97-21566. Alliance All-Market Advantage Fund, Inc.; Notice of Application  

  • [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]
    
    
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    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'').
    
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    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\
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        \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.
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    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
    
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    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
    
    
    

Document Information

Published:
08/14/1997
Department:
Securities and Exchange Commission
Entry Type:
Notice
Action:
Notice of application for exemption under the Investment Company Act of 1940 (the ``Act'').
Document Number:
97-21566
Dates:
The application was filed on March 7, 1997, and amended on July 8, 1997.
Pages:
43561-43562 (2 pages)
Docket Numbers:
Rel. No. IC-22784, 812-10546
PDF File:
97-21566.pdf