ALLIANCE ALL-MARKET ADVANTAGE FUND ALLIANCE ALL-MARKET ADVANTAGE FUND
ANNUAL REPORT
SEPTEMBER 30, 1999
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
November 10, 1999
Dear Shareholder:
This report discusses investment results and market activity for Alliance
All-Market Advantage Fund (the "Fund") for the annual reporting period ended
September 30, 1999. The Fund is a closed-end fund and trades under the New York
Stock Exchange symbol "AMO." The 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 Fund's core portfolio typically consists of the
25 companies that are the most highly regarded at any point in time. The
balance of the Fund's 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 over the 12-month period ended
September 30, 1999. For comparison, we have shown returns for the overall U.S.
stock market, as represented by the unmanaged Standard & Poor's 500 Stock Index
("S&P 500"), and the Russell 1000 Growth Stock Index.
The Fund significantly outperformed its benchmarks over the 12-month period
under review primarily due to strong stock selection.
During the 12-month period ended September 30, 1999, the Fund paid four
distributions totaling $4.26 per share. The Fund's net asset value ("NAV")
ended the period at $42.13 per share.
INVESTMENT RESULTS*
Period Ended September 30, 1999
TOTAL RETURN
12 MONTHS
------------
ALLIANCE ALL-MARKET ADVANTAGE FUND 42.20%
S&P 500 27.79%
RUSSELL 1000 GROWTH STOCK INDEX 34.85%
* THE FUND'S INVESTMENT RESULTS ARE TOTAL RETURNS FOR THE PERIOD AND ARE
BASED ON THE NET ASSET VALUE AS OF SEPTEMBER 30, 1999. 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 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.
THE YEAR IN REVIEW
The market rebounded quite nicely in the fiscal first quarter (October 1998 to
December 1998) as fear of a financial meltdown, largely due to "The Asian
Contagion," subsided. Actions we took in the weak July to September 1998 period
to position the Fund's portfolio for a rebound in the market allowed us to get
off to a very strong start. In essence, we used our "V-Factor" methodology to
take advantage of the volatility in the market.
As the 1999 calendar year progressed, the market began to wrestle with the
historically high market valuations and the rising interest rates that were
caused by the fear of higher inflation and stronger world growth. Subsequently,
the higher interest rates somewhat contained the market's appreciation and the
last three months of the Fund's fiscal year have had negative returns.
Despite the current uncertainties in the market, the Fund has had a very strong
fiscal year. Strong stock selection coupled with prudent use of protective
strategies (such as written calls or purchased puts against individual stocks
1
ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
or indices) enabled the Fund to outperform its benchmarks during the 12-month
period ended September 30, 1999. Standout performers during this period
included several technology names (Nokia Corp., Cisco Systems Inc. and EMC
Corp.), several financial names (Morgan Stanley Dean Witter & Co. and Citigroup
Inc.), consumer service companies (AT&T Corp-Liberty Media Group and Vodafone
AirTouch Plc) and multi-industry companies (such as Tyco International Ltd.).
The Fund's performance was helped by not only owning the equity in these
stocks, but also by owning (where appropriate) the underlying options to
further enhance the Fund's returns.
At the end of September 1999, the short positions in the Fund consisted of
written calls against individual stocks and written calls and purchased puts
against market indices. Due to the higher valuation of the market, we have
added some puts to the Fund to provide increased protection in case of a
correction.
During the year, we successfully raised approximately $42 million net of
expenses through a rights offering. The rights offering allowed the Fund to
more fully take advantage of investment opportunities in the large-cap equity
market, reduce the relative significance of certain large positions in the
Fund's portfolio and improve the portfolio's tax efficiency.
MARKET ENVIRONMENT AND OUTLOOK
As we have discussed before, our investment philosophy is predicated on the
correct marriage of prospective fundamentals and valuation. Our outlook for the
U.S. economy and financial markets remains favorable. In our view, the current
concern about U.S. dollar weakness is overblown since the weakness relates
strictly to the yen, even though the dollar has rallied for most of the year
against the euro. The real domestic economy continues to grow at 2.5% to 3.5%,
creating corporate profits of around 8%, as well as new job opportunities.
Inflation, the key economic fundamental, remains under control. Even though oil
prices are approaching $20 per barrel, energy comprises only 6% of the consumer
price index ("CPI"). The CPI was up a modest 2.2% during the third quarter, and
we are forecasting a 1.5% to 2.5% range for expected inflation through the
year-end in 2000. The underpinnings for our confidence in continued moderate
inflation are sourced directly to the offset of labor's productivity
improvements (approximately 2% to 4%) with healthy nominal wage gains of 3.5%.
Also, U.S. consumers and corporate purchasing departments remain steadfast
against price increases. Our ongoing focus will be on productivity and unit
labor cost trends, since real labor costs represent two-thirds of the CPI. We
believe that the risk of a synchronized global recovery, which could lead to an
overheated situation, is mitigated by the fact that the international economies
remain mixed and that U.S. consumer demand may slow sometime in the next
several quarters. A rise in rates (especially mortgages) and a modest slump in
the stock market will likely dampen future consumer spending. In congressional
testimony, Federal Reserve Bank Chairman Alan Greenspan defined recent and
potential tightening as a reversal of the easing undertaken last fall, rather
than the start of a sustained, deliberate program designed to throttle the
economy. This constructive fundamental outlook should also have positive
consequences for the U.S. bond markets.
We believe that the fourth quarter of 1999 will undoubtedly bring us
challenges. These challenges may include everything from dollar/yen
considerations, possibly breaking 10,000 again on the Dow Jones Industrial
Average, Y2K purchase lockdowns, and finally the psychological overhang of
additional Federal Reserve rate increases at some future date, given the Fed's
current tightening bias. However, assuming that we can come through this
quarter adequately, the year 2000 is shaping up quite nicely. There should be
continued growth in the U.S., supplemented by a slightly better tone both in
Europe and Asia. Moreover, no great inflationary strains should emerge in this
competitive, technologically driven environment.
PORTFOLIO STRATEGY
Consistent with our prior guidance, which expressed absolute valuation
concerns, our full year 1999 expectations for U.S. equity market returns are in
the 5% to 12% range, with associated high volatility. Given that the S&P 500 is
up 5% through the first three calendar quarters, we have structured the Fund's
portfolio accordingly. We are slightly more optimistic than we were at mid-year
due to the 6.4% decline in the S&P 500 during the third quarter.
2
ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
Accordingly, we have moved the Fund's net long position back up to 100% within
an 80% to 120% range. We would, however, adopt a more defensive strategy if the
bond market were to weaken significantly from current 6.35% levels. Looking
past year-end, corporate earnings and cashflows are projected to grow at a 7%
to 10% rate for the year 2000, which should justify commensurate S&P 500
upside. Recognizing that current stock prices reflect future corporate
performance, we remain fundamentally focused on the strongest prospective
corporate earnings for the best available prices. We will continue to capture
the rich premiums by selling at-the-money and slightly in-the-money calls on
the S&P 500 and NASDAQ, while purchasing S&P 500 puts for added protection. It
is important, however, to remember that this is a long-biased Fund. Therefore,
we can mitigate, but not avoid, losses if the market should experience a
sustained decline.
At the end of the quarter, the Fund's gross long portfolio had a weighted
average price-to-earnings multiple of 27 times for 24% projected 2000 earnings
growth versus 25 times for 7% earnings growth for the S&P 500. Despite absolute
valuation concerns, we believe that the best relative investment opportunity is
to stay with the Fund's long portfolio positions, which provide strong relative
earnings growth (four times the market's growth rate) for only a modest 10%
premium to the market's valuation. Our rigorous bottom-up, company-specific
research process is especially important in today's environment where companies
with disappointing fundamentals are treated harshly by the market.
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 is distributed to shareholders, plus any remaining
net investment income and net realized capital gains deemed, for Federal income
tax purposes, to be undistributed during the year.
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
Vice President
3
TEN LARGEST HOLDINGS
SEPTEMBER 30, 1999 ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
PERCENT OF
COMPANY VALUE NET ASSETS
- -------------------------------------------------------------------------------
Dell Computer Corp. $ 9,951,375 6.6%
Home Depot, Inc. (a) 8,997,563 6.0
Nokia Corp. ADR (Finland) (a) 8,689,488 5.8
Tyco International Ltd. (a) 8,308,900 5.5
Cisco Systems, Inc. (a) 7,650,100 5.1
Intel Corp. 7,111,706 4.7
Schering-Plough Corp. 6,107,500 4.1
AT&T Corp. - Liberty Media Group Cl. A. 6,088,500 4.0
Microsoft Corp. (a) 5,521,813 3.7
Morgan Stanley Dean Witter & Co. (a) 5,039,125 3.3
$73,466,070 48.8%
(a) Adjusted for market value of call options purchased and written.
4
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1999 ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS-74.3%
TECHNOLOGY-31.7%
COMMUNICATION EQUIPMENT-8.9%
EMC Corp. (a) 57,000 $ 4,071,937
Lucent Technologies, Inc. (b) 22,400 1,453,200
Nokia Corp. ADR
(Finland) 87,400 7,849,613
------------
13,374,750
COMPUTER HARDWARE-7.2%
Dell Computer Corp. (a) 238,000 9,951,375
Sun Microsystems, Inc. (a) 10,000 930,000
------------
10,881,375
COMPUTER SOFTWARE-3.7%
Microsoft Corp. (a) 61,000 5,524,313
INTERNET CONTENT-0.7%
Alteon Websystems, Inc. (a) 600 56,400
America Online, Inc. (a) 8,900 925,600
------------
982,000
NETWORKING SOFTWARE-5.1%
Cisco Systems, Inc. (a) 111,800 7,665,287
SEMICONDUCTOR CAPITAL EQUIPMENT-0.5%
Applied Materials, Inc. (a)(b) 9,400 730,262
SEMICONDUCTOR COMPONENTS-4.7%
Intel Corp. 95,700 7,111,706
MISCELLANEOUS-0.9%
Foundry Networks, Inc. (a) 1,600 201,600
Solectron Corp. (a)(b) 18,000 1,292,625
------------
1,494,225
------------
47,763,918
CONSUMER SERVICES-19.7%
BROADCASTING & CABLE-8.9%
AMFM, Inc. (a) 20,000 1,217,500
AT&T Corp. - Liberty Media
Group Cl. A (a)(b) 164,000 6,088,500
Clear Channel Communications (a)(b) 27,800 2,220,525
Skytel Communications, Inc. (a) 10,000 183,125
Vodafone Airtouch PLC-SP ADR
(United Kingdom) 15,500 3,685,125
------------
13,394,775
ENTERTAINMENT & LEISURE-0.7%
Time Warner, Inc. 18,000 1,093,500
RETAIL - GENERAL MERCHANDISE-10.1%
Costco Wholesale Corp (a)(b) 20,800 1,497,600
Dayton Hudson Corp. (b) 36,000 2,162,250
Gap Inc. 38,000 1,216,000
Home Depot, Inc. 107,000 7,342,875
Kohl's Corp. (a) 34,400 2,274,700
Lowe's Companies, Inc. 15,000 731,250
------------
15,224,675
------------
29,712,950
FINANCE-11.0%
BANKING - REGIONAL-0.7%
Bank of America Corp 5,000 278,437
Wells Fargo Co. 19,500 772,687
------------
1,051,124
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
SHARES OR
CONTRACTS (C) VALUE
- -------------------------------------------------------------------------------
BROKERAGE & MONEY MANAGEMENT-3.8%
Goldman Sachs Group Inc. (b) 19,800 $ 1,207,800
Merrill Lynch & Co. 17,000 1,142,188
Morgan Stanley Dean Witter & Co. 38,000 3,389,125
------------
5,739,113
INSURANCE-2.7%
American International Group (b) 7,625 662,898
Citigroup, Inc. (b) 78,000 3,432,000
------------
4,094,898
MORTGAGE BANKING-1.1%
Fannie Mae Corp. 27,000 1,692,563
MISCELLANEOUS-2.7%
Associates First Capital Corp. Cl. A. (b) 21,000 756,000
MBNA Corp. 143,225 3,267,320
------------
4,023,320
------------
16,601,018
HEALTHCARE-8.5%
DRUGS-7.2%
Bristol-Myers Squibb Co. (b) 21,000 1,417,500
Pfizer, Inc. 91,500 3,288,281
Schering-Plough Corp. 140,000 6,107,500
------------
10,813,281
MEDICAL PRODUCTS-1.3%
IMS Health, Inc. 5,000 114,062
Medtronic, Inc. 50,800 1,803,400
------------
1,917,462
------------
12,730,743
UTILITIES-1.9%
TELEPHONE UTLILTY-1.9%
MCI WorldCom, Inc. 39,700 2,853,438
MULTI-INDUSTRY-1.1%
CAPITAL GOODS-1.1%
Tyco International Ltd. 16,200 1,672,650
CONSUMER GOODS-0.4%
ELECTRICAL EQUIPMENT-0.4%
General Electric Co. 5,000 592,813
Total Common Stocks
(cost $66,634,742) 111,927,530
CALL OPTIONS PURCHASED-21.0% (A)
AirTouch Communications, Inc.
expiring Jan '00 @ $20 100 1,080,000
American International Group
expiring Jan '00 @ $48 (d) 100 495,312
Associates First Capital Corp. Cl. A
expiring Jan '00 @ $20 300 489,375
expiring Jan '00 @ $22.50 300 420,000
expiring Jan '01 @ $20 650 1,157,813
BankAmerica Corp.
expiring Jan '00 @ $40 305 493,719
Bristol-Myers Squibb Co.
expiring Jan '00 @ $30 200 757,500
expiring Jan '00 @ $40 100 281,250
expiring Jan '01 @ $35 100 350,000
Citigroup, Inc.
expiring Jan '00 @ $23.33 (e) 225 700,313
Colgate-Palmolive Co.
expiring Jan '01 @ $30 200 370,000
6
ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
CONTRACTS (C) OR
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------------
Dayton Hudson Corp.
expiring Jan '00 @ $27.50 200 $ 657,500
Fannie Mae Corp.
expiring Jan '00 @ $35 300 523,125
General Electric Co.
expiring Jan '00 @ $50 100 693,125
expiring Jan '01 @ $60 100 621,875
Home Depot, Inc.
expiring Jan '00 @ $17.50 250 1,289,063
expiring Jan '01 @ $35 100 365,625
IBM Corp.
expiring Jan '00 @ $45 160 1,234,000
expiring Jan '00 @ $75 30 143,250
expiring Jan '00 @ $80 30 129,000
expiring Jan '01 @ $65 20 121,000
expiring Jan '01 @ $70 50 288,125
Lowe's Companies, Inc.
expiring Jan '00 @ $30 70 129,500
expiring Jan '00 @ $37.50 100 127,500
MBNA Corp.
expiring Jan '00 @ $15 1,741 1,436,325
MCI WorldCom, Inc.
expiring Jan '00 @ $25 190 904,875
expiring Jan '00 @ $40 90 291,375
expiring Jan '00 @ $50 75 172,500
Mediaone Group
expiring Jan '00 @ $40 675 1,936,406
Merrill Lynch & Co., Inc.
expiring Jan '00 @ $50 135 264,937
Morgan Stanley Dean
Witter & Co.
expiring Jan '00 @ $50 300 1,215,000
expiring Jan '01 @ $50 100 435,000
Motorola, Inc.
expiring Jan '00 @ $45 130 568,750
Nokia Corp. (ADR) (Finland)
expiring Jan '00 @ $30 140 845,250
Pfizer, Inc.
expiring Jan '00 @ $23.33 300 356,250
Time Warner, Inc.
expiring Jan '00 @ $32.50 150 432,188
expiring Jan '00 @ $35 150 394,688
Tyco International Ltd.
expiring Jan '00 @ $30 640 4,720,000
expiring Jan '00 @ $40 300 1,916,250
United Technologies Corp.
expiring Jan '00 @ $35 390 945,750
Wal-Mart Stores, Inc.
expiring Jan '00 @ $17.50 600 1,818,750
Total Call Options Purchased
(cost $26,050,094) 31,572,264
PUT OPTION PURCHASED-0.4% (A)
Standard & Poor's 500 Index
expiring Oct '99 @ $100
(cost $420,150) 50 562,500
SHORT TERM INVESTMENT-5.3%
COMMERCIAL PAPER-5.3%
General Electric Capital Corp.
5.03%, 10/01/99
(amortized cost $7,972,000) $7,972 7,972,000
TOTAL INVESTMENTS-101.0%
(cost $101,076,986) 152,034,294
CALL OPTIONS WRITTEN-(0.3%)(A)
Chicago Board Options Exchange NASDAQ
100 Index
expiring Oct '99 @ $2,420 25 (158,438)
expiring Oct '99 @ $2,440 10 (56,250)
expiring Oct '99 @ $2,480 10 (39,500)
expiring Oct '99 @ $2,500 20 (60,000)
Cisco Systems, Inc.
expiring Oct '99 @ $70 90 (15,187)
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
CONTRACTS (C) VALUE
- -------------------------------------------------------------------------------
General Electric Co.
expiring Oct '99 @ $120 20 $ (4,750)
IBM Corp.
expiring Oct '99 @ $130 40 (4,250)
Microsoft Corp.
expiring Oct '99 @ $95 20 (2,500)
Nokia Corp. ADR (Finland)
expiring Oct '99 @ $90 20 (5,375)
Vodafone Airtouch
PLC-SP ADR (United Kingdom)
expiring Oct '99 @ $210 20 (59,500)
expiring Oct '99 @ $220 60 (114,750)
Total Call Options Written
(premiums received $715,376) (520,500)
TOTAL INVESTMENTS, NET OF OUTSTANDING
CALL OPTIONS WRITTEN-100.7%
(cost $100,361,610) 151,513,794
Other assets less liabilities (0.7%) (994,990)
NET ASSETS-100% $150,518,804
(a) Non-income producing security.
(b) Security, or a portion thereof, has been segregated to collateralize open
options written. This collateral has a total market value of approximately
$20,380,168.
(c) One contract relates to 100 shares unless otherwise indicated.
(d) One contract relates to 125 shares.
(e) One contract relates to 150 shares.
Glossary:
ADR - American Depository Receipt.
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999 ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $101,076,986) $152,034,294
Receivable for investment securities sold 6,771,841
Dividends receivable 16,696
Deferred organization expenses and other assets 10,391
Total assets 158,833,222
LIABILITIES
Outstanding call options written, at value
(premiums received $715,376) 520,500
Due to custodian 3,325
Dividends payable 4,277,264
Payable for investment securities purchased 2,618,085
Rights offering payable 371,112
Advisory fee payable 221,934
Administration fee payable 27,592
Accrued expenses and other liabilities 274,606
Total liabilities 8,314,418
NET ASSETS $150,518,804
COMPOSITION OF NET ASSETS
Capital stock, at par $ 35,727
Additional paid-in capital 91,637,968
Accumulated net realized gain on investment transactions 7,692,925
Net unrealized appreciation of investments and
options written 51,152,184
$150,518,804
NET ASSET VALUE PER SHARE
(based on 3,572,754 shares outstanding) $42.13
See notes to financial statements.
9
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1999 ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign tax
withheld of $9,853) $ 364,275
Interest 131,003 $ 495,278
EXPENSES
Advisory fee 1,975,334
Administrative 289,030
Audit and legal 169,657
Custodian 127,884
Shareholder servicing 115,612
Printing 55,307
Directors' fees and expenses 39,695
Registration 20,890
Transfer agency 6,199
Amortization of organization expenses 4,000
Miscellaneous 7,734
Total expenses before interest 2,811,342
Interest expense on short sales 4,573
Total expenses 2,815,915
Net investment loss (2,320,637)
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS, SHORT SALES AND
OPTIONS WRITTEN
Net realized gain on long transactions 24,492,634
Net realized loss on short sale
transactions (90,496)
Net realized loss on written
option transactions (504,509)
Net change in unrealized appreciation of
investments and options written 17,182,666
Net gain on investments 41,080,295
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 38,759,658
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,
1999 1998
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment loss $ (2,320,637) $(1,932,651)
Net realized gain on investment,
short sale and written option
transactions 23,897,629 8,866,477
Net change in unrealized appreciation
of investments and options written 17,182,666 2,937,240
Net increase in net assets from
operations 38,759,658 9,871,066
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments (11,970,696) (12,924,008)
COMMON STOCK TRANSACTIONS
Reinvestment of dividends resulting
in issuance of common stock 274,154 127,507
Proceeds from sale of shares of
common stock in rights offering 41,903,669 -0-
Total increase (decrease) 68,966,785 (2,925,435)
NET ASSETS
Beginning of year 81,552,019 84,477,454
End of year $150,518,804 $81,552,019
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 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 effect 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, 1999,
the fee as adjusted, amounted to 1.68% of the Fund's average net assets.
12
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 $1,140 during the year ended September 30, 1999.
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, 1999 amounted to $259,520, none of which was paid to brokers
utilizing the services of the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corp. ("DLJ"), an affiliate of the Adviser, nor to DLJdirectly.
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments,
short-term options, and U.S. government securities) aggregated $146,019,509 and
$118,595,029, respectively, for the year ended September 30, 1999. There were
no purchases or sales of U.S. government or government agency obligations for
the year ended September 30, 1999.
At September 30, 1999, the cost of investments for federal income tax purposes
was $101,501,168. Accordingly, gross unrealized appreciation of investments was
$55,514,459 and gross unrealized depreciation of investments was $5,501,833
resulting in net unrealized appreciation of $50,012,626.
1. OPTIONS TRANSACTIONS
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.
13
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
Transactions in options written for the year ended September 30, 1999 were as
follows:
NUMBER PREMIUMS
OF CONTRACTS RECEIVED
------------ ----------
Options outstanding at beginning of year 885 $ 1,306,240
Options written 5,909 13,859,584
Options terminated in closing purchase
transactions (6,459) (14,450,448)
Options outstanding at September 30, 1999 335 $ 715,376
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 7.50% 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
3,572,754 shares outstanding at September 30, 1999, the Investment Adviser
owned 5,000 shares. During the year ended September 30, 1999, the Fund issued
7,737 shares in connection with the Fund's dividend reinvestment plan.
NOTE E: RIGHTS OFFERING
During the year ended September 30, 1999, the Fund issued 1,057,000 shares in
connection with a rights offering of the Fund's shares. Shareholders of record
on June 21, 1999, were issued one non-transferable right for each share of
common stock owned, entitling shareholders the opportunity to acquire one newly
issued share of common stock for every three rights held at a subscription
price of $41.68 per share. Offering costs of $500,000 attributed to the rights
offering were charged to additional paid-in capital. Dealer management and
soliciting fees of $1,652,091 were netted against the proceeds of the
subscription.
14
FINANCIAL HIGHLIGHTS ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NOVEMBER 4,
1994(A)
YEAR ENDED SEPTEMBER 30, TO
-------------------------------------------------- SEPTEMBER 30,
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $32.52 $33.72 $22.19 $23.78 $19.70(b)
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.84)(c) (.77) (.58) (.48) (.09)
Net realized and unrealized gain
on investment transactions 17.26 4.73 14.40 1.86 5.65
Net increase in net asset value
from operations 16.42 3.96 13.82 1.38 5.56
LESS: DISTRIBUTIONS
Distributions from net realized gains (4.26) (5.16) (2.29) (2.97) (1.48)
CAPITAL SHARE TRANSACTIONS
Dilutive effect of rights offering (2.41) -0- -0- -0- -0-
Offering costs charged to additional
paid-in capital (.14) -0- -0- -0- -0-
Total capital share transactions (2.55) -0- -0- -0- -0-
Net asset value, end of period $42.13 $32.52 $33.72 $22.19 $23.78
Market value, end of period $38.688 $36.875 $31.188 $19.00 $19.50
TOTAL RETURN
Total investment return based on: (d)
Market value 15.45% 37.40% 79.27% 13.26% 5.46%
Net asset value 42.20% 12.49% 65.66% 8.10% 28.60%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $150,519 $81,552 $84,477 $55,582 $59,561
Ratio of expenses to average net assets 2.39% 2.57% 2.48% 2.87% 2.00%(e)
Ratio of expenses to average net assets
excluding interest expense 2.39%(f) 2.52%(f) 2.43%(f) 2.62%(f) 2.00%(e)
Ratio of net investment loss to average
net assets (1.97)% (2.18)% (2.07)% (2.11)% (.48)%(e)
Portfolio turnover rate 110% 96% 105% 199% 140%
</TABLE>
(a) Commencement of operations.
(b) Net of offering costs of $.30.
(c) Based on average shares outstanding.
(d) 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.
(e) Annualized.
(f) Net of interest expense of .003%, .05%, .05% and .25%, respectively, on
short sales (see Note C).
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, 1999, 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
four 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, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
November 19, 1999
TAX INFORMATION (UNAUDITED)
In order to meet certain requirements of the Internal Revenue Code we are
advising you that $5,527,323 of capital gain distributions paid by the Fund
during the fiscal year ended September 30, 1999 are subject to a maximum tax
rate of 20%.
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 2000.
16
ADDITIONAL INFORMATION ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
YEAR 2000
Many computer systems and applications that process transactions use two-digit
date fields for the year of a transaction, rather than the full four digits. If
these systems are not modified or replaced, transactions occurring after 1999
could be processed as year "19XX," which could result in processing
inaccuracies and inoperability at or after the year 2000. The Funds and their
major service providers, including Alliance, utilize a number of computer
systems and applications that have been either developed internally or licensed
from third-party suppliers. In addition, the Funds and their major service
providers, including Alliance, are dependent on third-party suppliers for
certain systems applications and for electronic receipt of information critical
to their business. Should any of the computer systems employed by the Funds or
their major service providers, including Alliance, fail to process Year 2000
related information properly, that could have a significant negative impact on
the Funds' operations and the services that are provided to the Funds'
shareholders. To the extent that the operations of issuers of securities held
by the Funds are impaired by the Year 2000 problem, the value of the Funds'
shares may be materially affected. In addition, for the Funds' investments in
foreign markets, it is possible that foreign companies and markets will not be
as prepared for Year 2000 as domestic companies and markets.
The Year 2000 issue is a high priority for the Funds and Alliance. During 1997,
Alliance began a formal Year 2000 initiative which established a structured and
coordinated process to deal with the Year 2000 issue. As part of its
initiative, Alliance established a Year 2000 project office to manage the Year
2000 initiative, focusing on both information technology and non-information
technology systems. The Year 2000 project office meets periodically with the
audit committee of the board of directors of Alliance Capital Management
Corporation, Alliance's general partner, and with Alliance's executive
management to review the status of the Year 2000 efforts. Alliance has also
retained the services of a number of consulting firms which have expertise in
advising and assisting with regard to Year 2000 issues. Alliance reports that
by June 30, 1998 it had completed its inventory and assessment of its domestic
and international computer systems and applications, identified mission
critical systems (those systems where loss of their function would result in
immediate stoppage or significant impairment to core business units) and
nonmission critical systems and determined which of these systems were not Year
2000 compliant. All third-party suppliers of mission critical computer systems
and applications and nonmission critical systems have been contacted to verify
whether their systems and applications will be Year 2000 compliant and their
responses are being evaluated. Substantially all of those contacted have
responded and approximately 90% have informed Alliance that their systems and
applications are or will be Year 2000 compliant. All mission and nonmission
critical systems supplied by third parties have been tested with the exception
of those third parties not able to comply with Alliance's testing schedule.
Alliance reports that it expects that all testing will be completed before the
end of 1999.
Alliance has remediated, replaced or retired all of its non-compliant mission
critical systems and applications that can affect the Funds. All nonmission
critical systems have been remediated. After each system has been remediated,
it is tested with 19XX dates to determine if it still performs its intended
business function correctly. Next, each system undergoes a simulation test
using dates occurring after December 31, 1999. Inclusive of the replacement and
retirement of some of its systems, Alliance has completed these testing phases
for approximately 98% of mission critical systems and 100% of nonmission
critical systems. Integrated systems tests were conducted to verify that the
systems would continue to work together. Full integration testing of all
mission critical and nonmission critical systems is complete. Testing of
interfaces with third-party suppliers has begun and will continue throughout
1999. Alliance reports that it has completed an inventory of its facilities and
related technology applications and has begun to evaluate and test these
systems. Alliance reports that it anticipates that these systems will be fully
operable in the year 2000. Alliance has deferred certain other planned
information technology projects until after the Year 2000 initiative is
completed. Such delay is not expected to have a material adverse effect on
Alliance's financial condition or results of operations. Alliance, with the
assistance of a consulting firm, is developing Year
17
ADDITIONAL INFORMATION (CONTINUED) ALLIANCE ALL-MARKET ADVANTAGE FUND
_______________________________________________________________________________
2000 specific contingency plans with emphasis on mission critical functions.
These plans seek to provide alternative methods of processing in the event of a
failure that is outside Alliance's control.
The estimated current cost to Alliance of the Year 2000 initiative ranges from
approximately $40 million to $45 million. These costs consist principally of
modification and testing and costs to develop formal Year 2000 specific
contingency plans. These costs, which will generally be expensed as incurred,
will be funded from Alliance's operations and the issuance of debt. Through
June 30, 1999, Alliance had incurred approximately $36.0 million of costs
related to the Year 2000 initiative. At this time, management of Alliance
believes that the costs associated with resolving the Year 2000 issue will not
have a material adverse effect on Alliance's results of operations, liquidity
or capital resources.
There are many risks associated with Year 2000 issues, including the risks that
the computer systems and applications used by the Funds and its major service
providers will not operate as intended and that the systems and applications of
third-party suppliers to the Funds and their service providers will not be Year
2000 compliant. Likewise there can be no assurance the compliance schedules
outlined above will be met or that the actual cost incurred will not exceed
current cost estimates. Should the significant computer systems and
applications used by the Funds or their major service providers, or the systems
of their important third-party suppliers, be unable to process date-sensitive
information accurately after 1999, the Funds and their service providers may be
unable to conduct their normal business operations and to provide shareholders
with required services. In addition, the Funds and their service providers may
incur unanticipated expenses, regulatory actions and legal liabilities. The
Funds and Alliance cannot determine which risks, if any, are most reasonably
likely to occur or the effects of any particular failure to be Year 2000
compliant. Certain statements provided by Alliance in this section entitled
"Year 2000", as such statements relate to Alliance, are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. To the fullest extent permitted by law, the foregoing Year 2000
discussion is a "Year 2000 Readiness Disclosure" within the meaning of the Year
2000 Information and Readiness Disclosure Act, 15 U.S.C. Sec. 1 (1998).
18
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 NORDBY, 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.
19
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.
AMAAR999
