ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
ANNUAL REPORT
AUGUST 31, 1997
LETTER TO SHAREHOLDERS ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
August 31, 1997
Dear Shareholder:
As shown below, the Fund's total return (for Class A shares) was 17.37% for the
six months ended August 31, 1997, compared with 14.78% for the Standard and
Poor's 500 Index. From its inception in December of last year through August
31, the Fund's return was 21.60% for Class A shares, compared with 26.38% for
the index. The Fund's performance thus far in 1997 largely results from its
sector positioning, which continues to reflect judgments about the longer-term
prospects of the economy and for individual industries.
INVESTMENT RESULTS
For the periods ended August 31, 1997
6 MONTHS SINCE INCEPTION
---------- -----------------
ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
Class A 17.37% 21.60%
Class B 16.99 21.20
Class C 16.99 21.20
S&P 500 STOCK INDEX 14.78 26.38
TOTAL RETURNS FOR ADVISOR CLASS SHARES WILL DIFFER DUE TO DIFFERENT EXPENSES.
ECONOMIC AND MARKET OUTLOOK
The U.S. economy continues to perform impressively, with robust growth
accompanied by minimal inflation. While real gross domestic product (GDP) has
grown at an annual rate greater than 4% this year, consumer price inflation has
fallen to a 1.6% rate through August, and wholesale prices have dropped for
seven of the last eight months.
Results of this kind are extraordinary so late in a cyclical expansion. The
history of the U.S. business cycle suggests late-cycle imbalances, such as
higher inflation brought on through a wage-price spiral, should have emerged by
now. Instead, the U.S. economy is showing its best performance in more than
thirty years, and continues to improve on almost every measure.
Looking forward, we expect the economic outlook to remain favorable. In our
view, today's superlative U.S. economic performance stems from both deeply
rooted structural changes and unusually positive cyclical developments.
Structurally, such technological changes as the computing and communications
revolution have led to huge productivity gains in both manufacturing and
service industries, even though these gains do not always appear in official
statistics.
The current U.S. expansion has been driven by exceptionally strong business
investment spending (much of which has been for information technology) rather
than by consumer or government spending. This has helped the economy avoid the
capacity constraints of past business cycles.
Deregulation and privatization across the world continue to bring greater
economic activity into the sphere of competition, thus allowing greater scope
for specialization and comparative advantage. Despite recent financial
turbulence in some Southeast Asian countries, the International Monetary Fund
now expects the world economy to show its most sustainable period of growth in
more than 25 years, and sees no serious imbalances threatening global growth
between now and 2002.
On a shorter term basis, many of the concerns which the Federal Reserve and
financial markets faced earlier this year have recently begun to recede. While
the Fed continues to grapple with the extent to which structural changes have
transformed the U.S. economy, continuing good news on inflation has reduced the
likelihood of another policy tightening in the near future. Reduced
apprehension about inflation and Fed policy has led to the fall of long bond
yields. We believe that long term yields can decline still further, even if
irregularly, as the bond market adjusts to new economic realities.
Although better-than-expected earnings for U.S. companies have led to rising
stock prices over the past three years, the valuation the stock market has
placed on these earnings has also risen: the S&P 500's price/earnings ratio is
now 24 times expected 1997 earnings. Our valuation work suggests that U.S.
stocks as a class are now fairly to fully valued based on consensus profit and
growth estimates. Nevertheless, we continue to believe that many sectors and
industries offer unusually attractive opportunities.
1
ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
INVESTMENT STRATEGY
The Fund's investment strategy is guided principally by our economic outlook.
This includes both a forecast of the long-term growth prospects for individual
sectors and industries as well as an understanding of their changing cyclical
prospects. This economic analysis is then supplemented with valuation and
earnings analysis in order to identify the expectations that current stock
prices are already discounting, and how these expectations are evolving through
time.
Since the Fund's inception late last year, our outlook has led us to maintain
an emphasis on sectors and industries which we expect to benefit from a
relatively robust U.S. economy. This has led to significant positions in
technology and consumer cyclicals, the Fund's two largest areas of emphasis
relative to the S&P 500. The Fund's emphasis on technology reflects both our
long-term growth outlook for the computer, communications and related sectors
as well as our view that the current U.S. cyclical expansion will remain driven
by business investment. The Fund's emphasis on consumer cyclicals (retailing,
media, apparel and related industries relying to a large extent on
discretionary consumer spending, as well as durable consumer goods industries
such as autos) reflects our shorter-term view that consumer spending should
continue to benefit from a relatively strong economy.
At the same time, we have continued to maintain underweighted positions in
consumer staples industries such as foods, beverages and personal care
products. We have done so in the belief that the market had placed an excessive
premium on the earnings stability that companies in these industries have
historically demonstrated. In recent months, concerns over this earnings
stability issue have led many stocks in this sector to underperform and, in
some cases, to correct substantially. On balance, however, we believe that it
is still premature to move to a more aggressive stance on this sector,
particularly since our economic analysis still favors a cyclical emphasis in
the portfolio.
Over the past several months we have reduced our representation in the
financial sector to a level slightly below that of the S&P 500. While long-term
growth prospects for this group remain highly positive (as a result of
demographic shifts, technological innovation and consolidation in the banking
industry) valuations of stocks in this sector have begun to reflect these
prospects more fully.
Thank you for your interest and investment in Alliance/Regent Sector
Opportunity Fund. We look forward to reporting its progress to you in future
periods.
Sincerely,
John D. Carifa
Chairman and President
Eugene J. Lancaric
Senior Vice President
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
2
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
Alliance/Regent Sector Opportunity Fund seeks long-term growth of capital
through investment in U.S. equity securities. The Fund utilizes a "top-down"
investment approach focusing on economic analysis to determine portfolio
allocation among market sectors and industries, and pursues its objective by
investing in a diversified portfolio of securities of U.S. issuers that have a
market capitalization of at least one billion dollars.
INVESTMENT RESULTS
TOTAL RETURNS AS OF AUGUST 31, 1997
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
Since Inception* 21.60% 16.48%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
Since Inception* 21.20% 17.20%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
Since Inception* 21.20% 20.20%
The average annual total returns reflect reinvestment of dividends and/or
capital gain distributions in additional shares, with and without the effect of
the 4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (4% year 1; 3% year 2; 2% year 3; 1% year 4);
and for Class C shares (1% year 1). Returns for Class A shares do not reflect
the imposition of the 1 year 1% contingent deferred sales charge for accounts
over $1,000,000. Total returns for Advisor Class shares may differ due to
different expenses associated with that class.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
* Inception date for all shares was 12/16/96.
3
ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
GROWTH OF A $10,000 INVESTMENT
12/31/96* TO 8/31/97
$13,000
$12,000
$11,000
$10,000
$9,000
S&P500: $12,290
ALLIANCE/REGENT SECTOR OPPORTUNITY FUND CLASS A: $11,783
12/31/96 1/31/97 2/28/97 3/31/97 4/30/97 5/31/97 6/30/97 7/31/97 8/31/97
This chart illustrates the total value of an assumed $10,000 investment in
Alliance/Regent Sector Opportunity Fund Class A shares (from 12/31/96 to
8/31/97) as compared to the performance of an appropriate broad-based index.
The chart reflects the deduction of the maximum 4.25% sales charge from the
initial $10,000 investment in the Fund and assumes the reinvestment of
dividends and capital gains. Performance for Class B, Class C and Advisor Class
shares will vary from the results shown above due to differences in expenses
charged to those classes. Past performance is not indicative of future results,
and is not representative of future gain or loss in capital value or dividend
income.
The unmanaged Standard &Poor's 500 Stock Index includes 500 U.S. stocks and is
a common measure of the performance of the overall U.S. stock market.
When comparing Alliance/Regent Sector Opportunity Fund to the index shown
above, you should note that no charges or expenses are reflected in the
performance of the index.
Alliance/Regent Sector Opportunity Fund
Standard & Poor's 500 Stock Index
* Month-end nearest to Fund's inception date of 12/16/96.
4
TEN LARGEST HOLDINGS
AUGUST 31, 1997 ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
PERCENT OF
COMPANY VALUE NET ASSETS
- -------------------------------------------------------------------------------
Home Depot, Inc. $ 297,281 4.1%
Intel Corp. 294,800 4.0
General Electric Co. 256,250 3.5
Oracle Corp. 251,625 3.4
Johnson Controls, Inc. 247,975 3.4
Sears Roebuck & Co. 244,025 3.3
United Technologies Corp. 241,993 3.3
Philip Morris Cos., Inc. 231,212 3.1
Dell Computer Corp. 213,362 2.9
Merck & Co., Inc. 211,169 2.9
$2,489,692 33.9%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED AUGUST 31, 1997
_______________________________________________________________________________
SHARES
- -------------------------------------------------------------------------------
HOLDINGS
PURCHASES BOUGHT 8/31/97
- -------------------------------------------------------------------------------
Ameritech Corp. 2,100 2,100
Ford Motor Co. 3,400 3,400
General Electric Co. 3,200 4,100
Home Depot, Inc. 4,700 6,300
Intel Corp. 2,400 3,200
Johnson Controls, Inc. 4,100 5,200
Oracle Corp. 4,700 6,600
Philip Morris Cos., Inc. 4,500 5,300
Sears Roebuck & Co. 3,000 4,300
United Technologies Corp. 2,000 3,100
HOLDINGS
SALES SOLD 8/31/97
Applied Materials, Inc. 300 1,100
Avon Products, Inc. 300 1,100
Chrysler Corp. 1,100 -0-
Eastman Kodak Co. 600 -0-
General Motors Corp. 600 -0-
General Reinsurance Corp. 200 -0-
McGraw-Hill Cos., Inc. 400 1,000
Microsoft Corp. 200 600
Phillips Petroleum Co. 1,100 1,400
Travelers Group, Inc. 100 2,500
5
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-98.8%
TECHNOLOGY-24.7%
COMMUNICATIONS EQUIPMENT-1.4%
Northern Telecom, Ltd. 1,000 $ 99,125
COMPUTER HARDWARE-6.9%
COMPAQ Computer Corp. (a) 2,900 189,950
Dell Computer Corp. (a) 2,600 213,362
Sun Microsystems, Inc. (a) 2,100 100,800
------------
504,112
COMPUTER SOFTWARE-9.3%
Computer Associates International, Inc. 1,400 93,625
HBO & Co. 1,000 71,625
Microsoft Corp. (a) 600 79,312
Netscape Communications Corp. (a) 1,500 59,719
Oracle Systems Corp. (a) 6,600 251,625
PeopleSoft, Inc. (a) 2,200 123,750
------------
679,656
NETWORKING SOFTWARE-1.7%
Cisco Systems, Inc. (a) 1,700 128,138
SEMI-CONDUCTOR CAPITAL EQUIPMENT-1.4%
Applied Materials, Inc. (a) 1,100 103,813
SEMI-CONDUCTOR COMPONENTS-4.0%
Intel Corp. 3,200 294,800
------------
1,809,644
CONSUMER SERVICES-14.4%
APPAREL-0.7%
Nike, Inc. Cl. B 1,000 53,375
BROADCASTING & CABLE-1.1%
Cox Communications, Inc. Cl. A (a) 3,000 81,188
PRINTING & PUBLISHING-3.7%
McGraw-Hill Cos., Inc. 1,000 61,312
New York Times Co. Cl. A 4,400 207,900
------------
269,212
RETAIL - GENERAL MERCHANDISE-8.9%
Federated Department Stores, Inc. (a) 2,700 113,400
Home Depot, Inc. 6,300 297,281
Sears Roebuck & Co. 4,300 244,025
------------
654,706
------------
1,058,481
FINANCE-12.5%
BANKING - MONEY CENTER-2.0%
BankAmerica Corp. 2,200 144,788
BANKING - REGIONAL-5.4%
Mellon Bank Corp. 4,300 206,937
NationsBank Corp. 3,200 190,000
------------
396,937
INSURANCE-2.2%
Travelers Group, Inc. 2,500 158,750
MISCELLANEOUS-2.9%
American Express Co. 1,400 108,850
MBNA Corp. 2,700 103,781
------------
212,631
------------
913,106
6
ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
CAPITAL GOODS-11.9%
ELECTRICAL EQUIPMENT-6.9%
General Electric Co. 4,100 $ 256,250
Johnson Controls, Inc. 5,200 247,975
------------
504,225
MISCELLANEOUS-5.0%
Allied-Signal, Inc. 1,500 123,844
United Technologies Corp. 3,100 241,993
------------
365,837
------------
870,062
HEALTH CARE-8.4%
DRUGS-4.1%
Merck & Co., Inc. 2,300 211,169
Pfizer, Inc. 1,600 88,600
------------
299,769
MEDICAL PRODUCTS-1.9%
Medtronic, Inc. 1,600 144,600
MEDICAL SERVICES-2.4%
Columbia/HCA Healthcare Corp. 3,200 101,000
United Healthcare Corp. 1,500 72,937
------------
173,937
------------
618,306
ENERGY-7.8%
DOMESTIC INTEGRATED-0.9%
Phillips Petroleum Co. 1,400 66,588
INTERNATIONAL-1.7%
Texaco, Inc. 1,100 126,775
OIL SERVICE-3.9%
Baker Hughes, Inc. 3,100 131,362
Schlumberger, Ltd. 2,000 152,375
------------
283,737
PIPELINES-1.3%
Enron Corp. 2,500 96,406
------------
573,506
CONSUMER STAPLES-5.4%
COSMETICS-1.0%
Avon Products, Inc. 1,100 70,469
HOUSEHOLD PRODUCTS-1.3%
Colgate-Palmolive Co. 1,500 94,125
TOBACCO-3.1%
Philip Morris Cos., Inc. 5,300 231,212
------------
395,806
MULTI INDUSTRY COMPANIES-3.6%
Corning, Inc. 1,500 79,313
Tyco International, Ltd. 2,400 188,250
------------
267,563
UTILITIES-2.6%
ELECTRIC UTILITIES-0.8%
Texas Utilities Co. 1,700 59,287
TELEPHONE UTILITY-1.8%
Ameritech Corp. 2,100 131,644
------------
190,931
BASIC INDUSTRY-2.3%
CHEMICALS-2.3%
Dow Chemical Co. 800 70,800
Monsanto Co. 2,200 96,663
------------
167,463
TRANSPORTATION-2.2%
AIR FREIGHT-1.0%
Federal Express Corp. (a) 1,100 73,081
RAILROAD-1.2%
Burlington Northern Santa Fe 1,000 91,688
------------
164,769
CONSUMER MANUFACTURING-2.0%
AUTO & RELATED-2.0%
Ford Motor Co. 3,400 146,200
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
AEROSPACE & DEFENSE-1.0%
AEROSPACE-1.0%
General Dynamics Corp. 900 $ 71,663
Total Common Stocks
(cost $6,262,537) 7,247,500
TIME DEPOSIT-2.6%
State Street Cayman Islands
5.25%, 9/02/97
(amortized cost $189,000) $189 189,000
TOTAL INVESTMENTS-101.4%
(cost $6,451,537) 7,436,500
Other assets less liabilities-(1.4%) (102,898)
NET ASSETS-100% $ 7,333,602
(a) Non-income producing security.
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1997 ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $6,451,537) $ 7,436,500
Cash 377
Deferred organization expenses 215,769
Receivable for capital stock sold 25,797
Receivable due from Adviser 14,973
Dividends and interest receivable 8,853
Total assets 7,702,269
LIABILITIES
Organization expense payable 245,513
Payable for capital stock redeemed 5,833
Distribution fee payable 2,428
Accrued expenses and other liabilities 114,893
Total liabilities 368,667
NET ASSETS $ 7,333,602
COMPOSITION OF NET ASSETS
Capital stock, at par $ 603
Additional paid-in capital 6,258,376
Undistributed net investment income 2,935
Accumulated net realized gain on investment transactions 86,725
Net unrealized appreciation of investments 984,963
$ 7,333,602
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($782,573/
64,337 shares of capital stock issued and outstanding) $12.16
Sales charge--4.25% of public offering price .54
Maximum offering price $12.70
CLASS B SHARES
Net asset value and offering price per share ($2,386,180/
196,849 shares of capital stock issued and outstanding) $12.12
CLASS C SHARES
Net asset value and offering price per share ($218,012/
17,984 shares of capital stock issued and outstanding) $12.12
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($3,946,837/323,998 shares of capital stock issued and
outstanding) $12.18
See notes to financial statements.
9
STATEMENT OF OPERATIONS
DECEMBER 16, 1996* TO AUGUST 31, 1997 ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $18) $ 45,556
Interest 8,661 $ 54,217
EXPENSES
Advisory fee 25,393
Distribution fee - Class A 1,285
Distribution fee - Class B 9,722
Distribution fee - Class C 792
Administrative 85,000
Custodian 61,776
Audit and legal 47,371
Amortization of organization expenses 41,984
Printing 35,441
Directors' fees 27,000
Transfer agency 21,250
Registration 12,554
Miscellaneous 3,665
Total expenses 373,233
Less: expenses waived and reimbursed by
Adviser (see Note B) (243,867)
Net expenses 129,366
Net investment loss (75,149)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 164,809
Net unrealized appreciation of investments 984,963
Net gain on investments 1,149,772
NET INCREASE IN NET ASSETS FROM OPERATIONS $1,074,623
* Commencement of operations.
See notes to financial statements.
10
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
DECEMBER 16, 1996*
TO
AUGUST 31, 1997
------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $ (75,149)
Net realized gain on investment transactions 164,809
Net unrealized appreciation of investments 984,963
Net increase in net assets from operations 1,074,623
CAPITAL STOCK TRANSACTIONS
Net increase 6,158,679
Total increase 7,233,302
NET ASSETS
Beginning of period 100,300
End of period $ 7,333,602
* Commencement of operations.
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1997 ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance/Regent Sector Opportunity Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940 as a diversified, open-end management
investment company. Prior to commencement of operations on December 16, 1996,
the Fund had no operations other than the sale to Alliance Capital Management
L.P. (the "Adviser") of 10 shares each of Class A, Class B and Class C and
10,000 shares of Advisor Class for the aggregate amount of $100 each on Class
A, Class B and Class C shares and $100,000 on the Advisor Class shares on
October 7, 1996. The fund offers Class A, Class B, Class C and Advisor Class
shares. Class A shares are sold with a front-end sales charge of up to 4.25%
for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000
or more, Class A shares redeemed within one year of purchase will be subject to
a contingent deferred sales charge of 1%. Class B shares are currently sold
with a contingent deferred sales charge which declines from 4% to zero
depending on the period of time the shares are held. Class B shares will
automatically convert to Class A shares eight years after the end of the
calendar month of purchase. Class C shares are subject to a contingent deferred
sales charge of 1% on redemptions made within the first year after purchase.
Advisor Class shares are sold without an initial or contingent deferred sales
charge and are not subject to ongoing distribution expenses. Advisor Class
shares are offered to investors participating in fee based programs and to
certain retirement plan accounts. All four classes of shares have identical
voting, dividend, liquidation and other rights, except that each class bears
different distribution expenses and has exclusive voting rights with respect to
its distribution plan. The following is a summary of significant accounting
policies followed by the Fund.
1. SECURITY VALUATION
Securities traded on national securities exchanges are valued at the last
reported sales price, or, if no sale occurred, at the mean of the bid and asked
price at the close of such exchange. Over-the-counter securities not traded on
national securities exchanges are valued at the closing bid price. Debt
securities are valued at the mean of the bid and asked price except that debt
securities maturing within 60 days are valued at amortized cost which
approximates market value. Securities for which current market quotations are
not readily available (including investments which are subject to limitations
as to their sale) are valued at their fair value as determined in good faith by
the Board of Directors. In determining fair value, consideration is given to
cost, operating and other financial data.
2. ORGANIZATION EXPENSES
Organization expenses of approximately $258,000 have been deferred and are
being amortized on a straight-line basis through December, 2001.
3. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Dividend income is recorded on ex-dividend
date. Investment transactions are accounted for on the date the securities are
purchased or sold. Investment gains and losses are determined on the
identified cost basis. The Fund accretes discount as adjustment to interest
income.
4. 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 its
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
5. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisory Class shares have no distribution fees.
6. 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
12
ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
to net investment loss, resulted in a net increase in undistributed net
investment income and a corresponding decrease in accumulated net realized gain
on investment transactions. This reclassification had no affect on net assets.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser") an advisory fee at an annual rate of
.75% of the Fund's average daily net assets. Such fee is accrued daily and paid
monthly. As of January 13, 1997, the Adviser has agreed to voluntarily waive
its fees and bear certain expenses so that total expenses do not exceed on an
annual basis 3.00%, 3.70%, 3.70% and 2.70% of average net assets, respectively,
for the Class A, Class B, Class C and Advisor Class shares. For the period
ended August 31, 1997, such waiver and reimbursement amounted to $146,867.
Pursuant to the Advisory agreement, the Adviser provides certain legal and
accounting services for the Fund. For the period ended August 31, 1997, the
Adviser voluntarily agreed to waive its fees in the amount of $85,000 for such
services.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. For the period
ended August 31, 1997 the transfer agent agreed to waive fees of $12,000 for
such services.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $454 from the sales of Class A shares and $816 in
contingent deferred sales charges imposed upon redemptions by shareholders of
Class B shares for the period ended August 31, 1997.
Brokerage commissions paid on investment transactions for the period ended
August 31, 1997, amounted to $5,915, none of which was paid to brokers
utilizing the services of the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corp., ("DLJ") an affiliate of the Adviser nor to DLJ directly.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30 of 1% of the Fund's average daily net assets attributable to
Class A shares and 1.00% of the Fund's average daily net assets attributable to
both Class B and Class C shares. There is no distribution fee on Advisor Class
shares. Such fee is accrued daily and paid monthly. The Agreement provides that
the Distributor will use such payments in their entirety for distribution
assistance and promotional activities. The Distributor has incurred expenses in
excess of the distribution costs reimbursed by the Fund in the amount of
$237,189 and $23,078, for Class B and C shares, respectively. Such costs may be
recovered from the Fund in future periods so long as the Agreement is in
effect. In accordance with the Agreement there is no provision for recovery of
unreimbursed distribution costs incurred by the Distributor beyond the current
fiscal year for Class A shares. The Agreement also provides that the Adviser
may use its own resources to finance the distribution of the Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $7,229,635 and $1,131,907,
respectively, for the period ended August 31, 1997. There were no purchases or
sales of U.S. government or government agency obligations for the period ended
August 31, 1997. At August 31, 1997 the cost of investments for federal income
tax purposes was $6,453,603. Accordingly, gross unrealized appreciation of
investments was $1,062,318 and gross unrealized depreciation of investments was
$79,421 resulting in net unrealized appreciation of $982,897.
13
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 12,000,000,000 shares of $.001 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class. Each class consists of 3,000,000,000 authorized shares. Transactions in
capital stock were as follows:
SHARES AMOUNT
------------------ ------------------
DECEMBER 16, 1996* DECEMBER 16, 1996*
TO TO
AUGUST 31, 1997 AUGUST 31, 1997
------------------ ------------------
CLASS A
Shares sold 67,868 $ 691,960
Shares redeemed (3,541) (40,439)
Net increase 64,327 $ 651,521
CLASS B
Shares sold 200,255 $ 2,105,855
Shares redeemed (3,416) (41,258)
Net increase 196,839 $ 2,064,597
CLASS C
Shares sold 18,204 $ 191,273
Shares redeemed (230) (2,537)
Net increase 17,974 $ 188,736
ADVISOR CLASS
Shares sold 314,221 $ 3,256,599
Shares redeemed (223) (2,774)
Net increase 313,998 $ 3,253,825
* Commencement of operations.
14
FINANCIAL HIGHLIGHTS ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
CLASS A CLASSB CLASS C ADVISOR CLASS
---------------- ---------------- ---------------- ----------------
DEC. 16, 1996(A) DEC. 16, 1996(A) DEC. 16, 1996(A) DEC. 16, 1996(A)
TO TO TO TO
AUG. 31, 1997 AUG. 31, 1997 AUG. 31, 1997 AUG. 31, 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (b) (.21) (.18) (.19) (.19)
Net realized and unrealized gain
on investment transactions 2.37 2.30 2.31 2.37
Net increase in net asset value
from operations 2.16 2.12 2.12 2.18
Net asset value, end of period $12.16 $12.12 $12.12 $12.18
TOTAL RETURN
Total investment return based on
net asset value (c) 21.60% 21.20% 21.20% 21.80%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $783 $2,386 $218 $3,947
Ratio to average net assets of:
Expenses, under current cap (d)(e) 3.00% 3.70% 3.70% 2.70%
Expenses, net of waivers/
reimbursements (d)(f) 4.13% 3.70% 3.70% 3.82%
Net investment loss (d) (2.51)% (2.15)% (2.24)% (2.19)%
Portfolio turnover rate 27% 27% 27% 27%
Average commission rate $.0500 $.0500 $.0500 $.0500
</TABLE>
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or contingent
deferred sales charge is not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(d) Annualized.
(e) Expense cap in effect as of January 13, 1997.
(f) Net of expenses waived/reimbursed by the Adviser. Absent such
waivers/reimbursements the expense ratios would have been 11.77%, 10.52%,
9.99%, and 11.16% for Class A, Class B, Class C and Advisor Class shares,
respectively, for the period ending August 31, 1997.
15
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE/REGENT SECTOR OPPORTUNITY FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Alliance/Regent Sector Opportunity Fund, Inc. including the portfolio of
investments, as of August 31, 1997, and the related statements of operations
and changes in net assets and financial highlights for the period from December
16, 1996 (commencement of operations) to August 31, 1997. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance/Regent Sector Opportunity Fund, Inc. at August 31, 1997, and the
results of its operations, the changes in its net assets and the financial
highlights for the period from December 16, 1996 to August 31, 1997, in
conformity with generally accepted accounting principles.
New York, New York
October 7, 1997
16
ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
RUTH BLOCK (1)
DAVID H. DIEVLER (1)
JOHN H. DOBKIN (1)
WILLIAM H. FOULK, JR. (1)
JAMES M. HESTER (1)
CLIFFORD L. MICHEL (1)
DONALD J. ROBINSON (1)
OFFICERS
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
EUGENE J. LANCARIC, SENIOR VICE PRESIDENT
THOMAS BARDONG, VICE PRESIDENT
LLANA CHINJ-MINAFRA, VICE PRESIDENT
DANIEL V. PANKER, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
VINCENT S. NOTO, CONTROLLER
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02110
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY 10019
PRINCIPAL UNDERWRITER
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-free 1-(800) 221-5672
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
(1) Member of the audit committee.
Distribution of this report other than to shareholders must be preceded or
accompanied by the Fund's current prospectus, which contains further
information about the Fund.
R These registered service marks used under license from the owner, Alliance
Capital Management L.P.
17
