ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
SEMI-ANNUAL REPORT
FEBRUARY 28, 1998
LETTER TO SHAREHOLDERS ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
April 27, 1998
Dear Shareholder:
This semi-annual report discusses investment results and market activity for
Alliance/Regent Sector Opportunity Fund for the period ended February 28, 1998.
INVESTMENT RESULTS
Since our last report to you dated August 31, 1997, your Fund's total return
has somewhat lagged that of the S&P 500 Stock Index, although 12 month
performance tracked the market quite closely. The Fund's underperformance
during the past few months was primarily a result of its sector and industry
exposures, which are guided by our long term outlook for the economy. We remain
committed to those positions, which we believe continue to offer good
opportunities.
INVESTMENT RESULTS*
Periods ended February 28, 1998
TOTAL RETURNS
6 MONTHS 12 MONTHS
---------- ----------
ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
Class A 14.45% 34.33%
Class B 13.99% 33.36%
Class C 13.99% 33.36%
S&P 500 STOCK INDEX 17.61% 34.99%
* THE FUND'S INVESTMENT RESULTS ARE CUMULATIVE TOTAL RETURNS FOR THE PERIOD
AND ARE BASED ON THE NET ASSET VALUE OF EACH CLASS OF SHARES AS OF FEBRUARY 28,
1998. ALL FEES AND EXPENSES RELATED TO THE OPERATION OF THE FUND HAVE BEEN
DEDUCTED, BUT NO ADJUSTMENT HAS BEEN MADE FOR SALES CHARGES THAT MAY APPLY WHEN
SHARES ARE PURCHASED OR REDEEMED. TOTAL RETURN FOR ADVISOR CLASS SHARES WILL
DIFFER DUE TO DIFFERENT EXPENSES ASSOCIATED WITH THAT CLASS. RETURNS FOR THE
FUND AND ITS COMPARATIVE INDEX INCLUDE THE REINVESTMENT OF ANY DISTRIBUTIONS
PAID DURING THE PERIOD. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THE S&P 500 STOCK INDEX INCLUDES 500 U.S. STOCKS AND IS A COMMON MEASURE
OF THE PERFORMANCE OF THE OVERALL U.S. STOCK MARKET. THE INDEX IS UNMANAGED AND
REFLECTS NO FEES OR EXPENSES. AN INVESTOR CANNOT INVEST DIRECTLY IN THE INDEX.
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 3.
ECONOMIC AND MARKET OUTLOOK
The U.S. economy has remained strong over the past six months. Real Gross
Domestic Product (GDP) rose 3.7% on an annual basis in the fourth quarter of
1997, due primarily to stronger consumer spending, growth in net exports and a
buildup in business inventory. The outlook for future growth is mixed. Higher
inventories and slower business investment argue for a somewhat slower pace of
growth in the first half of this year. Yet other recent evidence, such as
strong job growth, record-high consumer confidence and robust housing activity,
argue against a significant slowdown. We thus expect continued strength in the
U.S. economy, with growth in the 2.5%-3.0% range.
The drivers of U.S. growth in 1998 are likely to show more balance between
consumer activity and business capital spending than has been the case in the
last several years. This balance is reflected in the Fund's current portfolio
structure. Nevertheless, we believe that the longer-term forces that have led
to robust U.S. investment spending in the 1990's, such as tough global
competition and furious technological change, will remain intact in future
years.
The financial crisis in Asia presents continued risks to our positive outlook,
even if the broad contours of its impact are now relatively clear. We are
reasonably confident, for example, that the more severe outcomes--such as
global recession or deflation which were feared by observers last fall--are now
relatively unlikely. While the crisis has clearly affected industries from
energy to semiconductors, its effect on the U.S. economy as a whole may end up
being close to neutral. Lower interest rates and oil prices stemming from the
crisis have led to stronger consumer spending and helped offset the decline in
U.S. exports. Meanwhile, economic revival in Western Europe, spurred by the
countdown to currency unification in 2002, is also serving to mute the impact
of Asia on the world economy and on U.S. firms.
The moderate U.S. growth we expect for this year also suggests that inflation
should remain well-controlled. While labor markets remain tight, productivity
gains have continued to prevent wage increases from leading to more general
price increases. The most recent reports on producer and consumer prices
support this view. The Asian crisis should result in lower import prices, while
oil prices do not seem likely to rise much from current low levels any time
soon. Flat to falling goods prices should help offset any wage-driven inflation
pressures
1
ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
that the service sector might experience. Therefore, we are expecting
inflation, as measured by the Consumer Price Index, to remain in the 2.0%-2.5%
range during 1998.
As a result, we do not expect the Federal Reserve Board to take any significant
action on short term interest rates this year. The factors guiding monetary
policy, including U.S. GDP growth, inflation prospects, and the effects of the
Asian crisis, appear in a rough balance. Longer-term interest rates, meanwhile,
have fallen sharply in recent months. While the secular backdrop for long term
rates remains benign, the recent decline suggests that rates may have limited
room to fall further from current levels. Yet a significant backup in rates
also seems unlikely at any time in the next several quarters.
The U.S. stock market has continued to perform well in 1998. This is a result
of strength in the domestic economy, as well as the realization that the impact
of the Asian crisis on the U.S. has not been as dramatic as it initially
appeared. The potential for the equity market as a whole has thus narrowed
somewhat compared to late 1997 when stocks had become particularly undervalued
after the late October decline. Nevertheless, we continue to believe that
several industry groups and sectors offer important opportunities.
INVESTMENT STRATEGY
Since its inception in late 1996, your Fund has maintained an emphasis on
sectors and industries expected to benefit from a robust U.S. economy. This
strategy has been guided by a belief that the U.S. economy would remain strong,
and that economically sensitive companies would be likely to show better
earnings than the investor consensus expected. Late last year, however, we
reduced this emphasis somewhat. At that point in time, the dimensions of the
Asian events and their effects on the U.S. were particularly unclear, and the
dispersion of possible effects on U.S. companies was at its widest. As a
result, we moved the Fund to a somewhat more defensive portfolio structure. We
accomplished this by increasing exposure to local telephone utilities and by
reducing exposure to semiconductors and other areas in technology that we
believed might be vulnerable.
This defensive stance has now been partially loosened as evidence suggests that
a strong domestic economy should offset the problems in Asia. Therefore, we
increased the Fund's sensitivity to industries tied to domestic economic
growth. These industries include both capital goods companies, such as
diversified manufacturing, aerospace, and electrical equipment companies, and
consumer cyclical industries, such as retailers and media. We retain an
above-market position in technology, where we place particular emphasis on
software. We maintain this position in recognition of technology's strong long
term growth prospects and attractive valuation. We believe that recent profit
disappointments at some computer and related firms will prove temporary, as
such incidents most often have in recent years. Our continuing expectation that
inflation will remain low leads us to maintain below-market positions in both
basic materials and energy.
We appreciate your interest and investment in Alliance/Regent Sector
Opportunity Fund, and look forward to reporting the Fund's progress to you in
upcoming 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
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 28, 1998
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 34.33% 28.62%
Since Inception* 31.71% 27.07%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 33.36% 29.36%
Since Inception* 30.91% 28.54%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 33.36% 32.36%
Since Inception* 30.91% 30.91%
SEC AVERAGE ANNUAL TOTAL RETURNS AS OF THE MOST RECENT
QUARTER-END (DECEMBER 31, 1997)
CLASS A CLASS B CLASS C
--------- --------- ---------
1 Year 23.34% 24.12% 27.12%
Since Inception* 20.99% 22.58% 25.44%
The average annual total returns reflect reinvestment of dividends and/or
capital gains 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 return for Advisor Class shares will differ due to
different expenses associated with that class. SEC average annual total returns
for the period shown reflect reinvestment of all distributions and deduction of
the maximum 4.25% front-end sales charges or applicable contingent deferred
sales charges.
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: 12/16/96 for all share Classes.
3
TEN LARGEST HOLDINGS
FEBRUARY 28, 1998 (UNAUDITED) ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
PERCENT OF
COMPANY VALUE NET ASSETS
- -------------------------------------------------------------------------------
General Electric Co. $ 505,375 5.2%
Home Depot, Inc. 433,925 4.5
Microsoft Corp. 406,800 4.2
Merck & Co., Inc. 395,443 4.1
Travelers Group, Inc. 334,500 3.4
Ameritech Corp. 316,825 3.3
Bell Atlantic Corp. 305,150 3.1
Tyco International, Ltd. 299,425 3.1
Pfizer, Inc. 274,350 2.8
PeopleSoft, Inc. 259,187 2.7
$3,530,980 36.4%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED FEBRUARY 28, 1998 (UNAUDITED)
_______________________________________________________________________________
SHARES*
-------------------------------
HOLDINGS
PURCHASES BOUGHT 2/28/98
- -------------------------------------------------------------------------------
Ameritech Corp. 5,500 7,600
Bell Atlantic Corp. 3,400 3,400
Bristol-Myers Squibb Co. 1,700 1,700
Chase Manhattan Corp. 1,200 1,200
Dayton Hudson Corp. 3,100 3,100
Delta Air Lines, Inc. 1,000 1,000
First Union Corp. 4,900 4,900
General Electric Co. 2,400 6,500
Lucent Technologies, Inc. 1,600 1,600
Microsoft Corp. 4,200 4,800
HOLDINGS
SALES SOLD 2/28/98
- -------------------------------------------------------------------------------
Applied Materials, Inc. 1,100 -0-
Columbia/HCA Healthcare Corp. 3,200 -0-
Dell Computer Corp. 1,200 1,400
Intel Corp. 1,500 1,700
Johnson Controls, Inc. 2,500 2,700
McGraw-Hill Cos., Inc. 1,000 -0-
Mellon Bank Corp. 1,500 2,800
Oracle Corp. 6,600 -0-
Sears Roebuck & Co. 4,300 -0-
Sun Microsystems, Inc. 2,100 -0-
* Adjusted for stock splits.
4
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1998 (UNAUDITED) ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-100.2%
TECHNOLOGY-19.8%
COMMUNICATIONS EQUIPMENT-2.7%
Lucent Technologies, Inc. 1,600 $ 173,400
Northern Telecom, Ltd. 1,600 85,300
------------
258,700
COMPUTER HARDWARE-3.6%
Compaq Computer Corp. 4,900 157,106
Dell Computer Corp. (a) 1,400 195,825
------------
352,931
COMPUTER SOFTWARE-9.8%
Computer Associates International, Inc. 1,750 82,469
HBO & Co. 3,800 205,675
Microsoft Corp. (a) 4,800 406,800
PeopleSoft, Inc. (a) 5,800 259,187
------------
954,131
NETWORKING SOFTWARE-2.1%
Cisco Systems, Inc. (a) 3,050 200,919
SEMI-CONDUCTOR COMPONENTS-1.6%
Intel Corp. 1,700 152,469
------------
1,919,150
FINANCE-16.4%
BANKING - MONEY CENTER-3.3%
BankAmerica Corp. 2,200 170,500
Chase Manhattan Corp. 1,200 148,875
------------
319,375
BANKING - REGIONAL-6.7%
First Union Corp. 4,900 258,169
Mellon Bank Corp. 2,800 174,475
NationsBank Corp. 3,200 219,200
------------
651,844
INSURANCE-3.5%
Travelers Group, Inc. 6,000 334,500
MISCELLANEOUS-2.9%
American Express Co. 1,500 135,094
MBNA Corp. 4,050 145,040
------------
280,134
------------
1,585,853
CONSUMER SERVICES-12.4%
AIRLINES-1.2%
Delta Air Lines, Inc. 1,000 113,063
BROADCASTING & CABLE-1.0%
Cox Communications, Inc. Cl.A (a) 2,500 96,406
PRINTING & PUBLISHING-2.2%
New York Times Co. Cl.A 3,300 215,944
RETAIL - GENERAL MERCHANDISE-8.0%
Dayton Hudson Corp. 3,100 239,669
Federated Department Stores, Inc. (a) 2,300 107,812
Home Depot, Inc. 6,800 433,925
------------
781,406
------------
1,206,819
HEALTH CARE-12.3%
DRUGS-8.7%
Bristol-Myers Squibb Co. 1,700 170,319
Merck & Co., Inc. 3,100 395,443
Pfizer, Inc. 3,100 274,350
------------
840,112
MEDICAL PRODUCTS-2.1%
Medtronic, Inc. 3,900 207,188
MEDICAL SERVICES-1.5%
United Healthcare Corp. 2,400 145,650
------------
1,192,950
CAPITAL GOODS-11.8%
ELECTRICAL EQUIPMENT-6.8%
General Electric Co. 6,500 505,375
Johnson Controls, Inc. 2,700 150,019
------------
655,394
5
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
MISCELLANEOUS-5.0%
Allied-Signal, Inc. 5,800 $ 246,862
United Technologies Corp. 2,700 241,144
------------
488,006
------------
1,143,400
UTILITIES-7.2%
ELECTRIC UTILITIES-0.8%
Texas Utilities Co. 1,900 76,831
TELEPHONE UTILITY-6.4%
Ameritech Corp. 7,600 316,825
Bell Atlantic Corp. 3,400 305,150
------------
621,975
------------
698,806
ENERGY-5.3%
DOMESTIC INTEGRATED-0.8%
Phillips Petroleum Co. 1,600 78,400
INTERNATIONAL-1.4%
Texaco, Inc. 2,400 133,950
OIL SERVICE-2.0%
Baker Hughes, Inc. 2,500 102,344
Schlumberger, Ltd. 1,300 97,987
------------
200,331
PIPELINES-1.1%
Enron Corp. 2,200 103,400
------------
516,081
CONSUMER STAPLES-5.1%
COSMETICS-1.6%
Avon Products, Inc. 2,200 154,962
HOUSEHOLD PRODUCTS-1.1%
Colgate-Palmolive Co. 1,300 105,544
TOBACCO-2.4%
Philip Morris Cos., Inc. 5,300 230,219
------------
490,725
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
MULTI INDUSTRY COMPANIES-3.7%
Corning, Inc. 1,500 $ 60,937
Tyco International, Ltd. 5,900 299,425
------------
360,362
BASIC INDUSTRY-2.4%
CHEMICALS-2.4%
Dow Chemical Co. 1,200 109,800
Monsanto Co. 2,500 127,188
------------
236,988
TRANSPORTATION-2.1%
AIR FREIGHT-0.9%
FDX Corp. (a) 1,300 82,794
RAILROAD-1.2%
Burlington Northern Santa Fe Corp. 1,200 119,550
------------
202,344
CONSUMER MANUFACTURING-1.2%
AUTO & RELATED-1.2%
Ford Motor Co. 2,100 118,781
AEROSPACE & DEFENSE-0.5%
AEROSPACE-0.5%
General Dynamics Corp. 600 52,050
Total Common Stocks
(cost $7,717,677) 9,724,309
TIME DEPOSIT-1.7%
State Street Cayman Islands
5.25%, 3/02/98
(amortized cost $158,000) $158 158,000
TOTAL INVESTMENTS-101.9%
(cost $7,875,677) 9,882,309
Other assets less liabilities-(1.9%) (179,589)
NET ASSETS-100% $ 9,702,720
(a) Non-income producing security.
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1998 (UNAUDITED) ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $7,875,677) $ 9,882,309
Cash 604
Receivable for investment securities sold 208,672
Deferred organization expenses 189,681
Receivable due from Adviser 14,530
Dividends and interest receivable 11,201
Total assets 10,306,997
LIABILITIES
Payable for investment securities purchased 281,454
Organization expense payable 220,308
Distribution fee payable 2,643
Accrued expenses 99,872
Total liabilities 604,277
NET ASSETS $ 9,702,720
COMPOSITION OF NET ASSETS
Capital stock, at par $ 709
Additional paid-in capital 7,579,852
Accumulated net investment loss (67,254)
Accumulated net realized gain on investment transactions 182,781
Net unrealized appreciation of investments 2,006,632
$ 9,702,720
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($933,651/
68,168 shares of capital stock issued and outstanding) $13.70
Sales charge--4.25% of public offering price .61
Maximum offering price $14.31
CLASS B SHARES
Net asset value and offering price per share ($2,860,550/
210,282 shares of capital stock issued and outstanding) $13.60
CLASS C SHARES
Net asset value and offering price per share ($413,663/
30,416 shares of capital stock issued and outstanding) $13.60
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($5,494,856 / 399,989 shares of capital stock issued
and outstanding) $13.74
See notes to financial statements.
7
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1998 (UNAUDITED)
ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $41) $ 52,550
Interest 4,697 $ 57,247
EXPENSES
Advisory fee 31,053
Distribution fee - Class A 1,280
Distribution fee - Class B 12,740
Distribution fee - Class C 1,625
Administrative 63,500
Custodian 49,604
Registration 31,476
Printing 30,144
Amortization of organization expenses 26,088
Directors' fees 15,000
Transfer agency 12,709
Audit and legal 10,155
Miscellaneous 1,041
Total expenses 286,415
Less: expenses waived and reimbursed
by Adviser (see Note B) (158,979)
Net expenses 127,436
Net investment loss (70,189)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 226,965
Net change in unrealized appreciation
of investments 1,021,669
Net gain on investments 1,248,634
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,178,445
See notes to financial statements.
8
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
SIX MONTHS ENDED DEC. 16, 1996(A)
FEB. 28, 1998 TO
(UNAUDITED) AUG. 31, 1997
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment loss $ (70,189) $ (75,149)
Net realized gain on investment transactions 226,965 164,809
Net change in unrealized appreciation
of investments 1,021,669 984,963
Net increase in net assets from operations 1,178,445 1,074,623
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments
Class A (13,835) -0-
Class B (40,054) -0-
Class C (5,448) -0-
Advisor Class (71,572) -0-
CAPITAL STOCK TRANSACTIONS
Net increase 1,321,582 6,158,679
Total increase 2,369,118 7,233,302
NET ASSETS
Beginning of year 7,333,602 100,300
End of period (including undistributed
net investment income of $2,935
at August 31, 1997) $ 9,702,720 $ 7,333,602
(a) Commencement of operations.
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1998 (UNAUDITED) 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 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 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. Securities traded in the
over-the-counter market, including securities traded 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. Readily marketable debt
securities are valued at the last sale price. 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 value of such
securities.
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 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 any, 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.
10
ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
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.
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 six months
ended February 28, 1998, such waiver and reimbursement amounted to $86,479.
Pursuant to the advisory agreement, the Adviser provides certain legal and
accounting services for the Fund. For the six months ended February 28, 1998,
the Adviser voluntarily agreed to waive its fees in the amount of $63,500 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 six months
ended February 28, 1998 the transfer agent agreed to waive fees of $9,000 for
such services.
Alliance Fund Distributors, Inc., (the "Distributor"), a wholly-owned
subsidiary of the Adviser, serves as the Distributor of the Fund's shares. The
Distributor received front-end sales charges of $146 from the sales of Class A
shares and $1,943 in contingent deferred sales charges imposed upon redemptions
by shareholders of Class B shares for the six months ended February 28, 1998.
Brokerage commissions paid on investment transactions for the six months ended
February 28, 1998, amounted to $3,917, none of which was paid to Donaldson,
Lufkin & Jenrette Securities Corp., an affiliate of the Adviser.
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 the Fund's average daily net assets attributable to Class
A shares and 1% of the average daily net assets attributable to both Class B
and Class C shares. There is no distribution fee on the 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
$335,861 and $54,299, 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 $3,727,532 and $2,499,356,
respectively, for the six months ended February 28, 1998. There were no
purchases or sales of U.S. government or government agency obligations for the
six months ended February 28, 1998.
11
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
At February 28, 1998, the cost of investments for federal income tax purposes
was $7,875,738. Accordingly, gross unrealized appreciation of investments was
$2,061,917 and gross unrealized depreciation of investments was $55,346
resulting in net unrealized appreciation of $2,006,571.
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 shares. Each class consists of 3,000,000,000 authorized shares.
Transactions in capital stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS DEC. 16, SIX MONTHS DEC. 16,
ENDED 1996(A) ENDED 1996(A)
FEB. 28, 1998 TO FEB. 28, 1998 TO
(UNAUDITED) AUG. 31, 1997 (UNAUDITED) AUG. 31, 1997
------------ ------------ -------------- --------------
CLASS A
Shares sold 9,611 67,868 $ 121,294 $ 691,960
Shares issued in
reinvestment of
distributions 1,112 -0- 13,715 -0-
Shares redeemed (6,892) (3,541) (89,248) (40,439)
Net increase 3,831 64,327 $ 45,761 $ 651,521
CLASS B
Shares sold 16,546 200,255 $ 206,276 $ 2,105,855
Shares issued in
reinvestment of
distributions 1,272 -0- 15,609 -0-
Shares redeemed (4,385) (3,416) (55,241) (41,258)
Net increase 13,433 196,839 $ 166,644 $ 2,064,597
CLASS C
Shares sold 12,173 18,204 $ 154,800 $ 191,273
Shares issued in
reinvestment of
distributions 401 -0- 4,923 -0-
Shares redeemed (142) (230) (1,716) (2,537)
Net increase 12,432 17,974 $ 158,007 $ 188,736
ADVISOR CLASS
Shares sold 74,517 314,221 $ 933,639 $ 3,256,599
Shares issued in
reinvestment of
distributions 5,631 -0- 69,601 -0-
Shares redeemed (4,157) (223) (52,070) (2,774)
Net increase 75,991 313,998 $ 951,170 $ 3,253,825
(a) Commencement of operations.
12
FINANCIAL HIGHLIGHTS ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
-------------------------------
SIX MONTHS DEC. 16,
ENDED 1996(A)
FEB. 28, 1998 TO
(UNAUDITED) AUG. 31, 1997
-------------- --------------
Net asset value, beginning of period $12.16 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (b) (.10) (.21)
Net realized and unrealized gain on
investment transactions 1.84 2.37
Net increase in net asset value
from operations 1.74 2.16
LESS: DISTRIBUTIONS
Distributions from net realized gains (.20) -0-
Net asset value, end of period $13.70 $12.16
TOTAL RETURN
Total investment return based on
net asset value (c) 14.45% 21.60%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $934 $783
Ratios to average net assets of:
Expenses, under current cap (d)(e) 3.00% 3.00%
Expenses, net of waivers/
reimbursements (d)(f) 3.00% 4.13%
Net investment loss (d) (1.61)% (2.51)%
Portfolio turnover rate 30% 27%
Average commission rate $.0500 $.0500
See footnote summary on page 16.
13
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
-------------------------------
SIX MONTHS DEC. 16,
ENDED 1996(A)
FEB. 28, 1998 TO
(UNAUDITED) AUG. 31, 1997
-------------- --------------
Net asset value, beginning of period $12.12 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (b) (.14) (.18)
Net realized and unrealized gain on
investment transactions 1.82 2.30
Net increase in net asset value
from operations 1.68 2.12
LESS: DISTRIBUTIONS
Distributions from net realized gains (.20) -0-
Net asset value, end of period $13.60 $12.12
TOTAL RETURN
Total investment return based on
net asset value (c) 13.99% 21.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $2,860 $2,386
Ratios to average net assets of:
Expenses, under current cap (d)(e) 3.70% 3.70%
Expenses, net of waivers/
reimbursements (d)(f) 3.70% 3.70%
Net investment loss (d) (2.32)% (2.15)%
Portfolio turnover rate 30% 27%
Average commission rate $.0500 $.0500
See footnote summary on page 16.
14
ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C
-------------------------------
SIX MONTHS DEC. 16,
ENDED 1996(A)
FEB. 28, 1998 TO
(UNAUDITED) AUG. 31, 1997
-------------- --------------
Net asset value, beginning of period $12.12 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (b) (.14) (.19)
Net realized and unrealized gain on
investment transactions 1.82 2.31
Net increase in net asset value
from operations 1.68 2.12
LESS: DISTRIBUTIONS
Distributions from net realized gains (.20) -0-
Net asset value, end of period $13.60 $12.12
TOTAL RETURN
Total investment return based on
net asset value (c) 13.99% 21.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $414 $218
Ratios to average net assets of:
Expenses, under current cap (d)(e) 3.70% 3.70%
Expenses, net of waivers/
reimbursements (d)(f) 3.70% 3.70%
Net investment loss (d) (2.32)% (2.24)%
Portfolio turnover rate 30% 27%
Average commission rate $.0500 $.0500
See footnote summary on page 16.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
-------------------------------
SIX MONTHS DEC. 16,
ENDED 1996(A)
FEB. 28, 1998 TO
(UNAUDITED) AUG. 31, 1997
-------------- --------------
Net asset value, beginning of period $12.18 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (b) (.08) (.19)
Net realized and unrealized gain on
investment transactions 1.84 2.37
Net increase in net asset value
from operations 1.76 2.18
LESS: DISTRIBUTIONS
Distributions from net realized gains (.20) -0-
Net asset value, end of period $13.74 $12.18
TOTAL RETURN
Total investment return based on
net asset value (c) 14.59% 21.80%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $5,495 $3,947
Ratios to average net assets of:
Expenses, under current cap (d)(e) 2.70% 2.70%
Expenses, net of waivers/
reimbursements (d)(f) 2.70% 3.82%
Net investment loss (d) (1.32)% (2.19)%
Portfolio turnover rate 30% 27%
Average commission rate $.0500 $.0500
(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 6.83% and 11.77% for
Class A, 7.53% and 10.52% for Class B, 7.50% and 9.99% for Class C and 6.52%
and 11.16% for Advisor Class for the six months ended February 28, 1998 and the
period December 16, 1996 to August 31, 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
CHRISTOPHER R. THOMPSON, 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
