ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
SEMI-ANNUAL REPORT
FEBRUARY 28, 1999
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1999 (UNAUDITED) ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
TIME DEPOSIT-110.3%
State Street Cayman Islands
4.50%, 3/01/99
(cost $233,000) $233 $233,000
TOTAL INVESTMENTS-110.3%
(amortized cost $233,000) 233,000
Other assets less liabilities-(10.3%) (21,777)
NET ASSETS-100% $211,223
See notes to financial statements.
1
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1999 (UNAUDITED) ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $233,000) $ 233,000
Cash 924
Receivable due from Adviser 10,011
Dividends and interest receivable 87
Total assets 244,022
LIABILITIES
Payable for capital stock redeemed 823
Distribution fee payable 180
Accrued expenses 31,796
Total liabilities 32,799
NET ASSETS $ 211,223
COMPOSITION OF NET ASSETS
Capital stock, at par $ 49
Additional paid-in capital 231,996
Undistributed net investment income 8,872
Accumulated net realized loss on investment transactions (29,694)
$ 211,223
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($13,400 / 3,046 shares of capital stock issued
and outstanding) $4.40
Sales charge--4.25% of public offering price .20
Maximum offering price $4.60
CLASS B SHARES
Net asset value and offering price per share
($132,636 / 31,461 shares of capital stock issued
and outstanding) $4.22
CLASS C SHARES
Net asset value and offering price per share
($18,499 / 4,398 shares of capital stock issued
and outstanding) $4.21
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($46,688 / 10,459 shares of capital stock issued
and outstanding) $4.46
See notes to financial statements.
2
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1999 (UNAUDITED)
ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
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INVESTMENT INCOME
Interest $ 24,653
Dividends 1,944
$ 26,597
EXPENSES
Advisory fee 4,486
Distribution fee - Class A 111
Distribution fee - Class B 4,439
Distribution fee - Class C 646
Administrative 61,000
Custodian 29,702
Amortization of organization expenses 15,591
Audit and legal 14,136
Directors' fees 9,909
Transfer agency 12,342
Printing 87
Miscellaneous 148
Total expenses 152,597
Less: expenses waived and reimbursed
by Adviser (see Note B) (131,252)
Net expenses 21,345
Net investment income 5,252
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized loss on investment transactions (29,093)
Net change in unrealized depreciation of
investments 63,725
Net gain on investments 34,632
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 39,884
See notes to financial statements.
3
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
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SIX MONTHS ENDED YEAR ENDED
FEBUARY 28, 1999 AUGUST 31,
(UNAUDITED) 1998
---------------- ----------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ 5,252 $ (148,033)
Net realized gain (loss) on
investment transactions (29,093) 3,128,104
Net change in unrealized appreciation
(depreciation) of investments 63,725 (1,048,688)
Net increase in net assets
from operations 39,884 1,931,383
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments
Class A (54,678) (13,835)
Class B (489,249) (40,054)
Class C (66,968) (5,448)
Advisor Class (96,524) (71,572)
CAPITAL STOCK TRANSACTIONS
Net decrease (1,262,750) (6,992,568)
Total decrease (1,930,285) (5,192,094)
NET ASSETS
Beginning of year 2,141,508 7,333,602
End of period (including undistributed
net investment income of $8,872 and
$3,620, respectively) $ 211,223 $ 2,141,508
See notes to financial statements.
4
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1999 (UNAUDITED) ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
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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 may 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 market 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. The Fund accretes discount as adjustment to interest income.
Investment gains and losses are determined on the identified cost basis.
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.
6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
5
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
Income dividends 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 1% 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 waive its fees
and bear certain expenses to the extent necessary to limit total operating
expenses on an annual basis to 3.00%, 3.70%, 3.70% and 2.70% of the daily
average net assets for Class A, Class B, Class C and Adviser Class shares,
respectively. For the six months ended February 28, 1999, such waiver and
reimbursement amounted to $61,252.
Pursuant to the advisory agreement, the Adviser provides certain legal and
accounting services for the Fund. For the six months ended February 28, 1999,
the Adviser voluntarily agreed to waive its fees in the amount of $61,000 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 six months
ended February 28, 1999 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 $15,803 and $80 in contingent
deferred sales charges imposed upon redemptions by shareholders of Class B and
Class C shares for the six months ended February 28, 1999.
Brokerage commissions paid on investment transactions for the six months ended
February 28, 1999, amounted to $1,013, 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
$570,365 and $113,193, 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 $0 and $1,144,357, respectively, for
the six months ended February 28, 1999. There were no purchases or sales of
U.S. government or government agency obligations for the six months ended
February 28, 1999.
At February 28, 1999, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes.
6
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 shares. Each class consists of 3,000,000,000 authorized shares.
Transactions in capital stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
FEB. 28, 1999 AUGUST 31, FEB. 28, 1999 AUGUST 31,
(UNAUDITED) 1998 (UNAUDITED) 1998
------------ ------------ -------------- --------------
CLASS A
Shares sold -0- 10,495 $ 63 $ 134,361
Shares issued in
reinvestment of
distributions 12,453 1,113 54,546 13,715
Shares redeemed (15,156) (70,196) (66,690) (1,024,838)
Net decrease (2,703) (58,588) $ (12,081) $ (876,762)
CLASS B
Shares sold -0- 29,379 $ 8,295 $ 388,611
Shares issued in
reinvestment of
distributions 13,892 1,272 58,347 15,609
Shares redeemed (109,980) (99,951) (1,194,451) (1,505,655)
Net decrease (96,088) (69,300) $(1,127,809) $(1,101,435)
CLASS C
Shares sold -0- 14,002 $ -0- $ 179,778
Shares issued in
reinvestment of
distributions 15,951 401 66,835 4,923
Shares redeemed (26,848) (17,092) (191,083) (252,736)
Net decrease (10,897) (2,689) $ (124,248) $ (68,035)
ADVISOR CLASS
Shares sold -0- 79,188 $ 11 $ 999,501
Shares issued in
reinvestment of
distributions 310 5,631 1,377 69,601
Shares redeemed -0- (398,668) -0- (6,015,438)
Net increase
(decrease) 310 (313,849) $ 1,388 $(4,946,336)
NOTE F: BANK BORROWING
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $750 million revolving credit facility (the "Facility")
intended to provide short-term financing if necessary, subject to certain
restrictions in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
the miscellaneous expenses in the statement of operations. The Fund did not
utilize the Facility during the six months ended February 28, 1999.
7
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 YEAR ENDED 1996(A)
FEB. 28, 1999 AUG. 31, TO
(UNAUDITED) 1998 AUG. 31, 1997
----------- ----------- -----------
Net asset value, beginning of period $13.61 $12.16 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (b) .08 (.24) (.21)
Net realized and unrealized gain on
investment transactions .22 1.89 2.37
Net increase in net asset value
from operations .30 1.65 2.16
LESS: DISTRIBUTIONS
Distributions from net realized gains (9.51) (.20) -0-
Net asset value, end of period $4.40 $13.61 $12.16
TOTAL RETURN
Total investment return based on
net asset value (c) 2.53% 13.70% 21.60%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $13 $78 $783
Ratios to average net assets of:
Expenses, under current cap (d) 3.00%(e) 3.00% 3.00%(e)
Expenses, net of waivers/
reimbursements (f) 3.00%(e) 3.00% 4.13%(e)
Net investment income (loss) 1.89%(e) (1.69)% (2.51)%(e)
Portfolio turnover rate 0% 58% 27%
See footnote summary on page 11.
8
ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
------------------------------------
SIX MONTHS DEC. 16,
ENDED YEAR ENDED 1996(A)
FEB. 28, 1999 AUG. 31, TO
(UNAUDITED) 1998 AUG. 31, 1997
----------- ----------- -----------
Net asset value, beginning of period $13.47 $12.12 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (b) .04 (.32) (.18)
Net realized and unrealized gain on
investment transactions .22 1.87 2.30
Net increase in net asset value
from operations .26 1.55 2.12
LESS: DISTRIBUTIONS
Distributions from net realized gains (9.51) (.20) -0-
Net asset value, end of period $4.22 $13.47 $12.12
TOTAL RETURN
Total investment return based on
net asset value (c) 2.27% 12.90% 21.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $133 $1,719 $2,386
Ratios to average net assets of:
Expenses, under current cap (d) 3.70%(e) 3.70% 3.70%(e)
Expenses, net of waivers/
reimbursements (f) 3.70%(e) 3.70% 3.70%(e)
Net investment income (loss) .67%(e) (2.33)% (2.15)%(e)
Portfolio turnover rate 0% 58% 27%
See footnote summary on page 11.
9
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C
------------------------------------
SIX MONTHS DEC. 16,
ENDED YEAR ENDED 1996(A)
FEB. 28, 1999 AUG. 31, TO
(UNAUDITED) 1998 AUG. 31, 1997
----------- ----------- -----------
Net asset value, beginning of period $13.47 $12.12 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (b) .04 (.33) (.19)
Net realized and unrealized gain on
investment transactions .21 1.88 2.31
Net increase in net asset value
from operations .25 1.55 2.12
LESS: DISTRIBUTIONS
Distributions from net realized gains (9.51) (.20) -0-
Net asset value, end of period $4.21 $13.47 $12.12
TOTAL RETURN
Total investment return based on
net asset value (c) 2.20% 12.90% 21.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $18 $206 $218
Ratios to average net assets of:
Expenses, under current cap (d) 3.70%(e) 3.70% 3.70%(e)
Expenses, net of waivers/
reimbursements (f) 3.70%(e) 3.70% 3.70%(e)
Net investment income (loss) .85%(e) (2.33)% (2.24)%(e)
Portfolio turnover rate 0% 58% 27%
See footnote summary on page 11.
10
ALLIANCE/REGENT SECTOR OPPORTUNITY FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
------------------------------------
SIX MONTHS DEC. 16,
ENDED YEAR ENDED 1996(A)
FEB. 28, 1999 AUG. 31, TO
(UNAUDITED) 1998 AUG. 31, 1997
----------- ----------- -----------
Net asset value, beginning of period $13.66 $12.18 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (b) .10 (.19) (.19)
Net realized and unrealized gain on
investment transactions .21 1.87 2.37
Net increase in net asset value
from operations .31 1.68 2.18
LESS: DISTRIBUTIONS
Distributions from net realized gains (9.51) (.20) -0-
Net asset value, end of period $4.46 $13.66 $12.18
TOTAL RETURN
Total investment return based on
net asset value (c) 2.59% 13.92% 21.80%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $47 $139 $3,947
Ratios to average net assets of:
Expenses, under current cap (d) 2.70%(e) 2.70% 2.70%(e)
Expenses, net of waivers/
reimbursements (f) 2.70%(e) 2.70% 3.82%(e)
Net investment income (loss) 1.94%(e) (1.39)% (2.19)%(e)
Portfolio turnover rate 0% 58% 27%
(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 charges or contingent
deferred sales charges are 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) Expense cap in effect as of January 13, 1997.
(e) Annualized.
(f) Net of expenses waived/reimbursed by the Adviser. Absent such
waivers/reimbursements the expense ratios would have been 26.19%, 6.05% and
11.77% for Class A, 25.36%, 6.75% and 10.52% for Class B, 25.65%, 6.72% and
9.99% for Class C and 26.11%, 5.73% and 11.16% for Advisor Class for the six
months ended February 28, 1999, the year ended August 31, 1998 and the period
December 16, 1996 to August 31, 1997.
11
