI-MARKET STRATEGY TRUST, INC.
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4. Organization Expenses
Organization expenses of approximately $243,000 have been deferred and are
being amortized on a straight-line basis through May 1996.
5. 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.
6. Investment Income and Security Transactions
Interest income is accrued daily. Security transactions are accounted for on
the date 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.
7. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles.
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
0.60 of 1% of the average adjusted 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 fee, 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 its average daily net
assets and 1 1/2% of its average daily net assets in excess of $100 million.
No reimbursement was required by the Adviser for the six months ended April 30,
1995. Pursuant to the advisory agreement, the Fund also paid $78,376 to the
Adviser representing the cost of certain legal and accounting services provided
to the Fund by the Adviser for the six months ended April 30, 1995.
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 $133,376 for the six months ended April 30, 1995.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $453 from the sale of Class A shares and $132,020 in
contingent deferred sales charges imposed upon redemptions by shareholders of
Class B shares for the six months ended April 30, 1995.
10
ALLIANCE MULTI-MARKET STRATEGY TRUST, INC.
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NOTE C: Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to 0.30 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 $6,688,342 and $298,672 for Class B and
C shares, respectively; 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)
aggregated $111,310,005 and $129,412,305, respectively, for the six months
ended April30, 1995. The Fund enters into forward exchange currency contracts
in order to hedge its exposure to changes in foreign currency exchange rates on
its foreign portfolio holdings and to hedge certain firm purchase and sale
commitments denominated in foreign currencies. A forward exchange currency
contract is a commitment to purchase or sell a foreign currency at a future
date at a negotiated forward rate. The gain or loss arising from the
difference between the original contracts and the closing of such contracts is
included in realized gains or losses from foreign currency transactions.
Fluctuations in the value of forward exchange currency contracts are recorded
for financial reporting purposes as unrealized gains or losses by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or U.S. Government securities in a separate account of the Fund having a value
equal to the aggregate amount of the Fund's commitments under forward exchange
currency contracts entered into with respect to position hedges. Risks may
arise from the potential inability of a counterparty to meet the terms of a
contract and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar. The face or contract amount, in U.S. dollars, as
reflected in the following table, reflects the total exposure the Fund has in
that particular currency contract.
11
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE MULTI-MARKET STRATEGY TRUST, INC.
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At April 30, 1995, the Fund had outstanding forward
exchange currency contracts as follows:
Contract Cost on U.S.$ Unrealized
Amount Origination Current Appreciation
Foreign Currency Buy Contracts (000) Date Value (Depreciation)
- ------------------------------ ------ ----------- ------------ -------------
British Pounds,
expiring 8/23/95 3,800 $ 5,978,825 $ 6,102,202 $ 123,377
Canadian Dollars,
expiring 6/19/95 4,466 3,236,359 3,277,549 41,190
Deutsche Marks,
expiring 5/10/95-6/20/95 40,200 28,359,304 29,045,417 686,113
Japanese Yen,
expiring 5/10/95-6/22/95 1,782,930 20,109,586 21,270,645 1,161,059
New Zealand Dollars,
expiring 8/04/95 3,700 2,462,535 2,470,689 8,154
Swiss Francs,
expiring 5/30/95 133,388 87,669,057 116,359,334 28,690,277
Foreign Currency Sale Contracts
- -------------------------------
Australian Dollars,
expiring 5/22/95-6/26/95 14,593 10,613,922 10,591,081 22,841
Belgian Francs,
expiring 6/19/95 427,353 15,180,740 14,987,370 193,370
British Pounds,
expiring 7/05/95 11,800 18,929,529 18,965,563 (36,034)
Canadian Dollars,
expiring 6/19/95 5,000 3,633,721 3,668,552 (34,831)
Deutsche Marks,
expiring 5/10/95-6/20/95 34,274 24,216,011 24,766,373 (550,362)
Japanese Yen,
expiring 5/10/95 1,096 12,090,772 13,051,187 (960,415)
New Zealand Dollars,
expiring 8/04/95 3,700 2,327,670 2,469,631 (141,961)
Swiss Francs,
expiring 5/30/95 133,388 85,248,591 116,173,318 (30,924,727)
$(1,721,949)
12
ALLIANCE MULTI-MARKET STRATEGY TRUST, INC.
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1. Option Transactions
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
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.
Transactions in call options written for the six months ended April 30, 1995
were as follows:
Number of
Contracts Premiums
--------- --------
Options outstanding at beginning of year 1 $50,000
Options written 2 29,238
Options terminated in closing purchase transactions 0 -0-
Options expired (1) (22,938)
Options exercised (1) (50,000)
Options outstanding at end of year 1 $ 6,300
At April 30, 1995, 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 $2,286,354 and gross unrealized
depreciation of investments was $14,223,064, resulting in net unrealized
depreciation of investments $11,936,710 (excluding foreign currency
transactions). At October 31, 1994 the Fund had a capital loss carryforward of
$14,277,488 of which $3,437,491 expires in the year 2000, $2,099,020 in 2001
and $8,740,977 in the year 2002.
NOTE E: Bank Borrowing
The Fund entered into a Multi-Currency Credit Agreement with Morgan Guaranty
Trust Company of New York on November 18, 1994, which terminates on November
18, 1997 unless extended for an additional one year period by the Fund. The
maximum credit available is $50,000,000 and requires no collateralization.
There was no loan outstanding under the Multi-Currency Credit Agreement, at
April 30, 1995.
13
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE MULTI-MARKET STRATEGY TRUST, INC.
- -------------------------------------------------------------------------------
NOTE F: Capital Stock
There are 9,000,000,000 shares of $.01 par value capital stock authorized,
divided into three classes, designated Class A, Class B and Class C shares.
Each class consists of 3,000,000,000 authorized shares. Transactions in
capital stock were as follows:
Shares Amount
---------------------------- -----------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
April 30,1995 October 31, April 30,1995 October 31,
(unaudited) 1994 (unaudited) 1994
------------ ------------ ------------- --------------
CLASS A
Shares sold 120,212 382,456 $859,298 $3,275,749
Shares issued
in reinvestment
of dividends 113,982 334,702 838,619 2,839,409
Shares redeemed (1,724,186) (3,480,825) (12,339,496) (29,367,740)
Net decrease (1,489,992) (2,763,667) $(10,641,579) $(23,252,582)
CLASS B
Shares sold 316,163 1,011,425 $2,230,289 $8,698,652
Shares issued
in reinvestment
of dividends 370,035 1,436,045 2,763,028 12,212,040
Shares redeemed (8,830,924) (21,584,883) (63,867,440) (181,536,799)
Net decrease (8,144,726) (19,137,413) $(58,874,123) $(160,626,107)
CLASS C
Shares sold 26,700 857,043 $ 203,313 $7,534,842
Shares issued
in reinvestment
of dividends 3,435 12,291 25,144 104,261
Shares redeemed (59,370) (793,761) (434,214) (6,811,546)
Net increase (decrease) (29,235) 75,573 $(205,757) $827,557
14
FINANCIAL HIGHLIGHTS ALLIANCE MULTI-MARKET STRATEGY TRUST, INC.
- -------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------------------
Six Months May 29,1991(a)
Ended Year Ended October 31, to
April 30,1995 -------------------------------------- October 28,
(unaudited) 1994 1993 1992 1991
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.04 $8.94 $8.85 $9.91 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .27 .85 1.02 1.00 .42
Net realized and unrealized loss on
investments and foreign currency transactions (1.22) (1.08) (.26) (1.23) (.09)
Net increase (decrease) in net asset value
from operations (.95) (.23) .76 (.23) .33
LESS: DISTRIBUTIONS
Dividends from net investment income (.33) (.09) (.67) (.81) (.42)
Return of capital -0- (.58) -0- -0- -0-
Distributions from net realized gains -0- -0- -0- (.02) -0-
Total dividends and distributions (.33) (.67) (.67) (.83) (.42)
Net asset value, end of period $6.76 $8.04 $8.94 $8.85 $9.91
TOTAL RETURN
Total investment return based on
net asset value (b) (11.83)% (2.64)% 9.01% (2.80)% 3.68%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $33,988 $52,385 $82,977 $141,526 $143,594
Ratios to average net assets of:
Expenses 1.59%(c) 1.41% 1.94% 2.53% 2.81%(c)
Expenses, excluding interest expense 1.52%(c) 1.30% 1.40% 1.33% 1.33%(c)
Net investment income 7.80%(c) 7.17% 9.17% 10.58% 10.17%(c)
Portfolio turnover rate 156% 605% 200% 239% 121%
</TABLE>
See footnote summary on page 17.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE MULTI-MARKET STRATEGY TRUST, INC.
- -------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------------
Six Months May 29, 1991(d)
Ended Year Ended October 31, TO
April 30,1995 --------------------------------------- October 28,
(unaudited) 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.04 $8.94 $8.85 $9.91 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .24 .88 .92 1.04 .39
Net realized and unrealized loss
on investments and foreign
currency transactions (1.21) (1.18) (.22) (1.34) (.09)
Net increase (decrease) in net
asset value from operations (.97) (.30) .70 (.30) .30
LESS: DISTRIBUTIONS
Dividends from net investment income (.30) (.08) (.61) (.74) (.39)
Distributions from net realized gains -0- -0- -0- (.02) -0-
Return of capital -0- (.52) -0- -0- -0-
Total dividends and distributions (.30) (.60) (.61) (.76) (.39)
Net asset value, end of period $6.77 $8.04 $8.94 $8.85 $9.91
TOTAL RETURN
Total investment return based on
net asset value (b) (12.09)% (3.35)% 8.25% (3.51)% 3.36%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $141,783 $233,896 $431,186 $701,465 $662,981
Ratios to average net assets of:
Expenses 2.30%(c) 2.11% 2.64% 3.24% 3.53%(c)
Expenses, excluding interest expense 2.23%(c) 2.01% 2.11% 2.05% 2.05%(c)
Net investment income 7.10%(c) 6.44% 8.46% 9.83% 9.40%(c)
Portfolio turnover rate 156% 605% 200% 239% 121%
</TABLE>
16
ALLIANCE MULTI-MARKET STRATEGY TRUST, INC.
- -------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class C
-------------------------------------------
Six Months Ended Year Ended May 3,1993(d)
April 30,1995 October 31, to
(unaudited) 1994O Oct. 31,1993
------------- ------------ ------------
Net asset value, beginning of period $8.04 $8.94 $8.76
INCOME FROM INVESTMENT OPERATIONS
Net investment income .25 .46 .32
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions (1.23) (.75) .16
Net increase (decrease) in net asset
value from operations (.98) (.29) .48
LESS: DISTRIBUTIONS
Dividends from net investment income (.30) (.09) (.30)
Distributions from net realized gains -0- -0- -0-
Return of capital -0- (.52) -0-
Total dividends and distributions (.30) (.61) (.30)
Net asset value, end of period $6.76 $8.04 $8.94
TOTAL RETURN:
Total investment return based
on net asset value (b) (12.22)% (3.34)% 5.54%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $856 $1,252 $718
Ratios to average net assets of:
Expenses 2.30%(c) 2.08%(c) 2.44%(c)
Expenses, excluding interest expense 2.23%(c) 1.99%(c) 2.11%(c)
Net investment income 7.15%(c) 6.10%(c) 7.17%(c)
Portfolio turnover rate 156% 605% 200%
(a) Commencement of operations.
(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 distribution at net asset value during the period, and redemption
on the last day of the period. Initial sales charge or contingent deferred
sales charge is 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) Annualized.
(d) Commencement of distribution.
17
ALLIANCE MULTI-MARKET STRATEGY 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
Robert M. Sinche, Senior Vice President
Douglas J. Peebles, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Patrick J. Farrell, Controller
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
TRANSFER AGENT
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free 1-(800) 221-5672
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, NY10004
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
(1) Member of the Audit Committee.
18
Alliance Multi-Market Strategy Trust, Inc.
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
Mutual funds without the MysterySM
This report is distributed solely to shareholders of the Fund
and is not to be used as sales literature.
R These registered service marks used under license from the owner,
Alliance Capital Management L.P.
ASTSR
20
