ALLIANCE ALL-MARKET ADVANTAGE FUND
ANNUAL REPORT
SEPTEMBER 30, 1997
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
October 28, 1997
Dear Shareholder:
We are pleased to provide the annual report to shareholders for Alliance
All-Market Advantage Fund, a closed-end fund trading under the New York Stock
Exchange symbol "AMO." Your Fund's investment objective is to seek long-term
growth of capital through all market conditions. AMO invests a majority of its
assets in a core portfolio of equity securities of large, intensely researched,
high quality companies that we believe are likely to achieve superior earnings
growth. The core portfolio typically consists of the 25 companies that are the
most highly regarded at any point in time. The balance of the portfolio may be
invested in equity securities of other U.S. and non-U.S. companies that we
believe have exceptional growth potential.
INVESTMENT RESULTS
During the 12 month period ended September 30, 1997, pursuant to its quarterly
distribution policy, AMO paid four distributions totaling $2.29 per share. The
Fund's net asset value (NAV) ended the period at $33.72 per share, up from
$22.19 per share on September 30, 1996, due to strong Fund performance. The
table below shows how the Fund performed during the six and 12 month periods
ending September 30, 1997. For comparison, we have shown returns for the
overall U.S. stock market, represented by the unmanaged S&P 500 Stock Index and
the Russell 1000 Growth Stock Index. As you can see, your Fund substantially
outperformed both benchmarks, posting a 43.69% return at NAV for the six month
period and a 65.66% return at NAV for the 12 month period ending September 30,
1997.
INVESTMENT RESULTS*
Period Ended September 30, 1997
TOTAL RETURN
6 MONTHS 12 MONTHS
---------- -----------
ALLIANCE ALL-MARKET ADVANTAGE FUND 43.69% 65.66%
S&P 500 STOCK INDEX 26.24% 40.43%
RUSSELL 1000 GROWTH STOCK INDEX 27.85% 36.30%
* THE FUND'S INVESTMENT RESULTS ARE CUMULATIVE TOTAL RETURNS FOR THE PERIOD
AND ARE BASED ON THE NET ASSET VALUE AS OF SEPTEMBER 30, 1997. ALL FEES AND
EXPENSES RELATED TO THE OPERATION OF THE FUND HAVE BEEN DEDUCTED. RETURNS FOR
THE FUND INCLUDE THE REINVESTMENT OF ANY DISTRIBUTIONS PAID DURING THE PERIOD.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THE S&P 500 STOCK INDEX IS AN UNMANAGED INDEX OF 500 U.S. COMPANIES. THE
RUSSELL 1000 GROWTH STOCK INDEX CONSISTS OF 1000 OF THE LARGEST STOCKS
REPRESENTING APPROXIMATELY 87% OF THE U.S. EQUITY MARKET. THE INDICES REFLECT
NO FEES OR EXPENSES. AN INVESTOR CANNOT INVEST DIRECTLY IN THE INDICES.
THE YEAR IN REVIEW
Fiscal year 1997 was a strong year; we benefited from being leveraged to the
market and also from our strong stock picks. Outperformance was largely due to
overweightings in technology and financial stocks and good stock selection
within those sectors. We remain quite bullish on technology as a sector due to
the increased global demand for technology products and productivity enhancing
tools ranging from software/microprocessors to wireless/data communication.
Compaq Computer Corp., one of our 10 largest holdings, rose 190% during the
fiscal year as the company continues to gain market share while streamlining
its production and distribution. Dell Computer Corp. posted a 390% gain during
the year as its units grew at three times the rate of the overall PC market
while its product mix improved. Intel Corp., our largest holding, rebounded
from a disappointing June quarter to post a 90% gain for the year as the market
recognized that this dominant company's P/E is only trading at a market
multiple.
1
ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
In the financial sector, while our holdings in the regional and money center
banks performed well, the buoyant equity and bond markets gave the brokerage
stocks a strong lift. The common stocks of Morgan Stanley, Dean Witter,
Discover & Co. and Merrill Lynch & Co., Inc. were up 100% and 125%,
respectively, for the year. MBNA Corp., up 70% for the year, benefited from
taking market share in the fast growing credit card industry. In addition, our
airline stocks rebounded from a disappointing June quarter as domestic traffic
was steady and strong and industry capacity additions have remained moderate.
Our UAL Corp. holding was up 80% during the year.
The common stock of Philip Morris Cos., Inc., our second largest holding
through options, was up 34% for the year. The company remains attractively
valued, and we continue to believe that, while near term political
considerations have pushed out the time frame for a national tobacco
settlement, we believe a settlement should occur that will be beneficial to
equity valuations in the industry and, in particular, Philip Morris.
We continue to use the S&P 500 and NASDAQ 100 indices for the vast majority of
our short positions. With the volatility presently in the market, by
writing/selling calls on the market, we are able to receive large premiums that
are priced on these options.
MARKET ENVIRONMENT AND OUTLOOK
Even though the market has experienced some volatility recently, our overall
investment perspective remains the same. As we have frequently stated, our
long-term philosophy is that successful investing stems from the successful
marriage of fundamentals--both macro and company specific--and current price.
With the S&P 500 Stock Index up about 120% since January of 1995, the sustained
advance has outpaced solid corporate earnings growth and elevated the 1998 P/E
multiple on the S&P 500 to about 19 times, at the high end of the normal
historic range of roughly 14 to 19 times earnings. Therefore, the key issue is
whether the fundamentals are so strong and sustainable that a higher P/E
multiple can be validated. Our view is that while the most dangerous words in
investing are "this time it really is different," maybe this time it is.
For some time now we have witnessed a confluence of events on a worldwide basis
that not only benefits all financial assets, but U.S. multi-national companies
in particular. These many positive factors have now come to be characterized as
the "new paradigm" by many market pundits. At the macro level, the "new
paradigm" sees the world moving to embrace the democratic capitalist model in
the post Cold War period; a global marketplace for capital flows that is moving
toward more free trade; centrist fiscal and monetary policies with the world's
politicians focused on sustaining moderate growth and keeping inflation in
check; and favorable demographic trends that have increased savings rates and
investor confidence in equities. It is notable that even with the market
corrections in March, August and October of this year, the investment flows
into equity mutual funds have remained positive.
At the micro level, the "new paradigm" definitely benefits U.S. companies
relative to their foreign competitors. Most U.S. companies have already
downsized to become more efficient. Due in large measure to our worldwide
leadership in technology, U.S. corporate managements have re-emerged as the
envy of the developed world. Today, looking at business sectors on a global
basis, it is clear that U.S. domiciled companies are the leading players in
most industries. And that picture is unlikely to change in the near-term as
both Japan and Western Europe have high embedded social costs and more rigid
economic and political systems than the United States.
Rapid innovations in information technology and supply chain management have
shortened production times and reduced inventory swings. If these changes can
dampen the business cycle, they could justify the extension of the time horizon
necessary to discount future earnings. This would validate a higher expected
rate of return for equities and, hence, higher P/E valuations.
Yet while we are somewhat persuaded by the arguments for the "new paradigm," we
believe that it is important to focus on absolute as well as relative returns.
At this stage in the market, with the strong performance that the Fund has had,
prudence dictates some caution. At this level of the market, the probability of
a severe correction has definitely increased. While the Fund is net long, we
have engaged in actions to position the portfolio less aggressively within the
bounds of our net long position. First, we are keeping our P/E multiple
moderate relative to the market (roughly 19 times on 1998 earnings per share).
We are balancing our continued mid-20% exposure to
2
ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
technology stocks with an almost equal weighting in lower P/E multiple
financial stocks that have mid-teens growth rates and should perform quite well
if the economy were to slow. We have also diversified the portfolio more than
in the past, both by adding more names, and by reducing our largest positions.
INCREASE IN QUARTERLY DISTRIBUTION
On May 5, 1997, the Fund's Board of Directors, at the recommendation of the
Fund's Advisor, Alliance Capital Management L.P., announced an increase in the
Fund's minimum quarterly "managed" distribution from 2% to 2.5% of total net
assets. John D. Carifa, President of Alliance and Chairman of the Board of the
Fund, commented in that day's press release that "Alliance and the Board of
Directors have been concerned that the Fund has been trading at a relatively
large market discount. Certain respected analysts have suggested that managed
distribution policies such as the Fund's have proven more likely to improve a
fund's trading characteristics if the annualized distribution rate is at least
10%. We believe that these analysts may well be correct. At our recommendation,
the Board of Directors increased the Fund's annualized distribution rate to the
10% level with a view to reducing the Fund's market discount." Thereafter, the
Fund's discount to its NAV decreased from 20.3% on May 5, 1997 to 7.5% on
September 30, 1997.
Under the Fund's revised managed distribution policy, the Fund will distribute
to its shareholders an amount equal to 2.5% of the Fund's total net assets as
of the beginning of each of the first three quarters of the calendar year. With
respect to the fourth quarter, an amount equal to at least 2.5% of total net
assets will be distributed to shareholders. If the distribution exceeds the
Fund's aggregate net investment income and net realized capital gains with
respect to a given year, the difference will generally constitute a tax-free
return of capital to shareholders.
Thank you for your continued interest in Alliance All-Market Advantage Fund. We
look forward to reporting to you again on market activity and the Fund's
investment results in six months.
Sincerely,
John D. Carifa
Chairman and President
Alfred Harrison
Senior Vice President
Michael J. Reilly
Vice President
3
TEN LARGEST HOLDINGS
SEPTEMBER 30, 1997 ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- ---------------------------------------------------------------------------
Intel Corp. warrants, expiring 3/14/98 (a) $ 6,296,743 7.5%
Compaq Computer Corp. 4,391,562 5.2
MBNA Corp. (a) 4,233,613 5.0
Merrill Lynch & Co., Inc. (a) 4,162,500 4.9
Dell Computer Corp. 3,758,750 4.5
Cisco Systems, Inc. 3,660,431 4.3
Microsoft Corp. 3,545,975 4.2
UAL Corp. (a) 3,287,637 3.9
Philip Morris Cos., Inc. (a) 3,106,625 3.7
Tyco International, Ltd. (a) 3,053,813 3.6
$39,497,649 46.8%
(a) Adjusted for market value of call options purchased.
4
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997 ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-55.6%
TECHNOLOGY-29.7%
COMMUNICATION EQUIPMENT-1.9%
Nokia Corp. ADR(a) 17,000 $ 1,594,813
COMPUTER HARDWARE-9.7%
Compaq Computer Corp.(b) 58,750 4,391,562
Dell Computer Corp.(b) 38,800 3,758,750
------------
8,150,312
COMPUTER SERVICES-0.5%
First Data Corp. 12,100 454,506
COMPUTER SOFTWARE-4.2%
Microsoft Corp.(b)(c) 26,800 3,545,975
NETWORKING SOFTWARE-4.3%
Cisco Systems, Inc.(b) 50,100 3,660,431
SEMICONDUCTOR CAPITAL EQUIPMENT-4.7%
Applied Materials, Inc.(b) 29,800 2,838,450
Novellus Systems, Inc.(b) 1,000 126,000
Teradyne, Inc.(b) 18,000 968,625
------------
3,933,075
SEMICONDUCTOR COMPONENTS-4.4%
Intel Corp. Warrants, expiring
3/14/98(b)(c) 36,500 2,630,281
Texas Instruments, Inc. 4,300 581,038
Xilinx, Inc.(b) 10,000 506,250
------------
3,717,569
------------
25,056,681
FINANCE-13.8%
BANKING - REGIONAL-2.4%
First Union Corp. 20,000 1,001,250
Norwest Corp. 17,000 1,041,250
------------
2,042,500
BROKERAGE & MONEY MANAGEMENT-3.5%
Merrill Lynch & Co., Inc. 40,000 2,967,500
INSURANCE-1.1%
Travelers Group, Inc.
Warrants, expiring
7/31/98(b) 10,000 980,000
MORTGAGE BANKING-2.0%
Fannie Mae Corp. 27,000 1,269,000
Washington Mutual, Inc. 6,000 418,500
------------
1,687,500
MISCELLANEOUS-4.8%
Household International, Inc. 11,200 1,267,700
MBNA Corp. 68,100 2,758,050
------------
4,025,750
------------
11,703,250
CONSUMER SERVICES-5.2%
AIRLINES-4.1%
Northwest Airlines, Inc. Cl. A(b) 21,900 910,219
UAL Corp.(b)(c) 30,300 2,564,137
------------
3,474,356
RETAIL - GENERAL MERCHANDISE-1.1%
Kohl's Corp.(b) 13,200 937,200
------------
4,411,556
MULTI-INDUSTRY-2.6%
CAPITAL GOODS-2.6%
Tyco International, Ltd. 27,000 2,215,688
HEALTHCARE-2.1%
MEDICAL PRODUCTS-1.0%
Medtronic, Inc. 18,000 846,000
MEDICAL SERVICES-1.1%
Oxford Health Plans, Inc.(b) 12,000 898,500
------------
1,744,500
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
SHARES OR
CONTRACTS VALUE
- -------------------------------------------------------------------------
UTILITY-1.0%
TELEPHONE UTILITY-1.0%
WorldCom, Inc.(b) 24,000 $ 849,000
ENERGY-0.9%
OIL SERVICE-0.9%
Baker Hughes, Inc. 8,000 350,000
Halliburton Co. 8,000 416,000
------------
766,000
CONSUMER MANUFACTURING-0.3%
MISCELLANEOUS-0.3%
Samsonite Corp.(b) 5,000 219,375
Total Common Stocks
(cost $26,492,229) 46,966,050
CALL OPTIONS PURCHASED-45.3%(B)
Airtouch Communications, Inc.
expiring Jan '98 @ $20 400 632,500
expiring Jan '99 @ $20 200 343,750
AlliedSignal, Inc.
expiring Jan '98 @ $17.5 190 482,125
Campbell Soup Co.
expiring Jan '98 @ $22.50 150 399,375
expiring Jan '99 @ $27.50 75 170,625
Chase Manhattan Corp.
expiring Jan '98 @ $40 140 1,158,500
expiring Jan '99 @ $60 80 482,000
Citicorp
expiring Jan '98 @ $50 70 590,625
expiring Jan '99 @ $60 65 497,250
Coca-Cola Co.
expiring Jan '98 @ $30 185 583,906
expiring Jan '99 @ $40 100 236,250
Colgate-Palmolive Co.
expiring Nov '97 @ $50 80 162,000
expiring Feb '98 @ $60 100 116,250
Ericsson (L.M.) Telephone Co.
expiring Jan '99 @ $25 225 558,281
Fannie Mae
expiring Jan '98 @ $20 300 817,500
expiring Jan '99 @ $25 90 208,125
First Data Corp.
expiring Feb '98 @ $30 300 268,125
General Electric Co.
expiring Jan '98 @ $25 200 867,500
expiring Jan '99 @ $30 100 393,750
Gillette Co.
expiring Jan '99 @ $55 260 913,250
expiring Jan '99 @ $60 50 155,000
Home Depot, Inc.
expiring Jan '98 @ $23.375 100 436,875
expiring Jan '98 @ $26.625 150 593,438
expiring Jan '99 @ $30 240 882,000
Household International, Inc.
expiring Jan '99 @ $70 45 214,313
Intel Corp.
expiring Jan '98 @ $20 60 436,500
expiring Jan '99 @ $25 466 3,229,962
Johnson & Johnson
expiring Jan '98 @ $30 70 195,125
MBNA Corp.
expiring Jan '98 @ $16.625 225 814,219
expiring Jan '98 @ $20 100 207,500
expiring Jan '99 @ $20 185 409,313
expiring Jan '99 @ $25 25 44,531
Merck & Co., Inc.
expiring Jan '98 @ $40 230 1,385,750
expiring Jan '99 @ $55 190 900,125
expiring Jan '99 @ $60 160 688,000
Merrill Lynch & Co., Inc.
expiring Jan '98 @ $15 200 1,195,000
Morgan Stanley, Dean
Witter, Discover & Co.
expiring Jan '98 @ $30 350 853,125
expiring Jan '99 @ $30 450 1,158,750
6
ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
CONTRACTS OR
PRINCIPAL
VALUE
(000) VALUE
- -------------------------------------------------------------------------
NationsBank Corp.
expiring Jan '99 @ $35 300 $ 840,000
Nike, Inc.
expiring Jan '98 @ $32.50 100 211,250
Nokia Corp.
expiring Jan '99 @ $50 300 1,432,500
Northwest Airlines, Inc.
expiring Oct '97 @ $35 200 135,000
Pfizer, Inc.
expiring Jan '98 @ $25 380 1,339,500
expiring Jan '99 @ $30 150 474,375
Philip Morris Cos., Inc.
expiring Jan '98 @ $20 240 519,000
expiring Jan '98 @ $23.375 645 1,209,375
expiring Jan '99 @ $23.375 745 1,378,250
Schering-Plough Corp.
expiring Jan '99 @ $25 460 1,293,750
Sears, Roebuck and Co.
expiring Jan '98 @ $25 405 1,306,125
Signet Banking Corp.
expiring Dec '97 @ $40 60 89,250
Tyco International, Ltd.
expiring Apr '98 @ $65 350 700,000
expiring Jan '99 @ $60 50 138,125
UAL Corp.
expiring Jan '98 @ $32.50 110 580,250
expiring Jan '99 @ $40 30 143,250
United Healthcare Corp.
expiring Jan '99 @ $25 340 922,250
United Technologies Corp.
expiring Jan '98 @ $40 100 413,750
expiring Jan '99 @ $50 100 336,250
Walt Disney Co.
expiring Jan '99 @ $50 340 1,117,750
Total Call Options Purchased
(cost $27,956,655) 38,261,213
TIME DEPOSIT-0.4%
Bank of New York 5.25%, 10/01/97
(cost $313,000) $313 313,000
CONTRACTS OR
SHARES VALUE
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS-101.3%
(cost $54,761,884) $85,540,263
CALL OPTIONS WRITTEN-(1.1%)(B)
Chicago Board Options Exchange
NASDAQ 100 Index
expiring Oct '97 @ $1,080 10 (37,875)
expiring Oct '97 @ $1,090 10 (38,000)
expiring Oct '97 @ $1,100 30 (76,500)
expiring Oct '97 @ $1,110 30 (61,500)
expiring Oct '97 @ $1,120 5 (8,625)
expiring Oct '97 @ $1,130 35 (63,000)
Standard & Poor's 500 Index
expiring Oct '97 @ $915 30 (135,750)
expiring Oct '97 @ $920 15 (53,625)
expiring Oct '97 @ $925 5 (15,875)
expiring Oct '97 @ $930 30 (84,000)
expiring Oct '97 @ $935 20 (56,000)
expiring Oct '97 @ $940 45 (109,125)
expiring Oct '97 @ $945 35 (60,375)
expiring Oct '97 @ $950 35 (50,750)
expiring Oct '97 @ $955 5 (7,125)
expiring Oct '97 @ $960 10 (11,250)
Total Call Options Written
(premiums received $1,191,160) (869,375)
SECURITIES SOLD SHORT-(0.3%)(B)
Advanced Micro Devices, Inc. 1,000 (32,563)
Arcadia Financial, Ltd. 20,000 (227,500)
Total Securities Sold Short
(proceeds $192,177) (260,063)
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
VALUE
- -------------------------------------------------------------------------
TOTAL INVESTMENTS, NET OF OUTSTANDING
CALL OPTIONS WRITTEN AND
SECURITIES SOLD SHORT-99.9%
(cost $53,378,547) $84,410,825
Other assets less liabilities-0.1% 66,629
NET ASSETS-100% $84,477,454
(a) Country of origin--Finland.
(b) Non-income producing.
(c) Security, or portion thereof, has been segregated to collateralize short
sales and options. This collateral has a total market value of approximately
$2,273,364.
Glossary:
ADR - American Depositary Receipt.
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997 ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $54,761,884) $85,540,263
Cash 210,768
Receivable for investment securities sold 2,116,748
Dividends and interest receivable 16,857
Deferred organization expenses and other assets 24,900
Total assets 87,909,536
LIABILITIES
Securities sold short, at value (proceeds $192,177) 260,063
Outstanding call options written, at value
(premiums received $1,191,160) 869,375
Dividend payable 1,861,966
Advisory fee payable 119,838
Payable for investment securities purchased 97,800
Administration fee payable 17,478
Accrued expenses and other liabilities 205,562
Total liabilities 3,432,082
NET ASSETS $84,477,454
COMPOSITION OF NET ASSETS
Capital stock, at par $ 25,050
Additional paid-in capital 49,343,315
Accumulated net realized gain on investment transactions 4,076,811
Net unrealized appreciation of investments,
short sales and options written 31,032,278
$84,477,454
NET ASSET VALUE PER SHARE
(based on 2,505,000 shares outstanding) $33.72
See notes to financial statements.
9
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1997 ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends(net of foreign taxes withheld of $2,286) $ 267,098
Interest 22,334 $ 289,432
EXPENSES
Advisory fee 1,101,452
Administrative 174,039
Custodian 143,467
Audit and legal 69,930
Shareholder servicing 69,613
Directors' fees and expenses 40,410
Transfer agency 33,047
Printing 24,253
Registration 16,077
Amortization of organization expenses 4,001
Dividends on securities sold short 924
Miscellaneous 13,431
Total expenses before interest 1,690,644
Interest expense on short sales 38,460
Total expenses 1,729,104
Net investment loss (1,439,672)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
SHORT SALES AND OPTIONS WRITTEN
Net realized gain on long transactions 15,920,971
Net realized loss on short sale transactions (297,815)
Net realized loss on written option transactions (3,313,147)
Net change in unrealized appreciation of investments,
short sales and options written 23,766,594
Net gain on investments 36,076,603
NET INCREASE IN NET ASSETS FROM OPERATIONS $34,636,931
See notes to financial statements.
10
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $(1,439,672) $(1,199,997)
Net realized gain on investment, short
sale and written option transactions 12,310,009 4,019,458
Net change in unrealized appreciation of
investments, short sales and options written 23,766,594 643,212
Net increase in net assets from operations 34,636,931 3,462,673
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments (5,741,965) (7,440,855)
Total increase (decrease) 28,894,966 (3,978,182)
NET ASSETS
Beginning of year 55,582,488 59,560,670
End of year $84,477,454 $55,582,488
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance All-Market Advantage Fund, Inc. (the "Fund") was incorporated under
the laws of the state of Maryland on August 16, 1994 and is registered under
the Investment Company Act of 1940 as a non-diversified, closed-end management
investment company. The following is a summary of significant accounting
policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities, including securities sold short traded on a national
securities exchange, are valued at the closing price on such exchange on the
day of valuation or, if no such closing price is available, at the mean of the
bid and asked price quoted on such day. Listed securities not traded and
securities traded in the over-the-counter market are valued at the mean between
the most recently quoted bid and asked price provided by the principal market
makers. Options are valued at such market value or fair value, if no market
exists, using methods determined by the Board of Directors. Securities for
which market quotations are not readily available and illiquid securities 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.
2. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provision for federal income or excise taxes is
required.
3. ORGANIZATION EXPENSES
Organization expenses of approximately $20,000 have been deferred and are being
amortized on a straight-line basis through November, 1999.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income (or expense on securities sold short) is recorded on the
ex-dividend date. Investment transactions are accounted for on the date
securities are purchased or sold. Investment gains and losses are determined on
the identified cost basis.
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 net investment loss, resulted in a net decrease in accumulated
net realized gain on investment transactions and a corresponding increase in
accumulated net investment loss. This reclassification had no affect on net
assets.
NOTE B: ADVISORY, ADMINISTRATIVE FEES AND OTHER AFFILIATED TRANSACTIONS
Under the terms of an Investment Advisory Agreement, the Fund pays Alliance
Capital Management L.P. (the "Investment Adviser") a monthly fee at an
annualized rate of 1.50% of the Fund's average weekly net assets (the "Basic
Fee") and an adjustment to the Basic Fee based upon the investment performance
of the Fund in relation to the investment record of the Russell 1000 Growth
Index for certain prescribed periods. During the year ended September 30, 1997,
the fee as adjusted, amounted to 1.58% of the Fund's average net assets.
Under the terms of an Administrative Agreement, the Fund pays its
Administrator, Alliance Capital Management L.P., a monthly fee equal to the
annualized rate of .25 of 1% of the Fund's average weekly net assets. The
Administrator provides administrative functions to the Fund as well as other
clerical services. The Administrator also prepares financial and regulatory
reports for the Fund.
Under the terms of a Shareholder Inquiry Agency Agreement with Alliance Fund
Services, Inc. ("AFS"), an affiliate of the Investment Adviser, the Fund
reimburses AFS for costs relating to servicing phone inquiries for the Fund.
The Fund reimbursed AFS$920 during the year ended September 30, 1997.
12
ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
Under terms of a Shareholder Servicing Agreement, the Fund pays its Shareholder
Servicing Agent, Paine Webber Inc. a quarterly fee equal to the annualized rate
of .10 of 1% of the Fund's average weekly net assets.
Brokerage commissions paid on investment transactions for the year ended
September 30, 1997 amounted to $216,191, of which $525 was paid to brokers
utilizing the services of the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corp. ("DLJ"), an affiliate of the Adviser. No commissions were paid
to DLJ directly.
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments,
short-term options, and U.S. government securities) aggregated $69,421,572 and
$80,526,387, respectively, for the year ended September 30, 1997. There were no
purchases or sales of U.S. government or government agency obligations for the
year ended September 30, 1997.
At September 30, 1997, the cost of investments for federal income tax purposes
was $53,989,188. Accordingly, gross unrealized appreciation of investments was
$31,755,445 and gross unrealized depreciation of investments was $1,333,808
resulting in net unrealized appreciation of $30,421,637.
1. OPTIONS TRANSACTIONS
For hedging purposes, the Fund purchases and writes (sells) options on market
indices and covered put and call options on U.S. securities that are traded on
U.S. 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 the premium and any 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 written call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security in determining whether the Fund has realized a gain or loss. If a
written put option is exercised, the premium reduces the cost basis of the
security purchased by the Fund. In writing covered options, the Fund bears the
market risk of an unfavorable change in the price of the security underlying
the written option. Exercise of an option written by the Fund could result in
the Fund selling or buying a security at a price different from the current
market value. Losses from written market index options may be unlimited.
Transactions in options written for the year ended September 30, 1997 were as
follows:
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
---------- -------------
Options outstanding at beginning of year 320 $ 207,873
Options written 12,349 18,289,639
Options terminated in closing purchase transactions (11,699) (16,668,567)
Options expired (620) (637,785)
Options outstanding at September 30, 1997 350 $ 1,191,160
2. SECURITIES SOLD SHORT
The Fund may sell securities short. A short sale is a transaction in which the
Fund sells securities it does not own, but has borrowed, in anticipation of a
decline in the
13
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
market price of the securities. The Fund is obligated to replace the borrowed
securities at their market price at the time of replacement. The Fund's
obligation to replace the securities borrowed in connection with a short sale
will be fully secured by collateral deposited with the broker. In addition, the
Fund will consider the short sale to be a borrowing by the Fund that is subject
to the asset coverage requirements of the 1940 Act. Short sales by the Fund
involve certain risks and special considerations. Possible losses from short
sales differ from losses that could be incurred from a purchase of a security
because losses from short sales may be unlimited, whereas losses from purchases
can not exceed the total amount invested. The Fund is currently paying an
interest expense of 6.25% to the prospective brokers on the market value of the
short sales.
NOTE D: CAPITAL STOCK
There are 300,000,000 shares of $.01 par value common stock authorized. Of the
2,505,000 shares outstanding at September 30, 1997, the Investment Adviser
owned 5,000 shares. During the year ended September 30, 1997 and the year ended
September 30, 1996, the Fund did not issue shares in connection with the
dividend reinvestment plan.
14
FINANCIAL HIGHLIGHTS ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH PERIOD
NOV. 4,
YEAR ENDED SEPTEMBER 30, 1994(A)
------------------------ TO SEP. 30,
1997 1996 1995
----------- ----------- ------------
Net asset value, beginning of period $22.19 $23.78 $19.70(b)
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.58) (.48) (.09)
Net realized and unrealized gain on
investment transactions 14.40 1.86 5.65
Net increase in net asset value
from operations 13.82 1.38 5.56
LESS: DISTRIBUTIONS
Distributions from net realized gains (2.29) (2.97) (1.48)
Net asset value, end of period $33.72 $22.19 $23.78
Market value, end of period $31.188 $19.00 $19.50
TOTAL RETURN
Total investment return based on: (c)
Market value 79.27% 13.26% 5.46%
Net asset value 65.66% 8.10% 28.60%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $84,477 $55,582 $59,561
Ratio of expenses to average net assets 2.48% 2.87% 2.00%(d)
Ratio of expenses to average net
assets excluding interest expense 2.43%(e) 2.62%(e) 2.00%(d)
Ratio of net investment loss to
average net assets (2.07)% (2.11)% (.48)%(d)
Portfolio turnover rate 105% 199% 140%
Average commission rate paid (f) $.0504 $.0616 --
(a) Commencement of operations.
(b) Net of offering costs of $.30.
(c) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day of
each period reported. Dividends and distributions, if any, are assumed for
purposes of this calculation, to be reinvested at prices obtained under the
Fund's dividend reinvestment plan. Generally, total investment return based on
net asset value will be higher than total investment return based on market
value in periods where there is an increase in the discount or a decrease in
the premium of the market value to the net asset value from the beginning to
the end of such periods. Conversely, total investment return based on the net
asset value will be lower than total investment return based on market value in
periods where there is a decrease in the discount or an increase in the premium
of the market value to the net asset value from the beginning to the end of
such periods. Total return for a period of less than one year is not annualized.
(d) Annualized.
(e) Net of interest expense of .05% and .25%, respectively, on short sales
(see Note C).
(f) For fiscal years beginning on or after September 1, 1995, a Fund is
required to disclose its average commission rate per share for trades on which
commissions are charged.
15
REPORT OF INDEPENDENT ACCOUNTANTS ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ALLIANCE ALL-MARKET ADVANTAGE
FUND, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Alliance All-Market Advantage
Fund, Inc. (the "Fund") at September 30, 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
two years in the period then ended and for the period November 4, 1994
(commencement of operations) through September 30, 1995, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at September 30, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
November 14, 1997
16
ADDITIONAL INFORMATION ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
Shareholders whose shares are registered in their own names will automatically
be participants in the Dividend Reinvestment and Cash Purchase Plan (the
"Plan"), pursuant to which dividends and capital gain distributions to
shareholders will be paid in or reinvested in additional shares of the Fund
("the Dividend Shares"). Bank of New York (the "Agent") will act as agent for
participants under the Plan. Shareholders whose shares are held in the name of
a broker or nominee should contact such broker or nominee to determine whether
or how they may participate in the Plan.
If the Board declares an income distribution or determines to make a capital
gain distribution payable either in shares or in cash, as holders of the Common
Stock may have elected, non-participants in the Plan will receive cash and
participants in the Plan will receive the equivalent in shares of Common Stock
of the Fund valued as follows:
(i) If the shares of Common Stock are trading at net asset value or at a
premium above net asset value at the time of valuation, the Fund will issue new
shares at the greater of net asset value or 95% of the then current market
price.
(ii) If the shares of Common Stock are trading at a discount from net asset
value at the time of valuation, the Plan Agent will receive the dividend or
distribution in cash and apply it to the purchase of the Fund's shares of
Common Stock in the open market on the New York Stock Exchange or elsewhere,
for the participants' accounts. Such purchases will be made on or shortly after
the payment date for such dividend or distribution and in no event more than 30
days after such date except where temporary enrollment or suspension of
purchase is necessary to comply with Federal securities laws. If, before the
Plan Agent has completed its purchases, the market price exceeds the net asset
value of a share of Common Stock, the average purchase price per share paid by
the Plan Agent may exceed the net asset value of the Fund's shares of Common
Stock, resulting in the acquisition of fewer shares than if the dividend or
distribution had been paid in shares issued by the Fund.
The Agent will maintain all shareholders' accounts in the Plan and furnish
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Agent in non-certificate form in the name of
the participant, and each shareholder's proxy will include those shares
purchased or received pursuant to the Plan.
There will be no charges with respect to shares issued directly by the Fund to
satisfy the dividend reinvestment requirements. However, each participant will
pay a pro rata share of brokerage commissions incurred with respect to the
Agent's open market purchases of shares. In each case, the cost per share of
shares purchased for each shareholder's accounts will be the average cost,
including brokerage commissions, of any shares purchased in the open market
plus the cost of any shares issued by the Fund.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to suspend or terminate the Plan as applied to any
voluntary cash payments made and any dividend or distribution paid subsequent
to written notice of the change sent to participants in the Plan at least 90
days before the record date for such dividend or distribution. The Plan may
also be amended or terminated by the Agent on at least 90 days' written notice
to participants in the Plan. All correspondence concerning the Plan should be
directed to the Agent at the Bank of New York, 101 Barclay Street, New York, NY
10286.
Since the filing of the most recent amendments to the Fund's registration
statement with the Securities and Exchange Commission, there have been (i) no
material changes in the Fund's investment objectives or policies, (ii) no
changes to the Fund's charter or by-laws that would delay or prevent a change
of control of the Fund, (iii) no material changes in the principal risk factors
associated with investment in the Fund, and (iv) no change in the person
primarily responsible for the day-to-day management of the Fund's portfolio,
who is Alfred Harrison, the Senior Vice President of the Fund.
17
ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
RUTH BLOCK (1)
DAVID H. DIEVLER (1)
JOHN H. DOBKIN (1)
WILLIAM H. FOULK, JR. (1)
DR. JAMES M. HESTER (1)
CLIFFORD L. MICHEL (1)
DONALD J. ROBINSON (1)
ROBERT C. WHITE (1)
OFFICERS
ALFRED HARRISON, SENIOR VICE PRESIDENT
KATHLEEN CORBET, SENIOR VICE PRESIDENT
PETER W. ADAMS, VICE PRESIDENT
THOMAS BARDONG, VICE PRESIDENT
JACK KOLTES, VICE PRESIDENT
DANIEL V. PANKER, VICE PRESIDENT
MICHAEL J. REILLY, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
JOSEPH J. MANTINEO, CONTROLLER
ADMINISTRATOR
ALLIANCE CAPITAL MANAGEMENT L.P.
1345 Avenue of the Americas
New York, NY 10105
DIVIDEND PAYING AGENT, TRANSFER
AGENT AND REGISTRAR
THE BANK OF NEW YORK
101 Barclay Street
New York, NY 10286
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, NY 10036-2798
CUSTODIAN
THE BANK OF NEW YORK
48 Wall Street
New York, NY 10286
(1) Member of the Audit Committee.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its Common Stock in the open market.
This report, including the financial statements herein, is transmitted to
the shareholders of Alliance All-Market Advantage Fund for their information.
The financial information included herein is taken from the records of the
Fund. This is not a prospectus, circular or representation intended for use in
the purchase of shares of the Fund or any securities mentioned in this report.
18
ALLIANCE ALL-MARKET ADVANTAGE FUND
Summary of General Information
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objective is to seek long-term growth of capital through
all market conditions. Consistent with the investment style of the Adviser's
Large-Cap Growth Group, the Fund will invest in a core portfolio of equity
securities (common stocks, securities convertible into common stocks and rights
and warrants to subscribe for or purchase common stocks) of large,
intensely-researched, high-quality companies that, in the judgement of the
Adviser, are likely to achieve superior earnings growth.
SHAREHOLDER INFORMATION
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transaction section of newspapers under the designation
"AllncAll". The Fund's NYSE trading symbol is "AMO". Weekly comparative net
asset value (NAV) and market price information about the Fund is published each
Monday in THE WALL STREET JOURNAL, each Sunday in THE NEW YORK TIMES and each
Saturday in BARRON'S, as well as other newspapers ina table called "Closed-End
Funds".
DIVIDEND REINVESTMENT PLAN
All shareholders whose shares are registered in their own names will have all
distributions reinvested automatically in additional shares, unless a
shareholder elects to receive cash.
Shareholders whose shares are held in the name of a broker or nominee will
automatically have distributions reinvested by the broker or nominee in
additional shares under the Plan, unless the automatic reinvestment service is
not provided by the particular broker or nominee or the Shareholder elects to
receive distributions in cash.
The Plan provides you with a convenient way to reinvest your dividends and
capital gains in additional shares of the Fund, thereby enabling you to
compound your returns from the Fund.
For questions concerning shareholder account information, or if you would like
a brochure describing the Dividend Reinvestment Plan, please call The Bank of
New York at 1-800-432-8224.
ALLIANCE ALL-MARKET ADVANTAGE FUND
1345 Avenue of the Americas
New York, New York 10105
ALLIANCE CAPITAL
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER, ALLIANCE
CAPITAL MANAGEMENT L.P.
AMAAR
