<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON JUNE 21, 1999
1933 ACT FILE NO. 333-77839
1940 ACT FILE NO. 811-08702
___________________________________________________________
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
(CHECK APPROPRIATE BOX OR BOXES)
/ / REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/X/ PRE-EFFECTIVE AMENDMENT NO. 2
/ / POST-EFFECTIVE AMENDMENT NO.
AND/OR
/ / REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
/X/ AMENDMENT NO. 5
EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER:
ALLIANCE ALL-MARKET ADVANTAGE FUND, INC.
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES
(NUMBER, STREET, CITY, STATE, ZIP CODE):
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(212) 969-1000
NAME AND ADDRESS (NUMBER, STREET, CITY, STATE, ZIP CODE)
OF AGENT FOR SERVICE:
EDMUND P. BERGAN, JR.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
ALLIANCE FUND DISTRIBUTORS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
WITH COPIES TO:
PATRICIA A. POGLINCO LEONARD B. MACKEY, JR.
SEWARD & KISSEL LLP ROGERS & WELLS, LLP
ONE BATTERY PARK PLAZA 200 PARK AVENUE
NEW YORK, NEW YORK 10004 NEW YORK, NEW YORK 10166
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF
<PAGE>
THIS REGISTRATION STATEMENT.
IF ANY SECURITIES BEING REGISTERED ON THIS FORM WILL BE OFFERED
ON A DELAYED OR CONTINUOUS BASIS IN RELIANCE ON RULE 415 UNDER
THE SECURITIES ACT OF 1933, OTHER THAN SECURITIES OFFERED IN
CONNECTION WITH A DIVIDEND REINVESTMENT PLAN, CHECK THE FOLLOWING
BOX. /X/
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Proposed Maximum
Title of Proposed Maximum Aggregate
Securities Amount Offering Amount of Registra-
Being Being Price Offering tion
Registered Registered Per Unit Price Fee
______________ ___________ ____________ _____________ ___________
Common Stock,
$.01 par value 1,048,230 $47.0625 (1) $49,332,325.00(1) $13,714.39(2)
8,770 44.1563 (3) $ 387,250.75(3) $ 110.00(4)
1,057,000* $49,719,575.75* $13,824.39
The registrant hereby amends this Registration Statement under
the Securities Act of 1933 on such date or dates as may be
necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or
until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to Section 8(a), may
determine.
___________________
(1) Estimated pursuant to Rule 457(c) under the Securities Act
of 1933 on the basis of a market price per share on May 3, 1999
for filing of the Fund's Registration Statement on May 5, 1999.
(2) Previously paid pursuant to filing of the Fund's Registration
Statement on May 5, 1999.
(3) Estimated pursuant to Rule 457(c) under the Securities Act
of 1933 on the basis of a market price per share on June 15, 1999
for filing of the Pre-Effective Amendment No. 1 to the Fund's
Registration Statement on June 18, 1999.
(4) Previously paid pursuant to filing of Pre-Effective
Amendment No. 1 to the Fund's Registration Statement on June 18,
1999.
2
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* Total
3
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845,600 SHARES OF COMMON STOCK
ALLIANCE ALL-MARKET ADVANTAGE FUND, INC.
ISSUABLE UPON EXERCISE OF
RIGHTS TO SUBSCRIBE FOR
SUCH SECURITIES
PROSPECTUS
DEALER MANAGER
PAINEWEBBER INCORPORATED
June 21, 1999
4
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TABLE OF CONTENTS
PROSPECTUS SUMMARY.......................................... 8
EXPENSE INFORMATION......................................... 17
FINANCIAL HIGHLIGHTS........................................ 20
THE FUND.................................................... 24
THE OFFER................................................... 24
USE OF PROCEEDS............................................. 38
INVESTMENT OBJECTIVE AND POLICIES........................... 38
RISK FACTORS AND SPECIAL CONSIDERATIONS..................... 57
MANAGEMENT OF THE FUND...................................... 64
PORTFOLIO TRADING........................................... 74
DETERMINATION OF NAV........................................ 77
TENDER OFFERS AND SHARE REPURCHASES......................... 79
DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT PLAN..... 82
FEDERAL TAXATION............................................ 85
DESCRIPTION OF COMMON STOCK................................. 91
CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING AGENT,
REGISTRAR AND SHAREHOLDER SERVICING AGENT................. 94
LEGAL MATTERS............................................... 95
REPORTS TO STOCKHOLDERS..................................... 95
EXPERTS..................................................... 95
FURTHER INFORMATION......................................... 95
FINANCIAL STATEMENTS........................................ F-1
5
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ALLIANCE ALL-MARKET ADVANTAGE FUND, INC.
845,600 Shares of Common Stock
Issuable upon Exercise of
Rights to Subscribe for These Shares
_____________________________
Alliance All-Market Advantage Fund, Inc., referred to in
this Prospectus as the Fund, is issuing non-transferable rights
to its stockholders. You will receive one right for each share
you own at the close of business on the record date, June 21,
1999. These rights will entitle you to subscribe for one new
share of the Fund's common stock for every three rights you
receive. Record date stockholders who receive less than three
rights will be entitled to purchase one share. Record date
stockholders who exercise all their rights may purchase shares
not acquired by other record date stockholders in this rights
offering subject to limitations described in this Prospectus.
The Fund may increase the number of shares that may be subscribed
for in this offering by up to 25% of the primary subscription (as
defined in this Prospectus), or an additional 211,400 shares, for
a total of 1,057,000 shares, to honor record date stockholder
requests to purchase more shares. Unless extended as described
in this Prospectus, this offer will expire at 5:00 P.M., New York
City time, on July 16, 1999.
The rights are non-transferable and therefore may not be
purchased or sold. The rights will not be admitted for trading
on the New York Stock Exchange, known as the NYSE, or any other
exchange. The Fund's outstanding shares are listed, and the
shares issued in this offer will be listed, on the NYSE under the
symbol "AMO." On June 18, 1999, the net asset value per Fund
share, or NAV, was $47.28, and the last reported sales price of a
share on the NYSE was $44.00.
The purchase price per share referred to in this
Prospectus as the Subscription Price will be 95% of the lower of
(1) the average of the last reported sales price per share on the
NYSE for the five trading days ending with the day the offer
expires and (2) the NAV as of the close of trading on the NYSE on
that day.
PER SHARE TOTAL
Estimated Subscription Price $41.80 $35,346,080
Sales Load $ 1.57 $ 1,325,478
Proceeds to the Fund* $40.23 $34,020,602
The estimated subscription price is based on 95% of the
last reported sales price per share on the NYSE on
6
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June 18, 1999. The proceeds to the Fund assumes all
845,600 shares are purchased at this estimated price.
If the Fund increases the number of shares subject to
subscription by up to 211,400 as described above, the
proceeds to the Fund would be $42,525,752.
* Before deduction of expenses incurred by the Fund
related to the offer estimated at $500,000, including an
aggregate of up to $100,000 to be paid to the Dealer
Manager as partial reimbursement for its expenses.
The Fund is a non-diversified, closed-end management
investment company. The Fund's investment objective is to
provide long-term growth of capital through all market
conditions. Consistent with the investment style of Alliance
Capital Management's "Large Cap Growth Group," the Fund invests
primarily in the equity securities of a limited number of large,
intensively researched, high-quality companies that are judged
likely to achieve superior earnings growth. Alliance Capital
Management L.P. has served as the Fund's investment adviser since
the Fund's inception in 1994.
If you do not exercise your rights, you will, upon the
completion of the offer, own a smaller proportional interest in
the Fund than you do now. Because the subscription price per
share will be less than the NAV on the expiration date and
because the Fund will incur expenses related to the offering,
record date stockholders will also experience an immediate
dilution, which could be substantial, of the aggregate NAV of
their shares. This dilution will disproportionately affect
record date stockholders who do not exercise their rights in
full. In addition, there also may be substantial dilution to the
extent that the Fund increases the number of shares subject to
subscription by up to 25% in order to satisfy over-subscription
requests. The Fund cannot state precisely the extent of this
dilution because the Fund does not know what the NAV will be when
the offer expires, how many rights will be exercised or the exact
expenses of the offer.
_____________________________
Neither the Securities and Exchange Commission nor any
state securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
Prospectus. Any representation to the contrary is a criminal
offense.
_____________________________
7
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This Prospectus sets forth concisely the information
about the Fund that a prospective investor ought to know before
investing. Investors are advised to read and retain it for
future reference.
PAINEWEBBER INCORPORATED
THE DATE OF THIS PROSPECTUS IS JUNE 21, 1999
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PROSPECTUS SUMMARY
This portion of the Prospectus summarizes information
contained elsewhere in the Prospectus. The summary is not
complete and does not contain all of the information that you
should consider before purchasing Fund shares. You should read
the entire Prospectus carefully, especially the risks of
investing in the shares discussed under "Risk Factors and Special
Considerations."
PURPOSES OF THE OFFER
The Board of Directors of the Fund has determined that
it is in the best interests of the Fund and its existing
stockholders to increase the assets of the Fund available for
investment, thereby allowing the Fund to more fully take
advantage of available investment opportunities, reduce the
relative significance of certain large positions in its portfolio
and improve the portfolio's tax efficiency. In reaching its
decision, the Board of Directors was advised by Alliance Capital
Management L.P., the Fund's investment adviser, referred to in
this Prospectus as Alliance, or the Adviser, that the
availability of new assets would give the Fund additional
investment flexibility to take advantage of what Alliance
believes to be attractive investment opportunities without being
required to sell current portfolio positions that it desires to
retain and which, if sold, could cause the realization of
significant capital gains by the Fund and its stockholders. The
Board of Directors also took into account that a well-subscribed
rights offering would likely reduce the Fund's expense ratio,
which would be of long-term benefit to stockholders. In
addition, the Board of Directors considered that this rights
offering could result in an improvement in the liquidity of the
trading market for the Fund's shares on the NYSE. The Board also
considered that this rights offering would give record date
stockholders the opportunity to purchase shares at a price below
market price per share and/or NAV, and might increase the level
of market interest in the Fund. The Board also considered the
proposed terms of the offer, the expenses of the offer, and its
dilutive effect, on exercising and non-exercising record date
stockholders.
There can be no assurance that the offer will be
successful or that by increasing the size of the Fund, the Fund's
aggregate expenses, and correspondingly, its expense ratio will
be lowered.
Alliance, as well as PaineWebber Incorporated, the
Dealer Manager for the offer who also serves as the shareholder
servicing agent for the Fund, will benefit from the offer because
they receive fees based in part on the average net assets of the
9
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Fund, which will increase as a result of the offer. In addition,
PaineWebber Incorporated will receive a dealer manager fee and
soliciting dealer fees as described below.
IMPORTANT TERMS OF THE OFFER
Aggregate number of shares offered.. 845,600 (not including up to
211,400 additional shares
the Fund may issue to cover
over-subscription requests)
Number of non-transferable rights
issued to each record date
stockholder......................... One right for each whole
share owned on the record
date
Subscription ratio.................. One share for every three
rights (1-for-3); record
date stockholders issued
fewer than three rights may
purchase one share at the
subscription price
Subscription price per share........ 95% of the lower of (1) the
average of the last reported
sales price of a Fund share
on the NYSE for the five
trading days ending with the
day the offer expires and
(2) the NAV as of the close
of trading on the NYSE on
that date
Expiration date..................... 5:00 P.M., New York City
time, on July 16, 1999,
unless the offer is extended
OVER-SUBSCRIPTION PRIVILEGE
Record date stockholders who fully exercise all of the
rights issued to them may subscribe for shares that were not
subscribed for by other record date stockholders. If enough
shares are available, all of these requests will be honored in
full. If these requests for shares exceed the shares available,
the Fund may determine after the expiration of the offer, in the
discretion of the Board of Directors, to issue up to an
additional 25% of the shares available pursuant to the offer (up
to an additional 211,400 shares) in order to cover these
requests. Regardless of whether the Fund issues such additional
10
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shares, to the extent shares are not available to honor all
requests, the available shares will be allocated pro rata among
those record date stockholders who over-subscribe based on the
number of rights originally issued to them by the Fund.
IMPORTANT DATES TO REMEMBER
Record Date....................... June 21, 1999
Subscription Period............... June 21, 1999 - July 16, 1999*
Expiration Date and Pricing Date. July 16, 1999*
Subscription Certificates and
Payment for Shares Due**.......... July 16, 1999*
Notice of Guaranteed Delivery Due. July 16, 1999*
Subscription Certificates and
Payment for Guarantees of Delivery
Due............................... July 21, 1999*
Confirmation Mailed to
Participants...................... July 28, 1999*
Final Payment for Shares***....... August 11, 1999*
* Unless the offer is extended.
** A record date stockholder exercising rights must deliver by
the expiration date either (i) a Subscription Certificate
and payment for shares or (ii) a Notice of Guaranteed
Delivery.
*** Additional amount due (in the event the subscription price
exceeds the estimated subscription price).
A more detailed description of the Subscription
Certificate and Notice of Guaranteed Delivery can be found on
page 28.
NON-TRANSFERABILITY OF RIGHTS
The rights are non-transferable and, therefore, may not
be purchased or sold. Rights not exercised will expire without
residual value when the offer expires. The rights will not be
listed for trading on the NYSE or any other securities exchange.
The shares to be issued pursuant to the offer will be listed for
trading on the NYSE, subject to notice of issuance.
METHODS FOR EXERCISING RIGHTS
The rights are evidenced by Subscription Certificates
that will be mailed to record date stockholders or their
nominees, except foreign record date stockholders and their
nominees. If you wish to exercise your rights, you may do so in
the following ways:
1. Complete and sign the Subscription Certificate.
Mail it in the envelope provided or deliver the
11
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completed and signed Subscription Certificate with
payment in full to The Bank of New York at the
address indicated on the Subscription Certificate.
Your completed and signed Subscription Certificate
and payment must be received by the expiration of
the offer (5:00 P.M., New York City time, on July
16, 1999, unless the offer is extended); or
2. Contact your broker, banker or trust company which
can arrange, on your behalf, pursuant to a Notice
of Guaranteed Delivery, to guarantee delivery of
payment and delivery of a properly completed and
executed Subscription Certificate by the close of
business on the third business day after the
expiration date of the offer. A fee may be charged
for this service. The Notice of Guaranteed
Delivery must be received on or before the
expiration of the offer.
Fractional shares will not be issued. After the
exercise of rights, record date stockholders who have remaining
less than three rights will not be able to purchase a share upon
exercise of these remaining rights, which will expire without any
residual value. Record date stockholders who receive less than
three rights, however, may purchase one share at the subscription
price. Record date stockholders may request additional shares
under the over-subscription privilege.
OFFERING FEES AND EXPENSES
The Fund has agreed to pay the Dealer Manager a fee for
its financial advisory and marketing services equal to 3.75% of
the aggregate subscription price for each share issued pursuant
to the offer. The Dealer Manager will reallow a part of its fees
to other broker-dealers which have assisted in soliciting the
exercise of rights as described in this Prospectus. Other
offering expenses incurred by the Fund are estimated at $500,000,
which includes up to $100,000 that may be paid to the Dealer
Manager as partial reimbursement for its expenses relating to the
offer.
FOREIGN RESTRICTIONS
The Fund will not mail Subscription Certificates to
record date stockholders whose record addresses are outside the
United States. Foreign record date stockholders or their
nominees will receive written notice of the offer. Their rights
will be held by The Bank of New York, the Subscription Agent,
until instructions are received to exercise the rights. If no
instructions are received prior to or on the expiration date, the
rights will expire.
12
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USE OF PROCEEDS
Based on the estimated subscription price of $41.80 per
share, the estimated net proceeds of the offer are approximately
$33,520,620 This amount assumes that all 845,600 shares offered
in the primary subscription are sold and that the offering
expenses are $500,000. If, as described above, the Fund
increases the number of shares subject to subscription by 25% in
order to satisfy over-subscription requests, the additional net
proceeds will be approximately $8,505,150.
The Fund's investment adviser anticipates that, under
current market conditions, the Fund will take up to 30 days to
invest or employ the offer proceeds consistent with the Fund's
investment objective and policies. This process will not take
longer than three months. Until invested, the proceeds of the
offer will be held in U.S. Government securities and other high-
quality, short-term money market instruments. These temporary
investments will not be consistent with the Fund's objective of
long-term growth of capital through all market conditions.
INFORMATION AGENT
Please direct all questions or inquiries relating to the
offer to the Fund's Information Agent at:
Shareholder Communications Corporation
17 State Street
New York, New York 10004
Toll Free: (800) 645-8640
Brokers and banks please call (212) 805-7113
Stockholders may also contact their brokers or nominees
for information with respect to the offer.
INFORMATION REGARDING THE FUND
The Fund has been a non-diversified, closed-end
management investment company since its initial public offering
in 1994. The Fund's investment objective is long-term growth of
capital through all market conditions. Consistent with the
investment style of Alliance's Large Cap Growth Group, the Fund
will invest in a "Core Portfolio" of equity securities of large,
intensively researched, high-quality companies that are judged
likely to achieve superior earnings growth. In the Adviser's
view, high-quality companies are larger capitalization companies
(companies with market capitalizations generally expected to
exceed $5 billion) that possess, among other things, relatively
long operating histories, strong management, superior industry
positions and excellent balance sheets. The Fund will seek to
take advantage of what the Adviser believes are opportunities
13
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presented by unwarranted fluctuations in the prices of
securities, both to purchase or increase positions on weakness
and to sell or reduce overpriced holdings. To take advantage of
investment opportunities in both rising and declining markets,
the Fund may make substantial use of options, including
purchasing and writing call and put options, and may engage in
short selling and use certain other investment practices,
including futures and forward contracts, and leverage.
The Fund's Core Portfolio, which will constitute at
least the majority of, and at times may constitute substantially
all of, its total assets, will normally consist of the equity
securities of the approximately 25 companies that are most highly
regarded by Alliance's Large Cap Growth Group. These Core
Portfolio companies will be predominantly U.S. companies. The
balance of the portion of the Fund's portfolio that is invested
in equity securities will be invested in equity securities of
other U.S. and non-U.S. companies that the Adviser considers to
have exceptional growth potential.
Normally, about 40-60 companies will be represented in
the Fund's portfolio. The Fund thus differs from more typical
equity investment companies because it invests most of its assets
in a relatively small number of intensively researched companies.
The Fund may invest up to 35% of its total assets in equity
securities of non-U.S. companies. Equity securities of non-U.S.
companies will be selected by the Adviser for investment by the
Fund on the basis of the same growth potential and other
characteristics as equity securities of U.S. companies.
The Fund has implemented a quarterly distribution policy
pursuant to which it makes quarterly distributions of 2.5% of the
Fund's NAV as of the beginning of each of the first three
calendar quarters each year and of at least 2.5% of the Fund's
NAV as of the beginning of the fourth calendar quarter. If
distributions for any quarter exceed the Fund's net investment
income and net realized short-term capital gains, the difference
would be treated as distributions of the Fund's net realized
long-term capital gains and, to the extent of the amount of any
distributions in excess of such gains, as a return of the
stockholder's capital.
INFORMATION REGARDING THE ADVISER
The Fund's investment adviser is Alliance Capital
Management L.P., a leading international investment adviser
managing client accounts with assets as of March 31, 1999
totaling more than $301 billion (of which approximately $127
billion represented assets of investment companies). As of
March 31, 1999, the Adviser managed retirement assets for many of
the largest public and private employee benefit plans (including
14
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30 of the nation's Fortune 100 companies), for public employee
retirement funds in 32 out of the 50 states, for investment
companies, and for foundations, endowments, banks and insurance
companies worldwide. The 54 registered investment companies,
with more than 119 separate portfolios, managed by the Adviser
currently have over 4 million shareholder accounts.
The persons primarily responsible for the day-to-day
management of the Fund are Alfred Harrison, Vice Chairman of
Alliance Capital Management Corporation, the Adviser's general
partner, and Michael J. Reilly, Senior Vice President of Alliance
Capital Management Corporation. Both Messrs. Harrison and Reilly
are members of Alliance's Large Cap Growth Group and have been
associated with Alliance since prior to 1994.
RISK FACTORS AND SPECIAL CONSIDERATIONS
You should consider the following factors, as well as
the other information in this Prospectus, before making an
investment in the Fund under this offer.
The offer will result in dilution.
Upon completion of the offer, stockholders who do not
fully exercise their rights will own a smaller proportional
interest in the Fund than would be the case if the offer had not
been made. Furthermore the subscription price per share for the
offer will be lower than the Fund's NAV. Any rights offering
priced at a discount to the Fund's NAV and involving payment of
expenses by the Fund entails some dilution in the NAV. Dilution
is the decrease in NAV that results from the Fund's issuance of
new shares at a discount to NAV when the rights are exercised and
from the Fund's payment of the expenses of the offer. The offer
will result in a dilution of NAV for all stockholders, which will
disproportionately affect stockholders who do not exercise their
rights. In addition, there also may be substantial dilution to
the extent that the Fund increases the number of shares subject
to subscription by up to 25% in order to satisfy over-
subscription requests. Although it is not possible to state
precisely the amount of the decrease in NAV because it is not
known at the date of this Prospectus how many shares will be
subscribed for, or what the subscription price will be, the
dilution might be substantial.
Principal risks.
In this Summary, we describe the principal risks that
may affect the Fund's portfolio as a whole. The Fund could be
subject to additional principal risks because the types of
investments made by the Fund can change over time. This
Prospectus has additional descriptions of investments that appear
15
<PAGE>
in bold type in the discussions under "Certain Investment
Practices" or "Risk Factors and Special Considerations." These
sections also include more information about the Fund, its
investments and related risks.
Other important things for you to note:
You may lose money by investing in the Fund.
An investment in the Fund is not a deposit in a
bank and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency.
Among the principal risks of investing in the Fund is
market risk, which is the risk that the value of your investment
may fluctuate as stock markets fluctuate. Because the Fund uses
derivatives strategies and other leveraging techniques
speculatively to enhance returns, it is subject to greater risk
and its returns may be more volatile than other funds,
particularly in periods of market declines. The Fund is "non-
diversified", which means that it invests in a smaller number of
securities than many other equity funds. As a result, changes in
the value of a single security may have a more significant
effect, either negative or positive, on the Fund's NAV. The
Fund's investments in foreign securities have foreign risk, which
is the risk that investments in issuers located in foreign
countries may have greater price volatility and less liquidity.
Foreign risk includes currency risk, which is the risk that
fluctuations in the exchange rates between the U.S. dollar and
foreign currencies could negatively affect the value of the
Fund's investments.
The Fund's shares may trade at a discount to NAV.
Shares of closed-end management investment companies
frequently trade at a discount from their NAV (the market price
per share is less than the value per share of the net assets).
This characteristic is a risk separate and distinct from the risk
that the Fund's NAV will decrease as a result of its investment
activities and may be greater for investors expecting to sell
their shares relatively soon after completion of this offering.
The Fund cannot predict whether its shares will trade at, above
or below NAV in the future.
There is no guarantee that the Fund will be able to
maintain its current level of dividends and distributions. Based
on information provided by the Adviser, the Board of Directors
believes that the offer will not result in a change in the Fund's
current level of dividends per share for the foreseeable future.
16
<PAGE>
There can be no assurance, however, that the Fund will be able to
maintain its current level of dividends per share, and the Board
of Directors may, at its sole discretion, change the Fund's
current dividend policy or its current level of dividends per
share in response to market or other conditions.
17
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EXPENSE INFORMATION
FEE TABLE
The following tables are intended to assist investors in
understanding the various costs and expenses that an investor in
this offer will bear, directly or indirectly.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load (as a percentage of
subscription price paid directly
from your investment)* 3.75%
ANNUAL EXPENSES (as a percentage of net assets
attributable to common shares)**
Management Fees*** 1.73%
Administration Fees**** 0.25%
Other Expenses***** 0.33%
TOTAL ANNUAL EXPENSES 2.31%
____________________
* The Fund has agreed to pay PaineWebber Incorporated, the
Dealer Manager, a fee for its financial advisory and
marketing services equal to 3.75% of the aggregate
subscription price for each share issued pursuant to the
offer. The Dealer Manager will reallow to other broker-
dealers solicitation fees equal to 2.50% of the
subscription price per share for each share issued
pursuant to the offer as a result of their soliciting
efforts. Other offering expenses to be incurred by the
Fund are estimated at $500,000, which includes up to
$100,000 that may be paid to the Dealer Manager as partial
reimbursement for its expenses relating to the offer.
These fees and expenses will be borne by the Fund and
indirectly by all of the Fund's stockholders, including
those stockholders who do not exercise their rights.
** Amounts are estimated for the Fund's current fiscal year
after giving effect to anticipated net proceeds of the
offer assuming that all of the rights are exercised, that
the maximum number of over-subscription shares are issued
and that the Fund incurs estimated offering expenses of
$500,000.
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*** The Adviser receives a monthly basic fee at an annualized
rate of 1.50% of the Fund's average net assets and an
adjustment to the basic fee based on the investment
performance of the Fund in relation to the investment
record of the Russell 1000 Growth(R) Index for certain
prescribed periods. The adjustment can cause the
Adviser's management fee to range from 1.20% to 1.80% of
the Fund's average net assets.
**** Alliance also receives a monthly fee at the annual rate of
.25% of the Fund's average weekly net assets for acting as
the Fund's Administrator.
***** Includes interest paid by the Fund in connection with
short sales.
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EXAMPLE
The following Example demonstrates the projected dollar
amount of total cumulative expenses that would be incurred over
various periods with respect to a hypothetical investment in the
Fund through this offering. The amounts are based upon payment
by the Fund of operating expenses at the levels set forth in the
above table.
1 Year 3 Years 5 Years 10 Years
An investor would
directly or indirectly
pay the following
expenses on a $1,000
investment in the Fund,
assuming a 5% annual $60 $107 $156 $292
return throughout the
relevant period and
reinvestment of all
dividends and other
distributions at NAV:
The foregoing fee table and example are intended to
assist investors in understanding the costs and expenses that an
investor in the Fund will bear directly or indirectly.
The Example set forth above assumes reinvestment of all
dividends and other distributions at NAV, payment of a 3.75%
sales load and annual expense ratio of 2.31%. The table above
and the assumption in the Example of a 5% annual return are
required by SEC regulations applicable to all management
investment companies. Your annual return may be more or less
than the 5% used in this Example. In addition, while the Example
assumes reinvestment of all dividends and other distributions at
NAV, participants in the Dividend Reinvestment Plan may receive
shares purchased or issued at a price or value different from
NAV.
The Example should not be considered a representation of
future expenses, and the Fund's actual expenses may be more or
less than those shown.
20
<PAGE>
FINANCIAL HIGHLIGHTS
The table below sets forth certain specified information for a
share outstanding throughout each period presented. Except for
the period from October 1, 1998 through March 31, 1999, the
financial highlights for each period presented have been audited
by PricewaterhouseCoopers LLP, the Fund's independent
accountants, whose unqualified report is included in the Fund's
September 30, 1998 Annual Report and is incorporated into this
Prospectus by reference. The financial highlights should be read
in conjunction with the financial statements and notes thereto,
which are set forth in this Prospectus and included in the Fund's
September 30, 1998 Annual Report and March 31, 1999 Semi-Annual
Report, each of which is available without charge by calling the
Fund at (212) 969-2232 or by contacting the Fund at 1345 Avenue
of the Americas, New York, New York 10105.
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT
EACH PERIOD
SIX MONTHS YEAR ENDED NOVEMBER 4,
ENDED SEPTEMBER 30, 1994(a) TO
MARCH 31, 1999 SEPTEMBER 30,
(UNAUDITED) 1998 1997 1996 1995
______________ _______ _______ _______ ______________
Net asset value,
beginning of period $32.52 $33.72 $ 22.19 $23.78 $19.70(b)
INCOME FROM
INVESTMENT OPERATIONS
Net investment loss (.41) (.77) (.58) (.48) (.09)
Net realized and
unrealized gain on
investment transactions 16.86 4.73 14.40 1.86 5.65
Net increase in net
asset value from
operations 16.45 3.96 13.82 1.38 5.56
LESS: DISTRIBUTIONS
Distributions from net
realized gains (1.88) (5.16) (2.29) (2.97) (1.48)
Net asset value, end of
period $47.09 $ 32.52 $33.72 $22.19 $23.78
Market value, end of
period $48.875 $36.875 $31.188 $19.00 $19.50
21
<PAGE>
TOTAL RETURN
Total investment return
based on: (c)
Market value 37.89% 37.40% 79.27% 13.26% 5.46%
Net asset value 50.77% 12.49% 65.66% 8.10% 28.60%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $118,471 $81,552 $84,477 $55,582 $59,561
Ratio of expenses to
average net assets 2.47%(d) 2.57% 2.48% 2.87% 2.00%(d)
Ratio of expenses to
average net assets
excluding interest
expense 2.47%(d) 2.52%(e) 2.43%(e) 2.62%(e) 2.00%(d)
Ratio of net investment
loss to average net
assets (2.02)%(d) (2.18)% (2.07)% (2.11)% (.48)%(d)
Portfolio turnover rate 59% 96% 105% 199% 140%(a)
_______________________
(a) Commencement of operations.
(b) Net of offering costs of $0.30.
(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.
22
<PAGE>
(e) Net of interest expense of 0.05%, 0.05% and 0.25%, respectively, on short
sales.
23
<PAGE>
CAPITALIZATION AT JUNE 1, 1999
________________________________________________________________
(1) (2) (3) (4)
AMOUNT
OUTSTANDING AMOUNT
HELD BY OUTSTANDING
AMOUNT FUND FOR ITS EXCLUSIVE OF
TITLE OF CLASS AUTHORIZED OWN ACCOUNT AMOUNT UNDER (3)
_______________ ___________ _____________ ________________
Common stock,
$0.01 par value 300,000,000 0 2,515,754
______________ ___________ _____________ ________________
TRADING AND NAV INFORMATION
In the past, the Fund's shares have traded both at a
premium and at a discount in relation to NAV. The Fund's shares
recently have been trading at times at a discount and at times at
a premium to NAV. As discussed above, shares of closed-end
investment companies frequently trade at a discount from NAV.
The shares are listed and traded on the NYSE under the
ticker symbol "AMO." The rights will not be admitted for trading
on the NYSE or any other stock exchange. The following table
shows the high and low sales prices of the Fund's shares on the
NYSE, the high and low NAV per share, and the high and low
premium or discount at which the Fund's shares were trading for
each fiscal quarter during its two most recent fiscal years and
since the beginning of the current fiscal year.
24
<PAGE>
QUARTER ENDED MARKET PRICE* NAV PREMIUM/(DISCOUNT)
TO NAV
HIGH LOW HIGH LOW HIGH LOW
_______ ________ ______ ______ ________ ________
December 31, 1996 $21 1/4 $19 $25.75 $22.80 (19.49)% (14.27)%
March 31, 1997 23 3/8 20 3/4 27.94 24.49 (19.07) (14.06)
June 30, 1997 28 3/8 20 1/4 31.02 24.28 (20.32) (5.81)
September 30, 1997 31 5/8 27 3/4 34.76 31.32 (13.57) (7.21)
December 31, 1997 33 3/8 28 11/16 35.37 29.42 0.19 (9.64)
March 31, 1998 37 5/8 28 1/2 37.30 29.13 2.29 (7.05)
June 30, 1998 41 3/16 35 11/16 39.88 35.91 5.05 (2.26)
September 30, 1998 47 7/16 34 3/8 43.87 31.71 12.77 2.15
December 31, 1998 43 5/16 28 7/16 42.99 27.32 15.35 (1.36)
March 31, 1999 49 7/8 44 48.43 42.55 6.59 0.59
___________________
Source:
* NYSE
The Fund's NAV at the close of business on April 14,
1999 (the last trading date on which the Fund publicly reported
its NAV prior to the announcement of the offer) and on June 18,
1999 (the last trading date on which the Fund publicly reported
its NAV prior to the date of this Prospectus) was $48.45 and
$47.28, respectively. The last reported sales price of the
Fund's shares on the NYSE on those dates was $49.25 and $44.00,
respectively.
THE FUND
The Fund was organized as a corporation under the laws
of Maryland on August 16, 1994 and has registered with the
Securities and Exchange Commission, or the SEC, under the
Investment Company Act of 1940, as amended, known as the 1940
Act, as an investment company. The Fund's principal office is
located at 1345 Avenue of the Americas, New York, NY 10105. The
Adviser is registered with the SEC under the Investment Advisers
Act of 1940, as amended.
The Fund is a closed-end management investment company.
These companies differ from open-end management investment
companies or mutual funds because closed-end investment companies
have a fixed capital base and do not redeem shares at NAV. Many
closed-end funds trade on the NYSE. Mutual funds issue
securities redeemable at NAV at any time at the option of the
stockholder and typically engage in a continuous offering of
their shares. For these reasons, mutual funds are subject to
periodic asset in-flows and out-flows that can complicate
portfolio management. Closed-end investment companies do not
face the prospect of having to liquidate portfolio holdings to
25
<PAGE>
satisfy redemptions at the option of stockholders or to maintain
cash positions to meet the possibility of redemptions and can
therefore remain fully invested.
THE OFFER
PURPOSES OF THE OFFER
The Board of Directors of the Fund has determined that
it is in the best interests of the Fund and its existing
stockholders to increase the assets of the Fund available for
investment, thereby allowing the Fund to more fully take
advantage of available investment opportunities, reduce the
relative significance of certain large positions in its portfolio
and improve the portfolio's tax efficiency. In reaching its
decision, the Board of Directors was advised by the Adviser that
the availability of new assets would give the Fund additional
investment flexibility to take advantage of what the Adviser
believes to be attractive investment opportunities without being
required to sell current portfolio positions that it desires to
retain, and which, if sold, could cause the realization of
significant capital gains by the Fund and its stockholders. The
Board of Directors also took into account that a well-subscribed
rights offering would likely reduce the Fund's expense ratio,
which would be of long-term benefit to stockholders. In
addition, the Board of Directors considered that this rights
offering could result in an improvement in the liquidity of the
trading market for the Fund's shares on the NYSE. The Board also
considered that this rights offering would give record date
stockholders the opportunity to purchase shares at a price below
market price per share and/or NAV, and might increase the level
of market interest in the Fund. The Board also considered the
proposed terms of the offer, the expenses of the offer, and its
dilutive effect on exercising and non-exercising record date
stockholders.
There can be no assurance that the offer will be
successful or that by increasing the size of the Fund, the Fund's
aggregate expenses, and correspondingly, its expense ratio will
be lowered.
The Fund may, in the future and at its discretion,
choose to make additional rights offerings of shares from time to
time for a number of shares and on terms that may or may not be
similar to this offer. Any such future offering will be made in
accordance with the 1940 Act.
26
<PAGE>
TERMS OF THE OFFER
The Fund is issuing to its stockholders of record as of
the close of business on June 21, 1999, non-transferable rights
entitling the holders to subscribe for an aggregate of 845,600
shares of the Fund's common stock (1,057,000 shares if the Fund
increases the number of shares available by up to 25% in
connection with the over-subscription privilege described below).
The Fund is issuing to each record date stockholder one right for
each whole share owned as of the record date. Only record date
stockholders will be issued rights and will be entitled to
participate in the offer. Three rights entitle the holder to
subscribe for one Fund share (1-for-3). A record date
stockholder's right to acquire, during the subscription period at
the subscription price, one share for every three rights held is
referred to in this Prospectus as the primary subscription.
Record date stockholders who receive less than three rights will
be entitled to purchase one share at the subscription price.
The rights may be exercised at any time during the
subscription period, which commences on June 21, 1999 and ends at
5:00 P.M., New York City time, on July 16, 1999, unless the
subscription period is extended. The rights are evidenced by
Subscription Certificates that will be mailed to record date
stockholders, except foreign record date stockholders.
Unsubscribed shares will be offered, by means of an
over-subscription privilege, to those record date stockholders
who have exercised all rights issued to them and who wish to
acquire more than the number of shares they are otherwise
entitled to purchase pursuant to the primary subscription. Over-
subscription shares will be allotted as more fully discussed
below.
The first regular quarterly dividend to be paid on
shares acquired upon exercise of rights will be the third
quarterly dividend, the record date for which occurs after the
issuance of the shares. The Fund's present policy is to pay
dividends on the last business day, generally any day the NYSE is
open, of each quarter to stockholders of record approximately 10
days prior to the payment date. It is expected that the first
dividend received by stockholders with respect to shares acquired
in the offer will be paid on the last business day of September,
1999.
Fractional shares will not be issued on the exercise of
fractional rights. Accordingly, shares may be purchased in the
primary subscription only pursuant to the exercise of whole
rights. For example, if a record date stockholder owns 100
shares, that record date stockholder will receive 100 rights,
although the record date stockholder may exercise 33.33 rights
27
<PAGE>
that record date stockholder will only be able to purchase 33
shares, with the unexercised fractional rights expiring.
However, record date stockholders holding fewer than three shares
will be entitled to subscribe for one share pursuant to the
primary subscription.
There is no minimum number of rights that must be
exercised in order for the offer to close.
OVER-SUBSCRIPTION PRIVILEGE
If record date stockholders do not exercise all the
rights issued to them, any shares represented by unexercised
rights will be offered by means of the over-subscription
privilege to the record date stockholders who have exercised all
the rights issued to them and who wish to subscribe for
additional shares. Only record date stockholders who exercise
all the rights issued to them may indicate on the Subscription
Certificate, which they or their nominees submit with respect to
the exercise of the rights issued to them, how many shares they
desire to purchase pursuant to the over-subscription privilege.
If sufficient shares remain after completion of the primary
subscription, all over-subscription requests will be honored in
full. If sufficient shares are not available after completion of
the primary subscription to honor all over-subscription requests,
the Fund may determine after the expiration of the offer, in the
discretion of the Board of Directors, to issue up to an
additional 25% of the shares available pursuant to the offer (up
to an additional 211,400 shares) in order to cover the over-
subscription requests. Regardless of whether the Fund issues
such additional shares, and to the extent shares are not
available to honor all over-subscription requests, the available
shares will be allocated among those who over-subscribe so that
the number of shares issued to participating record date
stockholders will generally be in proportion to the number of
shares owned by such stockholders on the record date. The
allocation process may involve a series of allocations in order
to assure that the total number of shares available for over-
subscription is distributed on a pro rata basis.
Banks, brokers, trustees and other nominee holders of
rights will be required to certify to the subscription agent,
before any over-subscription privilege may be exercised with
respect to any particular beneficial owner, as to the aggregate
number of rights exercised pursuant to the primary subscription
and the number of shares subscribed for pursuant to the over-
subscription privilege by such beneficial owner and that such
beneficial owner's primary subscription was exercised in full.
Nominee Holder Over-Subscription Forms and Beneficial Owner
Certification Forms will be distributed to banks, brokers,
28
<PAGE>
trustees and other nominee holders of rights with the
Subscription Certificates.
The Fund will not offer or sell any shares that are not
subscribed for pursuant to the primary subscription or the over-
subscription privilege.
SUBSCRIPTION PRICE
The subscription price for each share to be issued
pursuant to the offer will be 95% of the lower of (1) the average
of the last reported sales price of a Fund share on the NYSE for
the five trading days ending with the day the offer expires and
(2) the NAV as of the close of trading on the NYSE on that day.
For example, if the average of the last reported sales price per
share on the NYSE on the expiration date and on the four
preceding business days is $44.00 and the closing NAV per share
on the expiration date is $47.28 the subscription price will be
$41.80 (95% of $44.00). If, however, the average of the last
reported sales price per share on the NYSE on the expiration date
and on the four preceding business days is $44.00 and the closing
NAV per share on the expiration date is $40.00 the subscription
price will be $38.00 (95% of $40.00)
The Fund announced the offer on April 15, 1999. The
Fund's NAV at the close of business on April 14, 1999 (the last
trading date on which the Fund publicly reported its NAV prior to
the announcement) and on June 18, 1999 (the last trading date on
which the Fund publicly reported its NAV prior to the date of
this Prospectus) was $48.45 and $47.28, respectively. The last
reported sales price of the Fund's shares on these dates was
$49.25 and $44.00, respectively.
NON-TRANSFERABILITY OF RIGHTS
The rights are non-transferable and, therefore, may not
be purchased or sold. Rights not exercised will expire without
residual value when the offer expires. The rights will not be
listed for trading on the NYSE or any other securities exchange.
However, the shares to be issued pursuant to the offer will be
listed for trading on the NYSE, subject to notice of issuance.
EXPIRATION OF THE OFFER
The offer will expire at 5:00 P.M., New York City time,
on July 16, 1999, unless the offer is extended. The rights will
expire on the expiration date. Because the offer expires and the
shares will be priced on the same date, record date stockholders
who decide to acquire shares in the primary subscription or
pursuant to the over-subscription privilege will not know the
subscription price of the shares when they make their decision.
29
<PAGE>
Any extension of the offer will be followed as promptly as
practicable by an announcement of that fact. The announcement
will be issued no later than 9:00 A.M., New York City time, on
the next business day following the expiration date. The Fund
may make any announcement regarding the extension of the offer by
a release to the Dow Jones News Service or other means as the
Fund deems appropriate.
SUBSCRIPTION AGENT
The Subscription Agent is The Bank of New York. The
Subscription Agent will receive for its administrative,
processing, invoicing and other services as Subscription Agent, a
fee estimated to be approximately $15,000, plus reimbursement for
its out-of-pocket expenses related to the offer estimated to be
approximately $10,000. The Subscription Agent is also the Fund's
transfer agent, dividend-paying agent and registrar for the
shares. Questions regarding the Subscription Certificates should
be directed to (800) 507-9357 (toll free); stockholders may also
consult their brokers or nominees.
Completed Subscription Certificates must be sent
together with proper payment of the subscription price for all
shares subscribed for in the primary subscription and pursuant to
the over-subscription privilege (for record date stockholders) to
the Subscription Agent by one of the methods described below.
Alternatively, Notice of Guaranteed Delivery may be sent
by facsimile to (212) 815-9357 to be received by the Subscription
Agent prior to 5:00 P.M., New York City time, on the expiration
date. Facsimiles should be confirmed by telephone at (800) 507-
9357 . The Fund will accept only properly completed and executed
Subscription Certificates actually received at any of the
addresses listed below, prior to 5:00 P.M., New York City time,
on the expiration date or by the close of business on the third
business day after the expiration date following timely receipt
of a Notice of Guaranteed Delivery.
BY FIRST CLASS MAIL: BY HAND OR OVERNIGHT COURIER:
The Bank of New York The Bank of New York
P.O. Box 11248 101 Barclay Street
Church Street Station Receive & Deliver Window
New York, NY 10286-1248 New York, NY 10286
30
<PAGE>
DELIVERY TO AN ADDRESS OTHER THAN ONE OF THE ADDRESSES LISTED
ABOVE WILL NOT CONSTITUTE VALID DELIVERY.
METHOD FOR EXERCISING RIGHTS
Rights are evidenced by Subscription Certificates that,
except as described below under "Foreign Restrictions," will be
mailed to record date stockholders or, if a record date
stockholder's shares are held by Cede or any other depository or
nominee on their behalf, to Cede or such depository or nominee.
Rights may be exercised by completing and signing the
Subscription Certificate that accompanies this Prospectus and
mailing it in the envelope provided, or otherwise delivering the
completed and signed Subscription Certificate to the Subscription
Agent, together with payment in full for the shares at the
estimated subscription price by the expiration date. Rights may
also be exercised by contacting your broker, banker or trust
company, which can arrange, on your behalf, to guarantee payment
and delivery of a properly completed and executed Subscription
Certificate pursuant to a Notice of Guaranteed Delivery by the
close of business on the third business day after the expiration
date. A fee may be charged for this service. Because fractional
shares will not be issued, record date stockholders who have
remaining, after exercising rights, less than three rights, will
be unable to purchase a share upon the exercise of these
remaining rights. These remaining rights will expire without
residual value and stockholders will not be entitled to receive
any cash in lieu thereof. For example, if a record date
stockholder owns 301 shares, that record date stockholder will
receive 301 rights, but may only exercise 300 rights for the
purchase of 100 shares, with the unexercised remaining rights
expiring. However, record date stockholders who receive fewer
than three shares will be entitled to subscribe for one share
pursuant to the primary subscription. Record date stockholders
who fully exercise their rights may request additional rights
pursuant to the over-subscription privilege. Completed
Subscription Certificates must be received by the Subscription
Agent prior to 5:00 P.M., New York City time, on the expiration
date at one of the addresses set forth above (unless the
guaranteed delivery procedures are complied with as described
below under "Payment for Shares").
Stockholders Who are Record Owners. To exercise their
rights, record date stockholders may choose between either option
to exercise their rights set forth under "Payment for Shares"
below. If time is of the essence, option (2) under "Payment for
Shares" below will permit delivery of the Subscription
Certificate and payment after the expiration date.
Stockholders Whose Shares are Held By a Nominee. Record
date stockholders whose shares are held by a nominee such as a
31
<PAGE>
bank, broker or trustee must contact that nominee to exercise
their rights. In that case, the nominee will complete the
Subscription Certificate on behalf of the record date stockholder
and arrange for proper payment by one of the methods set forth
under "Payment for Shares" below.
Nominees. Nominees who hold shares for the account of
others should notify the respective beneficial owners of such
shares as soon as possible to ascertain the beneficial owners'
intentions and to obtain instructions with respect to the rights.
If the beneficial owner so instructs, the nominee should complete
the Subscription Certificate and submit it to the Subscription
Agent with the proper payment as described under "Payment for
Shares" below.
INFORMATION AGENT
Any questions or requests for assistance concerning the
method of subscribing for shares or for additional copies of this
Prospectus or Subscription Certificates or Notices of Guaranteed
Delivery may be directed to the Information Agent at its
telephone number and address listed below:
Shareholder Communications Corporation
17 State Street
New York, NY 10004
Toll Free: (800) 645-8640
Brokers and banks, please call: (212) 805-7113
Record date stockholders may also contact their brokers
or nominees for information with respect to the offer. The
Information Agent will receive a fee estimated to be $7,500, plus
reimbursement for its out-of-pocket expenses related to the
offer, estimated to be a maximum of $17,500.
PAYMENT FOR SHARES
Record date stockholders who wish to acquire shares in
the primary subscription and pursuant to the over-subscription
privilege may choose between the following methods of payment:
(1) A record date stockholder may send the
Subscription Certificate together with payment for the shares
acquired in the primary subscription and any additional shares
subscribed for pursuant to the over-subscription privilege to the
subscription agent. Payment should be calculated on the basis of
the estimated subscription price of $41.80 per share for all
shares subscribed. A subscription will be accepted when payment,
together with a properly completed and executed Subscription
Certificate, is received by the Subscription Agent's office at
one of the addresses set forth above no later than 5:00 P.M., New
32
<PAGE>
York City time, on the expiration date. The Subscription Agent
will deposit all checks and money orders received by it for the
purchase of shares into a segregated interest-bearing account
(the interest from which will inure to the benefit of the Fund)
pending proration and distribution of shares. A PAYMENT PURSUANT
TO THIS METHOD MUST BE IN U.S. DOLLARS BY MONEY ORDER OR CHECK
DRAWN ON A BANK OR BRANCH LOCATED IN THE UNITED STATES, MUST BE
PAYABLE TO "ALLIANCE ALL-MARKET ADVANTAGE FUND" AND MUST
ACCOMPANY A PROPERLY COMPLETED AND EXECUTED SUBSCRIPTION
CERTIFICATE FOR SUCH PAYMENT TO BE ACCEPTED. EXERCISE BY THIS
METHOD IS SUBJECT TO ACTUAL COLLECTION OF CHECKS BY 5:00 P.M.,
NEW YORK CITY TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED
PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR,
STOCKHOLDERS ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT,
BY MEANS OF A CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.
(2) Alternatively, a bank, a trust company or a
NYSE member subscription will be accepted by the Subscription
Agent if, prior to 5:00 P.M., New York City time, on the
expiration date, the Subscription Agent has received a Notice of
Guaranteed Delivery by facsimile or otherwise from a bank, a
trust company or a NYSE member, guaranteeing delivery of
(i) payment of the estimated subscription price of $41.80 per
share for the shares subscribed for in the primary subscription
and any additional shares requested pursuant to the over-
subscription privilege, and (ii) a properly completed and
executed Subscription Certificate. The Subscription Agent will
not honor a Notice of Guaranteed Delivery unless a properly
completed and executed Subscription Certificate and full payment
for the shares is received by the Subscription Agent by the close
of business on the third business day after the expiration date
(July 21, 1999, unless the offer is extended).
Within eight business days after the expiration date,
(July 28, 1999, unless the offer is extended), the confirmation
date, a confirmation will be sent by the Subscription Agent to
each subscribing record date stockholder (or, if the
stockholder's shares are held by Cede or any other depository or
nominee on such record date stockholder's behalf, to Cede or such
depository or nominee), showing (i) the number of shares acquired
in the primary subscription, (ii) the number of shares, if any,
acquired pursuant to the over-subscription privilege, (iii) the
subscription price per share and total purchase price of the
shares, and (iv) any additional amount payable by such record
date stockholder to the Fund or any excess to be refunded by the
Fund to such stockholder, in each case based on the subscription
price. If any record date stockholder exercises his or her right
to acquire shares pursuant to the over-subscription privilege,
any such excess payment that would otherwise be refunded to the
record date stockholder will be applied by the Fund toward
payment for shares acquired pursuant to the exercise of the over-
33
<PAGE>
subscription privilege. Any additional payment required from a
record date stockholder must be received by the subscription
agent within ten business days after the confirmation date
(August 11, 1999, unless the offer is extended). Any excess
payment to be refunded by the Fund to a record date stockholder
will be mailed by the Subscription Agent to such record date
stockholder as promptly as possible. All payments by a record
date stockholder must be in U.S. dollars by money order or check
drawn on a bank or branch located in the United States and
payable to "ALLIANCE ALL-MARKET ADVANTAGE FUND."
The Subscription Agent will deposit all checks received
by it prior to the final payment date into a segregated interest-
bearing account (which interest will inure to the benefit of the
Fund) pending proration and distribution of the shares.
Whichever of the two methods described above is used,
issuance and delivery of certificates for the shares purchased
are subject to collection of checks and actual payment pursuant
to any Notice of Guaranteed Delivery.
If a record date stockholder who acquires shares
pursuant to the primary subscription or the over-subscription
privilege does not make payment of any additional amounts due by
the tenth business day after the confirmation date, the Fund
reserves the right to take any or all of the following actions:
(i) sell such subscribed and unpaid-for shares to other record
date stockholders, (ii) apply any payment actually received
toward the purchase of the greatest whole number of shares that
could be acquired by such record date stockholder upon the
exercise of the primary subscription and/or over-subscription
privilege, and/or (iii) exercise any and all other rights or
remedies to which the Fund may be entitled.
THE METHOD OF DELIVERY TO THE FUND OF SUBSCRIPTION
CERTIFICATES AND PAYMENT OF THE SUBSCRIPTION PRICE WILL BE AT THE
ELECTION AND RISK OF THE EXERCISING RIGHTS HOLDERS, BUT IF SENT
BY MAIL IT IS RECOMMENDED THAT SUCH CERTIFICATES AND PAYMENTS BE
SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO
ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF
PAYMENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE
BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY URGED TO PAY, OR ARRANGE
FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY
ORDER.
All questions concerning the timeliness, validity, form
and eligibility of any exercise of rights will be determined by
the Fund, whose determinations will be final and binding. The
Fund in its sole discretion may waive any defect or irregularity,
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or permit a defect or irregularity to be corrected within such
time as it may determine, or reject the purported exercise of any
right. Subscriptions will not be deemed to have been received or
accepted until all irregularities have been waived or cured
within such time as the Subscription Agent determines in its sole
discretion. The Subscription Agent will not be under any duty to
give notification of any defect or irregularity in connection
with the submission of Subscription Certificates or incur any
liability for failure to give such notification.
EXERCISING RIGHTS HOLDERS WILL HAVE NO RIGHT TO RESCIND
THEIR SUBSCRIPTION AFTER RECEIPT OF THEIR PAYMENT FOR SHARES BY
THE SUBSCRIPTION AGENT, EXCEPT AS PROVIDED BELOW UNDER "NOTICE OF
NET ASSET VALUE DECLINE."
DELIVERY OF SHARE CERTIFICATES
Certificates representing shares acquired in the primary
subscription will be mailed promptly after the expiration of the
offer once full payment for such shares has been received and
cleared. Certificates representing shares acquired pursuant to
the over-subscription privilege will be mailed as soon as
practicable after full payment for such shares has been received
and cleared and all allocations have been completed.
Participants in the Dividend Reinvestment Plan will have any
shares acquired in the primary subscription and pursuant to the
over-subscription privilege credited to their accounts under the
Dividend Reinvestment Plan. Participants in the Dividend
Reinvestment Plan wishing to exercise rights issued with respect
to the shares held in their accounts under the Dividend
Reinvestment Plan must exercise such rights in accordance with
the procedures set forth above. Record date stockholders whose
shares are held of record by Cede or by any other depository or
nominee on their behalf or their broker-dealer's behalf will have
any shares acquired in the primary subscription credited to the
account of Cede or such other depository or nominee. Shares
acquired pursuant to the over-subscription privilege will be
certificated, and certificates representing such shares will be
sent directly to Cede or such other depository or nominee. Share
certificates will not be issued for shares credited to Dividend
Reinvestment Plan accounts.
FOREIGN RESTRICTIONS
Subscription Certificates will not be mailed to record
date stockholders whose record addresses are outside the United
States. Foreign record date stockholders or their nominees will
receive written notice of the offer. The rights issued to
foreign record date stockholders will be held by the Subscription
Agent for their accounts until instructions are received to
exercise the rights. Rights issued to foreign record date
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stockholders will expire unexercised if instructions are not
submitted to the Subscription Agent prior to or on the expiration
date.
FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER
The following is a general summary of the material
federal income tax consequences of the offer under the provisions
of the U.S. Internal Revenue Code of 1986, as amended, referred
to below as the Code, and the regulations thereunder as now in
effect that are generally applicable to record date stockholders
that are United States persons within the meaning of the Code,
and does not cover foreign, state or local taxes. The Code and
regulations are subject to change by legislative or
administrative action, which may be retroactive. Exercising
rights holders should consult their tax advisers regarding
specific questions as to foreign, federal, state or local taxes.
Stockholders will not recognize any taxable income
either upon the receipt or the exercise of the rights. If the
fair market value of the rights on the date of distribution is
less than 15% of the fair market of the stockholder's shares of
the Fund's common stock to which the rights relate and the
stockholder does not make the election described below, the
stockholder's basis in the rights is zero. A stockholder may,
however, irrevocably elect to allocate its existing basis in the
related shares between such shares and the rights based upon the
relative fair market values of such shares and the rights as of
the date of their issuance. The stockholder's basis in the
shares would then be reduced by an amount equal to the basis
allocated to the rights. This election must be made in a
statement attached to the stockholder's federal income tax return
for the year in which the rights are received. If the fair
market value of the rights on the date of distribution is equal
to at least 15% of the stockholder's shares to which they relate,
the stockholder will be required to allocate its existing basis
in those shares between such shares and the rights based upon the
relative fair market values of such shares and the rights as of
the date of their issuance. As with respect to the election
described above, the stockholder's basis in the shares would then
be reduced by an amount equal to the basis allocated to the
rights. The basis of any shares acquired by a stockholder's
exercise of its rights will be equal to the sum of the
subscription price of the shares, the basis of the rights and any
servicing fee charged to the stockholder by the stockholder's
broker, bank or trust company. The gain or loss recognized by a
stockholder upon the sale of a share acquired by the exercise of
a right will be capital gain or loss (assuming the share is held
as a capital asset at the time of sale). This gain or loss will
be long-term capital gain or loss if the share has been held for
more than one year at the time of sale. A stockholder's holding
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period for a share acquired upon the exercise of a right begins
with the date of exercise. No loss will be realized if rights
which have a tax basis expire without exercise. In such event,
the basis in the unexercised rights will be added back to the
stockholder's basis in the related shares.
NOTICE OF NAV DECLINE
The Fund has undertaken to suspend the offer until it
amends this Prospectus if, subsequent to June 21, 1999 (the
effective date of the Fund's registration statement), the Fund's
NAV declines more than 10% from its NAV as of that date. In such
event, the Fund would extend the expiration date and notify
record date stockholders that the NAV has declined more than 10%,
that the offer is suspended and that exercising rights holders
may cancel their exercise of rights.
EMPLOYEE BENEFIT PLAN CONSIDERATIONS
Stockholders who are employee benefit plans subject to
the Employee Retirement Income Security Act of 1974, as amended,
(including corporate savings and 401(k) plans), Keogh or H.R. 10
plans of self-employed individuals and individual retirement
accounts, collectively, retirement plans, should be aware that
additions to the retirement plan (other than rollovers or
trustee-to-trustee transfers from another retirement plans) in
order to exercise rights would be treated as contributions to the
retirement plan and, when taken together with contributions
previously made, may result in, among other things, excise taxes
for excess or nondeductible contributions. In the case of
retirement plans qualified under section 401(a) of the Code and
certain other retirement plans, additional cash contributions
could cause the maximum contribution limitations of section 415
of the Code or other qualification rules to be violated. They
may also be a reportable distribution and there may be other
adverse tax and ERISA consequences if rights are sold or
transferred by a retirement plan.
Retirement plans and other tax exempt entities, should
also be aware that if they borrow in order to finance their
exercise of rights, they may become subject to the tax on
unrelated business taxable income under section 511 of the Code.
ERISA contains fiduciary responsibility requirements,
and ERISA and the Code contain prohibited transaction rules, that
may bear upon the exercise of rights. Due to the complexity of
these rules and the penalties for noncompliance, retirement plans
should consult with their counsel and other advisors regarding
the consequences under ERISA and the Code of their exercise of
rights.
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DISTRIBUTION ARRANGEMENTS
PaineWebber Incorporated, 1285 Avenue of the Americas,
New York, New York, a broker-dealer and member of the National
Association of Securities Dealers, Inc., will act as the Dealer
Manager for the offer. The Dealer Manager is also the Fund's
Shareholder Servicing Agent. Under the terms and subject to the
conditions contained in the Dealer Manager Agreement dated the
date hereof, the Dealer Manager will provide financial advisory
and marketing services in connection with the offer and will
solicit the exercise of rights and participation in the over-
subscription privilege by record date stockholders. The offer is
not contingent upon any number of rights being exercised. The
Fund has agreed to pay the Dealer Manager a fee for financial
advisory and marketing services equal to 3.75% of the aggregate
[6~subscription price for each share issued pursuant to the
offer. The Dealer Manager will reallow to other broker-dealers
solicitation fees equal to 2.50% of the subscription price per
share for each share issued pursuant to the offer as a result of
their soliciting efforts.
In addition, the Fund has agreed to reimburse the Dealer
Manager up to an aggregate of $100,000 for its reasonable
expenses incurred in connection with the offer. The Fund and the
Adviser have each agreed to indemnify the Dealer Manager or
contribute to losses arising out of certain liabilities including
liabilities under the Securities Act. The Dealer Manager
Agreement also provides that the Dealer Manager will not be
subject to any liability to the Fund in rendering the services
contemplated by such agreement except for any act of bad faith,
willful misconduct or gross negligence of the Dealer Manager or
reckless disregard by the Dealer Manager of its obligations and
duties under such agreement.
The Fund has agreed not to offer or sell, or enter into
any agreement to sell, any equity or equity-related securities of
the Fund or securities convertible into such securities for a
period of 180 days after the date of the Dealer Manager
Agreement, except for the shares issued in reinvestment of
dividends or other distributions or other limited circumstances.
USE OF PROCEEDS
If all the rights are exercised in full at the
subscription price of $41.80 per share, the net proceeds of the
offer to the Fund assuming all 845,600 shares offered in the
primary subscription are sold are estimated to be approximately
$33,520,602, after deducting offering expenses payable by the
Fund estimated at approximately $500,000. If the Fund increases
the number of shares subject to subscription by up to 25%, or
211,400 shares, in order to satisfy over-subscription requests,
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<PAGE>
the additional net proceeds will be approximately $8,505,150.
The Adviser anticipates that the Fund will take up to 30 days
from its receipt of the net proceeds of the offer to invest such
proceeds, but in no event will any such use of proceeds take
longer than three months. Pending the use of the proceeds of the
offer, the proceeds will be held in U.S. Government securities
and other high-quality, short-term money market instruments.
These temporary investments will not be consistent with the
Fund's objective of long-term growth of capital through all
market conditions.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE AND STRATEGY
The Fund's investment objective is to provide long-term
growth of capital through all market conditions. Consistent with
the investment style of Alliance'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, intensively researched, high-quality companies that are
judged likely to achieve superior earnings growth. In the
Adviser's view, high-quality companies are larger capitalization
companies (companies with market capitalizations generally
expected to exceed $5 billion) that possess, among other things,
relatively long operating histories, strong management, superior
industry positions and excellent balance sheets. The term "high
quality" does not reflect ratings from any rating agency. The
Fund will seek to take advantage of what the Adviser believes are
opportunities presented by unwarranted fluctuations in the prices
of securities, both to purchase or increase positions on weakness
and to sell or reduce overpriced holdings. To take advantage of
investment opportunities in both rising and declining markets,
the Fund may make substantial use of options, including
purchasing and writing call and put options, and may engage in
short selling and may use certain other investment practices,
including futures and forward contracts, and leverage.
The Fund's Core Portfolio, which will constitute at
least the majority of, and at times may constitute substantially
all of, its total assets, will normally consist of the equity
securities of the approximately 25 companies that are most highly
regarded by Alliance's Large Cap Growth Group. These Core
Portfolio companies will be predominantly U.S. companies. The
balance of the portion of the Fund's portfolio that is invested
in equity securities will be invested in equity securities of
other U.S. and non-U.S. companies that the Adviser considers to
have exceptional growth potential.
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<PAGE>
Normally, about 40-60 companies will be represented in
the Fund's portfolio. The Fund thus differs from more typical
equity investment companies because it invests most of its assets
in a relatively small number of intensively researched companies.
The Fund may invest up to 35% of its total assets in equity
securities of non-U.S. companies. The Fund defines non-U.S.
companies to be entities (i) that are organized under the laws of
a country other than the United States and have their principal
office in a country other than the United States, or (ii) the
equity securities of which are traded principally in securities
markets outside the United States. Equity securities of non-U.S.
companies will be selected by the Adviser for investment by the
Fund on the basis of the same growth potential and other
characteristics as equity securities of U.S. companies. The Fund
may invest up to 5% of its total assets in illiquid securities.
Alfred Harrison, Vice Chairman of Alliance Capital
Management Corporation, the general partner of Alliance, and
Michael J. Reilly, Senior Vice President of Alliance Capital
Management Corporation, make day-to-day investment decisions for
the Fund. Both Messrs. Harrison and Reilly are members of
Alliance's Large Cap Growth Group. Alliance depends heavily upon
the fundamental analysis and research of its large internal
research staff in making investment decisions for the Fund. The
research staff generally follows a primary research universe of
approximately 600 companies that are considered by the Adviser to
have strong management, superior industry positions, excellent
balance sheets, and the ability to demonstrate superior earnings
growth. As one of the largest multi-national investment firms,
the Adviser has access to considerable information concerning all
of the companies it follows, an in-depth understanding of the
products, services, markets, and competition of these companies,
and a good knowledge of most of these companies' managements.
The Adviser's analysts prepare their own earnings
estimates and financial models for each company followed. While
each analyst has responsibility for following companies in one or
more identified sectors and/or industries, the lateral structure
of the Adviser's research organization and constant communication
among the analysts result in decision-making based on the
relative attractiveness of stocks among industry sectors. The
focus during this process is on the early recognition of change
on the premise that value is created through the dynamics of
changing company, industry, and economic fundamentals. The
Adviser's research emphasizes identifying companies whose
substantially above average prospective earnings growth is not
fully reflected in current market valuations.
The Adviser continually reviews its primary research
universe of approximately 600 companies to maintain a list of
favored securities, the "Alliance 100," considered by the Adviser
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<PAGE>
to have the most clearly superior earnings potential and
valuation attraction. The Adviser's concentration on a limited
universe of companies allows it to devote its extensive resources
to constant intensive research of these companies. Companies are
continually added to and deleted from the Alliance 100 as
fundamentals and valuations change. Alliance's Large Cap Growth
Group, in turn, further refines, on a weekly basis, the selection
process for the Fund, with each portfolio manager in the Group
selecting the 25 such companies which appear to the manager most
attractive at current prices. These individual ratings are then
aggregated and ranked to produce a composite list of
approximately the 25 most highly regarded stocks, the Favored 25.
As noted above, the Fund's Core Portfolio will be invested in the
Favored 25 and will constitute at least the majority of, and at
times may constitute substantially all of, the Fund's total
assets.
In the management of the Fund's investment portfolio,
the Adviser will seek to utilize market volatility judiciously
(assuming no change in company fundamentals) to adjust the Fund's
portfolio positions. The Fund will strive to capitalize on
unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings.
Under normal circumstances, the Fund will remain substantially
fully invested and will not take significant cash positions for
market timing purposes. Rather, during a market decline, while
adding to positions in favored stocks, the Fund will tend to
become somewhat more aggressive, gradually reducing the number of
companies represented in the Fund's portfolio. Conversely, in
rising markets, while reducing or eliminating fully valued
positions, the Fund will tend to become somewhat more
conservative, gradually increasing the number of companies
represented in the Fund's portfolio. Through this "buying into
declines" and "selling into strength," the Adviser seeks to gain
positive returns in good markets while providing some measure of
protection in poor markets.
The Fund's investment objective and its policy of
investing, under normal circumstances, at least 65% of the value
of its total assets in the equity securities of companies that,
in the Adviser's opinion, are likely to achieve superior earnings
growth are fundamental and cannot be changed without the approval
of the Fund's stockholders. The Fund's investment policies that
are not designated as fundamental policies may be changed by the
Fund without stockholder approval, but the Fund will not change
its investment policies without contemporaneous notice to its
stockholders. The Fund is designed primarily for long-term
investment and investors should not consider it a trading
vehicle. As with all investment companies, there can be no
assurance that the Fund's investment objective will be achieved.
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The Fund also may:
- engage in short sales of securities with respect to up
to 30% of its total assets;
- invest up to 20% of its total assets in convertible
securities of companies whose common stocks are eligible
for purchase by the Fund;
- invest up to 5% of its total assets in rights or
warrants with respect to equity securities deemed
appropriate for inclusion in the Fund's portfolio;
- write covered put and call options and purchase put and
call options on securities of the type in which the Fund
may invest, on U.S. and foreign securities exchanges and
over the counter, including options on market indices,
and write uncovered options for cross hedging purposes;
- enter into contracts for the purchase and sale for
future delivery of common stocks and purchase and write
put and call options on such futures contracts;
- enter into contracts for the purchase and sale for the
future delivery of foreign currencies or contracts based
on financial indices, including any index of U.S.
Government securities or securities issued by foreign
government entities and write put and call options on
such futures contracts;
- purchase and sell stock index futures for hedging
purposes against movements in the equity markets;
- purchase and write put and call options on foreign
currencies;
- purchase or sell forward foreign currency exchange
contracts;
- enter into forward commitments for the purchase or sale
of securities up to 30% of its total assets;
- enter into reverse repurchase agreements and dollar
rolls;
- enter into standby commitment agreements;
- enter into currency swaps for hedging purposes;
- make secured loans of its securities of up to 30% of its
total assets; and
- enter into repurchase agreements.
There can be no assurance that at any given time the Fund will
engage in any of these practices even if they are available or,
if the Fund does utilize a particular practice, that its use will
achieve the desired result.
Because the Fund is non-diversified and invests in a
smaller number of securities than many other equity funds, your
investment has the risk that changes in the value of a single
security may have a significant effect, either negative or
positive, on the Fund's NAV. In addition, because the Fund may
borrow money or leverage its portfolio, the value of an
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investment in the Fund will be more volatile and all other risks
will tend to be compounded. The Fund may create leverage by
using reverse repurchase agreements, derivatives or by borrowing
money. The Fund has, at times, made substantial use of its
ability to leverage its portfolio through borrowing money and
engaging in short sales.
CERTAIN INVESTMENT PRACTICES
The Fund may engage in the following investment
practices:
CONVERTIBLE SECURITIES. The Fund may invest up to 20%
of its total assets in the convertible securities of companies
whose common stocks are eligible for purchase by the Fund.
Convertible securities include bonds, debentures, corporate notes
and preferred stocks that are convertible into common stock.
Prior to conversion, convertible securities have the same general
characteristics as non-convertible debt securities, which
generally provide a stable stream of income with generally higher
yields than those of equity securities of the same or similar
issuers. The price of a convertible security will normally vary
with changes in the price of the underlying common stock,
although the higher yield tends to make the price of the
convertible security less volatile than that of the underlying
equity security. As with debt securities, the market values of
convertible securities tend to decrease as interest rates rise
and increase as interest rates fall. While convertible
securities generally offer lower interest yields than non-
convertible debt securities of similar quality, they offer
investors the potential to benefit from increases in the market
prices of the underlying common stock.
The Fund will not invest in convertible debt securities
rated below Baa by Moody's and BBB by S&P, or, if not rated,
determined by Alliance to be of equivalent quality. Securities
rated Baa by Moody's or BBB by S&P, and comparable unrated
securities as determined by Alliance are considered to have
speculative characteristics. Sustained periods of deteriorating
economic conditions or rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and
repay principal than in the case of higher-rated securities. The
Fund will not retain a convertible debt security that is
downgraded below Baa or BBB, or, if unrated, determined by
Alliance to have undergone similar credit quality deterioration
subsequent to purchase by the Fund.
CURRENCY SWAPS. Currency swaps involve the individually
negotiated exchange by the Fund with another party of a series of
payments in specified currencies. A currency swap may involve
the delivery at the end of the exchange period of a substantial
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amount of one designated currency in exchange for the other
designated currency. Therefore, the entire principal value of a
currency swap is subject to the risk that the swap counterparty
will default on its contractual delivery obligations. The net
amount of the excess, if any, of the Fund's obligations over its
entitlements with respect to each currency swap will be accrued
on a daily basis and an amount of liquid assets having an
aggregate net asset value at least equal to the accrued excess
will be maintained in a segregated account by the Fund's
custodian. The Fund will enter into currency swaps for hedging
purposes only. The Fund will not enter into any currency swap
unless the credit quality of the unsecured senior debt or the
claims-paying ability of the counterparty is rated in the highest
rating category of at least one nationally recognized rating
organization at the time of entering into the transaction. If
there is a default by the other party to such a transaction, the
Fund will have contractual remedies pursuant to the agreements
related to the transactions.
FORWARD COMMITMENTS. Forward commitments for the
purchase or sale of securities may include purchases on a "when-
issued" basis or purchases or sales on a "delayed delivery"
basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and
consummation of a merger, corporate reorganization or debt
restructuring (i.e., a "when, as and if issued" trade).
When forward commitment transactions are negotiated, the
price is fixed at the time the commitment is made, but delivery
and payment for the securities take place at a later date.
Normally, the settlement date occurs within two months after the
transaction, but the Fund may negotiate settlements beyond two
months. Securities purchased or sold under a forward commitment
are subject to market fluctuation, and no interest or dividends
accrue to the purchaser prior to the settlement date.
When-issued securities and forward commitments may be
sold prior to the settlement date, but the Fund enters into when-
issued and forward commitments only with the intention of
actually receiving securities or delivering them, as the case may
be. If the Fund chose to dispose of the right to acquire a when-
issued security prior to its acquisition or dispose of its right
to deliver or receive against a forward commitment, it may
realize a gain or incur a loss. Any significant commitment of
Fund assets to the purchase of securities on a "when, as and if
issued" basis may increase the volatility of the Fund's net asset
value. No forward commitments will be entered into if, as a
result, the Fund's aggregate commitments under the transactions
would be more than 30% of its total assets. In the event the
other party to a forward commitment transaction were to default,
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the Fund might lose the opportunity to invest money at favorable
rates or to dispose of securities at favorable prices.
The Fund's custodian will maintain, in a segregated
account of the Fund, liquid assets having value equal to, or
greater than, any commitments to purchase securities on a forward
commitment basis and, with respect to forward commitments to sell
portfolio securities of the Fund, the portfolio securities
themselves.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund
may purchase or sell forward foreign currency exchange contracts
to attempt to minimize the risk of adverse changes in the
relationship between the U.S. dollar and other currencies. A
forward contract is an obligation to purchase or sell a specific
currency for an agreed price at a future date, and is
individually negotiated and privately traded.
The Fund may enter into a forward contract, for example,
when it enters into a contract for the purchase or sale of a
security denominated in a foreign currency in order to "lock in"
the U.S. dollar price of the security ("transaction hedge"). The
Fund may not engage in transaction hedges with respect to the
currency of a particular country to an extent greater than the
aggregate amount of the Fund's transactions in that currency.
When the Fund believes that a foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a
forward sale contract to sell an amount of that foreign currency
approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency; or when the Fund
believes that the U.S. dollar may suffer a substantial decline
against a foreign currency, it may enter into a forward purchase
contract to buy that foreign currency for a fixed dollar amount
("position hedge"). The Fund will not position hedge with
respect to a particular currency to an extent greater than the
aggregate market value (at the time of making such sale) of the
securities held in its portfolio denominated or quoted in that
currency. Instead of entering into a position hedge, the Fund
may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount where
the Fund believes that the U.S. dollar value of the currency to
be sold pursuant to the forward contract will fall whenever there
is a decline in the U.S. dollar value of the currency in which
portfolio securities of the Fund are denominated ("cross-hedge").
Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it does not enter into
forward contracts.
The Fund's custodian will place liquid assets in a
segregated account of the Fund having a value equal to the
aggregate amount of the Fund's commitments under forward
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contracts entered into with respect to position hedges and cross-
hedges. If the value of the securities placed in a segregated
account declines, additional cash or securities will be placed in
the account on a daily basis so that the value of the account
will equal the amount of the Fund's commitments with respect to
such contracts. As an alternative to maintaining all or part of
the segregated account, the Fund may purchase a call option
permitting the Fund to purchase the amount of foreign currency
being hedged by a forward sale contract at a price no higher than
the forward contract price or the Fund may purchase a put option
permitting the Fund to sell the amount of foreign currency
subject to a forward purchase contract at a price as high or
higher than the forward contract price. Unanticipated changes in
currency prices may result in poorer overall performance for the
Fund than if it had not entered into such contracts.
Hedging against a decline in the value of a currency
does not eliminate fluctuations in the prices of portfolio
securities or prevent losses if the prices of securities decline.
These transactions also preclude the opportunity for gain if the
value of the hedge currency should rise. Moreover, it may not be
possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to
sell the currency at a price above the anticipated devaluation
level.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A
"sale" of a futures contract means the acquisition of a
contractual obligation to deliver the securities or foreign
currency or other commodity called for by the contract at a
specified price on a specified date. A "purchase" of a futures
contract means the incurring of an obligation to acquire the
securities or foreign currency or other commodity called for by
the contract at a specified price on a specified date. The
purchaser of a futures contract on an index agrees to take or
make delivery of an amount of cash equal to the difference
between a specified dollar multiple of the value of the index on
the expiration date of the contract ("current contract value")
and the price at which the contract was originally struck. No
physical delivery of the securities underlying the index is made.
The Fund will purchase options on futures contracts
written or purchased that are traded on U.S. or foreign exchanges
or over-the-counter. These investment techniques will be used
only to hedge against anticipated future changes in market
conditions and interest or exchange rates which otherwise might
either adversely affect the value of the Fund's portfolio
securities or adversely affect the prices of securities which the
Fund intends to purchase at a later date.
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The Fund will not enter into any futures contracts or
options on futures contracts if immediately thereafter the market
values of the outstanding futures contracts of the Fund and the
currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of the market value of its
total assets.
The Fund's custodian will place liquid assets in a
separate account of the Fund having a value equal to the
aggregate amount of the Fund's commitments under futures
contracts.
ILLIQUID SECURITIES. The Fund may invest up to 5% of
its total assets in illiquid securities. Illiquid securities
generally include (i) direct placements or other securities that
are subject to legal or contractual restrictions on resale or for
which there is no readily available market (e.g., when trading in
the security is suspended or, in the case of unlisted securities,
when market makers do not exist or will not entertain bids or
offers), including many individually negotiated currency swaps
and any assets used to cover currency swaps, (ii) over-the-
counter options and assets used to cover over-the-counter
options, and (iii) repurchase agreements not terminable within
seven days.
Because of the absence of a trading market for illiquid
securities, the Fund may not be able to realize the price at
which they are carried on the Fund's books upon sale. Alliance
will monitor the illiquidity of the Fund's investments in such
securities. To the extent permitted by applicable law,
securities that may be resold pursuant to Rule 144A of the
Securities Act will not be treated as "illiquid" for purposes of
the foregoing restriction so long as such securities meet
liquidity guidelines established by the Fund's Directors.
The Fund may not be able to readily sell securities for
which there is no ready market. To the extent that these
securities are foreign securities, there is no law in many of the
countries in which the Fund may invest similar to the Securities
Act requiring an issuer to register the sale of securities with a
governmental agency or imposing legal restrictions on resales of
securities, either as to length of time the securities may be
held or manner of resale. There may, however, be contractual
restrictions on resale of securities.
LOANS OF PORTFOLIO SECURITIES. The Fund may make
secured loans of its portfolio securities to entities with which
it can enter into repurchase agreements, provided that cash
and/or liquid high grade debt securities equal to at least 100%
of the market value of the securities loaned are deposited and
maintained by the borrower with the Fund. The risk in lending
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portfolio securities, as with other extensions of credit,
consists of the possible loss of rights in the collateral should
the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all
relevant facts and circumstances, including the creditworthiness
of the borrower. While securities are on loan, the borrower will
pay the Fund any income from the securities. The Fund may invest
any cash collateral in portfolio securities and earn additional
income, or receive an agreed-upon amount of income from a
borrower who has delivered equivalent collateral. The Fund will
have the right to regain record ownership of loaned securities to
exercise beneficial rights such as voting rights, subscription
rights, and rights to dividends, interest or distributions. The
Fund may pay reasonable finders', administrative, and custodial
fees in connection with a loan. The Fund will not lend portfolio
securities in excess of 30% of the value of its total assets nor
will the Fund lend its portfolio securities to any officer,
director, employee or affiliate of the Fund or of the Adviser.
OPTIONS ON SECURITIES. An option gives the purchaser of
the option, upon payment of a premium, the right to deliver to
(in the case of a put) or receive from (in the case of a call)
the writer of the option a specified amount of a security on or
before a fixed date at a predetermined price. A call option
written by the Fund is "covered" if the Fund owns the underlying
security, has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional
cash consideration held in a segregated account by its custodian)
upon conversion or exchange of another security it holds, or
holds a call option on the underlying security with an exercise
price equal to or less than that of the call option it has
written or is greater than the exercise price of the call written
if the difference is maintained by the Fund in liquid assets in a
segregated account with its custodian. A put option written by
the Fund is "covered" if the Fund maintains liquid assets with a
value equal to the exercise price in a segregated account with
its custodian, or else holds a put on the underlying securities
with an exercise price equal to or greater than that of the put
option it has written.
A call option is for cross-hedging purposes if the Fund
does not own the underlying security and is designed to provide a
hedge against a decline in value in another security which the
Fund owns or has the right to acquire. In such circumstances,
the Fund collateralizes its obligation under the option by
maintaining in a segregated account with the Fund's custodian
liquid assets in an amount not less than the market value of the
underlying security, marked to market daily. The Fund will only
write "covered" put and call options unless such options are for
cross-hedging purposes. The Fund would write a call option for
cross-hedging purposes, instead of writing a covered call option,
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when the premium to be received from the cross-hedge transaction
would exceed that which would be received from writing a covered
call option, while at the same time achieving the desired hedge.
In purchasing an option, the Fund would be in a position
to realize a gain if, during the option period, the price of the
underlying security increased (in the case of a call) or
decreased (in the case of a put) by an amount in excess of the
premium paid; otherwise the Fund would experience a loss equal to
the premium paid for the option.
If an option written by the Fund were exercised, the
Fund would be obligated to purchase (in the case of a put) or
sell (in the case of a call) the underlying security at the
exercise price. The risk involved in writing an option is that,
if the option is exercised, the underlying security would then be
purchased or sold by the Fund at a disadvantageous price.
Entering into a closing transaction (i.e., by disposing of the
option prior to its exercise) could reduce these risks. The Fund
retains the premium received from writing a put or call option
whether or not the option is exercised. The writing of call
options could result in increases in the Fund's portfolio
turnover rate, especially during periods when market prices of
the underlying securities appreciate.
The Fund will purchase or write options on securities of
the types in which it is permitted to invest in privately
negotiated (i.e., over-the-counter) transactions only with
investment dealers and other financial institutions (such as
commercial banks or savings and loan institutions) deemed
creditworthy by Alliance. Alliance has adopted procedures for
monitoring the creditworthiness of such entities. Options
purchased or written by the Fund in negotiated transactions are
illiquid and it may not be possible for the Fund to effect a
closing transaction at an advantageous time.
Options on Securities Indices. An option on a
securities index is similar to an option on a security except
that, rather than the right to take or make delivery of a
security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the
option, an amount of cash if the closing level of the chosen
index is greater than (in the case of a call) or less than (in
the case of a put) the exercise price of the option.
Options on Foreign Currencies. The Fund may purchase
and write put and call options on foreign currencies for the
purpose of protecting against declines in the U.S. dollar value
of foreign currency denominated portfolio securities and against
increases in the U.S. dollar cost of securities to be acquired.
As in the case of other kinds of options, the writing of an
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option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and the Fund could be
required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates, although,
in the event of rate movements adverse to the Fund's position,
the Fund may forfeit the entire amount of the premium plus
related transaction costs.
REPURCHASE AGREEMENTS. The Fund may enter into
repurchase agreements pertaining to U.S. Government Securities
with member banks of the Federal Reserve System or "primary
dealers" in such securities. A repurchase agreement arises when
a buyer purchases a security and simultaneously agrees to resell
it to the vendor at an agreed-upon future date, normally a day or
a few days later. The resale price is greater than the purchase
price, reflecting an agreed-upon interest rate for the period the
buyer's money is invested in the security. Such agreements permit
the Fund to keep all of its assets at work while retaining
"overnight" flexibility in pursuit of investments of a longer-
term nature. The Fund requires continual maintenance by its
custodian for its account in the Federal Reserve/Treasury Book
entry System of collateral in an amount equal to, or in excess
of, the resale price. If a vendor defaults on its repurchase
obligation, the Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the
repurchase price. If a vendor goes bankrupt, the Fund might be
delayed in, or be prevented from, selling the collateral for its
benefit.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. Reverse
repurchase agreements involve sales by the Fund of portfolio
assets concurrently with an agreement by the Fund to repurchase
the same assets at a later date at a fixed price. During the
reverse repurchase agreement period, the Fund continues to
receive principal and interest payments on these securities.
Generally, the effect of such a transaction is that the Fund can
recover all or most of the cash invested in the portfolio
securities involved during the term of the reverse repurchase
agreement, while it will be able to keep the interest income
associated with those portfolio securities. Such transactions
are only advantageous if the interest cost to the Fund of the
reverse repurchase transaction is less than the cost of otherwise
obtaining the cash.
Dollar rolls involve sales by the Fund of securities for
delivery in the current month and the Fund's simultaneously
contracting to repurchase substantially similar (same type and
coupon) securities on a specified future date. During the roll
period, the Fund forgoes principal and interest paid on the
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securities. The Fund is compensated by the difference between
the current sales price and the lower forward price for the
future purchase (often referred to as the "drop") as well as by
the interest earned on the cash proceeds of the initial sale.
The Fund will establish a segregated account with its
custodian in which it will maintain liquid assets equal in value
to its obligations in respect of reverse repurchase agreements
and dollar rolls. Reverse repurchase agreements and dollar rolls
involve the risk that the market value of the securities the Fund
is obligated to repurchase under the agreement may decline below
the repurchase price. In the event the buyer of securities under
a reverse repurchase agreement or dollar roll files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds
of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the
Fund's obligation to repurchase the securities. Reverse
repurchase agreements and dollar rolls are speculative techniques
and are considered borrowings by the Fund.
RIGHTS AND WARRANTS. The Fund will invest in rights or
warrants only if the underlying equity securities themselves are
deemed appropriate by Alliance for inclusion in the Fund's
portfolio. Rights and warrants entitle the holder to buy equity
securities at a specific price for a specific period of time.
Rights are similar to warrants except that they have a
substantially shorter duration. Rights and warrants may be
considered more speculative than certain other types of
investments in that they do not entitle a holder to dividends or
voting rights with respect to the underlying securities nor do
they represent any rights in the assets of the issuing company.
The value of a right or warrant does not necessarily change with
the value of the underlying securities, although the value of a
right or warrant may decline because of a decrease in the value
of the underlying stock, the passage of time, or a change in
perception as to the potential of the underlying stock, or any
combination of these factors.
If the market price of the underlying security is below
the exercise price of the warrant on the expiration date, the
warrant will expire worthless. Moreover, a right or warrant
ceases to have value if it is not exercised prior to the
expiration date.
SHORT SALES. The Fund will utilize short selling in
order to attempt both to protect its portfolio against the
effects of potential downtrends in the securities markets and as
a means of enhancing its overall performance. In identifying
short selling opportunities, Alliance's Large Cap Growth Group
will use the fundamental analysis and investment research
strategy described above to identify a small group of companies
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that it believes may decline in price as a result of fundamental
or market developments. The Fund is permitted to engage in short
sales of its securities with respect to up to 30% of its total
assets.
A short sale is a transaction in which the Fund sells a
security it does not own but has borrowed in anticipation that
the market price of that security will decline. The Fund may be
required to pay a fee to borrow the security and to pay over to
the lender any payments received on the security.
If the price of the security sold short increases
between the time of the short sale and the time the Fund replaces
the borrowed security, the Fund will incur a loss; conversely, if
the price declines, the Fund will realize a capital gain.
Although the Fund's gain is limited by the price at which it sold
the security short, its potential loss is unlimited.
In order to defer realization of gain or loss for U.S.
federal income tax purposes, the Fund may also make short sales
"against the box". In this type of short sale, at the time of
the sale, the Fund owns or has the immediate and unconditional
right to acquire at no additional cost the identical security.
STANDBY COMMITMENT AGREEMENTS. Standby commitment
agreements commit the Fund, for a stated period of time, to
purchase a stated amount of a security that may be issued and
sold to the Fund at the option of the issuer. The price and
coupon of the security are fixed at the time of the commitment.
At the time of entering into the agreement, the Fund is paid a
commitment fee, regardless of whether the security ultimately is
issued, typically equal to approximately 0.5% of the aggregate
purchase price of the security the Fund has committed to
purchase. The Fund will enter into such agreements only for the
purpose of investing in the security underlying the commitment at
a yield and price considered advantageous to the Fund and
unavailable on a firm commitment basis. The Fund will not enter
into a standby commitment with a remaining term in excess of 45
days and will limit its investment in such commitments so that
the aggregate purchase price of the securities subject to the
commitments will not exceed 50% of its assets taken at the time
of making the commitment. The Fund will at all times maintain a
segregated account with its custodian of liquid assets in an
aggregate amount equal to the purchase price of the securities
underlying the commitment.
There is no guarantee that the securities subject to a
standby commitment will be issued, and the value of the security,
if issued, on the delivery date may be more or less than its
purchase price. Since the issuance of the security underlying
the commitment is at the option of the issuer, the Fund will bear
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the risk of capital loss in the event the value of the security
declines and may not benefit from an appreciation in the value of
the security during the commitment period if the issuer decides
not to issue and sell the security to the Fund.
STOCK INDEX FUTURES. The Fund may purchase and sell
stock index futures as a hedge against movements in the equity
markets. There are several risks in connection with the use of
stock index futures by the Fund as a hedging device. One risk
arises because of the imperfect correlation between movements in
the price of a stock index future and movements in the price of
the securities which are the subject of the hedge. The price of
a stock index future may move more than or less than the price of
the securities being hedged. If the price of a stock index
future moves less than the price of the securities which are the
subject of the hedge, the hedge will not be fully effective but,
if the price of the securities being hedged has moved in an
unfavorable direction, the Fund would be in a better position
than if it had not hedged at all. If the price of the securities
being hedged has moved in a favorable direction, this advantage
will be partially offset by the loss on the index futures
contract. If the price of the index future moves more than the
price of the stock, the Fund will experience either a loss or
gain on the futures contract which will not be completely offset
by movements in the price of the securities which are subject to
the hedge.
To compensate for the imperfect correlation of movements
in the price of securities being hedged and movements in the
price of a stock index future, the Fund may buy or sell stock
index futures contracts in a greater dollar amount than the
dollar amount of securities being hedged if the volatility over a
particular time period of the prices of such securities has been
greater than the volatility over such time period of the stock
index, or if otherwise deemed to be appropriate by Alliance.
Conversely, the Fund may buy or sell fewer stock index futures
contracts if the volatility over a particular time period of the
prices of the securities being hedged is less than the volatility
over such time period of the stock index, or it is otherwise
deemed to be appropriate by Alliance. It is also possible that,
where the Fund has sold futures to hedge its portfolio against a
decline in the market, the market may advance and the value of
securities held in the Fund may decline. If this occurred, the
Fund would lose money on the futures and also experience a
decline in value in its portfolio securities. However, over time
the value of a diversified portfolio should tend to move in the
same direction as the market indices upon which the index futures
are based, although there may be deviations arising from
differences between the composition of the Fund and the stocks
comprising the index.
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Where a stock index futures contract is purchased to
hedge against a possible increase in the price of stock before
the Fund is able to invest its cash (or cash equivalents) in
stocks (or options) in an orderly fashion, it is possible that
the market may decline instead. If the Fund then concludes not
to invest in stock or options at that time because of concern as
to possible further market decline or for other reasons, the Fund
will realize a loss on the futures contract that is not offset by
a reduction in the price of securities purchased.
In addition to the possibility that there may be an
imperfect correlation, or no correlation at all, between
movements in stock index futures and the portion of the portfolio
being hedged, the price of stock index futures may not correlate
perfectly with movement in the stock index due to certain market
distortions. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through
offsetting transactions which could distort the normal
relationship between the index and futures markets. From the
point of view of speculators, the deposit requirements in the
futures market are less onerous than margin requirements in the
securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary price
distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between
the movements in a stock index and movements in the price of
stock index futures, a correct forecast of general market trends
by the investment adviser may still not result in a successful
hedging transaction over a short time frame.
Positions in stock index futures may be closed out only
on an exchange or board of trade which provides a secondary
market for such futures. Although the Fund intends to purchase
or sell futures only on exchanges or boards of trade where there
appear to be active secondary markets, there is no assurance that
a liquid secondary market on any exchange or board of trade will
exist for any particular futures contract or at any particular
time. In such event, it may not be possible to close a futures
investment position, and in the event of adverse price movements,
the Fund would continue to be required to make daily cash
payments of variation margin. However, in the event futures
contracts have been used to hedge portfolio securities, such
securities will not be sold until the futures contract can be
terminated. In such circumstances, an increase in the price of
the securities, if any, may partially or completely offset losses
on the futures contract. As described above, however, there is
no guarantee that the price of the securities will in fact
correlate with the price movements in the futures contract and
thus provide an offset on a futures contract.
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General. The successful use of the foregoing investment
practices draws upon Alliance's special skills and experience
with respect to such instruments and usually depends on
Alliance's ability to forecast price movements or currency
exchange rate movements correctly. Should prices or exchange
rates move unexpectedly, the Fund may not achieve the anticipated
benefits of the transactions or may realize losses and thus be in
a worse position than if such strategies had not been used.
Unlike many exchange-traded futures contracts and options on
futures contracts, there are no daily price fluctuation limits
with respect to options on currencies and forward contracts, and
adverse market movements could therefore continue to an unlimited
extent over a period of time. In addition, the correlation
between movements in the prices of such instruments and movements
in the prices of the securities and currencies hedged or used for
cover will not be perfect and could produce unanticipated losses.
The Fund's ability to dispose of its positions in
futures contracts, options and forward contracts depends on the
availability of liquid markets in such instruments. Markets in
options and futures with respect to a number of types of
securities and currencies are relatively new and still
developing, and there is no public market for forward contracts.
It is impossible to predict the amount of trading interest that
may exist in various types of futures contracts, options and
forward contracts. If a secondary market does not exist with
respect to an option purchased or written by the Fund, it might
not be possible to effect a closing transaction in the option
(i.e., dispose of the option) with the result that (i) an option
purchased by the Fund would have to be exercised in order for the
Fund to realize any profit and (ii) the Fund may not be able to
sell portfolio securities or currencies covering an option
written by the Fund until the option expires or it delivers the
underlying security, currency or futures contract upon exercise.
Therefore, no assurance can be given that the Fund will be able
to utilize these instruments effectively. In addition, the
Fund's ability to engage in options and futures transactions may
be limited by tax considerations and the use of certain hedging
techniques may adversely impact the characterization of income to
the Fund for U.S. federal income tax purposes.
Future Developments. The Fund may, following written
notice to its stockholders, take advantage of other investment
practices that are not currently contemplated for use by the Fund
or are not available but may yet be developed, to the extent such
investment practices are consistent with the Fund's investment
objective and legally permissible for the Fund. Such investment
practices, if they arise, may involve risks that exceed those
involved in the activities described above.
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Temporary Defensive Position. For temporary defensive
purposes, the Fund may reduce its position in equity securities
and invest in, without limit, certain types of short-term,
liquid, high-grade or high quality debt securities. These
securities may include U.S. Government securities, qualifying
bank deposits, money market instruments, prime commercial paper
and other types of short-term debt securities, including notes
and bonds. While the Fund is investing for temporary defensive
purposes, it may not meet its investment objective.
Portfolio Turnover. The portfolio turnover rate for the
Fund is included in the Financial Highlights section. The Fund
is actively managed and, in some cases in response to market
conditions, the Fund's portfolio turnover may exceed 100%. A
higher rate of portfolio turnover increases brokerage and other
expenses, which must be borne by the Fund and its stockholders.
High portfolio turnover also may result in realization of
substantial net short-term capital gains, which, when
distributed, are taxable to stockholders.
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment
policies listed below, which may not be changed without the
approval of its stockholders. The percentage limitations set
forth below, as well as those described elsewhere in this
Prospectus, apply only at the time an investment is made or other
relevant action is taken by the Fund.
The Fund may not:
1. Purchase more than 10% of the outstanding voting
securities of any one issuer;
2. Invest 25% or more of its total assets in securities of
issuers conducting their principal business activities
in the same industry, except that this restriction does
not apply to U.S. Government securities;
3. Make loans except through (a) the purchase of debt
obligations in accordance with its investment objective
and policies; (b) the lending of portfolio securities;
or (c) the use of repurchase agreements;
4. Borrow money or issue senior securities except the Fund
may, in accordance with the provisions of the 1940 Act,
(i) borrow from a bank or other entity in a privately
arranged transaction or through reverse repurchase
agreements or dollar rolls if after such borrowing there
is asset coverage of at least 300% as defined in the
1940 Act and (ii) borrow for temporary purposes in an
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amount not exceeding 5% of the value of the total assets
of the Fund;
5. Pledge, hypothecate, mortgage or otherwise encumber its
assets, except to secure permitted borrowings;
6. Invest in companies for the purpose of exercising
control; or
7. (a) Purchase or sell real estate, except that it may
purchase and sell securities of companies which deal in
real estate or interests therein and securities that are
secured by real estate, provided such securities are
securities of the type in which the Fund may invest;
(b) purchase or sell commodities or commodity contracts,
including futures contracts (except foreign currencies,
foreign currency options and futures, options and
futures on securities and securities indices and forward
contracts or contracts for the future acquisition or
delivery of securities and foreign currencies and
related options on futures contracts and other similar
contracts); (c) invest in interests in oil, gas, or
other mineral exploration or development programs;
(d) purchase securities on margin, except for such
short-term credits as may be necessary for the clearance
of transactions; and (e) act as an underwriter of
securities, except that the Fund may acquire restricted
securities under circumstances in which, if such
securities were sold, the Fund might be deemed to be an
underwriter for purposes of the Securities Act.
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RISK FACTORS AND SPECIAL CONSIDERATIONS
Investment in the Fund is subject to a number of risks
and special considerations, including the following:
MARKET RISK
This is the risk that the value of the Fund's
investments will fluctuate as the stock or bond markets fluctuate
and that prices overall will decline over short or longer-term
periods.
DILUTION
Upon completion of the offer, stockholders who do not
fully exercise their rights will own a smaller proportional
interest in the Fund than would be the case if the offer had not
been made. The subscription price per share is 95% of the lower
of (1) the average of the last reported sales price of a Fund
share on the NYSE for the five trading days ending with the day
the offer expires and (2) the NAV as of the close of trading on
the NYSE on that date. The subscription price is lower than the
Fund's NAV. Any rights offering priced at a discount to the
Fund's NAV entails some dilution in the NAV. Dilution is the
decrease in NAV that results from the Fund's issuance of new
shares at a discount to NAV when the rights are exercised and
from the Fund's payment of the expenses of the offer. The offer
will result in a dilution of NAV for all Fund stockholders, which
will disproportionately affect stockholders who do not exercise
their rights. In addition, there also may be substantial dilution
to the extent that the Fund increases the number of shares
subject to subscription by up to 25% in order to satisfy over-
subscription requests. Although it is not possible to state
precisely the amount of the decrease in NAV because it is not
known at the date of this Prospectus how many shares will be
subscribed for, or what the subscription price will be, the
dilution could be substantial. For example, assuming all the
rights are exercised at the estimated subscription price of
$41.80 which is 95% of the Fund's market price as of June 18,
1999, the Fund issues an additional 25% of shares to satisfy
over-subscription requests and the deduction of all expenses
related to the issuance of the shares, the Fund's NAV per share
would be reduced by approximately $2.22 per share or 4.7%. This
dilution of NAV will disproportionately affect stockholders who
do not exercise their rights.
FOREIGN SECURITIES
Alliance will select investments of non-U.S. companies
on the basis of the same growth potential and other
characteristics as investments in U.S. companies. Investment in
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equity securities of non-U.S. companies, however, involves
special considerations not generally associated with a portfolio
invested only in equity securities of U.S. companies. The
economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of
gross domestic product or gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and
balance of payments position. Issuers of securities in foreign
jurisdictions are generally not subject to the same degree of
regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation,
stockholder proxy requirements and timely disclosure of
information. The reporting, accounting and auditing standards of
foreign countries may differ, in some cases significantly, from
U.S. standards in important respects and less information may be
available to investors in foreign securities than to investors in
U.S. securities. Substantially less information is publicly
available about certain non-U.S. issuers than is available about
U.S. issuers. Nationalization, expropriation or confiscatory
taxation, currency blockage, political changes, government
regulation, political or social instability or diplomatic
developments could affect adversely the economy of a foreign
country or the Fund's investments in such country. In the event
of expropriation, nationalization or other confiscation, the Fund
could lose its entire investment in the country involved. In
addition, laws in foreign countries governing business
organizations, bankruptcy and insolvency may provide less
protection to security holders such as the Fund than that
provided by U.S. laws. The Fund is also subject to currency risk
which is the risk that fluctuations in the exchange rates between
the U.S. Dollar and foreign currencies may negatively affect the
value of the Fund's investments.
MANAGEMENT RISK
The Fund is subject to management risk because it is an
actively managed investment fund. Alliance will apply its
investment techniques and risk analyses in making investment
decisions for the Fund, but there is no guarantee that its
techniques will produce the intended result.
DERIVATIVE AND LEVERAGE RISK
The Fund may, when Alliance believes that market
conditions are appropriate, utilize the market technique of
borrowing in order to take full advantage of available investment
opportunities. The Fund may also make substantial use of
derivatives and employ specialized trading techniques such as
short sales, options, futures and forwards to increase its
exposure to certain selected securities. The Fund may, although
it has no present intention of doing so, borrow money from a bank
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or other entity in a privately arranged transaction to increase
the money available to the Fund to invest in securities when the
Fund believes that the return from the securities financed will
be greater than the interest expense paid on the borrowing. The
Fund also may borrow to finance repurchases of or tender offers
for its shares when the Fund deems it desirable in order to avoid
the untimely disposition of portfolio securities. Such
borrowings involve additional risk to the Fund, since the
interest expense may be greater than the income from or
appreciation of the securities carried by the borrowings and
since the value of the securities carried may decline below the
amount borrowed. Alliance employs these trading techniques
speculatively to enhance returns and not merely as hedging tools.
These techniques are riskier than many investment strategies and
will result in greater volatility for the Fund, particularly in
periods of market declines.
The 1940 Act requires the Fund to maintain "asset
coverage" of not less than 300% of its "senior securities
representing indebtedness," as those terms are defined and used
in the 1940 Act. In addition, the Fund may not make any cash
distributions to its stockholders if, after the distribution,
there would be less than 300% asset coverage of a senior security
representing indebtedness for borrowings (excluding for this
purpose certain evidences of indebtedness made by a bank or other
entity and privately arranged, and not intended to be publicly
distributed). This limitation on the Fund's ability to make
distributions could under certain circumstances impair the Fund's
ability to maintain its qualification for taxation as a
"regulated investment company".
Any investment gains made with the proceeds obtained
from borrowings in excess of interest paid on the borrowings will
cause the net income per share and the NAV of the Fund's common
stock to be greater than would otherwise be the case. On the
other hand, if the investment performance of the additional
securities purchased fails to cover their cost (including any
interest paid on the money borrowed) to the Fund, then the net
income per share and NAV of the Fund's shares will be less than
would otherwise be the case. This is the speculative factor
known as leverage.
Borrowing is a form of leverage and as such will pose
certain risks for the Fund's stockholders, including the
possibility of higher volatility of both the NAV and market value
of the Fund's shares. There can be no assurance that the Fund
will be able to realize a higher net return on its investment
portfolio than the then current interest rate on any borrowing.
Any decline in the value of the Fund's assets will be borne
entirely by stockholders in the form of reductions in the Fund's
NAV, and any requirement that the Fund sell assets at a loss in
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<PAGE>
order to repay any borrowing or for other reasons would make it
more difficult for the NAV to recover. Accordingly, the effect
of leverage in a declining market may result in a greater decline
in the NAV of the Fund's share than if the Fund were not
leveraged, which may be reflected in a greater decline in the
market price of the Fund's shares.
ANTI-TAKEOVER PROVISIONS OF THE FUND'S ARTICLES OF INCORPORATION
AND BY-LAWS MAY LIMIT CERTAIN THIRD-PARTY ACTIONS.
The Fund's Articles of Incorporation and By-Laws
referred to in this Prospectus as the charter documents, contain
certain "anti-takeover" provisions that limit (i) the ability of
other entities or persons to acquire control of the Fund,
(ii) the Fund's freedom to engage in certain transactions, and
(iii) the ability of the Board or the Fund's stockholders to
amend the charter documents or to effect changes in the Fund's
management. These provisions also may dissuade third parties
from making offers to purchase shares at a premium over market
price.
DISCOUNT FROM NAV
Shares of closed-end funds frequently trade at a market
price that is less than the value of the net assets attributable
to those shares. The possibility that shares of the Fund will
trade at a discount from NAV is a separate risk from the risk
that the Fund's NAV will decrease. In some cases, shares of
closed-end funds may trade at a premium to NAV. The Fund's shares
have traded in the market above, at, and below NAV since the
commencement of the Fund's operations. The Fund cannot predict
whether its shares will trade below, at, or above NAV in the
future.
The risk of purchasing shares of a closed-end investment
company that might trade at a discount is more pronounced for
investors who wish to sell their shares in a relatively short
period of time. For those investors, realization of gain or loss
on their investments is likely to be more dependent upon the
existence of a premium or discount than upon portfolio
performance.
An alternative investment option to the Fund is the
Alliance Select Investor Series, Premier Portfolio, a portfolio
of an open-end management investment company with substantially
the same investment objective and policies as the Fund. Because
the Premier Portfolio is a portfolio of an open-end investment
company, you may invest in it at the Premier Portfolio's NAV
without the risk of the shares trading at a discount to the
Premier Portfolio's NAV. An investment in the Premier Portfolio
may be redeemed at any time at the Premier Portfolio's NAV. The
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<PAGE>
Premier Portfolio, however, has a minimum initial investment
amount of $50,000 and it is not possible to invest in the Premier
Portfolio at a discount to its NAV (as is possible with respect
to an investment in the Fund by subscribing for shares in this
offering).
NON-DIVERSIFIED STATUS
The Fund is a "non-diversified" investment company,
which means the Fund is not limited in the proportion of its
assets that may be invested in the securities of a single issuer.
Because the Fund, as a non-diversified investment company, may
invest in a smaller number of individual issuers than a
diversified investment company, an investment in the Fund may,
under certain circumstances, present greater risk to an investor
than an investment in a diversified investment company.
QUARTERLY DISTRIBUTIONS
The Fund has implemented a quarterly distribution policy
pursuant to which the Fund distributes quarterly each year to
stockholders (i) with respect to each of the first three calendar
quarters of the year, an amount equal to 2.5% of the Fund's NAV
determined as of the beginning of the quarter, and (ii) with
respect to the fourth calendar quarter of each year, an amount
equal to at least 2.5% of the Fund's NAV as of the beginning of
that quarter. If distributions for any quarter exceed the Fund's
net investment income and net realized short-term capital gains,
the difference would be treated as distributions of the Fund's
net realized long-term capital gains and, to the extent of the
amount of any distributions in excess of such gains, as a return
of the stockholder's capital. The reduction of the Fund's assets
by the amount of the excess will have the likely effect of
increasing the Fund's expense ratio. In order to make
distributions, the Fund may have to sell a portion of its
investment portfolio at a time when independent investment
judgment might not suggest that action. The Fund's final
distribution for each calendar year will include any remaining
undistributed net investment income and net realized short-term
capital gains and long-term capital gains realized during the
year, provided that if the Fund's undistributed net investment
income and net realized short-term and long-term capital gains
for the year exceeded the minimum required amount for the
previous quarters' distributions as described above, the Fund
might choose not to distribute all or a portion of such excess
equal to the Fund's net realized long-term capital gains for the
year.
Based on information provided by the Adviser, the Board
of Directors believes that the offer will not result in a change
in the Fund's current level of dividends per share for the
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<PAGE>
foreseeable future. There can be no assurance, however, that the
Fund will be able to maintain its current level of dividends per
share, and the Board of Directors may, in its sole discretion,
change the Fund's current dividend policy or its current level of
dividends per share in response to market or other conditions.
YEAR 2000
Many computer systems and applications in use today
process transactions using two-digit date fields for 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 at or
after the Year 2000. This is commonly known as the Year 2000
problem. The Fund and its 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 Fund and its 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 Fund or its major service
providers, including Alliance, fail to process year 2000 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 stockholders. To the extent that the
operations of issuers of securities held by the Fund are impaired
by the Year 2000 problem, the value of the Fund's shares may be
materially affected. In addition, for the Fund's 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 Fund and
Alliance. The Fund has been advised that, 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. 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 and non-mission critical
systems and determined which of these systems are not Year 2000
compliant. All third party suppliers of mission critical
computer systems and applications have been contacted to verify
whether their systems and applications will be Year 2000
63
<PAGE>
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. Alliance will seek alternative solutions
or third party suppliers for all suppliers who do not furnish a
satisfactory response by June 30, 1999. The same process is
being performed for non-mission critical systems and is estimated
to be completed by June 30, 1999. Alliance has remediated,
replaced or retired all of its non-compliant mission critical
systems and applications which can impact the Fund. The same
process is being performed for non-mission critical systems and
is estimated to be completed by June 30, 1999. 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 approximately 89% of non-mission critical systems.
Integrated systems tests will then be conducted to verify that
the systems will continue to work together. Full integration
testing of all mission critical and non-mission critical systems
is estimated to be completed by June 30, 1999. 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, with the assistance of a
consulting firm, is developing Year 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 date
for the completion of these plans is June 30, 1999.
There are many risks associated with Year 2000 issues,
including the risks that the computer systems and applications
used by the Fund and its major service providers including
Alliance will not operate as intended and that the systems and
applications of third party providers to the Fund and its service
providers including Alliance 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 Fund, or its major
service providers, or the systems of its important third party
suppliers be unable to process date sensitive information
accurately after 1999, the Fund and/or its service providers may
be unable to conduct its normal business operations and to
provide stockholders with the required services. In addition,
the Fund and its service providers may incur unanticipated
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<PAGE>
expenses, regulatory actions and legal liabilities. The Fund 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).
MANAGEMENT OF THE FUND
THE INVESTMENT ADVISER
The Fund's Adviser, Alliance Capital Management L.P.,
1345 Avenue of the Americas, New York, New York 10105, is a
leading international investment adviser managing client accounts
with assets as of March 31, 1999 totaling more than $301 billion
(of which approximately $127 billion represented the assets of
investment companies). As of March 31, 1999, Alliance managed
retirement assets for many of the largest public and private
employee benefit plans (including 30 of the nation's Fortune 100
companies), for public employee retirement funds in 32 out of the
50 states, for investment companies, and for foundations,
endowments, banks and insurance companies worldwide. The 54
registered investment companies managed by Alliance comprising
more than 119 separate investment portfolios currently have over
4 million shareholder accounts.
The Adviser determines the composition of the Fund's
portfolio, places all orders for the purchase and sale of
securities and for other transactions, and oversees the
settlement of the Fund's securities and other portfolio
transactions. The Adviser also provides administrative services
to the Fund. These include, among other things, providing
officers and office space, preparing or assisting in preparing
materials for stockholder and regulatory bodies and overseeing
the provision to the Fund of custodial and accounting services.
The persons primarily responsible for the day-to-day
management of the Fund are Alfred Harrison, Vice Chairman of
Alliance Capital Management Corporation and Michael J. Reilly,
Senior Vice President of Alliance Capital Management Corporation.
Both Messrs. Harrison and Reilly are members of Alliance's Large
Cap Growth Group and, as such, have had management responsibility
with respect to the Fund since its inception.
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<PAGE>
Alliance Capital Management Corporation ("ACMC"), the
sole general partner of, and the owner of a 1% general
partnership interest in the Adviser, is an indirect wholly-owned
subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies
in the United States and a wholly-owned subsidiary of The
Equitable Companies Incorporated ("ECI"). ECI is a holding
company controlled by AXA, a French insurance holding company.
As of March 1, 1999 AXA and certain of its subsidiaries
beneficially owned approximately 58.4% of ECI's outstanding
common stock. ECI is a public company with shares traded on the
New York Stock Exchange.
AXA, a French company, is the holding company for an
international group of insurance and related financial services
companies. AXA's insurance operations include activities in life
insurance, property and casualty insurance and reinsurance. The
insurance operations are diverse geographically with activities
principally in Western Europe, North America, the Asia/Pacific
area and, to a lesser extent, in Africa and South America. AXA
is also engaged in asset management, investment banking,
securities trading, brokerage, real estate and other financial
services activities principally in the United States, as well as
in Western Europe and the Asia/Pacific area.
For insurance regulatory purposes the shares of capital
stock of ECI beneficially owned by AXA and its subsidiaries have
been deposited into a voting trust which has an initial term of
10 years commencing in 1992. The trustees of the voting trust
(the "Voting Trustees") have agreed to protect the legitimate
economic interests of AXA, but with a view of ensuring that
certain minority shareholders of AXA do not exercise control over
ECI or certain of its insurance subsidiaries. As of March 1,
1999, AXA, ECI, Equitable and certain subsidiaries of Equitable
were the beneficial owners of approximately 56.6% of the issued
and outstanding units representing assignments of beneficial
ownership of limited partnership interests ("Units") in the
Adviser.
Based on information provided by AXA, on March 1, 1999,
approximately 20.7% of the issued ordinary shares (representing
32.7% of the voting power) of AXA were owned directly and
indirectly by Finaxa, a French holding company. As of March 1,
1999, 61.7% of the shares (representing 72.3% of the voting
power) of Finaxa were owned by four French mutual insurance
companies (the "Mutuelles AXA") (one of which, AXA Assurances
I.A.R.D. Mutuelle, owned 35.4% of the shares, representing 41.5%
of the voting power of Finaxa, and 22.7% of the shares of Finaxa
(representing 13.7% of the voting power) were owned by Paribas, a
French bank. Including the ordinary shares owned by Finaxa, on
March 1, 1999, the Mutuelles AXA directly and indirectly owned
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<PAGE>
approximately 23.9% of the issued ordinary shares (representing
37.6% of the voting power) of AXA. The Voting Trustees may be
deemed to be beneficial owners of all Units beneficially owned by
AXA and its subsidiaries. By virtue of the provisions of the
voting trust agreement, AXA may be deemed to have shared voting
power with respect to the Units. In addition, the Mutuelles AXA,
as a group, and Finaxa may be deemed to be beneficial owners of
all Units beneficially owned by AXA and its subsidiaries. AXA
and its subsidiaries have the power to dispose or direct the
disposition of all shares of the capital stock of ECI deposited
in the voting trust. The Mutuelles AXA, as a group, and Finaxa
may be deemed to share the power to vote or to direct the vote
and to dispose or to direct the disposition of all the Units of
the Adviser beneficially owned by AXA and its subsidiaries. By
reason of their relationship, AXA, the voting Trustees, the
Mutuelles AXA, Finaxa, ECI, Equitable, Equitable Holdings,
L.L.C., Equitable Investment Corporation, Alliance Capital
Management Corporation and Equitable Capital Management
Corporation may be deemed to share the power to vote or to direct
the vote and to dispose or direct the disposition of all or a
portion of the Units beneficially owned by AXA and its
subsidiaries.
INVESTMENT ADVISORY AGREEMENT
The Advisory Agreement between the Fund and the Adviser
provides that the Adviser furnishes investment advice and
recommendations to the Fund. Under the Advisory Agreement, the
Adviser receives a basic fee at an annualized rate of 1.50% of
the Fund's average net assets and an adjustment to the basic fee
based on the investment performance of the Fund in relation to
the investment record of the Russell 1000 Growth Index (the
"Index") for certain prescribed periods as described below.
The Russell 1000(R) universe of securities is compiled
by Frank Russell Company and is segmented into two style indices,
the Russell 1000 Growth Index and the Russell 1000 Value(R)
Index, both based on the capitalization-weighted median price-to-
book of each of the securities. At each reconstitution, the
Russell 1000 constituents are ranked by their adjusted price-to-
book ratio and their I/B/E/S forecast long-term growth mean.
These rankings are converted to standardized units and combined
to produce a composite value score or CVS. The securities are
then ranked by their CVS, and a probability algorithm is applied
to the CVS distribution to assign growth and value weights to
each security. In general, securities with lower CVS are
considered growth, securities with higher CVS are considered
value, and securities with a CVS in the middle are considered to
have both growth and value characteristics, and are weighted
proportionately in the growth and value index. The Russell 1000
Growth Index is, accordingly, designed to include those Russell
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<PAGE>
1000 securities with a greater-than-average growth orientation.
In contrast with the securities in the Russell 1000 Value Index,
companies in the Russell 1000 Growth Index tend to exhibit higher
price-to-book and price-earnings ratios, lower dividend yields
and higher forecast growth values. The Russell 1000 Growth Index
reflects changes in market prices, and assumes reinvestment of
investment income.
The basic fee is a monthly fee equal to 1/12th of 1.5%
(1.5% on an annualized basis) of the average of the net assets of
the Fund at the end of each month included in the applicable
performance period. The performance period is a rolling 36 month
period ending with the most recent calendar month. The basic fee
for each such month may be increased or decreased at the rate of
1/12th of .05% per percentage point, depending on the extent, if
any, by which the investment performance of the Fund, measured by
the percentage change in the Fund's NAV, exceeds by more than two
percentage points, or is exceeded by more than two percentage
points by, the percentage change in the investment record of the
Index for such performance period. The maximum increase or
decrease in the basic fee for any month may not exceed 1/12th of
.30%. Accordingly, for each month the maximum monthly fee as
adjusted for performance is 1/12th of 1.80% and is payable if the
investment performance of the Fund exceeded the percentage change
in the investment record of the Index by eight or more percentage
points for the performance period, and the minimum monthly fee
rate as adjusted for performance is 1/12th of 1.20% and is
payable if the percentage change in the investment record of the
Russell 1000 Growth Index exceeded the investment performance of
the Fund by eight or more percentage points for the performance
period.
The following table illustrates the full range of
permitted increases or decreases to the basic fee.
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<PAGE>
Difference Between
the Percentage change in
NAV of the Fund and
Percentage change in the Adjustment
Russell 1000 Growth to 1.50% Annual Fee
Index* Basic Fee Rate as Adjusted
________________________ __________ ________________
+8 +.30% 1.80%
+7 +.25% 1.75%
+6 +.20% 1.70%
+5 +.15% 1.65%
+4 +.10% 1.60%
+3 +.05% 1.55%
+/-2 0 1.50%
-3 -.05% 1.45%
-4 -.10% 1.40%
-5 -.15% 1.35%
-6 -.20% 1.30%
-7 -.25% 1.25%
-8 -.30% 1.20%
____________________
* Measured over the performance period, which will be a rolling
36-month period ending with the most recent calendar month.
In calculating the investment performance of the Fund
and the Index, all dividends and distributions during the
performance period will treated as having been reinvested, and no
effect will be given to gain or loss resulting from any issuance,
sale or repurchase of the Fund's shares. Fractions of a
percentage point will be rounded to the nearer whole point (to
the higher point if exactly one-half).
For the fiscal years ended September 30, 1998,
September 30, 1997 and September 30, 1996, the Fund paid total
advisory fees to the Adviser of $1,528,461, $1,101,452 and
$879,811, respectively.
The Adviser will benefit from the offer because the
Adviser's fee is based on the average of the net assets of the
Fund at the end of each month included in the applicable
performance period. It is not possible to state precisely the
amount of additional compensation the Adviser will receive as a
result of the offer because it is not known how many shares will
be subscribed for and because the proceeds of the offer will be
invested in additional portfolio securities which will fluctuate
in value. However, based on the estimated proceeds from the
offer assuming all the rights are exercised in full at the
estimated subscription price of $41.80 per share, assuming the
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<PAGE>
Fund issues an additional 25% of shares to satisfy
over-subscription requests and after payment of the Dealer
Manager and estimated expenses, the Adviser would receive
additional annual advisory fees based on the basic fee of
approximately $630,386 as a result of the increase in assets
under management over the Fund's current assets under
management.
The Fund bears all costs of its operation other than
those incurred by the Adviser under the Investment Advisory
Agreement. In particular, the Fund pays: brokerage and
commission expenses; federal, state, local (if any) and foreign
taxes, including issue and transfer taxes, incurred by or levied
on the Fund; interest charges on borrowings; the organizational
and offering expenses of the Fund; fees and expenses of
registering or qualifying the shares of the Fund under the
appropriate federal and state securities laws; fees and expenses
of listing and maintaining the listing of the Fund's shares on
any securities exchange; expenses of printing and distributing
reports to stockholders; costs of proxy solicitation; fees,
charges and expenses of the Fund's administrator, custodian,
registrar, transfer and dividend paying agent and shareholder
servicing agent; compensation of directors, officers and
employees who do not devote any part of their time to the affairs
of the Adviser or its affiliates; legal and auditing expenses;
the cost of stock certificates representing the Fund's shares;
and costs of stationery and supplies. Under the Investment
Advisory Agreement, the Adviser provides the Fund with office
space, facilities and business equipment and provides the
services of executive and clerical personnel for administering
certain of the other affairs of the Fund. The Adviser
compensates Directors of the Fund if such persons are employed by
the Adviser or its affiliates.
The Investment Advisory Agreement provides that the
Adviser shall only be liable for willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties and
obligations under the Investment Advisory Agreement.
DIRECTORS AND OFFICERS
The Directors and officers of the Fund, and their
addresses, ages and principal occupations for at least the past
five years are set forth below. Unless otherwise specified, the
address of each of the following persons is 1345 Avenue of the
Americas, New York, New York 10105.
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<PAGE>
DIRECTORS
POSITIONS HELD PRINCIPAL OCCUPATIONS
NAME AND ADDRESS WITH REGISTRANT AGE DURING PAST 5 YEARS
___________________ _______________ ___ ________________________
John D. Carifa* Chairman of the 54 President and Chief
Board and Operating Officer and a
President Director of Alliance Capital
Management Corporation
("ACMC"), the general partner
of the Adviser, with which he
has been associated since
prior to 1994
Ruth Block Director 68 Formerly an Executive
P.O. Box 4623 Vice-President and
Stamford, Connecticut 06903 Chief Insurance Officer of
The Equitable Life Assurance
Society of the United States.
She is a Director of Ecolab
Incorporated (specialty
chemicals) and BP Amoco
Corporation (oil and gas).
David H. Dievler Director 69 Independent
P.O. Box 167 Consultant Formerly a
Spring Lake, New Jersey 07762 Senior Vice President of ACMC
until December 1994.
John H. Dobkin Director 57 Formerly President of
150 White Plains Road Historic Hudson Valley
Tarrytown, New York 10591 (historic preservation) from
1994 through May 1999.
Previously, he was Director
of the National Academy of
Design.
William H. Foulk, Jr. Director 66 Investment Adviser and
Room 1000 Independent Consultant.
2 Greenwich Plaza He was formerly Senior
Greenwich, Connecticut 06830 Manager of Barrett
Associates, Inc., a
registered investment
adviser, with which he had
been associated since prior
to 1994.
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<PAGE>
Dr. James Hester Director 75 President of the Harry
25 Cleveland Lane Frank Guggenheim
Princeton, New Jersey 08540 Foundation, with which he has
been associated since prior
to 1994. He was formerly
President of New York
University and The New York
Botanical Garden and Rector
of the United Nations
University.
Clifford L. Michel Director 59 Member of the law firm
St. Bernard's Road of Cahill Gordon &
Gladstone, New Jersey 07934 Reindel, with which he has
been associated since prior
to 1994. He is President and
Chief Executive Officer of
Wenonah Development Company
(investments) and a Director
of Placer Dome, Inc (mining).
Donald J. Robinson Director 64 Senior Counsel of the
98 Hell's Peak Road law firm of Orrick,
Weston, Vermont 05161 Herrington & Sutcliffe since
January of 1995. He was
formerly a senior partner and
member of the Executive
Committee of that firm. He
was also a Trustee of the
Museum of the City of New
York from 1977-1995.
Robert C. White Director 78 Formerly Assistant
30835 Rivercrossing Treasurer of Ford Motor
Bingham Farms, MI 48025 Company and until September
30, 1994, a Vice President
and the Chief Financial
Officer of the Howard Hughes
Medical Institute.
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<PAGE>
OFFICERS
POSITIONS HELD PRINCIPAL OCCUPATIONS
NAME AND ADDRESS WITH REGISTRANT AGE DURING PAST 5 YEARS
___________________ _______________ ___ ________________________
John D. Carifa Chairman of 53 See biography under
the Board "Directors," above.
and President
Kathleen A. Corbet Senior Vice 39 Executive Vice President
President of ACMC, with which she has
been associated since prior
to 1994.
Alfred Harrison Senior Vice 61 Vice Chairman of the
President Board of ACMC, with which he
has been associated since
prior to 1994.
Thomas J. Bardong Vice President 54 Senior Vice President of
ACMC, with which he has been
associated since prior to
1994.
John A. Koltes Vice President 56 Senior Vice President of
ACMC, with which he has been
associated since prior to
1994.
Michael J. Reilly Vice President 34 Senior Vice President of
ACMC, with which he has been
associated since prior to
1994.
Edmund P. Bergan, Jr. Secretary 49 Senior Vice President and the
General Counsel of Alliance
Fund Distributors, Inc.
("AFD") and Alliance Fund
Services, Inc. ("AFS") and
Vice President and Assistant
General Counsel of ACMC, with
which he has been associated
since prior to 1994.
Mark D. Gersten Treasurer and 48 Senior Vice President of
500 Plaza Drive Chief Financial AFS, with which he has
Secaucus, New Jersey 07094 Officer been associated since prior
to 1994.
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<PAGE>
Vincent S. Noto Controller 34 Vice President of AFS,
500 Plaza Drive with which he has been
Secaucus, New Jersey 07094 associated since prior to
1994.
____________________
* An "interested person" of the Fund, as defined in the 1940 Act.
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The Board of Directors is divided into three classes,
each class having a term of three years. Each year the term of
one class expires. The Fund does not pay any fees to, or
reimburse expenses of, its Directors who are considered
"interested persons" of the Fund, as defined in the 1940 Act.
The table below indicates the aggregate compensation
paid by the Fund to each of the Directors during its fiscal year
ended September 30, 1998, the aggregate compensation paid to each
of the Directors during calendar year 1998 by all of the funds to
which Alliance provides investment advisory services, referred to
below as the Alliance Fund Complex, and the total number of funds
in the Alliance Fund Complex for which each of the Directors
serves as a director or trustee. Neither the Fund nor any other
fund in the Alliance Fund Complex provides compensation in the
form of pension or retirement benefits to any of its directors or
trustees.
Total Number
of Investment
Companies in
Total the Alliance
Compensation Fund Complex,
from the including the
Aggregate Alliance Fund Fund, as to
Compensation Complex, which the
from the Fund including the Director is a
Name of Director for the Fiscal Fund during Director of
or Officer Year 1998 1998 Trustee
__________________ ______________ _____________ _____________
John D. Carifa 0 0 50
Ruth Block $4,376 $180,763 37
David Dievler $4,376 $216,288 43
John H. Dobkin $4,379 $185,363 41
William H. Foulk, Jr. $4,373 $241,003 45
Dr. James M. Hester $4,379 $172,913 37
Clifford L. Michel $4,379 $187,763 38
Donald J. Robinson $4,376 $193,709 41
Robert C. White $8,500 $ 83,000 10
HOLDINGS OF FUND SHARES
As far as is known to the Fund, no person owned
beneficially five percent or more of the outstanding shares of
the Fund at June 1, 1999. The Depository Trust Company ("DTC")
held of record 97.81% of the outstanding shares at June 1, 1999.
As far as is known to the Fund, no person other than DTC owned of
record shares of the Fund representing more than five percent of
the voting power of the Fund's outstanding shares at June 1,
1999. The Adviser of the Fund beneficially owned 5,000 shares at
June 1, 1999.
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As of June 1, 1999, all Directors and officers of the
Fund owned in the aggregate less than 1% of the Fund's shares.
ADMINISTRATOR
The Adviser is also the Fund's Administrator and as such
performs or arranges for the performance of the following
services:
- prepares and assembles reports required to be sent to
Fund stockholders and arranges for the printing and
dissemination of such reports;
- assembles reports required to be filed with the SEC and
files such completed reports with the SEC;
- arranges for the dissemination to stockholders of the
Fund's proxy materials and oversees the tabulation of
proxies by the Fund's transfer agent;
- negotiates the terms and conditions under which
custodian services will be provided to the Fund and the
fees to be paid by the Fund to its custodian;
- negotiates the dividend disbursing services fees to be
paid by the Fund and reviews the provision of dividend
disbursing services to the Fund;
- calculates, or arranges for the calculation of, the NAV
of the Fund's shares;
- calculates the basic fee payable to the Adviser and the
adjustment to the basic fee based on the investment
performance of the Fund in relation to the investment
record of the Russell 1000 Growth Index;
- determines the amounts available for distribution as
dividends and distributions to be paid by the Fund to
its stockholders; prepares and arranges for the printing
of dividend notices to stockholders; and provides the
Fund's dividend disbursing agent and custodian with such
information as is required for them to effect the
payment of dividends and distributions and to implement
the Fund's dividend reinvestment plan;
- assists in providing to the Fund's independent
accountants such information as is necessary for such
accountants to prepare and file the Fund's federal
income and excise tax returns and the Fund's state and
local tax returns;
- monitors compliance of the Fund's operation with the
1940 Act and with its investment policies and
limitations;
- monitors compliance of the Fund's operations, with
respect to engaging in short sales, with the 1940 Act
and the Code;
- provides accounting and bookkeeping services (including
the maintenance of such accounts, books and records of
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the Fund as may be required by Section 31(a) of the 1940
Act and the rules and regulations thereunder); and
- makes such reports and recommendations to the Fund's
Board of Directors as the Board reasonably requests or
deems appropriate.
The Administrator will benefit from the offer because it
will receive fees based in part on the average net assets of the
Fund. For the services rendered to the Fund and related expenses
borne by the Administrator, the Fund pays the Administrator a
monthly fee at the annual rate of .25 of 1% of the Fund's average
weekly net assets. For the fiscal years ended September 30,
1998, September 30, 1997 and September 30, 1996, the Fund paid
total administrative fees to the Administrator of $221,977,
$174,039 and $142,915, respectively. For purposes of the
calculation of the fee payable to the Administrator, average
weekly net assets are determined on the basis of the average net
assets of the Fund for each weekly period (ending on Friday)
ending during the month. The net assets for each weekly period
are determined by averaging the net assets on Friday of such
weekly period with the net assets on Friday of the immediately
preceding weekly period. If a Friday is not a Fund business day,
then the calculation will be based on the net assets of the Fund
on the Fund business day immediately preceding such Friday.
PORTFOLIO TRADING
Subject to the general supervision of the Board of
Directors, the Adviser is responsible for decisions to buy and
sell securities and other portfolio holdings for the Fund, the
selection of brokers and dealers to effect the transactions and
the negotiation of brokerage commissions. It is the Fund's
general policy to seek favorable net prices and prompt reliable
execution in connection with the purchase or sale of all
portfolio securities. In the purchase and sale of over-the-
counter securities, it is the Fund's policy to use the primary
market makers except when a better price can be obtained by using
a broker. The use of brokers who supply supplemental research
and analysis and other services may result in the payment of
higher commissions than those available from other brokers and
dealers who provide only the execution of portfolio transactions.
In addition, the supplemental research and analysis and other
services that may be obtained from brokers and dealers through
which brokerage transactions are effected may be useful to the
Adviser in connection with advisory clients other than the Fund.
Investment decisions for the Fund are made independently
from those for other investment companies and other advisory
accounts managed by the Adviser. It may happen, on occasion,
that the same security is held in the portfolio of the Fund and
one or more of such other companies or accounts. Simultaneous
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transactions are likely when several funds or accounts are
managed by the same adviser, particularly when a security is
suitable for the investment objectives of more than one of such
companies or accounts. When two or more companies or accounts
managed by the Adviser are simultaneously engaged in the purchase
or sale of the same security, the transactions are allocated to
the respective companies or accounts both as to amount and price,
in accordance with a method deemed equitable to each company or
account. In some cases this system may adversely affect the
price paid or received by the Fund or the size of the position
obtainable for the Fund.
Allocations are made by the officers of the Fund or of
the Adviser. Purchases and sales of portfolio securities are
determined by the Adviser and are placed with broker-dealers by
the order department of the Adviser.
The extent to which commissions that will be charged by
broker-dealers selected by the Fund may reflect an element of
value for research cannot presently be determined. To the extent
that research services of value are provided by broker-dealers
with or through whom the Fund places portfolio transactions, the
Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers could be
useful and of value to the Adviser in servicing its other clients
as well as the Fund; but, on the other hand, certain research
services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value
to it in serving the Fund. Consistent with the Conduct Rules of
the National Association of Securities Dealers, Inc., and subject
to seeking best execution, the Fund may consider sales of shares
of the Fund or other investment companies managed by the Adviser
as a factor in the selection of brokers to execute portfolio
transactions for the Fund.
The Fund may from time to time place orders for the
purchase or sale of securities (including listed call options)
with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
an affiliate of the Adviser, and with brokers which may have
their transactions cleared or settled, or both, by the Pershing
Division of DLJ, for which DLJ may receive a portion of the
brokerage commissions. In such instances, the placement of
orders with such brokers would be consistent with the Fund's
objective of obtaining best execution and would not be dependent
upon the fact that DLJ is an affiliate of the Adviser.
During the fiscal periods ended September 30, 1996, 1997
and 1998 the Fund incurred brokerage commissions amounting in the
aggregate to $195,295, $216,191, and $250,574, respectively.
During the fiscal periods ended September 30, 1996, 1997 and
1998, brokerage commissions amounting in the aggregate to $0, $0,
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and $0, respectively were paid to DLJ and brokerage commissions
amounting in the aggregate to $0 were paid to brokers utilizing
the Pershing Division of DLJ. During the fiscal period ended
September 30, 1998, the brokerage commissions paid to DLJ
constituted 0% of the Fund's aggregate brokerage commissions and
the brokerage commissions paid to brokers utilizing the Pershing
Division of DLJ constituted 0% of the Fund's aggregate brokerage
commissions. During the fiscal period ended September 30, 1998,
of the Fund's aggregate dollar amount of brokerage transactions
involving the payment of commissions, 0% were effected through
DLJ and 0% were effected through brokers utilizing the Pershing
Division of DLJ. During the fiscal period ended September 30,
1998, transactions in portfolio securities of the Fund
aggregating $210,314,741 with associated brokerage commissions of
approximately $78,014 were allocated to persons of firms
supplying research services to the Fund or the Adviser.
Some of the Fund's portfolio transactions in equity
securities may occur on foreign stock exchanges. Transactions on
stock exchanges involve the payment of brokerage commissions. On
many foreign stock exchanges these commissions are fixed.
Securities traded in foreign over-the-counter markets (including
most fixed-income securities) are purchased from and sold to
dealers acting as principal. Over-the-counter transactions
generally do not involve the payment of a stated commission, but
the price usually includes an undisclosed commission or markup.
The prices of underwritten offerings, however, generally include
a stated underwriter's discount. The Adviser expects to effect
the bulk of its transactions in securities of companies based in
foreign countries through brokers, dealers or underwriters
located in such countries. U.S. Government or other U.S.
securities constituting permissible investments will be purchased
and sold through U.S. brokers, dealers or underwriters.
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DETERMINATION OF NAV
The Fund determines NAV no less frequently than the
close of trading on the NYSE (generally 4:00 P.M. New York City
time) on the last business day of each week (generally Friday).
The Fund's per share net asset value is calculated by dividing
the value of the Fund's total assets, less its liabilities, by
the total number of its shares then outstanding. A Fund business
day is any weekday on which the NYSE is open for trading.
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at
fair value as determined in good faith by the Board of Directors.
The Board of Directors has delegated to the Adviser certain of
the Board's duties with respect to the following procedures.
Readily marketable securities listed on the NYSE or on a foreign
securities NYSE (other than foreign securities exchanges whose
operations are similar to those of the United States over-the-
counter market) are valued, except as indicted below, at the last
sale price reflected on the consolidated tape at the close of the
NYSE or, in the case of a foreign securities exchange, at the
last quoted sale price, in each case on the business day as of
which such value is being determined. If there has been no sale
on such day, the securities are valued at the mean of the closing
bid and asked prices on such day. If no bid or asked prices are
quoted on such day, then the security is valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors. Readily marketable securities not listed
on the NYSE or on a foreign securities exchange but listed on
other United States national securities exchanges or traded on
The Nasdaq Stock Market, Inc. are valued in like manner.
Portfolio securities traded on the NYSE and on one or more
foreign or other national securities exchanges, and portfolio
securities not traded on the NYSE but traded on one or more
foreign or other national securities exchanges are valued in
accordance with these procedures by reference to the principal
exchange on which the securities are traded.
Readily marketable securities traded in the over-
the-counter market, securities listed on a foreign securities
exchange whose operations are similar to those of the United
States over-the-counter market, and securities listed on a U.S.
national securities exchange whose primary market is believed to
be over-the-counter (but excluding securities traded on The
Nasdaq Stock Market, Inc.), are valued at the mean of the current
bid and asked prices as reported by Nasdaq or, in the case of
securities not quoted by Nasdaq, the National Quotation Bureau or
another comparable source.
Listed put or call options purchased by the Fund are
valued at the last sale price. If there has been no sale on that
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day, such securities will be valued at the closing bid prices on
that day.
Open futures contracts and options thereon will be
valued using the closing settlement price or, in the absence of
such a price, the most recent quoted bid price, If there are no
quotations available for the day of valuations, the last
available closing settlement price will be used.
U.S. Government securities and other debt instruments
having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that
this method does not represent fair value).
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities. The
prices provided by pricing service take into account many
factors, including institutional size trading in similar groups
of securities and any developments related to specific
securities.
All other assets of the Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.
Trading in securities on Far Eastern and European
securities exchanges and over-the-counter markets is normally
completed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place
in various foreign markets on days that are not Fund business
days. The Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities
in these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are
determined in accordance with the above procedures and the close
of the NYSE will not be reflected in the Fund's calculation of
net asset value unless it is believed that these prices do not
reflect current market value, in which case the securities will
be valued in good faith by, or in accordance with procedures
established by, the Board of Directors at fair value.
For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in a
foreign currency will be converted into U.S. dollars at the mean
of the current bid and asked prices of such currency against the
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U.S. dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the
basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If such quotations are
not available as of the close of the NYSE, the rate of exchange
will be determined in good faith by, or under the direction of,
the Board of Directors.
TENDER OFFER AND SHARE REPURCHASES
As discussed above, shares of closed-end investment
companies frequently trade at a discount from NAV. To address
this possibility, the Board of Directors presently contemplates
that the Fund may from time to time consider either the
repurchase or tender offer of its shares on the open market.
Since commencement of the Fund's operations, no such open market
purchases or tender offers have been made. The Fund may borrow
money to finance the repurchase of shares.
There can be no assurance that repurchases or tenders
will result in the Fund's shares trading at a price which is
equal to its NAV. The Fund anticipates that the market price of
the Fund's shares will usually vary from NAV. The market price
of the Fund's shares will be determined, among other things, by
the relative demand for and supply of the Fund's shares in the
market, the Fund's investment performance, the Fund's dividends
and yield and investor perception of the Fund's overall
attractiveness as an investment as compared with other investment
alternatives. Nevertheless, the fact that the Fund's shares may
be the subject of repurchases or tender offers from time to time
may enhance its attractiveness to investors and thus reduce the
spread between market price and NAV that may otherwise exist.
Although the Board of Directors believes that share
repurchases and tenders generally would have a favorable effect
on the market price of the Fund's shares, it should be recognized
that the acquisition of shares of the Fund will decrease the
total assets of the Fund and therefore have the effect of
increasing the Fund's expense ratio. Furthermore, any interest
on borrowings to finance Fund shares from repurchase transactions
will reduce the Fund's net income.
Even if a tender offer has been made, it is the Board of
Directors' announced policy, which may be changed by the Board of
Directors, not to accept tenders or effect repurchases if
(1) such transactions, if consummated, would (a) result in the
delisting of the Fund's shares from the NYSE (the NYSE having
advised the Fund that it would consider delisting if the
aggregate market value of the Fund's outstanding publicly held
common stock is less than $5.0 million, the number of publicly
held shares of common stock falls below 600,000 or the number of
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round-lot holders falls below 1,200), (b) result in a violation
of applicable asset coverage requirements, (c) impair the Fund's
status as a regulated investment company under the Code (which
would make the Fund a taxable entity, causing the Fund's income
to be taxed at the corporate level in addition to the taxation of
stockholders who receive dividends from the Fund); (2) the Fund
would not be able to liquidate portfolio securities in an orderly
manner and consistent with the Fund's investment objective and
policies in order to repurchase shares; or (3) there is, in the
Board's judgment, any (a) material legal action or proceeding
instituted or threatened challenging, in the Board's judgment,
such transactions or otherwise materially adversely affecting the
Fund, (b) suspension of or limitation on prices for trading
securities generally on the NYSE or any foreign exchange on which
portfolio securities of the Fund are traded, (c) declaration of a
banking moratorium by federal, state or foreign authorities or
any suspension of payment by banks in the United States, New York
State or foreign countries in which the Fund invests,
(d) limitation affecting the Fund or issuers of its portfolio
securities imposed by federal, state or foreign authorities on
the extension of credit by lending institutions or on the
exchange of foreign currency, (e) commencement of war, armed
hostilities or other international or national calamity directly
or indirectly involving the United States or other countries in
which the Fund invests, or (f) other event or condition which
would have a material adverse effect on the Fund or its
stockholders if shares were repurchased. The Board of Directors
may modify these conditions from time to time in light of
experience and may determine to make a tender offer even if one
of the above conditions exists.
Any tender offer made by the Fund will be at a price
equal to the NAV of the shares as of the close of business on the
date the offer ends. Each offering document will contain such
information as is required under the federal securities law.
Each offering document will also disclose the federal income tax
consequences of the Fund's repurchase of shares pursuant to the
tender offer. When a tender offer is authorized to be made by
the Board a stockholder wishing to accept the offer will be
required to tender all (but not less than all) of their shares.
The Fund will purchase shares tendered by a stockholder at any
time during the period of the tender offer in accordance with the
terms of the offer unless it determines to accept none of them
(based upon one of the conditions set forth above). Each person
tendering shares will be required to submit a check in an amount
not to exceed $25 payable to the Fund, which will be used to help
defray the costs associated with effecting the tender offer.
This fee will be imposed upon each tendering stockholder whose
tendered shares are purchased in the tender offer and will be
imposed regardless of the number of shares purchased. The Fund
expects the cost to the Fund of effecting a tender offer will be
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greater than the aggregate of all service charges received from
those who tender their shares. Costs associated with the tender
offer will be charged against capital of the Fund. During the
period of a tender offer, the Fund's stockholders will be able to
obtain the Fund's current NAV by use of a toll-free telephone
number.
Shares that have been purchased by the Fund will be
retired and will be authorized but unissued shares. The purchase
of shares by the Fund will reduce the Fund's net asset value.
The portfolio turnover rate of the Fund may or may not be
affected by the Fund's repurchase of shares pursuant to a tender
offer.
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DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT PLAN
The Fund has implemented a quarterly distribution policy
that distributes quarterly each year to stockholders (i) with
respect to each of the first three calendar quarters of the year,
an amount equal to 2.5% of the Fund's NAV determined as of the
beginning of the quarter, and (ii) with respect to the fourth
calendar quarter of each year, an amount equal to at least 2.5%
of the Fund's NAV as of the beginning of that quarter. If
distributions for any quarter exceed the Fund's net investment
income and net realized short-term capital gains, the difference
would be treated as distributed from net realized long-term
capital gains if sufficient and to the extent not sufficient from
other Fund assets as a return of capital. The reduction of the
Fund's assets by the amount of the excess will have the likely
effect of increasing the Fund's expense ratio. In order to make
distributions, the Fund may have to sell investments at an
inopportune time. The Fund's final distribution for each
calendar year will include remaining undistributed net investment
income, realized short-term capital gains, and realized long-term
capital gains, provided that if the Fund's undistributed net
investment income and net realized short-term and long-term
capital gains for the year exceeded the minimum required amount
for the previous quarters distributions as described above, the
Fund might choose not to distribute all or a portion of such
excess equal to the Fund's net realized long-term capital gains
for the year.
If, for any calendar year, for U.S. federal income tax
purposes, the total amount distributed exceeds the aggregate of
net investment income and net realized capital gains, the
difference, distributed from the Fund's assets, will generally be
treated as a tax-free return of capital (up to the amount of the
stockholder's tax basis in his shares). You are advised to
consult your own advisers with respect to the particular tax
consequences to you of these distributions. The Fund's Board of
Directors may change its distribution policy without stockholder
approval.
Under the Fund's Dividend Reinvestment Plan or plan, all
stockholders whose shares are registered in their own names will
have all distributions reinvested automatically in additional
shares of the Fund by The Bank of New York, as plan agent under
the plan, unless a stockholder elects to receive cash. An
election to receive cash may be revoked or reinstated at the
option of the stockholder. Stockholders whose shares are held in
the name of a broker or nominee will have distributions
reinvested automatically by the broker or nominee in additional
shares under the plan, unless the service is not provided by the
broker or nominee, or unless the stockholder elects to receive
distributions in cash. If the service is not available, such
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distributions will be paid in cash. Stockholders whose shares
are held in the name of a broker or nominee should contact the
broker or nominee for details. All distributions to investors
who elect not to participate (or whose broker or nominee elects
not to participate) in the plan, will be paid by check mailed
directly to the recordholder by the plan agent, as dividend
paying agent.
If the Board declares a dividend or capital gains
distribution payable either in Fund shares or in cash, as
stockholders may have elected, then nonparticipants in the plan
will receive cash and participants in the plan will receive the
equivalent in Fund shares valued at the lower of market price or
NAV. Whenever market price is equal to or exceeds NAV at the
time shares are valued for the purpose of determining the number
of shares equivalent to the cash dividend or capital gains
distribution, participants will be issued shares at the NAV most
recently determined as described above, but in no event less than
95% of the market price. If the NAV of Fund shares at such time
exceeds the market price of the shares at such time, or if the
Fund should declare a dividend or capital gains distribution
payable only in cash, the plan agent will buy Fund shares in the
open market, on the NYSE or elsewhere, for the participants'
accounts. If, before the plan agent has completed its purchases,
the market price exceeds the Fund's NAV, the average per share
purchase price paid by the plan agent may exceed the Fund's NAV,
resulting in the acquisition of fewer shares than if the dividend
or capital gains distribution had been paid in Fund shares issued
by the Fund. The plan agent will apply all cash received as a
dividend or capital gains distribution to purchase shares on the
open market as soon as practicable after the payment date of such
dividend or capital gains distribution, but in no event later
than 30 days after such date, except where necessary to comply
with applicable provisions of the federal securities laws.
The plan agent maintains all stockholder accounts in the
plan and furnishes written confirmations of all transactions in
such accounts, including information needed by stockholders for
personal and tax records. Fund shares in the account of each
plan participant are held by the plan agent in noncertificated
form in the name of the participant, and each participant's proxy
will include those shares purchased pursuant to the plan.
There is no charge to participants for reinvesting
dividends or capital gains distributions. The plan agent's fees
for handling the reinvestment of dividends and capital gains
distributions are paid by the Fund. There are no brokerage
charges with respect to shares issued directly by the Fund as a
result of dividends or capital gains distributions payable either
in stock or in cash. However, each participant is to pay a pro
rata share of brokerage commissions incurred with respect to the
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plan agent's open market purchases in connection with the
reinvestment of dividends and capital gains distributions.
The automatic reinvestment of dividends and capital
gains distributions does not relieve participants of any income
tax which may be payable on such dividends or distributions.
Experience under the plan may indicate that changes are
desirable. Accordingly, the Fund has reserved the right to amend
or terminate the plan as applied to any dividend or capital gains
distribution paid after written notice of the change sent to the
members of the plan at least 90 days before the record date for
such dividend or capital gains distribution. The plan also may
be amended or terminated by the plan agent, with the Fund's prior
written consent but, except when necessary or appropriate to
comply with applicable law or the rules or policies of a
regulatory body, only on at least 90 days' written notice to
participants in the plan. All correspondence concerning the plan
should be directed to The Bank of New York, 101 Barclay Street,
New York, New York 10286.
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FEDERAL TAXATION
The following summary addresses only principal United
States federal income tax considerations pertinent to the Fund
and to stockholders of the Fund who are United States citizens or
residents or United States corporations. The effects of federal
income tax law on stockholders who are nonresident alien
individuals, foreign corporations or other foreign persons may be
substantially different. The summary is based upon the advice of
counsel for the Fund and upon current law and interpretations
thereof. No confirmation has been obtained from the relevant tax
authorities. There is no assurance that the applicable laws and
interpretations will not change.
In view of the individual nature of tax consequences,
each stockholder is advised to consult the stockholder's own tax
adviser with respect to the specific consequences of being a
stockholder of the Fund, including the effect and applicability
of federal, state, local, foreign and other tax laws and the
effects of changes therein.
UNITED STATES FEDERAL INCOME TAXATION OF DIVIDENDS AND
DISTRIBUTIONS
General. The Fund intends for each taxable year to
qualify to be taxed as a "regulated investment company." To so
qualify, the Fund must, among other things, (i) derive at least
90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign
currency, or certain other income (including, but not limited to,
gains from options, futures and forwards contracts) derived with
respect to its business of investing in stock, securities or
currency; and (ii) diversify its holdings so that, at the end of
each quarter of its taxable year, the following two conditions
are met: (a) at least 50% of the value of the Fund's assets is
represented by cash, U.S. Government securities, securities of
other regulated investment companies and other securities, with
respect to which the Fund's investment is limited, in respect of
any one issuer, to an amount not greater than 5% of the Fund's
assets and 10% of the outstanding voting securities of such
issuer, and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than
U.S. Government securities or the securities of other regulated
investment companies) or of two or more issuers which the Fund
controls and which are determined to be engaged in the same or
similar trades or businesses or related trades or businesses.
If the Fund qualifies as a regulated investment company
for any taxable year and makes timely distributions to its
stockholders of 90% or more of its investment company taxable
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income for that year (calculated without regard to its net
capital gain, i.e., the excess of its net long-term capital gain
over its net short-term capital loss), it will not be subject to
federal income tax on the portion of its taxable income for the
year (including any net capital gain) that it distributes to
stockholders. If the Fund retains such taxable income, it will
be subject under current rates to federal income tax on the
amount retained at a maximum rate of 35%.
The Fund will also avoid the 4% federal excise tax that
would otherwise apply to certain undistributed income for a given
calendar year if it makes timely distributions to the
stockholders equal to at least the sum of (i) 98% of its ordinary
income for the calendar year, (ii) 98% of its capital gain net
income and foreign currency gains for the twelve-month period
ending on October 31 of that year; and (iii) any ordinary income
and capital gain net income from the preceding calendar year that
was not distributed during that year. For this purpose, income
or gain retained by the Fund that is subject to corporate income
tax will be considered to have been distributed by the Fund by
year-end. For federal income and excise tax purposes, dividends
declared and payable to stockholders of record as of a date in
October, November or December of a given year but actually paid
during the immediately following January will be treated as if
paid by the Fund on December 31 of that calendar year, and will
be taxable to these stockholders for the year declared, and not
for the year in which the stockholders actually receive the
dividend.
The Fund intends to make timely distributions of the
Fund's taxable income (including any net capital gain) so that
the Fund will not be subject to federal income or excise taxes.
However, exchange control or other regulations on the
repatriation of investment income, capital or the proceeds of
securities sales, if any exist or are enacted in the future, may
limit the Fund's ability to make distributions sufficient in
amount to avoid being subject to one or both of such federal
taxes.
If in any taxable year the Fund fails to qualify as a
regulated investment company, the Fund will be taxed in the same
manner as an ordinary corporation, and distributions to it
stockholders will not be deductible by the Fund in computing its
taxable income. In addition, in the event of failure to qualify,
the Fund's distributions, to the extent derived from the Fund's
current or accumulated earnings and profits, will constitute
dividends (eligible for the corporate dividends-received
deduction, subject to certain requirements) which are taxable to
stockholders as ordinary income, even though those distributions
might otherwise (at least in part) have been treated in the
stockholders' hands as long-term capital gains.
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Dividends and Distributions. Dividends of the Fund's
net ordinary income and distributions of any net realized short-
term capital gain will be taxable to stockholders as ordinary
income to the extent of the Fund's current and accumulated
earnings and profits for the year of the distribution period.
Distributions of net capital gain (i.e., the excess of net long-
term capital gain over net short-term capital loss) are taxable
as long-term capital gain, regardless of how long a stockholder
has held shares in the Fund. If, because of the Fund's
distribution policies, the amount of the distributions by the
Fund with respect to any calendar year exceed the sum of the
Fund's ordinary income and net realized gains for the year, the
amount of such excess will be treated as a nontaxable return of
capital to the stockholder to the extent of the stockholder's tax
basis in his shares in the Fund. The amount of any distributions
in excess of such tax basis will be taxed as capital gain or loss
assuming the stockholder holds such shares as a capital asset.
Any dividend or distribution received by a stockholder
on shares of the Fund will have the effect of reducing the net
asset value of such shares by the amount of such dividend or
distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a stockholder,
although in effect a return of capital to that particular
stockholder, would be taxable to the stockholder as described
above. Dividends are taxable in the manner discussed above
regardless of whether they are paid to the stockholder in cash or
are reinvested in additional shares of the Fund. The investment
objective of the Fund is such that only a small portion, if any,
of the Fund's distributions is expected to qualify for dividends-
received deduction for corporate stockholders.
After the end of the taxable year, the Fund will notify
stockholders of the federal income tax status of any
distributions made by the Fund to stockholders during such year.
A dividend or capital gains distribution with respect to
shares of the Fund held by a tax-deferred or qualified plan, such
as an individual retirement account, 403(b)(7) retirement plan or
corporate pension or profit-sharing plan, generally will not be
taxable to the plan. Distributions from such plans will be
taxable to individual participants under applicable tax rules
without regard to the character of the income earned by the
qualified plan.
Sales and Redemptions. A stockholder will realize gain
or loss on the sale or redemption of Fund shares in an amount
equal to the difference between the stockholder's adjusted tax
basis in the shares sold or redeemed and the amount realized on
their disposition. Such gain or loss generally will be capital
90
<PAGE>
gain or loss except in the case of dealers or certain financial
institutions. Such gain or loss will be long-term capital gain
or loss if the stockholder has held such shares for more than one
year at the time of the sale or redemption and short-term capital
gain or loss if the holding period is one year or less. If a
stockholder has held shares in the Fund for six months or less
and during that period has received a distribution of net capital
gain, any loss recognized by the stockholder on the sale of those
shares during the six-month period will be treated as a long-term
capital loss to the extent of the distribution. In determining
the holding period of such shares for this purpose, any period
during which a stockholder's risk of loss is offset by means of
options, short sales or similar transactions is not counted.
Any loss realized by a stockholder on a sale or exchange
of shares of the Fund will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30
days before and ending 30 days after the shares are sold or
exchanged. For this purpose, acquisitions pursuant to the
Dividend Reinvestment Plan would constitute a replacement if made
within the period. If disallowed, the loss will be reflected in
an upward adjustment to the tax basis of the shares acquired.
Foreign Taxes. Income received by the Fund also may be
subject to foreign income taxes, including withholding taxes. It
is not possible to determine the effective rate of foreign tax in
advance since the amount of the Fund's assets to be invested
within various countries is not known.
Backup Withholding. The Fund may be required to
withhold for federal income tax at the rate of 31% of all taxable
distributions payable to noncorporate stockholders who fail to
provide the Fund with their correct taxpayer identification
numbers or to make required certifications, or who have been
notified by the Internal Revenue Service that they are subject to
backup withholding. Corporate stockholders and certain other
stockholders specified in the Code are exempt from such backup
withholding. Backup withholding is not an additional tax; any
amounts so withheld may be credited against the stockholder's
federal income tax liability or refunded.
UNITED STATES FEDERAL INCOME TAXATION OF THE FUND
The following discussion related to certain significant
United States federal income tax consequences to the Fund with
respect to the determination of its "investment company taxable
income" each year. This discussion assumes that the Fund will be
taxed as a regulated investment company for each of its taxable
years.
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Currency Fluctuations, "Section 988" Gains or Losses.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss. Similarly,
gains or losses from the disposition of foreign currencies, from
the disposition of debt securities denominated in a foreign
currency, or from the disposition of a forward contract
denominated in a foreign currency, which are attributable to
fluctuations in the value of the foreign currency between the
date of acquisition of the asset and the date of disposition also
are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "section 988" gains or losses,
increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to its stockholders as
ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. Because section 988 losses
reduce the amount of ordinary dividends the Fund will be allowed
to distribute for a taxable year, such section 988 losses may
result in all or a portion of prior dividend distributions for
such year being recharacterized as nontaxable return of capital
to stockholders, rather than as an ordinary dividend, reducing
each stockholder's basis in his Fund shares. If such
distributions exceed such stockholder's basis, such excess will
be treated as a gain from the sale of shares.
Options, Futures and Forward Contracts. Certain listed
options, regulated futures contracts, and forward foreign
currency contracts are considered "section 1256 contracts" for
federal income tax purposes. Section 1256 contracts held by the
Fund at the end of each taxable year will be "marked to market"
and treated for federal income tax purposes as though sold for
fair market value on the last business day of such taxable year.
Gain or loss realized by the Fund on section 1256 contracts other
than forward foreign currency contracts will be considered 60%
long-term and 40% short-term capital gain or loss. Gain or loss
realized by the Fund on forward foreign currency contracts
generally will be treated as section 988 gain or loss and will
therefore be characterized as ordinary income or loss and will
increase or decrease the amount of the Fund's net investment
income available to be distributed to stockholders as ordinary
income, as described above. The Fund can elect to exempt its
section 1256 contracts which are part of a "mixed straddle" (as
described below) from the application of section 1256.
With respect to equity options or options traded over-
the-counter on certain foreign exchanges, gain or loss realized
by the Fund upon the lapse or sale of such options held by the
Fund will be either long-term or short-term capital gain or loss
92
<PAGE>
depending upon the Fund's holding period with respect to such
option. However, gain or loss realized upon the lapse or closing
out of such options that are written by the Fund will be treated
as short-term capital gain or loss. In general, if the Fund
exercises an option, or an option that the Fund has written is
exercised, gain or loss on the option will not be separately
recognized but the premium received or paid will be included in
the calculation of gain or loss upon disposition of the property
underlying the option.
Gain or loss realized by the Fund on the lapse or sale
of put and call options on foreign currencies which are traded
over-the-counter or on certain foreign exchanges will be treated
as section 988 gain or loss and will therefore be characterized
as ordinary income or loss and will increase or decrease the
amount of the Fund's net investment income available to be
distributed to stockholders as ordinary income, as described
above. The amount of such gain or loss shall be determined by
subtracting the amount paid, if any, for or with respect to the
option (including any amount paid by the Fund upon termination of
an option written by the Fund) from the amount received, if any,
for or with respect to the option (including any amount received
by the Fund upon termination of an option held by the Fund). In
general, if the Fund exercises such an option on a foreign
currency, or such an option that the Fund has written is
exercised, gain or loss on the option will be recognized in the
same manner as if the Fund had sold the option (or paid another
person to assume the Fund's obligation to make delivery under the
option) on the date on which the option is exercised, for the
fair market value of the option. The foregoing rules will also
apply to other put and call options and which are traded over-
the-counter or on certain foreign exchanges to the extent gain or
loss with respect to such options is attributable to fluctuations
in foreign currency exchange rates.
Tax Straddles. Any option, futures contract, forward
foreign currency contract, currency swap, or other position
entered into or held by the Fund in conjunction with any other
position held by the Fund may constitute a "straddle" for federal
income tax purposes. A straddle of which at least one, but not
all, the positions are section 1256 contracts may constitute a
"mixed straddle." In general, straddles are subject to certain
rules that may affect the character and timing of the Fund's
gains and losses with respect to straddle positions by requiring,
among other things, that (i) loss realized on disposition of one
position of a straddle not be recognized to the extent that the
Fund has unrealized gains with respect to the other position in
such straddle; (ii) the Fund's holding period in straddle
positions be suspended while the straddle exists (possibly
resulting in gain being treated as short-term capital gain rather
than long-term capital gain); (iii) losses recognized with
93
<PAGE>
respect to certain straddle positions which are part of a mixed
straddle and which are non-section 1256 positions be treated as
60% long-term and 40% short-term capital loss; (iv) losses
recognized with respect to certain straddle positions which would
otherwise constitute short-term capital losses be treated as
long-term capital losses; and (v) the deduction of interest and
carrying charges attributable to certain straddle positions may
be deferred. The Treasury Department is authorized to issue
regulations providing for the proper treatment of a mixed
straddle where at least one position is ordinary and at least one
position is capital. No such regulations have yet been issued.
Various elections are available to the Fund which may mitigate
the effects of the straddle rules, particularly with respect to
mixed straddles. In general, the straddle rules described above
do not apply to any straddles held by the Fund all of the
offsetting positions of which consist of section 1256 contracts.
The Fund may be subject to other state and local taxes
than those discussed above. Also, distributions by the Fund may
be subject to additional state, local and foreign taxes depending
on each stockholder's particular circumstances.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Fund consists of
300,000,000 shares of common stock, $0.01 par value. As of the
date of this Prospectus, 2,515,754 shares are outstanding.
DESCRIPTION OF FUND SHARES
Each share has equal voting, dividend, distribution and
liquidation rights. The shares outstanding are, and the shares
offered hereby when issued will be, fully paid and nonassessable.
Stockholders are entitled to one vote per share. All voting
rights for the election of Directors are noncumulative, which
means that the holders of more than 50% of the shares can elect
100% of the Directors then nominated for election if they choose
to do so and, in that event, the holders of the remaining shares
will not be able to elect any Directors. The foregoing
description and the description under "Certain Anti-Takeover
Provisions of the Articles of Incorporation and Bylaws" are
subject to the provisions contained in the Fund's Articles of
Incorporation and Bylaws.
94
<PAGE>
CERTAIN ANTI-TAKEOVER PROVISIONS OF THE ARTICLES OF INCORPORATION
AND BYLAWS
The Fund presently has provisions in its Articles of
Incorporation and Bylaws (together, the "Charter Documents") that
are intended to limit (i) the ability of other entities or
persons to acquire control of the Fund, (ii) the Fund's freedom
to engage in certain transactions and (iii) the ability of the
Fund's Directors or stockholders to amend the Charter Documents
or effect changes in the Fund's management. These provisions of
the Charter Document may be regarded as "anti-takeover"
provisions. At the first annual meeting of stockholders, the
Board of Directors was divided into three classes. Upon the
expiration of the term of office of each class the Directors in
such class will be elected for a term of three years to succeed
the Directors whose terms of office expire. Accordingly, only
those Directors in one class may be changed in any one year, and
it would require two years to change a majority of the Board of
Directors (although under Maryland law procedures are available
for the removal of Directors for cause even if they are not then
standing for re-elections, and under Securities and Exchange
Commission regulations, procedures are available for including
stockholder proposals in management's annual proxy statement).
Such system of electing Directors is intended to have the effect
of maintaining the continuity of management and, thus, make it
more difficult for the Fund's stockholders to change the majority
of the Directors. A director may be removed from office only for
cause and by a vote of at least 75% of the outstanding shares of
the Fund entitled to vote for the election of Directors. Under
Maryland law and the Fund's Articles of Incorporation, the
affirmative vote of the holders of a majority of the votes
entitled to be cast is required for the consolidation of the Fund
with another corporation, a merger of the Fund with or into
another corporation (except for certain mergers in which the Fund
is the successor), a statutory share exchange in which the Fund
is not the successor, a sale or transfer of all or substantially
all of the Fund's assets and any amendment to the Fund's Articles
of Incorporation (except for amendments to certain provisions of
the Articles of Incorporation that require the affirmative vote
of 75% of the votes entitled to be cast). The affirmative vote
of 75% (which is higher than that required under Maryland law or
the 1940 Act) of the outstanding shares of the Fund is required
to authorize the liquidation or dissolution of the Fund in the
absence of approval of the liquidation or dissolution by a
majority of the Continuing Directors of the Fund (defined for
this purpose as those Directors who are either members of the
Board of Directors on the date of closing of the initial public
offering of the shares of the Fund or subsequently become
Directors and whose elections are approved by a majority of the
Continuing Directors then on the Board. If a majority of the
Continuing Directors approve the liquidation or dissolution of
95
<PAGE>
the Fund, then such action shall require an affirmative vote of a
majority of the outstanding shares of the Fund. In addition, the
affirmative vote of 75% (which is higher than that required under
Maryland law or the 1940 Act) of the outstanding shares of the
Fund is required generally to authorize any of the following
transactions involving a corporation, person or entity, that is
directly or indirectly through affiliates, the beneficial owner
of more than 5% of the outstanding shares of the Fund (a
"Principal Stockholder"), or to amend the provisions of the
Articles of Incorporation relating to such transactions:
i. merger, consolidation or statutory share exchange of the
Fund with or into any Principal Stockholder;
ii. issuance of any securities of the Fund to any Principal
Stockholder for cash except upon (a) reinvestment of
dividends pursuant to a dividend reinvestment plan,
(b) issuance of any securities pursuant to the exercise
of any stock subscription rights distributed by the Fund
or (c) a public offering by the Fund registered under
the Securities Act;
iii. sale, lease or exchange of all or any substantial part
of the assets of the Fund to any Principal Stockholder
(except assets having an aggregate fair market value of
less than $1,000,000);
iv. sale, lease or exchange to the Fund, in exchange for
securities of the Fund, of any assets of any Principal
Stockholder (except assets having an aggregate fair
market value of less than $1,000,000).
However, such vote would not be required when, under
certain conditions, the Continuing Directors approve the
transactions described in (i)-(iv) above, although in certain
cases involving merger, consolidation or statutory share exchange
or sale of all or substantially all of the Fund's assets, the
affirmative vote of a majority of the outstanding shares of the
Fund would nevertheless be required. The affirmative vote of 75%
(which is higher than that under Maryland law or the 1940 Act) of
the outstanding shares of the Fund is required to convert the
Fund to an open-end investment company and to amend the Fund's
Articles of Incorporation to effect any such conversion. For the
full text of these provisions, reference is made to the Articles
of Incorporation and Bylaws of the Fund, on file with the
Securities and Exchange Commission.
The provisions of the Charter Documents described above
could have the effect of depriving the owners of shares of the
Fund of opportunities to sell their shares at a premium over
prevailing market prices by discouraging a third party from
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<PAGE>
seeking to obtain control of the Fund in a tender offer or
similar transaction. See "Tender Offers and Repurchase of
Shares." The overall effect of these provisions is to render
more difficult the accomplishment of a merger or the assumption
of control by a Principal Stockholder. The Board of Directors of
the Fund has considered the foregoing anti-takeover provisions
and concluded that they are in the best interests of the Fund and
its stockholders.
The Fund is required by the rules of the NYSE to hold
annual meetings of stockholders. The most recent annual meeting
of stockholders was held on March 9, 1999. The next annual
meeting of stockholders will be held between March 9, 2000 and
April 9, 2000.
CUSTODIAN, TRANSFER AGENT, DIVIDEND
DISBURSING AGENT, REGISTRAR AND
SHAREHOLDER SERVICING AGENT
The Bank of New York, 101 Barclay Street, New York, New
York 10286, acts as the Fund's custodian, transfer agent,
dividend paying agent and registrar. The Fund's portfolio of
securities and cash, when invested in securities of foreign
countries, will be held by its subcustodians, subject to approval
by the Board of Directors of the Fund as and when appropriate in
accordance with the rules of the SEC.
The Dealer Manager also acts as shareholder servicing
agent for the Fund and (i) provides services and makes efforts to
publicize the Fund on an ongoing basis to investors, including
both clients of the shareholder servicing agent and other
investors, and reminds investors, and prospective investors of
the Fund's features and benefits, including communications with
clients and their representatives, periodic seminars or
conference calls, internal and external publications,
presentations at retail system meetings, responses to questions
from potential or current stockholders and specific stockholder
contact where appropriate; (ii) makes available to brokers and
investors market price, NAV and yield information regarding the
Fund for the purpose of helping to maintain the visibility of the
Fund to brokers and clients (including investors and prospective
investors in the Fund); and (iii) provides financial advice and
consultation at the request of the Fund with respect of the Fund
with respect to consideration by the Board of Directors of the
Fund of share repurchases or tender offers. For these services,
the Fund pays the shareholder servicing agent a fee equal on an
annual basis to .10 of 1% of the Fund's average weekly net assets
and payable at the end of each calendar month. The shareholder
servicing agreement by its terms continues until September 30,
1999 and thereafter for successive one year periods unless
terminated by either party upon written notice 60 days prior to
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<PAGE>
the anniversary date thereof. In this regard, as part of its
ongoing oversight responsibilities, the Board of Directors will
monitor the performance of the shareholder servicing agent and
the continuing appropriateness of that agreement.
LEGAL MATTERS
The validity of the shares offered hereby will be passed
upon for the Fund by Seward & Kissel LLP, New York, New York.
Certain matters will be passed upon for the Dealer Manager by
Rogers & Wells LLP, New York, New York. Seward & Kissel will
rely upon the opinion of Venable, Baetjer and Howard, LLP for
matters relating to Maryland law.
REPORTS TO STOCKHOLDERS
The Fund will send semi-annual and audited annual
reports to its stockholders, including a list of investments
held. A copy of the Fund's annual report for the fiscal year
ended September 30, 1998 was mailed to stockholders on November
30, 1998 and its semi-annual report for the six months ended
March 31, 1999 was mailed to stockholders on May 28, 1999.
EXPERTS
The audited Financial Statements included in this
Prospectus have been audited by PricewaterhouseCoopers LLP,
independent public accountants, as indicated in their reports and
are included in reliance upon the authority of the firm as
experts in giving the report. The address of
PricewaterhouseCoopers LLP is 1177 Avenue of the Americas, New
York, NY 10036-2798.
FURTHER INFORMATION
On occasion, the Fund may compare its performance to
performance data published by Lipper Analytical Services, Inc.,
Morningstar Publications, Inc. or other industry publications.
As with other performance data, performance comparisons should
not be considered indicative of the Fund's relative performance
for any future period.
The Fund has filed with the SEC, Washington, D.C. 20549,
a registration statement under the Securities Act relating to the
shares offered by this Prospectus. Further information
concerning these shares and the Fund may be found in that
registration statement on file with the SEC, of which this
Prospectus constitutes a part. The Fund also files reports and
other information with the SEC. The registration statements and
these reports and other information can be inspected, without
charge, and copied, for a fee, at the public reference facilities
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<PAGE>
maintained by the SEC at 450 5th Street, Washington, D.C. 20549.
The Fund's filings are also available to the public on the SEC's
internet site (http://www.sec.gov). The reports and other
information concerning the Fund may also be inspected at the
offices of the NYSE.
No one has been authorized to give any information or to
make any representation other than those contained in this
Prospectus in connection with this offer. If information is
given or other representations are made, such information or
representations must not be relied upon since neither was
authorized by the Fund, the Adviser, or the Dealer Manager. This
Prospectus does not constitute an offer to sell or the
solicitation of any offer to buy any security other than the
Fund's shares, as described in this Prospectus. This Prospectus
also does not constitute an offer to sell or a solicitation of
any offer to buy the Fund's shares, as described in this
Prospectus, by anyone in any state in which the person making
such offer or solicitation is not qualified to do so, or to any
such person to whom it is illegal to make such offer or
solicitation. The information in this Prospectus may no longer
be correct after the date on the Prospectus. However, if any
material change occurs during the period in which this Prospectus
is legally required to be delivered, the Prospectus will be
amended or supplemented accordingly.
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_________________________________________________________________
FINANCIAL STATEMENTS
_________________________________________________________________
ALLIANCE ALL-MARKET ADVANTAGE FUND
ANNUAL REPORT
SEPTEMBER 30, 1998
ALLIANCE CAPITAL
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
F-1
<PAGE>
------------
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
F-2
<PAGE>
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
F-3
<PAGE>
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
F-4
<PAGE>
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.
F-5
<PAGE>
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.
F-6
<PAGE>
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
Custodian161,142
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.
F-7
<PAGE>
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.
F-8
<PAGE>
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.
F-9
<PAGE>
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.
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.
F-10
<PAGE>
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
F-11
<PAGE>
exercised, the premium reduces the cost basis of the security
purchased by the Fund. In writing covered options, the Fund bears
the market risk of an unfavorable change in the price of the
security underlying the written option. Exercise of an option
written by the Fund could result in the Fund selling or buying a
security at a price different from the current market value.
Losses from written market index options may be unlimited.
Transactions in options written for the year ended September 30,
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.
F-12
<PAGE>
FINANCIAL HIGHLIGHTS ALLIANCE ALL-MARKET ADVANTAGE FUND
- ----------------------------------------------------------------
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT
EACH PERIOD
NOVEMBER 4,
YEAR ENDED SEPTEMBER 30, 1994(A)
------------------------ TO SEPT. 30,
1998 1997 1996 1995
----------- ----------- ----------- -----------
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
F-13
<PAGE>
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%
(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).
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
F-14
<PAGE>
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.
F-15
<PAGE>
ALLIANCE ALL-MARKET ADVANTAGE FUND
SEMI-ANNUAL REPORT
MARCH 31, 1999
ALLIANCE CAPITAL
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999 (UNAUDITED) ALLIANCE ALL-MARKET
ADVANTAGE FUND
- ----------------------------------------------------------------
SHARES VALUE
- ----------------------------------------------------------------
COMMON STOCKS-77.4%
TECHNOLOGY-35.7%
COMMUNICATION EQUIPMENT-13.4%
EMC Corp.(a) 37,700 $ 4,816,175
Lucent Technologies, Inc. 13,000 1,400,750
Nokia Corp. ADR (Finland) 62,000 9,656,500
------------
15,873,425
COMPUTER HARDWARE-7.6%
Dell Computer Corp.(b) 190,000 7,766,250
Sun Microsystems, Inc. (a)(b) 10,300 1,286,856
------------
9,053,106
COMPUTER SOFTWARE-4.2%
Microsoft Corp.(a)(b) 55,200 4,947,300
INTERNET CONTENT-0.1%
Ziff-Davis, Inc. (b) 2,500 90,000
NETWORKING SOFTWARE-6.4%
Ascend Communications, Inc. (b) 8,000 669,500
Cisco Systems, Inc.(a)(b) 63,050 6,907,916
------------
7,577,416
SEMICONDUCTOR COMPONENTS-4.0%
Intel Corp. (a) 39,500 4,695,562
------------
42,236,809
HEALTHCARE-15.5%
DRUGS-9.8%
Bristol-Myers Squibb Co. (a) 36,000 2,315,250
Schering-Plough Corp. (a) 85,000 4,701,563
F-16
<PAGE>
Pfizer, Inc. (a) 33,500 4,648,125
------------
11,664,938
MEDICAL PRODUCTS-5.7%
IMS Health, Inc. 30,000 993,750
Mckesson HBOC, Inc. 72,522 4,786,452
Medtronic, Inc. (a) 13,400 961,450
------------
6,741,652
------------
18,406,590
CONSUMER SERVICES-15.4%
BROADCASTING & CABLE-6.9%
AirTouch Communications, Inc.(a)(b) 30,000 2,898,750
AT&T Corp - Liberty Media Group Cl. A 61,500 3,236,437
Chancellor Media Corp. Cl. A (a)(b) 43,200 2,035,800
------------
8,170,987
RETAIL - GENERAL MERCHANDISE-8.5%
Dayton Hudson Corp. (a) 20,000 1,332,500
Home Depot, Inc. (a) 105,000 6,536,250
Kohl's Corp. (a) 30,400 2,154,600
------------
10,023,350
------------
18,194,337
FINANCE-7.1%
BANKING - REGIONAL-0.6%
Wells Fargo Co. 19,500 683,719
BROKERAGE & MONEY MANAGEMENT-1.2%
Morgan Stanley, Dean Witter & Co. (a) 14,000 1,399,125
INSURANCE-0.8%
Citigroup, Inc. 16,000 1,022,000
MORTGAGE BANKING-1.6%
Fannie Mae Corp. 27,000 1,869,750
F-17
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE ALL-MARKET
ADVANTAGE FUND
- ----------------------------------------------------------------
SHARES OR
CONTRACTS (C)
VALUE
- ----------------------------------------------------------------
MISCELLANEOUS-2.9%
MBNA Corp. (a) 143,225 $ 3,419,497
------------
8,394,091
MULTI-INDUSTRY-1.5%
CAPITAL GOODS-1.5%
Tyco International, Ltd. (a) 25,200 1,808,100
CONSUMER GOODS-1.1%
ELECTRICAL EQUIPMENT-0.4%
General Electric Co. 5,000 553,125
MISCELLANEOUS-0.7%
United Technologies Corp. (a) 6,000 812,625
------------
1,365,750
UTILITIES-1.1%
TELEPHONE UTILITY-1.1%
MCI WorldCom, Inc. (b) 14,300 1,266,444
Total Common Stocks
(cost $43,169,880) 1,311,997 91,672,121
CALL OPTIONS PURCHASED-25.1%(B)
AirTouch Communications, Inc.
expiring Jul '99 @ $10 500 2,365,625
expiring Jan '00 @ $20 150 1,162,500
Associates First Capital Corp. Cl. A
expiring Jan '00 @ $20 300 768,750
expiring Jan '00 @ $22.50 300 710,625
BankAmerica Corp.
expiring Jan '00 @ $40 305 972,188
Bristol-Myers Squibb Co.
expiring Jan '00 @ $30 200 707,500
expiring Jan '00 @ $40 100 260,000
expiring Jan '01 @ $35 100 321,250
Citigroup, Inc.
expiring Jan '00 @ $35 150 451,875
Colgate-Palmolive Co.
expiring Jan '00 @ $60 75 258,750
Dayton Hudson Corp.
expiring Jan '00 @ $27.50 200 800,000
Fannie Mae Corp.
expiring Jan '00 @ $35 300 705,000
General Electric Co.
expiring Jan '00 @ $50 100 620,000
Home Depot, Inc.
F-18
<PAGE>
expiring Jan '00 @ $17.50 250 1,128,125
IBM Corp.
expiring Jan '00 @ $90 80 730,000
Kroger Co.
expiring Jan '00 @ $30 150 468,750
Lowe's Cos., Inc.
expiring Jan '00 @ $30 300 967,500
expiring Jan '00 @ $37.50 100 256,250
MBNA Corp.
expiring Jan '00 @ $15 1,230 1,199,250
MCI WorldCom, Inc.
expiring Jan '00 @ $25 190 1,230,250
expiring Jan '00 @ $40 90 473,625
expiring Jan '00 @ $50 75 311,250
Merck & Co., Inc.
expiring Jan '00 @ $40 150 618,750
Merrill Lynch & Co., Inc.
expiring Jan '00 @ $50 135 555,187
Morgan Stanley, Dean Witter & Co.
expiring Jan. '00 @ $50 100 518,750
Nokia Corp. (ADR)
expiring Jan '00 @ $60 70 687,750
expiring Jan '00 @ $70 80 708,000
Pfizer, Inc.
expiring Jan '00 @ $70 100 716,250
Philip Morris Cos., Inc.
expiring Jan '00 @ $30 300 232,500
expiring Jan '00 @ $35 200 87,500
Time Warner, Inc.
expiring Jan '00 @ $32.50 150 598,125
expiring Jan '00 @ $35 75 280,312
Tyco International, Ltd.
expiring Jan '00 @ $30 640 2,776,000
expiring Jan '00 @ $40 200 700,000
F-19
<PAGE>
ALLIANCE ALL-MARKET
ADVANTAGE FUND
- ----------------------------------------------------------------
CONTRACTS (C) OR
PRINCIPAL
AMOUNT
(000)
VALUE
- ----------------------------------------------------------------
United Technologies Corp.
expiring Jan '00 @ $70 210 $ 1,425,375
Wal-Mart Stores, Inc.
expiring Jan '00 @ $30 50 316,250
expiring Jan '00 @ $35 350 2,058,438
expiring Jan '00 @ $40 50 269,375
Waste Management
expiring Jan '00 @ $30 195 318,094
Total Call Options Purchased
(cost $22,665,670) 29,735,719
PUT OPTIONS PURCHASED-0.5%(B)
Standard & Poor's 500 Index
expiring Apr '99 @ $1,350 10 61,000
expiring Apr '99 @ $1,390 10 76,000
expiring Apr '99 @ $1,400 30 344,250
expiring Jun '99 @ $1,450 5 80,062
Total Put Options Purchased
(cost $527,486) 561,312
SHORT TERM INVESTMENT-0.3%
COMMERCIAL PAPER-0.3%
General Electric Capital Corp.
5.03%, 4/01/99
(amortized cost $401,000) $401 401,000
TOTAL INVESTMENTS-103.3%
(cost $66,764,036) 122,370,152
CALL OPTIONS WRITTEN-(0.8%)(B)
Chicago Board Options Exchange
NASDAQ 100 Index
expiring Apr '99 @ $1,980 10 (183,000)
expiring Apr '99 @ $2,020 10 (127,875)
expiring Apr '99 @ $2,040 20 (197,000)
expiring Apr '99 @ $2,060 20 (184,250)
Cisco Systems, Inc.
expiring Apr '99 @ $105 70 (44,625)
Microsoft Corp.
expiring Apr '99 @ $82.50 70 (54,250)
expiring Apr '99 @ $87.50 70 (28,000)
Standard & Poor's 500 Index
expiring Apr '99 @ $1,275 10 (37,500)
expiring Apr '99 @ $1,300 35 (51,625)
Total Call Options Written
(premiums received $762,814) (908,125)
F-20
<PAGE>
TOTAL INVESTMENTS, NET OF OUTSTANDING
CALL OPTIONS WRITTEN-102.5%
(cost $66,001,222) 121,462,027
Other assets less liabilities-(2.5%) (2,990,855)
NET ASSETS-100% $ 118,471,172
(a) Security, or a portion thereof, has been segregated to
collateralize open options written. This collateral has a
total market value of approximately $23,824,041.
(b) Non-income producing.
(c) One contract relates to 100 shares unless otherwise
indicated.
Glossary:
ADR - American Depositary Receipt.
See notes to financial statements.
F-21
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999 (UNAUDITED) ALLIANCE ALL-MARKET
ADVANTAGE FUND
- ----------------------------------------------------------------
ASSETS
Investments in securities, at value
(cost $66,764,036) $ 122,370,152
Cash 183,952
Receivable for investment securities sold 268,691
Dividends receivable 91,099
Deferred organization expenses and
other assets 12,397
Total assets 122,926,291
LIABILITIES
Outstanding call options written,
at value (premiums received $762,814)
908,125
Dividend payable 2,688,838
Payable for investment securities purchased 489,244
Advisory fee payable 167,698
Administration fee payable 24,657
Accrued expenses and other liabilities 176,557
Total liabilities 4,455,119
NET ASSETS $ 118,471,172
COMPOSITION OF NET ASSETS
Capital stock, at par $ 25,157
Additional paid-in capital 49,741,734
Undistributed net investment loss (5,740,917)
Accumulated net realized gain on
investment transactions 18,984,393
Net unrealized appreciation of
investments and options
written 55,460,805
$ 118,471,172
NET ASSET VALUE PER SHARE (based
on 2,515,686 shares
outstanding) $47.09
See notes to financial statements.
F-22
<PAGE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
ALLIANCE ALL-MARKET
ADVANTAGE FUND
- ----------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 214,044
Interest 17,641 $ 231,685
EXPENSES
Advisory fee 884,555
Administrative 128,673
Custodian 74,141
Audit and legal 52,151
Shareholder servicing 51,470
Printing 33,525
Directors' fees and expenses 24,000
Registration 4,720
Transfer agency 2,824
Amortization of organization
expenses 1,995
Miscellaneous 3,310
Total expenses before interest 1,261,364
Interest expense on short sales 2,223
Total expenses 1,263,587
Net investment loss (1,031,902)
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS,
SHORT SALES AND OPTIONS WRITTEN
Net realized gain on long
transactions 21,532,569
Net realized gain on short sale
transactions 33,773
Net realized loss on written option
transactions (668,578)
Net change in unrealized appreciation of
investments and options written 21,491,287
Net gain on investments 42,389,051
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 41,357,149
See notes to financial statements.
F-23
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE ALL-MARKET
ADVANTAGE FUND
- ----------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30,
(UNAUDITED) 1998
-------------- --------------
INCREASE (DECREASE) IN
NET ASSETS
FROM OPERATIONS
Net investment loss $ (1,031,902) $ (1,932,651)
Net realized gain on
investment, short
sale and written
option transactions 20,897,764 8,866,477
Net change in unrealized
appreciation of
investments and options
written 21,491,287 2,937,240
Net increase in net assets
from operations 41,357,149 9,871,066
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net realized gain on
investments (4,709,015) (12,924,008)
COMMON STOCK TRANSACTIONS
Reinvestment of dividends
resulting in issuance
of common stock 271,019 127,507
Total increase (decrease) 36,919,153 (2,925,435)
NET ASSETS
Beginning of year 81,552,019 84,477,454
End of period $ 118,471,172 $ 81,552,019
See notes to financial statements.
F-24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999 (UNAUDITED) 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.
F-25
<PAGE>
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.
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 six
months ended March 31, 1999, the fee as adjusted, amounted to
1.73% of the Fund's average net assets.
Under the terms of an Administrative Agreement, the Fund pays its
Administrator, Alliance Capital Management L.P., a monthly fee
equal to the annualized rate of .25 of 1% of the Fund's average
weekly net assets. The Administrator provides administrative
functions to the Fund as well as other clerical services. The
Administrator also prepares financial and regulatory reports for
the Fund.
Under the terms of a Shareholder Inquiry Agency Agreement with
Alliance Fund Services, Inc. ("AFS"), an affiliate of the
Investment Adviser, the Fund reimburses AFS for costs relating to
servicing phone inquiries for the Fund. During the six months
ended March 31, 1999, there was no reimbursement paid to AFS.
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.
F-26
<PAGE>
Brokerage commissions paid on investment transactions for the six
months ended March 31, 1999 amounted to $121,209, 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 $58,573,860 and $71,963,350, respectively,
for the six months ended March 31, 1999. There were no purchases
or sales of U.S. government or government agency obligations for
the six months ended March 31, 1999.
At March 31, 1999, the cost of investments for federal income tax
purposes was substantially the same as the cost for financial
reporting purposes. Accordingly, gross unrealized appreciation of
investments was $57,453,728 and gross unrealized depreciation of
investments was $1,847,612 resulting in net unrealized
appreciation of $55,606,116.
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
F-27
<PAGE>
the Fund has realized a gain or loss. If a written put option is
exercised, the premium reduces the cost basis of the security
purchased by the Fund. In writing covered options, the Fund bears
the market risk of an unfavorable change in the price of the
security underlying the written option. Exercise of an option
written by the Fund could result in the Fund selling or buying a
security at a price different from the current market value.
Losses from written market index options may be unlimited.
Transactions in options written for the six months ended March
31, 1999 were as follows:
NUMBER PREMIUMS
OF CONTRACTS RECEIVED
------------ ------------
Options outstanding at
beginning of year 885 $ 1,306,240
Options written 3,460 6,301,198
Options terminated
in closing purchase
transactions (4,030) (6,844,624)
Options outstanding at
March 31, 1999 315 $ 762,814
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 5.59% 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 2,515,686 shares outstanding at March 31,
1999, the Investment Adviser owned 5,000 shares. During the six
months ended March 31, 1999, the Fund issued 7,669 shares in
connection with the Fund's dividend reinvestment plan.
F-28
<PAGE>
NOTE E: YEAR 2000
Many computer systems and applications in use today process
transactions using two-digit date fields for 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. Should any of the
computer systems employed by the Fund's major service providers
fail to process Year 2000 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 prices of securities held by the Fund decline as a
result of real or perceived problems relating to the Year 2000,
the value of the Fund's shares may be materially affected. With
respect to the Year 2000, the Fund has been advised that
Alliance, the Fund's Investment Manager, 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 structured and coordinated
process to deal with the Year 2000 issues. Alliance reports that
it has completed its assessment of 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 in early 1999. Full integration testing of
these systems and testing of interfaces 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.
The Fund and Alliance have been advised by the Fund's Transfer
Agent and Custodian that they are also in the process of
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.
F-29
<PAGE>
FINANCIAL HIGHLIGHTS ALLIANCE ALL-MARKET
ADVANTAGE FUND
- ----------------------------------------------------------------
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH PERIOD
SIX MONTHS NOVEMBER 4,
ENDED 1994(A)
MARCH 31, YEAR ENDED SEPTEMBER 30, TO
1999 ------------------------- SEPTEMBER 30,
(UNAUDITED) 1998 1997 1996 1995
----------- -------- -------- -------- -----------
Net asset value,
beginning of period $32.52 $33.72 $22.19 $23.78 $19.70(b)
INCOME FROM INVESTMENT
OPERATIONS
Net investment loss (.41) (.77) (.58) (.48) (.09)
Net realized and
unrealized gain on
investment transactions 16.86 4.73 14.40 1.86 5.65
Net increase in net asset
value from
operations 16.45 3.96 13.82 1.38 5.56
LESS: DISTRIBUTIONS
Distributions from net
realized gains (1.88) (5.16) (2.29) (2.97) (1.48)
Net asset value, end
of period $47.09 $32.52 $33.72 $22.19 $23.78
Market value, end
of period $48.875 $36.875 $31.188 $19.00 $19.50
TOTAL RETURN
Total investment return
based on: (c)
Market value 37.89% 37.40% 79.27% 13.26% 5.46%
Net asset value 50.77% 12.49% 65.66% 8.10% 28.60%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $118,471 $81,552 $84,477 $55,582 $59,561
Ratio of expenses to
average net assets 2.47%(d) 2.57% 2.48% 2.87% 2.00%(d)
Ratio of expenses to
average net assets
excluding interest
expense 2.47%(d) 2.52%(e) 2.43%(e) 2.62%(e) 2.00%(d)
F-30
<PAGE>
Ratio of net investment
loss to average
net assets (2.02)%(d) (2.18)% (2.07)% (2.11)% (.48)%(d)
Portfolio turnover
rate 59% 96% 105% 199% 140%
(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).
F-31
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. FINANCIAL STATEMENTS
Included in Part A:
Financial Highlights and Financial Statements
2. EXHIBITS.
(a) Articles of Incorporation*
(b) By-Laws*
(c) Not applicable.
(d) (1) Form of Subscription Certificate*
(2) Form of Notice of Guaranteed Delivery*
(3) DTC Participant Over-Subscription Certificate and
Nominee Holder Over-Subscription Certificate*
(4) Subscription Rights Agency Agreement*
(e) Dividend Reinvestment Plan*
(f) Not applicable
(g) Investment Advisory Agreement*
(h) (1) Dealer Manager Agreement*
(2) Soliciting Dealer Agreement*
(i) Not applicable
(j) Custodian Agreement*
(k) (1) Transfer Agency Agreement*
(2) Administration Agreement*
_____________
* Previously filed and incorporated by reference from Pre-
Effective Amendment No. 2 to the Registration Statement
(File Nos. 333-77839 and 811-08702) as filed with the
Securities and Exchange Commission on June 18, 1999.
C-1
<PAGE>
(3) Shareholder Servicing Agreement*
(4) Shareholder Inquiry Agency Agreement*
(5) Information Agent Agreement*
(l) (1) Opinion and Consent of Seward & Kissel LLP
(2) Opinion and Consent of Venable, Baetjer and Howard,
LLP
(m) Not applicable
(n) Consent of Independent Auditors
(o) Not applicable
(p) Investment Representation Letter*
(q) Not applicable
(r) Financial Data Schedule
ITEM 25. MARKETING ARRANGEMENTS
See Dealer Manager Agreement as Exhibit (h)(1)*.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Registration fees $ 10,000
New York Stock Exchange listing fees $ 9,000
National Association of Securities Dealers, Inc. fees $ 6,000
Printing $100,000
Legal fees and expenses $200,000
Dealer Manager expenses $100,000
Auditing fees and expenses $ 20,000
Subscription Agent fees and expenses $ 25,000
Information Agent fees and expenses $ 25,000
Miscellaneous $ 5,000
Total $500,000
_____________
* Previously filed and incorporated by reference from Pre-
Effective Amendment No. 2 to the Registration Statement
(File Nos. 333-77839 and 811-08702) as filed with the
Securities and Exchange Commission on June 18, 1999.
C-2
<PAGE>
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
Not applicable
ITEM 28. NUMBER OF HOLDERS OF SECURITIES (as of June 1, 1999)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Common Stock ($0.01 par value per share) 112
ITEM 29. INDEMNIFICATION
It is the Registrant's policy to indemnify its directors
and officers, employees and other agents to the maximum extent
permitted by Section 2-418 of the General Corporation Law of the
State of Maryland and as set forth in Article EIGHTH of
Registrant's Articles of Incorporation filed as Exhibit (a),*
Article IX of the Registrant's Bylaws filed as Exhibit (b) 1 and
Section 7 of the Dealer Manager Agreement filed as Exhibit
(h)(1).* The Adviser's liability for any loss suffered by the
Registrant or its stockholders is set forth in Section 4 of the
Investment Advisory Agreement filed as Exhibit (g) to this
Registration Statement.* The Administrator's liability for any
loss suffered by the Registrant or its stockholders is set forth
in Section 6 of the Administration Agreement filed as Exhibit
(k)(2).*
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF ALLIANCE
The description of Alliance Capital Management L.P.
under the caption "Management of the Fund-Investment Adviser" in
the Prospectus is incorporated by reference herein.
The information as to the directors and executive
officers of Alliance Capital Management Corporation, the general
partner of Alliance, set forth in Alliance Capital Management
L.P.'s Form ADV filed with the Securities and Exchange Commission
on April 21, 1988 (File No. 801-32361) and as amended through the
date hereof is incorporated by reference herein.
_____________
* Previously filed and incorporated by reference from Pre-
Effective Amendment No. 2 to the Registration Statement
(File Nos. 333-77839 and 811-08702) as filed with the
Securities and Exchange Commission on June 18, 1999.
C-3
<PAGE>
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940
and the Rules thereunder are maintained as follows: journals,
ledgers, securities records and other original records are
maintained principally at the offices of Alliance Capital
Management L.P., 500 Plaza Drive, Secaucus, New Jersey 07094, and
at the offices of The Bank of New York, the Registrant's
Custodian, Transfer Agent, Dividend-Disbursing Agent and
Registrar, 101 Barclay Street, New York 10286. All other records
so required to be maintained are maintained at the offices of
Alliance Capital Management L.P., 1345 Avenue of the Americas,
New York, New York 10105.
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
1. Registrant undertakes to suspend offering of the shares
covered hereby until it amends its Prospectus contained
herein if subsequent to the effective date of this
Registration Statement, its net asset value per share
declines more than 10 percent from its net asset value per
share as of the effective date of this Registration
Statement.
2. Registrant hereby undertakes:
(1) that for purposes of determining any liability under
the Securities Act of 1933, the information omitted
from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the
Registrant pursuant to Rule 497(h) under the
Securities Act shall be deemed to be part of this
Registration Statement as of the time it was
declared effective.
(2) that for the purpose of determining any liability
under the Securities Act of 1933, each post-
effective amendment that contains a form of
prospectus shall be deemed to be a new registration
statement relating to the securities offered
therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide
offering thereof.
3. Not applicable
C-4
<PAGE>
4. (a) Registrant undertakes to file, during any period in
which offers or sales are being made, a post-
effective amendment to this Registration Statement:
(1) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(2) to reflect in the prospectus any facts or
events after the effective date of this
Registration Statement (or the most recent
post-effective amendment hereof) which,
individually or in the aggregate, represent a
fundamental change in the information set
forth in this Registration Statement; and
(3) to include any material information with
respect to the plan of distribution not
previously disclosed in this Registration
Statement or any material change to such
information in this Registration Statement.
(4) (a) Registrant undertakes to file, during
any period in which offers or sales are being
made, a post-effective amendment to this
Registration Statement:
(1) to include any prospectus required by
Section 10(a)(3) of the Securities Act
of 1933;
(2) to reflect in the prospectus any facts
or events after the effective date of
this Registration (or the most recent
post-effective amendment hereof)
which, individually or in the
aggregate, represent a fundamental
change in the information set forth in
this Registration Statement; and
(3) to include any material information
with respect to the plan of
distribution not previously disclosed
in this Registration Statement or any
material change to such information in
this Registration Statement.
(b) Registrant undertakes that, for the purpose of determining
any liability under the Securities Act of 1933, each subsequent
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the
C-5
<PAGE>
offering of those securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Registrant undertakes to remove from registration by means of
a post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
5. Not applicable
6. Not applicable
C-6
<PAGE>
EXHIBIT INDEX
EXHIBIT SEQUENTIALLY NUMBERED PAGE
(l)(1) Opinion and Consent of Seward & Kissel
LLP
(l)(2) Opinion and Consent of Venable, Baetjer
and Howard, LLP
(n) Consent of Independent Auditors
(r) Financial Data Schedule
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant has duly caused the Pre-Effective
Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in The City
of New York and the State of New York, on the 21st day of June
1999.
Alliance All-Market Advantage Fund, Inc.
By /s/ John D. Carifa
_____________________
John D. Carifa
Chairman
Pursuant to the requirements of the Securities Act of
1933, as amended, the Pre-Effective Amendment No. 1 to the
Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Signature Title Date
_________ _____ ____
(1) Principal Executive Chairman 6/21/99
/s/ John D. Carifa
__________________
John D. Carifa
(2) Principal Financial Treasurer 6/21/99
and Accounting and Chief
Officer: Financial
Officer
/s/ Mark D. Gersten
___________________
Mark D. Gersten
(3) Majority of the Directors: 6/21/99
John D. Carifa*
Ruth Block *
David H. Dievler*
John H. Dobkin*
William H. Foulk, Jr.*
Dr. James M. Hester*
Clifford L. Michel*
Robert C. White *
C-8
<PAGE>
Donald J. Robinson
*By /s/ Edmund P. Bergan, Jr.
____________________________
Edmund P. Bergan, Jr.
Attorney-in-fact
C-9
00250205.AT0
<PAGE>
June 21, 1999
Alliance All-Market Advantage
Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
Alliance All-Market Advantage Fund, Inc.
Registration Statement on Form N-2,
(File Nos. 333-77839 and 811-08702)
Dear Sirs:
We are acting as counsel for the Alliance All-Market
Advantage Fund, Inc., a Maryland corporation (the "Fund"), in
connection with the proposed registration under the Securities
Act of 1933 of 1,057,000 shares of the Fund's common stock, par
value $.01 per share (the "Common Stock"), consisting of 845,600
primary subscription shares and 211,400 additional over-
subscription shares, to be issued pursuant to the exercise of
non-transferable rights (the "Rights") to purchase Common Stock
to be distributed to the Fund's shareholders in accordance with
the Fund's Registration Statement on Form N-2 (Securities and
Exchange Commission File Nos. 333-77839 and 811-08702) relating
to the shares (the "Registration Statement").
As counsel for the Fund we have participated in the
preparation of the Registration Statement and the form of
subscription certificate relating to the exercise of the Rights
and have examined and relied upon such corporate records of the
Fund and such other documents and certificates as to factual
matters as we have deemed to be necessary to render the opinion
expressed herein. We have assumed that the Fund has no
"Principal Shareholder" as defined in Article Seventh of its
Articles of Incorporation and have relied upon a Certificate of
the Secretary of the Fund to the effect that the Fund has no
knowledge of any such Principal Shareholder.
Based on the foregoing, we are of the opinion that:
(i). the primary subscription shares of Common Stock to be
issued upon exercise of the Rights have been duly
authorized, and, upon such exercise, when the primary
subscription shares have been issued and paid for as
contemplated by the Registration Statement, the primary
subscription shares will have been validly and legally
<PAGE>
authorized and issued and will be fully paid and
nonassessable; and
(ii). when the Pricing Committee of the Board of Directors
has authorized the issuance of the additional over-
subscription shares pursuant to the authority delegated
to it by the Board of Directors, the additional over-
subscription shares of Common Stock to be issued upon
exercise of the Rights will have been duly authorized
and, upon such exercise, when the additional over-
subscription shares have been issued and paid for as
contemplated by the Registration Statement, the
additional over-subscription shares will have been
validly and legally authorized and issued and will be
fully paid and nonassessable.
As to the matters of Maryland law contained in the foregoing
opinion, we have relied on the opinion of Venable, Baetjer and
Howard, LLP of Baltimore, Maryland, dated June 21, 1999
pertaining to the subject matter hereof.
We hereby consent to the filing of this opinion with the
Securities and Exchange Commission as an exhibit to the
Registration Statement and to the reference to our firm under the
caption "Legal Matters" in the Prospectus contained in the
Registration Statement.
Very truly yours,
/s/ Seward & Kissel LLP
2
00250205.AS9
<PAGE>
June 21, 1999
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
Re: Alliance All-Market Advantage Fund, Inc.
Ladies and Gentlemen:
We have acted as special Maryland counsel to
Alliance All-Market Advantage Fund, Inc., a Maryland
corporation (the "Company"), in connection with the issuance
of up to 1,057,000 shares, consisting of up to 845,600
Primary Subscription Shares and up to 211,400 Additional
Over-Subscription Shares, of the Company's common stock, par
value $.01 per share (the "Common Stock"), pursuant to the
exercise of rights (the "Rights") to purchase Common Stock
to be distributed to the Fund's shareholders in accordance
with the Fund's Registration Statement on Form N-2 (File No.
333-77839) (the "Registration Statement").
We have examined the Company's prospectus included
in the Registration Statement substantially in the form in
which it is to become effective (the "Prospectus"), the form
of subscription certificate for exercise of the Rights, the
Company's Charter and Bylaws, and resolutions adopted by the
Board of Directors of the Company and its Pricing Committee.
We have further examined and relied upon a certificate of
the Maryland State Department of Assessments and Taxation to
the effect that the Company is duly incorporated and
existing under the laws of the State of Maryland and is in
good standing and duly authorized to transact business in
the State of Maryland. We have assumed that the Company has
no "Principal Shareholder" as defined in Article Seventh of
the Charter and have relied upon the certificate of the
Secretary of the Company to the effect that the Company has
no knowledge of any such Principal Shareholder. We have
also assumed that if the initial Expiration Date of the
offering is extended as described in the Registration
Statement, such action will have been duly authorized by the
Pricing Committee of the Board of Directors pursuant to the
<PAGE>
authority that has heretofore been delegated to the Pricing
Committee by the Board of Directors.
We have also examined and relied upon such other
corporate records of the Company and documents and
certificates with respect to factual matters as we have
deemed necessary for purposes of this opinion. With respect
to the documents we have received, we have assumed, without
independent verification, the genuineness of all signatures
on documents submitted to us for review, the authenticity of
all documents submitted to us as originals, and the
conformity with originals of all documents submitted to us
as copies.
Based on the forgoing, we are of the opinion that:
1. The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Maryland.
2. The Primary Subscription Shares of Common
Stock to be issued upon exercise of the Rights have been
duly authorized, and, upon such exercise, when the Primary
Subscription Shares have been issued and paid for as
contemplated by the Registration Statement, the Primary
Subscription Shares will have been validly and legally
authorized and issued and will be fully paid and
nonassessable. When the Pricing Committee of the Board of
Directors has authorized the issuance of the Additional
Over-Subscription Shares pursuant to the authority delegated
to it by the Board of Directors, the Additional Over-
Subscription Shares of Common Stock to be issued upon
exercise of the Rights will have been duly authorized and,
upon such exercise, when the Additional Over-Subscription
Shares have been issued and paid for as contemplated by the
Registration Statement, the Additional Over-Subscription
Shares will have been validly and legally authorized and
issued and will be fully paid and nonassessable.
This letter expresses our opinion with respect to
the Maryland General Corporation Law governing matters such
as due organization and the authorization and issuance of
stock. It does not extend to the securities of "Blue Sky"
laws of Maryland, to federal securities laws or to other
laws.
You may rely on this opinion in rendering your
opinion to the Company that is to be filed as an exhibit to
the Registration Statement. We consent to the filing of
this opinion as an exhibit to the Registration Statement and
to the reference to us in the Prospectus under the caption
2
<PAGE>
"Legal Matters." We do not thereby admit that we are
"experts" within the meaning of the Securities Act of 1933
and the regulations thereunder. This opinion may not be
relied upon by any other person or for any other purpose
without our prior written consent.
Very truly yours,
/s/ Venable, Baetjer and Howard, LLP
00250205.AS5 3
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus constituting part of Pre-Effective Amendment No. 1 to
this Registration Statement on Form N-2 (the "Registration
Statement") of our report dated November 18, 1998, relating to
the financial statements and financial highlights appearing in
the September 30, 1998 Annual Report to Shareholders of Alliance
All-Market Advantage Fund, Inc., which is also incorporated by
reference into the Registration Statement. We also consent to
the references to us under the headings "Financial Highlights"
and "Experts" in the Prospectus.
/s/ PricewaterhouseCoopers LLP
__________________________
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
June 16, 1999
<PAGE>
[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] SEP-30-1998
[PERIOD-END] MAR-31-1999
[INVESTMENTS-AT-COST] 66,764,036
[INVESTMENTS-AT-VALUE] 122,370,152
[RECEIVABLES] 543,742
[ASSETS-OTHER] 12,397
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 122,926,291
[PAYABLE-FOR-SECURITIES] 489,244
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3,965,875
[TOTAL-LIABILITIES] 4,455,119
[SENIOR-EQUITY] 25,157
[PAID-IN-CAPITAL-COMMON] 49,741,734
[SHARES-COMMON-STOCK] 2,515,686
[SHARES-COMMON-PRIOR] 2,508,017
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 18,984,393
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 55,460,805
[NET-ASSETS] 118,471,172
[DIVIDEND-INCOME] 214,044
[INTEREST-INCOME] 17,641
[OTHER-INCOME] 0
[EXPENSES-NET] 1,263,587
[NET-INVESTMENT-INCOME] (1,031,902)
[REALIZED-GAINS-CURRENT] 20,897,764
[APPREC-INCREASE-CURRENT] 21,491,287
[NET-CHANGE-FROM-OPS] 41,357,149
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] (4,709,015)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 7,669
[NET-CHANGE-IN-ASSETS] 36,919,153
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (1,913,371)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 884,555
[INTEREST-EXPENSE] 2,223
[GROSS-EXPENSE] 1,263,587
[AVERAGE-NET-ASSETS] 102,415,256
[PER-SHARE-NAV-BEGIN] 32.52
<PAGE>
[PER-SHARE-NII] (0.41)
[PER-SHARE-GAIN-APPREC] 16.86
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (1.88)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 47.09
[EXPENSE-RATIO] 2.47
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250205.AS8
