[Federal Register Volume 62, Number 157 (Thursday, August 14, 1997)]
[Notices]
[Pages 43561-43562]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-21566]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-22784; 812-10546]


Alliance All-Market Advantage Fund, Inc.; Notice of Application

August 8, 1997.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for exemption under the Investment 
Company Act of 1940 (the ``Act'').

-----------------------------------------------------------------------

SUMMARY OF APPLICATION: Applicant requests an order under section 6(c) 
of the Act granting an exemption from section 19(b) of the Act and rule 
19b-1 to permit it to make up to five distributions of long-term 
capital gains in any one taxable year, so long as it maintains in 
effect a distribution policy calling for quarterly distributions of a 
fixed percentage of its net asset value.

FILING DATE: The application was filed on March 7, 1997, and amended on 
July 8, 1997.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
applicant with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on September 3, 
1997, and should be accompanied by proof of service on applicant, in 
the form of an affidavit or, for lawyers, a certificate of service. 
Hearing requests should state the nature of the writer's interest, the 
reason for the request, and the issues contested. Persons may request 
notification of a hearing by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 5th Street, N.W., Washington, D.C. 
20549. Applicant, 1345 Avenue of the Americas, New York, New York 
10105.

FOR FURTHER INFORMATION CONTACT: John K. Forst, Attorney-Advisor, at 
(202) 942-0569, or Mary Kay French, Branch Chief, at (202) 942-0564 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
SEC's Public Reference Branch, 450 5th Street NW., Washington, D.C. 
20549 (tel. 202-942-8090).

Applicant's Representations

    1. Applicant is a closed-end non-diversified management investment 
company organized as a Maryland corporation. Applicant's investment 
objective is to seek long-term growth of capital through all market 
conditions.
    2. Applicant currently has a ``Quarterly Distribution Policy'' 
pursuant to which it makes quarterly distributions of 2% of applicant's 
net asset value, determined as of the beginning of the quarter, for 
each of the first three calendar quarters of each year. Applicant's 
fourth calendar quarter distribution for each year is an amount equal 
to at least 2% of applicant's net asset value determined as of the 
beginning of that quarter. If, with respect to any quarterly 
distribution, net investment income and net realized short-term capital 
gains are less than the amount of the distribution, the difference is 
distributed from other assets. Applicant's final distribution for each 
calendar year includes any remaining net investment income and net 
realized short-term capital gains deemed, for federal income tax 
purposes, undistributed during the year, as well as any net long-term 
capital gains realized during the year. If, for any fiscal year, the 
total distributions exceed net investment income and net realized 
capital gains, the excess, distributed from other assets, is treated as 
a return of capital.
    3. Applicant's fiscal year ends on September 30. To avoid the 
excise tax under Section 4982 of the Internal Revenue Code of 1986, as 
amended, (the ``Code'') applicant may need to make a fifth distribution 
of net long term capital gains in a taxable year.\1\
---------------------------------------------------------------------------

    \1\ Section 4982 of the Code requires an investment company each 
year to distribute 98% of its capital gain net income for the one-
year period ending on October 31 of that year. Because applicant's 
fiscal year ends on September 30, it is possible that applicant may 
need to make a distribution of net long-term capital gains realized 
during October in a given year in order to avoid the excise tax 
under Section 4982.
---------------------------------------------------------------------------

Applicant's Legal Analysis

    1. Section 19(b) of the Act provides that a registered investment 
company may not, in contravention of such rules, regulations, or orders 
as the SEC may

[[Page 43562]]

prescribe, distribute long-term capital gains more often than once 
every twelve months. Rule 19b-1(a) permits a registered investment 
company, with respect to any one taxable year, to make one capital 
gains distribution, as defined in section 852(b)(3)(C) of the Code. 
Rule 19b-1(a) also permits a supplemental distribution to be made 
pursuant to section 855 of the Code not exceeding 10% of the total 
amount distributed for the year. Rule 19b-1(f) permits one additional 
long-term capital gains distribution to be made to avoid the excise tax 
under section 4982 of the Code.
    2. Applicant asserts that the limitation on the number of net long-
term capital gains distributions in rule 19b-1 in effect prohibits 
applicant from including available net long-term capital gains in 
certain of its quarterly distributions. As a result, applicant must 
fund these quarterly distributions with returns of capital (to the 
extent net investment income and realized short-term capital gains are 
insufficient to cover a quarterly distribution). Applicant further 
asserts that, in order to distribute all of its long-term capital gains 
within the limits on the number of long-term capital gains 
distributions in rule 19b-1, applicant may be required to make certain 
of its quarterly distributions in excess of the fixed percentage called 
for by its policy. Alternatively, applicant states that it may be 
forced to retain long-term capital gains and pay the applicable taxes.
    3. Applicant asserts that the application of rule 19b-1 to its 
Quarterly Distribution Policy may cause anomalous results and create 
pressure to limit the realization of long-term capital gains based on 
considerations unrelated to investment goals. Applicant requests relief 
to permit it to make up to five distributions of long-term capital 
gains in any one taxable year, provided applicant maintains in effect a 
distribution policy calling for quarterly distributions of a fixed 
percentage of applicant's net asset value. Applicant represents that a 
fifth distribution will be made only if necessary to avoid the excise 
tax under Section 4982 of the Code.
    4. Applicant believes that the concerns underlying section 19(b) 
and rule 19b-1 are not present in applicant's situation. One of these 
concerns is that shareholders might not be able to distinguish frequent 
distributions of capital gains and dividends from investment income. 
Applicant states that the Quarterly Distribution Policy has been fully 
and repeatedly described in applicant's communications to its 
shareholders, including annual reports and its prospectus. In addition, 
a statement showing the amount and source of distributions received 
during the year is included with applicant's IRS Form 1099-DIV report 
sent to each shareholder who received distributions during the year 
(including shareholders who sold shares during the year). Applicant 
believes that its shareholders fully understand that their 
distributions are not tied to applicant's net investment income and 
realized capital gains and do not represent yield or investment return.
    5. Another concern underlying section 19(b) and rule 19b-1 is that 
frequent capital gains distributions could facilitate improper sales 
practices, including in particular, the practice of urging an investor 
to purchase fund shares on the basis of an upcoming distribution 
(``selling the dividend''), when the distribution would result in an 
immediate corresponding reduction in net asset value and would be, in 
effect, a return of the investor's capital. Applicant believes that 
this concern does not apply to closed-end investment companies, such as 
applicant, which do not continuously distribute shares.
    6. Applicant states that increased administrative costs also are a 
concern underlying section 19(b) and rule 19b-1. Applicant asserts that 
it will continue to make quarterly distributions regardless of whether 
capital gains are included in any particular distribution.
    7. Section 6(c) of the Act provides that the SEC may exempt any 
person, security, or transaction, or any class or classes of persons, 
securities, or transactions, from any provisions of the Act, if and to 
the extent such exemption is necessary or appropriate in the public 
interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the Act. For 
the reasons stated above, applicant believes that the requested 
exemption meets the standards set forth in section 6(c).

Applicant's Condition

    Applicant agrees that the order granting the requested relief shall 
terminate upon the effective date of a registration statement under the 
Securities Act of 1933 for any future public offering by applicant of 
its shares other than: (i) A non-transferable rights offering to 
shareholders of applicant, provided that such offering does not include 
solicitation by brokers or the payment of any commissions or 
underwriting fee; and (ii) an offering in connection with a merger, 
consolidation, acquisition, or reorganization; unless applicant has 
received from the staff of the Commission written assurance that the 
order will remain in effect.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-21566 Filed 8-13-97; 8:45 am]
BILLING CODE 8010-01-M