ALLIANCE ALL-MARKET ADVANTAGE FUND
ANNUAL REPORT
SEPTEMBER 30, 1998
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
November 27, 1998
Dear Shareholder:
This annual report discusses investment results and market activity for
Alliance All-Market Advantage Fund (the "Fund"), a closed-end fund which trades
under the New York Stock Exchange symbol "AMO," for the periods ended September
30, 1998. Your Fund's investment objective is to seek long-term growth of
capital through all market conditions. The Fund invests a majority of its
assets in a core portfolio of stocks 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
The following table shows how the Fund performed during the six- and 12-month
periods ended September 30, 1998. 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.
The Fund and its benchmarks experienced negative performance over the six-month
period ended September 30, 1998 due to the Asian crisis and subsequent problems
in Russia and Latin America. Several of your Fund's financial holdings declined
during this time which negatively affected performance. However, your Fund
outperformed both benchmarks during the 12-month period, posting a 12.49%
return at net asset value (NAV). The Fund benefited from good stock selections
during this time frame, specifically within the technology, financial and
health care sectors.
INVESTMENT RESULTS*
Periods Ended September 30, 1998
TOTAL RETURNS
6 MONTHS 12 MONTHS
-------- ---------
ALLIANCE ALL-MARKET
ADVANTAGE FUND -5.48% 12.49%
S&P 500 STOCK INDEX -6.93% 9.08%
RUSSELL 1000 GROWTH STOCK INDEX -4.96% 11.11%
* THE FUND'S INVESTMENT RESULTS ARE CUMULATIVE TOTAL RETURNS FOR THE PERIOD,
AND ARE BASED ON THE NET ASSET VALUE AS OF SEPTEMBER 30, 1998. 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 AND IS
A COMMON MEASURE OF THE PERFORMANCE OF THE OVERALL U.S. STOCK MARKET. 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.
During the 12-month period ended September 30, 1998, the Fund paid four
distributions totaling $5.1581 per share. The Fund's NAV ended the period at
$32.52 per share.
THE YEAR IN REVIEW
We experienced a very strong equity market during the first nine and one-half
months of the fiscal year, followed by a quick and violent correction over the
last two and one-half months. In our previous shareholder letters, we wrote
that as the market's valuation continued to increase, any uncertainties that
developed would increase the volatility of the market. The uncertainty or risks
that we referred to included the Asian economy and the Year 2000 (Y2K) computer
conversion. The recent market correction we experienced was due to more than
these two factors. It included concerns about the Asian, Russian, and Latin
American economies, as well as their effect on a potential global recession and
the current credit/liquidity crisis mind set. The credit/liquidity crisis that
followed caused the demand for most fixed income securities to dry up. Long
Term Capital Management (LTCM), a large, highly leveraged hedge fund, lost a
1
ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
good deal of its value very quickly as interest rate spreads went against them
due to the liquidity crisis. Some investors feared this could happen to other
highly leveraged funds.
Our underlying investment thesis, given the potential risks we saw in the
market, was that our overweight positions in the technology and financial
sectors would counterbalance each other in a slowing economy. The flaw in this
tenet during the last three months was the quickness in which asset/credit
quality became a real issue for those trading/banking entities exposed to the
financial markets. Several of our financial holdings such as Citicorp, Merrill
Lynch & Co., Inc. and Morgan Stanley, Dean Witter & Co. declined 30-50% from
their highs in July.
The strongest contributions to the Fund's portfolio this fiscal year came from
our holdings in the technology and health care sectors. Specifically in
technology, our four largest holdings were all up over 50%. Dell Computer
Corp., the Fund's largest holding, grew revenues at over 3 times the overall PC
market. Cisco Systems, Inc. outperformed as a result of gaining market share in
the fast growing network arena. Nokia Corp. ADR continued to take market share
in both the wireless handset market and the telecommunication's infrastructure
market. Microsoft benefited from new product introductions and a strong PC
environment.
In the health care sector, the Fund owns large positions in several
pharmaceutical companies including Merck & Co., Inc., Schering-Plough Corp.,
Bristol-Myers Sqibb Co. and Pfizer, Inc. We believed these companies would grow
earnings in the mid teens or better as the demographics for these companies'
products continue to improve. These four pharmaceutical companies also had a
number of new drugs in their pipelines. Additionally, in a low inflationary
environment, they did not have to rely on price increases to sustain earnings
growth.
Other sectors also performed well for the Fund this fiscal year. In retailing,
where strong U.S. consumer spending drove sales, the Fund's holdings in
Wal-Mart Stores, Inc., Home Depot, Inc., Dayton Hudson Corp., and Kohl's Corp.
benefited. In the media sector, Tele-communications Liberty Media Group
outperformed due to the scarcity value being placed on programming assets. In
the multi-industry sector, Tyco International grew through strong organic
growth and through accretive acquisitions funded by strong internal cash flow.
By fiscal year-end, the short positions in the Fund consisted of written calls
against individual stocks and written calls against market indices. Time
premiums have been inflated by significantly higher implied volatilities on the
index-related options. Therefore, we believe, given our outlook of the market,
that the most attractive strategy for proving downside protection to the Fund
is to write calls, or in effect, receive these expensive premiums.
MARKET ENVIRONMENT AND OUTLOOK
It is important to recognize that the world's financial markets have changed
dramatically over the last three months. Investors are now concerned that the
recession/deflation environment that impacted Asia last year has circuitously
spread to both Latin America and Eastern Europe, through Russia. Russia's
collapse may be correctly judged as being economically insignificant but it
proved to be the turning point for the world's financial markets. Russia's
problems impacted not only emerging market economies, but also rich country
commodity producers whose export revenues have collapsed. Compounding this
negative development is the potential credit/liquidity crisis that firms like
LTCM have brought into focus.
First on the recessionary/deflationary front, we believe that the Latin
American situation is of greatest significance to the U.S. due to the important
trade relationship with our two neighbors, Mexico and Canada. We are focusing
particularly on Brazil, which we believe will adopt the needed fiscal and
monetary policies to orchestrate a managed and gradual devaluation (6%/year) of
Brazil's currency, the real. This should alleviate corresponding pressures on
Argentina.
With regard to the credit/liquidity crisis, investment organizations like LTCM
have stressed the global financial system through the leverage they employed.
We have certainly experienced the increased volatility associated with the
unwinding, or "forced selling," of these leveraged positions in the recent
months. However, we believe that the actual trading, credit and counterparty
losses associated with LTCM will be forthcoming and could
2
ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
impact some company balance sheets. The likely conclusion we can draw is that
credit, in its many forms, will be more difficult to obtain in the capital
markets going forward.
As we approach the millennium, Y2K computer and 1999 Euro conversion issues
could quickly create uncertainty regarding our computer readiness and security.
This is particularly true in the government area and the financial sector, with
Europe and Asia a step behind the U.S. in terms of preparedness.
As we step back and analyze these developments, it is important to recognize
that the U.S. and Europe account for $15 trillion of the $25 trillion world
Gross Domestic Product (GDP). The United States' $7 trillion economy is
primarily domestic with the U.S. consumer playing the dominant role. In order
to ensure the health of the U.S. consumer, the Fed has the flexibility to cut
rates (which happened twice in the month of October). Additionally, it is
possible that the U.S. Congress could cut taxes next year which would also help
the U.S. consumer. Fed funds rates are at 5.00% and we believe there is
flexibility down to a 3.00% level. (Expected U.S. inflation is less than 2% and
Europe's short-term rates are at 3.3%.) In other words, to get from where we
are today to a recession in the U.S. and a resulting global slump would require
the current global concerns to worsen (e.g., Japanese banking reforms continue
to stall) and U.S. policy makers to exercise poor judgment in using their
available tools to keep the economy on its current track.
PORTFOLIO STRATEGY
Our cautiously optimistic view of the U.S. equity market has not changed. A
"flight to quality" will likely mean lower U.S. interest rates. As of
mid-November, the long bond yield was approximately 5.2%. Well chosen large cap
growth stocks, with double-digit earnings growth, should reflect their superior
returns over time.
As the market has been indiscriminate in its selling of stocks, we are using
this as an opportunity to add to key holdings where our confidence in the
underlying earnings capacity of the companies remains high and where the
exposure to developing countries is either muted or overly discounted.
The issues for the emerging markets, particularly Asia and Russia, are real and
troubling. However, our often-stated positives for the U.S. equity market
remain in place. The U.S. continues to enjoy some tremendous strengths in both
absolute and relative terms. These range all the way from our
democratic-capitalist base, through sound legal and accounting structures,
excellent corporate health, technology leadership, ongoing benefits of cost
cutting, brand leadership, centralist fiscal, monetary and political policies,
and strong 401(k) type investment flows. Thus, although we anticipate market
volatility to continue, we also argue that there are very persuasive reasons
for "staying the equity course."
QUARTERLY DISTRIBUTION
The Fund distributes 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 the total net assets distributed to shareholders. If these
distributions exceed 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 the coming periods.
Sincerely,
John D. Carifa
Chairman and President
Alfred Harrison
Senior Vice President
Michael J. Reilly
Senior Vice President
3
TEN LARGEST HOLDINGS
SEPTEMBER 30, 1998 ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Dell Computer Corp. $ 9,152,400 11.2%
Nokia Corp. ADR 6,627,969 8.1
Cisco Systems, Inc. 6,369,778 7.8
AirTouch Communications, Inc. (a) 4,443,375 5.5
MBNA Corp. (a) 3,998,544 4.9
Tyco International Ltd. (a) 3,922,750 4.8
Microsoft Corp. 3,918,225 4.8
Home Depot, Inc. (a) 3,633,000 4.5
Pfizer, Inc. (a) 3,514,687 4.3
Schering-Plough Corp. (a) 3,352,187 4.1
$48,932,915 60.0%
(a) Adjusted for market value of call options purchased.
4
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998 ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS-74.5%
TECHNOLOGY-38.5%
COMMUNICATION EQUIPMENT-10.1%
America Online, Inc.(a) 10,000 $ 1,112,500
Lucent Technologies, Inc.(a) 7,000 483,438
Nokia Corp. ADR(b) 84,500 6,627,969
------------
8,223,907
COMPUTER HARDWARE-15.2%
Compaq Computer Corp. 60,000 1,897,500
Dell Computer Corp.(a)(c) 139,200 9,152,400
EMC Corp.(c) 24,100 1,378,219
------------
12,428,119
COMPUTER SOFTWARE-4.8%
Microsoft Corp.(a)(c) 35,600 3,918,225
NETWORKING SOFTWARE-7.8%
Cisco Systems, Inc.(a)(c) 103,050 6,369,778
SEMICONDUCTOR COMPONENTS-0.6%
Intel Corp. 5,500 471,625
------------
31,411,654
FINANCE-16.0%
BANKING - REGIONAL-1.7%
Norwest Corp.(a) 19,500 698,344
U.S. Bancorp 20,000 711,250
------------
1,409,594
BROKERAGE & MONEY MANAGEMENT-2.1%
Merrill Lynch & Co., Inc.(a) 36,000 1,705,500
INSURANCE-2.4%
Progressive Corp.(a) 9,000 1,014,750
Travelers Group, Inc.(a) 24,000 900,000
------------
1,914,750
MORTGAGE BANKING-3.0%
Fannie Mae Corp. 27,000 1,734,750
H. F. Ahmanson & Co.(a) 8,600 477,300
Washington Mutual, Inc. 8,000 270,000
------------
2,482,050
MISCELLANEOUS-6.8%
Associates First Capital
Corp. Cl. A(a) 21,000 1,370,250
Household International, Inc.(a) 32,100 1,203,750
MBNA Corp.(a) 102,150 2,924,044
------------
5,498,044
------------
13,009,938
CONSUMER SERVICES-11.2%
AIRLINES-2.5%
Northwest Airlines, Inc. Cl. A(c) 34,200 857,137
UAL Corp.(a)(c) 18,300 1,186,069
------------
2,043,206
BROADCASTING & CABLE-5.0%
AirTouch Communications, Inc.(a)(c) 32,000 1,824,000
Tele-Communications Liberty Media
Group Cl. A(c) 60,500 2,219,594
------------
4,043,594
RETAIL - GENERAL MERCHANDISE-3.7%
Dayton Hudson Corp. 39,000 1,394,250
Home Depot, Inc.(a) 15,000 592,500
Kohl's Corp.(c) 27,400 1,068,600
------------
3,055,350
------------
9,142,150
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
SHARES OR
CONTRACTS (D) VALUE
- -------------------------------------------------------------------------------
HEALTHCARE-6.2%
DRUGS-2.8%
Pfizer, Inc.(a) 17,000 $ 1,800,937
Warner-Lambert Co.(a) 6,500 490,750
------------
2,291,687
MEDICAL PRODUCTS-3.4%
HBO & Co.(a) 39,200 1,131,900
IMS Health, Inc.(a) 13,000 805,187
Medtronic, Inc.(a) 13,400 775,525
------------
2,712,612
------------
5,004,299
MULTI-INDUSTRY-2.6%
CAPITAL GOODS-2.6%
Tyco International Ltd.(a) 39,000 2,154,750
Total Common Stocks (cost $33,877,467) 60,722,791
CALL OPTIONS PURCHASED-27.2%(C)
AirTouch Communications, Inc.
expiring Jan '99 @ $20 550 2,062,500
expiring Jan '00 @ $20 150 556,875
Bristol-Myers Squibb Co.
expiring Jan '99 @ $60 250 1,110,937
expiring Jan '00 @ $60 100 468,750
Citicorp
expiring Jan '99 @ $60 20 68,500
Coca-Cola Co.
expiring Jan '99 @ $35 50 118,125
Dayton Hudson Corp.
expiring Jan '99 @ $22.50 240 324,000
Fannie Mae
expiring Jan '00 @ $40 80 217,000
General Electric Co.
expiring Jan '99 @ $30 100 502,500
expiring Jan '00 @ $50 100 337,500
Home Depot, Inc.
expiring Jan '99 @ $30 (e) 580 2,142,375
expiring Jan '00 @ $27.50 200 307,500
expiring Jan '00 @ $35 250 590,625
CONTRACTS (D) OR
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------------
MBNA Corp.
expiring Jan '99 @ $13.375 135 $ 311,344
expiring Jan '99 @ $15 180 254,250
expiring Jan '99 @ $16.625 225 417,656
expiring Jan '99 @ $20 100 91,250
Merck & Co., Inc.
expiring Jan '99 @ $55 150 1,125,000
expiring Jan '99 @ $60 20 140,250
Morgan Stanley, Dean Witter & Co.
expiring Jan '99 @ $30 400 595,000
NationsBank Corp.
expiring Jan '99 @ $35 230 457,125
Pfizer, Inc.
expiring Jan '99 @ $30 150 1,151,250
expiring Jan '99 @ $50 100 562,500
Philip Morris Cos., Inc.
expiring Jan '99 @ $23.375 505 1,174,125
Schering-Plough Corp.
expiring Jan '99 @ $25 425 3,352,187
Tyco International Ltd.
expiring Jan '00 @ $30 640 1,768,000
United Technologies Corp.
expiring Jan '99 @ $50 230 618,125
Wal-Mart Stores, Inc.
expiring Jan '00 @ $30 50 135,625
expiring Jan '00 @ $35 350 774,375
expiring Jan '00 @ $40 50 101,250
Walt Disney Co.
expiring Jan '99 @ $50 425 387,813
Total Call Options Purchased
(cost $15,225,920) 22,224,312
SHORT TERM INVESTMENT-1.3%
COMMERCIAL PAPER-1.3%
General Electric Capital Corp.
5.70%, 10/01/98
(amortized cost ($1,049,000) $1,049 1,049,000
TOTAL INVESTMENTS-103.0%
(cost $50,152,387) $83,996,103
6
ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
CONTRACTS (D) VALUE
- -------------------------------------------------------------------------------
CALL OPTIONS WRITTEN-(1.4%)(C)
Chicago Board Options Exchange
NASDAQ 100 Index
expiring Oct '98 @ $1,280 15 $ (136,312)
expiring Oct '98 @ $1,300 30 (231,000)
expiring Oct '98 @ $1,320 5 (31,063)
expiring Oct '98 @ $1,360 10 (38,000)
expiring Oct '98 @ $1,380 10 (25,625)
expiring Oct '98 @ $1,400 20 (40,000)
Cisco Systems, Inc.
expiring Oct '98 @ $65 130 (20,313)
Dell Computer Corp.
expiring Oct '98 @ $60 100 (75,000)
expiring Oct '98 @ $62.50 140 (80,500)
expiring Oct '98 @ $70 70 (12,688)
Merrill Lynch & Co., Inc.
expiring Oct '98 @ $45 100 (42,500)
Nokia Corp.
expiring Oct '98 @ $80 (b) 100 (36,250)
Standard & Poor's 500 Index
expiring Oct '98 @ $995 30 $(142,500)
expiring Oct '98 @ $1,010 20 (70,000)
expiring Oct '98 @ $1,025 20 (54,000)
expiring Oct '98 @ $1,030 20 (48,000)
expiring Oct '98 @ $1,050 65 (96,687)
Total Call Options Written
(premiums received $1,306,240) (1,180,438)
TOTAL INVESTMENTS, NET OF OUTSTANDING
CALL OPTIONS WRITTEN-101.6%
(cost $48,846,147) 82,815,665
Other assets less liabilities-(1.6%) (1,263,646)
NET ASSETS-100% $81,552,019
(a) Security or a portion thereof, has been segregated to collateralize open
options written. This collateral has a total market value of approximately
$25,968,392.
(b) Country of origin--Finland.
(c) Non-income producing.
(d) One contract relates to 100 shares unless otherwise indicated.
(e) One contract relates to 150 shares.
Glossary of Terms:
ADR - American Depository Receipt.
See notes to financial statements.
7
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998 ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $50,152,387) $83,996,103
Receivable for investment securities sold 3,302,994
Dividends receivable 19,468
Deferred organization expenses and other assets 19,112
Total assets 87,337,677
LIABILITIES
Due to custodian 325,058
Outstanding call options written, at value (premiums
received $1,306,240) 1,180,438
Dividend payable 2,464,879
Payable for investment securities purchased 1,437,159
Advisory fee payable 123,649
Administration fee payable 17,620
Accrued expenses 236,855
Total liabilities 5,785,658
NET ASSETS $81,552,019
COMPOSITION OF NET ASSETS
Capital stock, at par $25,080
Additional paid-in capital 49,470,792
Accumulated net realized loss on investment transactions (1,913,371)
Net unrealized appreciation of investments and options written 33,969,518
$81,552,019
NET ASSET VALUE PER SHARE (based on 2,508,017 shares outstanding) $32.52
See notes to financial statements.
8
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1998 ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld
of $10,345) $284,590
Interest 60,878 $ 345,468
EXPENSES
Advisory fee 1,528,461
Administrative 221,977
Custodian 161,142
Audit and legal 96,327
Shareholder servicing 88,710
Printing 53,599
Directors' fees and expenses 39,672
Transfer agency 17,625
Registration 16,058
Dividends on securities sold short 5,226
Amortization of organization expenses 4,000
Miscellaneous 3,995
Total expenses before interest 2,236,792
Interest expense on short sales 41,327
Total expenses 2,278,119
Net investment loss (1,932,651)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
SHORT SALES AND OPTIONS WRITTEN
Net realized gain on long transactions 10,885,551
Net realized gain on short sale transactions 36,031
Net realized loss on written option transactions (2,055,105)
Net change in unrealized appreciation of
investments, short sales and options written 2,937,240
Net gain on investments 11,803,717
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 9,871,066
See notes to financial statements.
9
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment loss $(1,932,651) $(1,439,672)
Net realized gain on investment,
short sale and written option
transactions 8,866,477 12,310,009
Net change in unrealized
appreciation of investments,
short sales and options written 2,937,240 23,766,594
Net increase in net assets
from operations 9,871,066 34,636,931
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments (12,924,008) (5,741,965)
COMMON STOCK TRANSACTIONS
Reinvestment of dividends resulting
in issuance of common stock 127,507 -0-
Total increase (decrease) (2,925,435) 28,894,966
NET ASSETS
Beginning of year 84,477,454 55,582,488
End of year $81,552,019 $84,477,454
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 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 financial statements have been prepared in conformity
with generally accepted accounting principles which require management to make
certain estimates and assumptions that affect the reported amounts of assets
and liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are
generally valued at the last reported sales price or if no sale occurred, at
the mean of the closing bid and asked prices on that day. Readily marketable
securities traded in the over-the-counter market, securities listed on a
foreign securities exchange whose operations are similar to the U.S.
over-the-counter market, and securities listed on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked prices. U.S. government and fixed income
securities which mature in 60 days or less are valued at amortized cost, unless
this method does not represent fair value. Securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith by, or in accordance with procedures adopted by, the
Board of Directors. Fixed income securities may be valued on the basis of
prices obtained from a pricing service when such prices are believed to reflect
the fair market value of such securities.
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, 1998,
the fee as adjusted, amounted to 1.72% of the Fund's average net assets.
11
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
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$1,215 during the year ended September 30, 1998.
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, 1998 amounted to $250,574, none of which was paid to brokers
utilizing the services of the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corp., an affiliate of the Adviser.
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments,
short-term options, and U.S. government securities) aggregated $80,730,704 and
$94,323,383, respectively, for the year ended September 30, 1998. There were no
purchases or sales of U.S. government or government agency obligations for the
year ended September 30, 1998.
At September 30, 1998, the cost of investments for federal income tax purposes
was $49,206,916. Accordingly, gross unrealized appreciation of investments was
$35,977,558 and gross unrealized depreciation of investments was $2,368,809
resulting in net unrealized appreciation of $33,608,749.
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.
12
ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
Transactions in options written for the year ended September 30, 1998 were as
follows:
NUMBER PREMIUMS
OF CONTRACTS RECEIVED
------------ ---------
Options outstanding at beginning of year 350 $ 1,191,160
Options written 13,464 26,336,503
Options terminated in closing purchase
transactions (12,804) (25,834,686)
Options expired (125) (386,737)
Options outstanding at September 30, 1998 885 $ 1,306,240
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 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
2,508,017 shares outstanding at September 30, 1998, the Investment Adviser
owned 5,000 shares. During the year ended September 30, 1998, the Fund issued
3,017 shares in connection with the Fund's dividend reinvestment plan. During
the year ended September 30, 1997, the Fund did not issue shares in connection
with the Fund's dividend reinvestment plan.
13
FINANCIAL HIGHLIGHTS ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NOVEMBER 4,
YEAR ENDED SEPTEMBER 30, 1994(A)
------------------------ TO SEPT. 30,
1998 1997 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $33.72 $22.19 $23.78 $19.70(b)
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.77) (.58) (.48) (.09)
Net realized and unrealized gain on
investment transactions 4.73 14.40 1.86 5.65
Net increase in net asset value from
operations 3.96 13.82 1.38 5.56
LESS: DISTRIBUTIONS
Distributions from net realized gains (5.16) (2.29) (2.97) (1.48)
Net asset value, end of period $32.52 $33.72 $22.19 $23.78
Market value, end of period $36.875 $31.188 $19.00 $19.50
TOTAL RETURN
Total investment return based on: (c)
Market value 37.40% 79.27% 13.26% 5.46%
Net asset value 12.49% 65.66% 8.10% 28.60%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $81,552 $84,477 $55,582 $59,561
Ratio of expenses to average net assets 2.57% 2.48% 2.87% 2.00%(d)
Ratio of expenses to average net assets
excluding interest expense 2.52%(e) 2.43%(e) 2.62%(e) 2.00%(d)
Ratio of net investment loss to
average net assets (2.18)% (2.07)% (2.11)% (.48)%(d)
Portfolio turnover rate 96% 105% 199% 140%
</TABLE>
(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%, .05% and .25%, respectively, on short
sales (see Note C).
14
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, 1998, 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
three 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, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
November 18, 1998
TAX INFORMATION (UNAUDITED)
In order to meet certain requirements of the Internal Revenue Code we are
advising you that $2,530,050 of capital gain distributions were paid by the
fund during the fiscal year ended September 30, 1998. Shareholders should not
use the above information to prepare their tax returns. The information
necessary to complete your income tax returns will be included with your Form
1099 DIV which will be sent to you separately in January 1999.
15
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.
16
ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
YEAR 2000 AND EURO (UNAUDITED)
Many computer systems and applications in use today process transactions using
two digit date fields for the year of the year of the transaction, rather than
the full four digits. If these systems are not modified or replaced,
transactions occurring after 1999 could be processed as year 1900, which could
result in processing inaccuracies and computer system failures. This is
commonly known as the year 2000 problem. In addition to the year 2000 problem,
the European Economic and Monetary Union has established a single currency, the
Euro currency ("Euro") that will replace the national currency of certain
European countries effective January 1, 1999. Computer systems and applications
must be adapted in order to be able to process Euro sensitive information
accurately beginning in 1999. Should any of the computer systems employed by
the Fund's major service providers fail to process Year 2000 or Euro related
information properly, that could have a significant negative impact on the
Fund's operations and the services that are provided to the Fund's
shareholders. In addition, to the extent that the operations of issuers of
securities held by the Fund are impaired by the Year 2000 problem or Euro, or
prices of securities held by the Fund decline as a result of real or perceived
problems relating to the Year 2000 or Euro, the value of the Fund's shares may
be materially affected.
With respect to the Year 2000, the Fund has been advised that the Adviser,
("Alliance") began to address the year 2000 issue several years ago in
connection with the replacement or upgrading of certain computer systems and
applications. During 1997, Alliance began a formal Year 2000 initiative, which
established a structure and coordinated process to deal with the Year 2000
issues on its domestic and international computer systems and applications.
Currently, management of Alliance expects that the required modifications for
the majority of its significant systems and applications that will be in use on
January 1, 2000, will be completed and tested by the end of 1998. Full
integration testing of these systems and testing of interface with third-party
suppliers will continue through 1999. At this time, management of Alliance
believes that the costs associated with resolving this issue will not have a
material adverse effect on its operations or on its ability to provide the
level of services it currently provides to the Fund.
With respect to the Euro, the Fund has been advised that Alliance has
established a project team to assess changes that will be required in
connection with the introduction of the Euro. Alliance reports that its project
team has assessed all systems, including those developed or managed internally
as well as those provided by vendors, in order to determine the modifications
that will be required to process accurately transactions denominated in Euro
after 1998. At this time, management of Alliance expects that the required
modifications for the introduction of the Euro will be completed and tested
before the end of 1998. Management of Alliance believes that the costs
associated with resolving this issue will not have a material adverse effect on
its operations or on its ability to provide the level of services it currently
provides to the Fund.
The Fund and Alliance have been advised by the Fund's Transfer Agent and
Custodian that they are also in the process or reviewing their systems with the
same goals. As of the date of this report the Fund and Alliance have no reason
to believe that the Transfer Agent and Custodian will be unable to achieve
these goals.
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
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
ALFRED HARRISON, SENIOR VICE PRESIDENT
THOMAS J. BARDONG, VICE PRESIDENT
JOHN A. 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
VINCENT S. NOTO, 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
PRICEWATERHOUSECOOPERS LLP
1177 Avenue of the Americas
New York, NY 10036-2798
CUSTODIAN
THE BANK OF NEW YORK
One 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
