-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IPBvtzxEqg6kXQGjs53IduQ6zPd+U32VoisQdKxxKk0R1vobVYEa3X9q1uxOdyde +1/VmlhuWib4DVeDqplXAw== 0000936772-98-000180.txt : 19980810 0000936772-98-000180.hdr.sgml : 19980810 ACCESSION NUMBER: 0000936772-98-000180 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980531 FILED AS OF DATE: 19980807 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANCE TECHNOLOGY FUND INC CENTRAL INDEX KEY: 0000350181 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133056623 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-03131 FILM NUMBER: 98678816 BUSINESS ADDRESS: STREET 1: 1345 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10105 BUSINESS PHONE: 2013194104 MAIL ADDRESS: STREET 1: ALLIANCE CAPITAL MANAGEMENT LP STREET 2: 1345 AVENUE OF THE AMERICAS 31ST FL CITY: NEW YORK STATE: NY ZIP: 10105 N-30D 1 ALLIANCE TECHNOLOGY FUND SEMI-ANNUAL REPORT MAY 31, 1998 ALLIANCE CAPITAL LETTER TO SHAREHOLDERS ALLIANCE TECHNOLOGY FUND _______________________________________________________________________________ July 27, 1998 Dear Shareholder: We are pleased to provide an update of Alliance Technology Fund's performance for the semi-annual reporting period ended May 31, 1998. INVESTMENT RESULTS The following table provides performance data for your Fund over the six and 12-month periods ended May 31, 1998. For comparison, performance data is also provided for the Fund's benchmark, the Pacific Stock Exchange (PSE) High Tech Index, which is a measure of the U.S. technology sector, and for the S&P 500 Stock Index (S&P 500), a measure of the broad U.S. stock market, and the Lipper Science & Technology Fund Index (Lipper Index), a representation of the Fund's peer group. As you can see, Alliance Technology Fund has outperformed its benchmark for both the six and 12-month periods ended May 31, 1998. In our last letter to you (November 30, 1997), we indicated that while the technology sector continued to underperform the S&P 500, performance which also continued through the end of May, we felt that our confidence in the Fund's major holdings would be rewarded. This has been the case as your Fund's outperformance can be attributed to the success of maintaining relatively large positions in the networking and personal computer sectors. This consistent strategy and our commitment to these sectors has also contributed to very positive relative performance versus other technology mutual funds as measured by the Lipper Index. For the six-month period ending June 30, 1998, your Fund posted a return of 28.25%, exceeding that of the Lipper Index, which posted a return of 17.46%. INVESTMENT RESULTS* Periods Ended May 31, 1998 TOTAL RETURNS 6 MONTHS 12 MONTHS -------- --------- ALLIANCE TECHNOLOGY FUND Class A 12.25% 19.29% Class B 11.87% 18.46% Class C 11.86% 18.44% PACIFIC STOCK EXCHANGE (PSE) HIGH TECH INDEX 9.43% 18.01% S&P 500 STOCK INDEX 15.07% 30.66% LIPPER SCIENCE AND TECHNOLOGY FUND INDEX 5.76% 13.20% * THE FUND'S INVESTMENT RESULTS REPRESENT TOTAL RETURNS AND ARE BASED ON THE NET ASSET VALUE AS OF MAY 31, 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 RETURNS FOR ADVISOR CLASS SHARES WILL DIFFER DUE TO DIFFERENT EXPENSES ASSOCIATED WITH THAT CLASS. RETURNS FOR THE FUND AND ITS COMPARATIVE BENCHMARKS INCLUDE THE REINVESTMENT OF ANY DISTRIBUTIONS PAID DURING THE PERIOD. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE PACIFIC STOCK EXCHANGE (PSE) HIGH TECH INDEX IS A PRICE-WEIGHTED, BROAD BASED INDEX, REPRESENTING 100 LISTED AND OVER-THE-COUNTER U.S. STOCKS DESIGNED TO MIRROR THE U.S. TECHNOLOGY SECTOR. THE PSE HIGH TECH INDEX IS DESIGNED TO REPRESENT THE ENTIRE U.S. TECHNOLOGY AND SCIENCE SECTOR, INCLUDING SUCH INDUSTRY GROUPS AS COMPUTER SOFTWARE PRODUCTS, INFORMATION PROCESSING SERVICES, MEDICAL TECHNOLOGY, BIOTECHNOLOGY, AMONG OTHERS. THE S&P 500 STOCK INDEX IS AN UNMANAGED INDEX OF 500 U.S. COMPANIES. THE LIPPER SCIENCE AND TECHNOLOGY FUND INDEX IS AN EQUALLY-WEIGHTED PERFORMANCE INDEX, ADJUSTED FOR CAPITAL GAINS DISTRIBUTIONS AND INCOME DIVIDENDS, OF THE LARGEST QUALIFYING FUNDS THAT HAVE A SCIENCE AND TECHNOLOGY INVESTMENT OBJECTIVE (ACCORDING TO LIPPER, THIS INVESTMENT OBJECTIVE INCLUDES THOSE FUNDS THAT INVEST AT LEAST 65% OF THEIR EQUITY PORTFOLIOS IN SCIENCE AND TECHNOLOGY STOCKS). AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX. ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 3. PORTFOLIO DISCUSSION Following a difficult fourth quarter in 1997, tech stocks have recovered strongly in the first half of 1998. 1 ALLIANCE TECHNOLOGY FUND _______________________________________________________________________________ Throughout the 1990s, these stocks continued along this up-and-down pattern of strong price gains which were then interrupted by one or two price corrections in most years. The most recent of these corrections was prompted by concerns about many Asian economies and their importance to the overall growth of the technology sector. The subsequent recovery in technology stocks reflected several factors. These include the realization that the Asian situation was more of a longer term challenge than a sudden implosion, the continued impressive growth in many technology companies and simple bargain hunting as valuations became more reasonable. Volatility has probably become a permanent characteristic of technology stocks. Therefore, whenever possible, and assuming valuations are reasonable, we place strong emphasis on those companies which are most dominant in their industry. The correctness of this approach is being reinforced by the fact that consolidation in many areas of technology is helping the strong companies become even stronger. Intense competition, short product cycles, rapid change and increased complexity make the average investor intolerant of earnings shortfalls, all of which place a premium on intelligent stock selection. MARKET ENVIRONMENT AND OUTLOOK The secular outlook for the technology sector remains impressive. The transition in the U.S. to a digital-based economy is evident and very much underway. Information technology is increasingly becoming a necessary competitive tool, and the "on-line economy" will change the way business is conducted in many industries. The same can be said for the ways in which consumers will be adjusting their behavior with respect to shopping, entertainment, financial decision making and general information access. All this sets the stage for the rest of the world to do the same--that is, to emulate something which is working very much in favor of the U.S. economy and for U.S.-based companies. The fact that information technology, as a percentage of U.S. Gross Domestic Product, has gone from 2.5% in 1990, to 8.5% in early 1998 could be a prelude for similar and perhaps even more rapid adoption rates in many other countries. Technology is now easier to use and much more affordable. In addition, many companies are currently offering integrated and total solutions to customers who need this information resource today more than ever. In our opinion, all this bodes particularly well for many of the companies in your Fund's portfolio. As always, we remain appreciative of your continued support of Alliance Technology Fund. We look forward to reporting to you on future investment results and market activity. Sincerely, John D. Carifa President and Chairman Peter Anastos Portfolio Manager Gerald T. Malone Portfolio Manager 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 TECHNOLOGY FUND _______________________________________________________________________________ Alliance Technology Fund is a diversified investment company that emphasizes growth of capital and invests for capital appreciation, and only incidentally for current income. The Fund may seek income by writing listed call options. The Fund invests primarily in securities of companies expected to benefit from technological advances and improvements. The Fund normally will have substantially all of its assets invested in equity securities, but it also invests in debt securities offering appreciation potential. The Fund may invest in listed and unlisted U.S. and foreign securities and has the flexibility to invest both in well-known, established companies and in new, unseasoned companies. The Fund's policy is to invest in any company and industry and in any type of security with potential for capital appreciation. INVESTMENT RESULTS _______________________________________________________________________________ NAV AND SEC AVERAGE ANNUAL TOTAL RETURNS AS OF MAY 31, 1998 CLASS A SHARES WITHOUT WITH SALES CHARGE SALES CHARGE ------------ ------------ One Year 19.29% 14.23% Five Years 25.43% 24.34% Ten Years 19.20% 18.68% CLASS B SHARES WITHOUT WITH SALES CHARGE SALES CHARGE ------------ ------------ One Year 18.46% 14.46% Five Years 24.57% 24.57% Since Inception* 26.80% 26.80% CLASS C SHARES WITHOUT WITH SALES CHARGE SALES CHARGE ------------ ------------ One Year 18.44% 17.44% Five Years 24.57% 24.57% Since Inception* 26.79% 26.79% SEC AVERAGE ANNUAL TOTAL RETURNS AS OF THE MOST RECENT QUARTER-END (MARCH 31, 1998) CLASS A CLASS B CLASS C --------- --------- --------- 1 Year 33.38% 34.37% 37.34% 5 Years 25.31% n/a n/a 10 Years 18.75% n/a n/a The Fund's investment results represent Average Annual Total Returns. The NAV and SEC returns reflect reinvestment of dividends and/or capital gains distributions in additional shares without (NAV) and with (SEC) 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 will 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: 5/3/93 Class B and Class C. n/a: not applicable. 3 TEN LARGEST HOLDINGS MAY 31, 1998 (UNAUDITED) ALLIANCE TECHNOLOGY FUND _______________________________________________________________________________ PERCENT OF COMPANY VALUE NET ASSETS - ------------------------------------------------------------------------------- Dell Computer Corp. $151,363,800 6.4% Cisco Systems, Inc. 146,069,687 6.2 Compaq Computer Corp. 95,593,750 4.1 Tellabs, Inc. 87,547,687 3.7 Nokia, Corp. (ADR) 84,613,563 3.6 Intuit, Inc. 78,201,913 3.3 Ascend Communications, Inc. 74,887,125 3.2 HBO & Co. 73,499,056 3.1 Network Associates, Inc. 72,611,875 3.1 Fore Systems, Inc. 68,070,200 2.9 $932,458,656 39.6% MAJOR PORTFOLIO CHANGES SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED) _______________________________________________________________________________ SHARES ----------------------------------- HOLDINGS PURCHASES BOUGHT 5/31/98 - ------------------------------------------------------------------------------- Alcatel Alsthom Maroc (ADR) 1,260,000 1,260,000 Ascend Communications, Inc. 1,734,000 1,734,000 First Data Corp. 1,331,000 2,000,300 Fiserv, Inc. 427,900 742,700 Fore Systems, Inc. 2,208,100 3,094,100 Glenayre Technologies, Inc. 1,755,500 1,755,500 Intuit, Inc. 1,650,700 1,650,700 KLA-Tencor Corp. 1,140,000 1,324,000 Lexmark International Group, Inc. Cl.A 701,200 701,200 Network Associates, Inc. 522,500 1,185,500 HOLDINGS SALES SOLD 5/31/98 - ------------------------------------------------------------------------------- 3Com Corp. 581,000 -0- ACC Corp. 484,900 -0- Bay Networks, Inc. 739,090 1,391,400 Ericsson (L.M.) Telephone Co. Cl.B (ADR) 900,000 -0- Lucent Technologies, Inc. 360,000 -0- Microchip Technology, Inc. 737,845 -0- Motorola, Inc. 307,690 -0- National Semiconductor Corp. 1,119,100 -0- Oracle Corp. 2,105,550 -0- Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) 906,200 1,258,500 4 PORTFOLIO OF INVESTMENTS MAY 31, 1998 (UNAUDITED) ALLIANCE TECHNOLOGY FUND _______________________________________________________________________________ COMPANY SHARES VALUE - ------------------------------------------------------------------------- COMMON STOCKS-98.9% TECHNOLOGY-97.2% COMMUNICATION EQUIPMENT-11.2% Alcatel Alsthom Maroc (ADR) 1,260,000 $ 54,495,000 Glenayre Technologies, Inc. (a) 1,755,500 26,881,094 Nokia Corp. (ADR) (b) 1,303,000 84,613,563 PairGain Technologies, Inc. (a) 616,600 9,634,375 Tellabs, Inc. (a) 1,274,000 87,547,687 ------------ 263,171,719 COMPUTER HARDWARE-11.4% Apex PC Solutions, Inc. (a) 840,900 21,127,612 Compaq Computer Corp. 3,500,000 95,593,750 Dell Computer Corp. (a) 1,836,800 151,363,800 ------------ 268,085,162 COMPUTER PERIPHERALS-1.6% Lexmark International Group, Inc. Cl.A (a) 701,200 38,916,600 COMPUTER SERVICES-14.3% Computer Sciences Corp. 1,010,200 52,467,262 DST Systems, Inc. (a) 1,025,800 54,239,175 First Data Corp. 2,000,300 66,509,975 Fiserv, Inc. (a) 742,700 43,796,091 Galileo International, Inc. 627,600 24,711,750 Gartner Group, Inc. Cl.A (a) 945,600 31,263,900 Renaissance Worldwide, Inc. (a) 827,200 15,561,700 SunGard Data Systems, Inc. (a) 1,398,600 47,727,225 ------------ 336,277,078 COMPUTER SOFTWARE-17.4% Cadence Design Systems, Inc. (a) 1,113,800 39,261,450 HBO & Co. 1,273,400 73,499,056 Health Management Systems, Inc. (a) 1,714,300 18,857,300 I2 Technologies, Inc. (a) 139,400 8,303,013 Industri-Matematik International Corp. (a) 739,600 11,879,825 Intuit, Inc. (a) 1,650,700 78,201,913 J.D. Edwards & Co. (a) 347,400 12,777,806 Microsoft Corp. (a) 480,000 40,710,000 Network Associates, Inc. (a) 1,185,500 72,611,875 Pegasystems, Inc. (a) 600,500 13,004,578 PeopleSoft, Inc. (a) 936,700 40,922,081 ------------ 410,028,897 NETWORKING SOFTWARE-15.7% Ascend Communications, Inc. (a) 1,734,000 74,887,125 Bay Networks, Inc. (a) 1,391,400 38,524,388 CIENA Corp. (a) 500,000 26,000,000 Cisco Systems, Inc. (a) 1,931,500 146,069,687 Fore Systems, Inc. (a) 3,094,100 68,070,200 Newbridge Networks Corp. (a) 610,000 17,308,750 ------------ 370,860,150 SEMI-CONDUCTOR CAPITAL EQUIPMENT-5.4% Amkor Technology, Inc. (a) 1,164,000 12,076,500 Applied Materials, Inc. (a) 1,323,130 42,340,160 ISS Group, Inc. (a) 88,300 3,333,325 KLA-Tencor Corp. (a) 1,324,000 44,850,500 Teradyne, Inc. (a) 782,300 24,055,725 ------------ 126,656,210 5 PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE TECHNOLOGY FUND _______________________________________________________________________________ COMPANY SHARES VALUE - ------------------------------------------------------------------------- SEMI-CONDUCTOR COMPONENTS-11.4% Altera Corp. (a) 1,957,000 $ 65,804,125 Cirrus Logic, Inc. (a) 1,679,000 16,790,000 Cypress Semiconductor Corp. (a) 1,400,000 11,987,500 Intel Corp. 750,000 53,578,125 PMC-Sierra, Inc. (a) 671,700 26,154,319 Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) (a)(c) 1,258,500 23,754,188 Texas Instruments, Inc. 588,400 30,229,050 Xilinx, Inc. (a) 1,074,000 40,845,562 ------------ 269,142,869 MISCELLANEOUS-8.8% Com21, Inc. (a) 62,000 906,750 Ingram Micro, Inc. Cl.A (a) 1,126,600 49,640,812 Sanmina Holdings Corp. (a) 866,400 67,470,900 Solectron Corp. (a) 1,419,400 58,727,675 Tech Data Corp. (a) 779,000 31,646,875 ------------ 208,393,012 ------------ 2,291,531,697 SHARES OR PRINCIPAL AMOUNT COMPANY (000) VALUE - ------------------------------------------------------------------------- UTILITIES-1.3% TELEPHONE UTILITY-1.3% WorldCom, Inc. (a) 674,850 $ 30,705,675 CONSUMER SERVICES-0.4% MISCELLANEOUS-0.4% Equifax, Inc. 267,000 9,712,125 Total Common Stocks (cost $1,704,586,260) 2,331,949,497 PRIVATE PLACEMENT-0.0% Interactive Light Holdings, Inc. 8.00%, 2/07/99 (d) (cost $500,000) $500 500,000 TOTAL INVESTMENTS-98.9% cost $1,705,086,260) 2,332,449,497 Other assets less liabilities-1.1% 25,172,509 NET ASSETS-100% $2,357,622,006 (a) Non-income producing security. (b) Country of origin--Finland. (c) Country of origin--Taiwan. (d) Illiquid security, valued at fair value (see Notes A & F). Glossary: ADR - American Depositary Receipt See notes to financial statements. 6 STATEMENT OF ASSETS AND LIABILITIES MAY 31, 1998 (UNAUDITED) ALLIANCE TECHNOLOGY FUND _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $1,705,086,260) $2,332,449,497 Receivable for investment securities sold 36,411,631 Receivable for capital stock sold 5,343,947 Interest and dividends receivable 221,257 Prepaid expenses 85,868 Total assets 2,374,512,200 LIABILITIES Due to custodian 4,348,651 Advisory fee payable 5,894,055 Payable for investment securities purchased 3,763,249 Payable for capital stock redeemed 2,147,432 Distribution fee payable 281,435 Accrued expenses and other liabilities 455,372 Total liabilities 16,890,194 NET ASSETS $2,357,622,006 COMPOSITION OF NET ASSETS Capital stock, at par $ 399,385 Additional paid-in capital 1,573,244,873 Net investment loss (16,165,131) Accumulated net realized gain on investment transactions 172,779,642 Net unrealized appreciation of investments 627,363,237 $2,357,622,006 CALCULATION OF MAXIMUM OFFERING PRICE CLASS A SHARES Net asset value and redemption price per share ($720,674,493 / 11,919,729 shares of capital stock issued and outstanding) $60.46 Sales charge--4.25% of public offering price 2.68 Maximum offering price $63.14 CLASS B SHARES Net asset value and offering price per share ($1,248,322,912 / 21,461,230 shares of capital stock issued and outstanding) $58.17 CLASS C SHARES Net asset value and offering price per share ($219,120,319 / 3,767,545 shares of capital stock issued and outstanding) $58.16 ADVISOR CLASS SHARES Net asset value, redemption and offering price per share ($169,504,282 / 2,789,903 shares of capital stock issued and outstanding) $60.76 See notes to financial statements. 7 STATEMENT OF OPERATIONS SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED) ALLIANCE TECHNOLOGY FUND _______________________________________________________________________________ INVESTMENT INCOME Interest $ 4,527,265 Dividends (net of foreign taxes withheld of $210,455) 1,718,052 $ 6,245,317 EXPENSES Advisory fee 11,788,508 Distribution fee - Class A 1,018,467 Distribution fee - Class B 5,804,477 Distribution fee - Class C 1,007,257 Transfer agency 2,328,624 Printing 208,213 Custodian 129,859 Registration 86,057 Administrative 61,000 Taxes 50,613 Audit and legal 48,704 Directors' fees 43,000 Miscellaneous 33,873 Total expenses 22,608,652 Less: expense offset arrangement (see Note B) (198,204) Net expenses 22,410,448 Net investment loss (16,165,131) REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain on investment transactions 180,343,918 Net change in unrealized appreciation of investments 91,954,204 Net gain on investments 272,298,122 NET INCREASE IN NET ASSETS FROM OPERATIONS $256,132,991 See notes to financial statements. 8 STATEMENT OF CHANGES IN NET ASSETS ALLIANCE TECHNOLOGY FUND _______________________________________________________________________________ SIX MONTHS ENDED YEAR ENDED MAY 31, 1998 NOVEMBER 30, (UNAUDITED) 1997 ---------------- --------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment loss $ (16,165,131) $ (23,986,074) Net realized gain on investment transactions 180,343,918 14,764,297 Net change in unrealized appreciation of investments 91,954,204 133,346,847 Net increase in net assets from operations 256,132,991 124,125,070 DISTRIBUTIONS TO SHAREHOLDERS FROM: Net realized gain on investments Class A (6,722,769) (4,879,329) Class B (11,607,315) (5,671,805) Class C (2,036,454) (916,491) Advisor Class (1,788,297) (4,489) CAPITAL STOCK TRANSACTIONS Net increase 94,178,145 551,976,958 Total increase 328,156,301 664,629,914 NET ASSETS Beginning of year 2,029,465,705 1,364,835,791 End of period $2,357,622,006 $2,029,465,705 See notes to financial statements. 9 NOTES TO FINANCIAL STATEMENTS MAY 31, 1998 (UNAUDITED) ALLIANCE TECHNOLOGY FUND _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES Alliance Technology Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. 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 or on a foreign securities exchange (other than foreign securities exchanges whose operations are similar to those of the United States over-the-counter market) 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. Readily marketable securities traded in the over-the-counter market, securities listed on a foreign securities exchange whose operations are similar to the U.S. over-the-counter market, and securities listed 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. U.S. government and fixed income 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. 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 shareholders. Therefore, no provisions for federal income or excise taxes are required. 3. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS Dividend income is recorded on the ex-dividend date. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. The Fund accretes discounts as adjustments to interest income. Investment gains and losses are determined on the identified cost basis. 4. 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 Advisor Class shares have no distribution fees. 5. DIVIDENDS AND DISTRIBUTIONS Dividends and distributions to shareholders are recorded on the ex-dividend date. 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 10 ALLIANCE TECHNOLOGY FUND _______________________________________________________________________________ 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 a quarterly rate equal to .25% (approximately 1% on an annual basis) of the net assets of the Fund valued on the last business day of the previous quarter. Pursuant to the advisory agreement, the Fund paid $61,000 to the Adviser representing the cost of certain legal and accounting services provided to the Fund by the Adviser for the six months ended May 31, 1998. 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. Such compensation amounted to $1,500,673 for the six months ended May 31, 1998. In addition, for the six months ended May 31, 1998, the Fund's expenses were reduced by $198,204 under an expense offset arrangement with Alliance Fund Services. Transfer agency fees reported in the statement of operations exclude these credits. 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 $154,285 from the sales of Class A shares and $36,464, $1,439,243 and $66,277 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A, Class B and Class C shares, respectively, for the six months ended May 31, 1998. Brokerage commissions paid on investment transactions for the six months ended May 31, 1998 amounted to $874,048 of which $4,800 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. The fees are 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 $34,864,082 and $1,619,211 for Class B and Class 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 $846,148,152 and $639,269,723, respectively, for the six months ended May 31, 1998. There were no purchases or sales of U.S. government and government agency obligations for the six months ended May 31, 1998. At May 31, 1998, the cost of investments for federal income tax purposes was $1,709,334,238. Accordingly, gross unrealized appreciation of investments was $682,121,973 and gross unrealized depreciation of investments was $59,006,714 resulting in net unrealized appreciation of $623,115,259. 11 NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE TECHNOLOGY FUND _______________________________________________________________________________ OPTION TRANSACTIONS For hedging and investment purposes, the Fund purchases and writes call options listed on national securities exchanges and purchases listed put options, including put options on market indices. The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid. When the Fund writes an option, the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from writing options which expire unexercised are recorded by the Fund on the expiration date as realized gains from option transactions. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Fund has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security or currency purchased by the Fund. The risk involved in writing an option is that, if the option was exercised the underlying security could then be purchased or sold by the Fund at a disadvantageous price. For the six months ended May 31, 1998, the Fund did not engage in any option transactions. NOTE E: CAPITAL STOCK There are 12,000,000,000 shares of $0.01 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 MAY 31, 1998 NOVEMBER 30, MAY 31, 1998 NOVEMBER 30, (UNAUDITED) 1997 (UNAUDITED) 1997 ------------ ------------ -------------- -------------- CLASS A Shares sold 7,788,951 10,236,552 $ 448,819,909 $ 542,859,733 Shares issued in reinvestment of distributions 110,995 78,573 5,935,121 3,946,887 Shares converted from Class B 63,769 125,065 3,612,357 6,591,693 Shares redeemed (7,518,671) (10,594,530) (435,479,238) (567,186,149) Net increase (decrease) 445,044 (154,340) $ 22,888,149 $ (13,787,836) CLASS B Shares sold 3,507,048 9,702,206 $ 189,867,729 $ 491,739,865 Shares issued in reinvestment of distributions 209,351 90,233 10,804,657 4,406,275 Shares converted to Class A (66,185) (129,230) (3,612,357) (6,591,693) Shares redeemed (2,223,739) (2,910,995) (123,316,761) (148,766,672) Net increase 1,426,475 6,752,214 $ 73,743,268 $ 340,787,775 12 ALLIANCE TECHNOLOGY FUND _______________________________________________________________________________ SHARES AMOUNT --------------------------- ------------------------------ SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED MAY 31, 1998 NOVEMBER 30, MAY 31, 1998 NOVEMBER 30, (UNAUDITED) 1997 (UNAUDITED) 1997 ------------ ------------ -------------- -------------- CLASS C Shares sold 6,144,106 4,659,352 $ 337,492,531 $ 244,912,719 Shares issued in reinvestment of distributions 35,111 11,825 1,812,083 577,411 Shares redeemed (5,915,297) (3,347,816) (326,481,857) (179,818,433) Net increase 263,920 1,323,361 $ 12,822,757 $ 65,671,697 ADVISOR CLASS Shares sold 1,102,826 4,033,381 $ 62,049,444 $ 216,794,442 Shares issued in reinvestment of distributions 32,400 89 1,738,612 4,489 Shares redeemed (1,404,313) (985,537) (79,064,085) (57,493,609) Net increase (decrease) (269,087) 3,047,933 $ (15,276,029) $ 159,305,322 NOTE F: ILLIQUID SECURITY DATE ACQUIRED COST ------------- ------------ Interactive Light Holdings, Inc. 8.00%, 2/07/99 1/27/94 $500,000 The security shown above is illiquid and has been valued at fair value in accordance with the procedures described in Note A. The value of this security at May 31, 1998 was $500,000, representing .02% of net assets. 13 FINANCIAL HIGHLIGHTS ALLIANCE TECHNOLOGY FUND _______________________________________________________________________________ SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A -------------------------------------------------------------------------------- SIX MONTHS JANUARY 1, ENDED YEAR ENDED NOVEMBER 30, 1994 TO YEAR ENDED MAY 31, 1998 ------------------------------------- NOVEMBER 30, DECEMBER 31, (UNAUDITED) 1997 1996 1995 1994(A) 1993 ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $54.44 $51.15 $46.64 $31.98 $26.12 $28.20 INCOME FROM INVESTMENT OPERATIONS Net investment loss (.30)(b) (.51)(b) (.39)(b) (.30)(b) (.32) (.29) Net realized and unrealized gain on investment transactions 6.90 4.22 7.28 18.13 6.18 6.39 Net increase in net asset value from operations 6.60 3.71 6.89 17.83 5.86 6.10 LESS: DISTRIBUTIONS Distributions from net realized gains (.58) (.42) (2.38) (3.17) -0- (8.18) Net asset value, end of period $60.46 $54.44 $51.15 $46.64 $31.98 $26.12 TOTAL RETURN Total investment return based on net asset value (c) 12.25% 7.32% 16.05% 61.93% 22.43% 21.63% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $720,675 $624,716 $594,861 $398,262 $202,929 $173,732 Ratio of expenses to average net assets 1.63%(d)(e) 1.67%(e) 1.74% 1.75% 1.66%(d) 1.73% Ratio of net investment loss to average net assets (1.04)%(d) (.97)% (.87)% (.77)% (1.22)%(d) (1.32)% Portfolio turnover rate 31% 51% 30% 55% 55% 64%
See footnote summary on page 17. 14 ALLIANCE TECHNOLOGY FUND _______________________________________________________________________________ SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B --------------------------------------------------------------------------------- SIX MONTHS JANUARY 1, MAY 3, ENDED YEAR ENDED NOVEMBER 30, 1994 TO 1993(F) TO MAY 31, 1998 ------------------------------------- NOVEMBER 30, DECEMBER 31, (UNAUDITED) 1997 1996 1995 1994(A) 1993 ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $52.58 $49.76 $45.76 $31.61 $25.98 $27.44 INCOME FROM INVESTMENT OPERATIONS Net investment loss (.49)(b) (.88)(b) (.70)(b) (.60)(b) (.23) (.12) Net realized and unrealized gain on investment transactions 6.66 4.12 7.08 17.92 5.86 6.84 Net increase in net asset value from operations 6.17 3.24 6.38 17.32 5.63 6.72 LESS: DISTRIBUTIONS Distributions from net realized gains (.58) (.42) (2.38) (3.17) -0- (8.18) Net asset value, end of period $58.17 $52.58 $49.76 $45.76 $31.61 $25.98 TOTAL RETURN Total investment return based on net asset value (c) 11.87% 6.57% 15.20% 60.95% 21.67% 24.49% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $1,248,323 $1,053,436 $660,921 $277,111 $18,397 $1,645 Ratio of expenses to average net assets 2.35%(d)(e) 2.38%(e) 2.44% 2.48% 2.43%(d) 2.57%(d) Ratio of net investment loss to average net assets (1.76)%(d) (1.70)% (1.61)% (1.47)% (1.95)%(d) (2.30)%(d) Portfolio turnover rate 31% 51% 30% 55% 55% 64%
See footnote summary on page 17. 15 FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE TECHNOLOGY FUND _______________________________________________________________________________ SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C ------------------------------------------------------------------------------ SIX MONTHS JANUARY 1, MAY 3, ENDED YEAR ENDED NOVEMBER 30, 1994 TO 1993(F) TO MAY 31, 1998 ------------------------------------- NOVEMBER 30, DECEMBER 31, (UNAUDITED) 1997 1996 1995 1994(A) 1993 ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $52.57 $49.76 $45.77 $31.61 $25.98 $27.44 INCOME FROM INVESTMENT OPERATIONS Net investment loss (.48)(b) (.88)(b) (.70)(b) (.58)(b) (.24) (.13) Net realized and unrealized gain on investment transactions 6.65 4.11 7.07 17.91 5.87 6.85 Net increase in net asset value from operations 6.17 3.23 6.37 17.33 5.63 6.72 LESS: DISTRIBUTIONS Distributions from net realized gains (.58) (.42) (2.38) (3.17) -0- (8.18) Net asset value, end of period $58.16 $52.57 $49.76 $45.77 $31.61 $25.98 TOTAL RETURN Total investment return based on net asset value (c) 11.86% 6.55% 15.17% 60.98% 21.67% 24.49% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $219,120 $184,194 $108,488 $43,161 $7,470 $1,096 Ratio of expenses to average net assets 2.35%(d)(e) 2.38%(e) 2.44% 2.48% 2.41%(d) 2.52%(d) Ratio of net investment loss to average net assets (1.77)%(d) (1.70)% (1.60)% (1.47)% (1.94)%(d) (2.25)%(d) Portfolio turnover rate 31% 51% 30% 55% 55% 64%
See footnote summary on page 17. 16 ALLIANCE TECHNOLOGY FUND _______________________________________________________________________________ SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS ---------------------------------------- OCTOBER 2, SIX MONTHS 1996(F) ENDED YEAR ENDED TO MAY 31, 1998 NOVEMBER 30, NOVEMBER 30, (UNAUDITED) 1997 1996 ----------- ----------- ----------- Net asset value, beginning of period $54.63 $51.17 $47.32 INCOME FROM INVESTMENT OPERATIONS Net investment loss (b) (.21) (.45) (.05) Net realized and unrealized gain on investment transactions 6.92 4.33 3.90 Net increase in net asset value from operations 6.71 3.88 3.85 LESS: DISTRIBUTIONS Distributions from net realized gains (.58) (.42) -0- Net asset value, end of period $60.76 $54.63 $51.17 TOTAL RETURN Total investment return based on net asset value (c) 12.41% 7.65% 8.14% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $169,504 $167,120 $566 Ratio of expenses to average net assets 1.33%(d)(e) 1.39%(e) 1.75%(d) Ratio of net investment loss to average net assets (.74)%(d) (.81)% (1.21)%(d) Portfolio turnover rate 31% 51% 30%
(a) The Fund changed its fiscal year end from December 31 to November 30. (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) Annualized. (e) Ratio reflects expenses grossed up for expense offset arrangement with the Transfer Agent. For the six months ended May 31, 1998 and the year ended November 30, 1997, the ratios of expenses to average net assets were 1.61% and 1.66% for Class A shares, 2.33% and 2.36% for Class B shares, 2.33% and 2.37% for Class C shares and 1.31% and 1.38% for Advisor Class shares, respectively. (f) Commencement of distribution. 17 ALLIANCE TECHNOLOGY FUND _______________________________________________________________________________ BOARD OF DIRECTORS JOHN D. CARIFA, CHAIRMAN AND PRESIDENT ROBERT C. ALEXANDER (1) DAVID H. DIEVLER (1) DR. CHARLES H. FERGUSON (1) WILLIAM H. FOULK, JR. (1) D. JAMES GUZY (1) MARSHALL C. TURNER, JR. (1) OFFICERS PETER ANASTOS, SENIOR VICE PRESIDENT KATHLEEN A. CORBET, SENIOR VICE PRESIDENT THOMAS G. BARDONG, VICE PRESIDENT GERALD T. MALONE, 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 & TRUST COMPANY 225 Franklin Street Boston, MA 02110 DISTRIBUTOR ALLIANCE FUND DISTRIBUTORS, INC. 1345 Avenue of the Americas New York, NY 10105 LEGAL COUNSEL SEWARD & KISSEL One Battery Park Plaza New York, NY 10004 TRANSFER AGENT ALLIANCE FUND SERVICES, INC. P.O. Box 1520 Secaucus, NJ 07096-1520 Toll-Free 1-(800) 221-5672 INDEPENDENT AUDITORS ERNST & YOUNG LLP 787 Seventh Avenue New York, NY 10019 (1) Member of the Audit Committee. 18 THE ALLIANCE FAMILY OF MUTUAL FUNDS _______________________________________________________________________________ FIXED INCOME Alliance Bond Fund U.S. Government Portfolio Corporate Bond Portfolio Alliance Global Dollar Government Fund Alliance Global Strategic Income Trust Alliance High Yield Fund Alliance Mortgage Securities Income Fund Alliance Limited Maturity Government Fund Alliance Multi-Market Strategy Trust Alliance North American Government Income Trust Alliance Short-Term Multi-Market Trust Alliance Short-Term U.S. Government Fund Alliance World Income Trust TAX-FREE INCOME Alliance Municipal Income Fund California Portfolio Insured California Portfolio Insured National Portfolio National Portfolio New York Portfolio Alliance Municipal Income Fund II Arizona Portfolio Florida Portfolio Massachusetts Portfolio Michigan Portfolio Minnesota Portfolio New Jersey Portfolio Ohio Portfolio Pennsylvania Portfolio Virginia Portfolio MONEY MARKET AFD Exchange Reserves GROWTH The Alliance Fund Alliance Global Environment Fund Alliance Growth Fund Alliance Premier Growth Fund Alliance/Regent Sector Opportunity Fund GROWTH & INCOME Alliance Strategic Balanced Fund Alliance Balanced Shares Alliance Conservative Investors Fund Alliance Growth & Income Fund Alliance Growth Investors Fund Alliance Income Builder Fund Alliance Real Estate Investment Fund Alliance Utility Income Fund AGGRESSIVE GROWTH Alliance Global Small Cap Fund Alliance Quasar Fund Alliance Technology Fund INTERNATIONAL Alliance All-Asia Investment Fund Alliance Greater China '97 Fund Alliance International Fund Alliance International Premier Growth Fund Alliance New Europe Fund Alliance Worldwide Privatization Fund CLOSED-END FUNDS Alliance All-Market Advantage Fund ACM Government Income Fund ACM Government Opportunity Fund ACM Government Securities Fund ACM Government Spectrum Fund ACM Managed Dollar Income Fund ACM Managed Income Fund ACM Municipal Securities Income Fund Alliance World Dollar Government Fund Alliance World Dollar Government Fund II The Austria Fund The Korean Investment Fund The Spain Fund The Southern Africa Fund CASH MANAGEMENT SERVICES ACM Institutional Reserves Government Portfolio Prime Portfolio Tax-Free Portfolio Trust Portfolio Alliance Capital Reserves Alliance Government Reserves Alliance Insured Account Alliance Money Reserves Alliance Municipal Trust California Portfolio Connecticut Portfolio Florida Portfolio General Portfolio Massachusetts Portfolio New Jersey Portfolio New York Portfolio Virginia Portfolio Alliance Treasury Reserves Alliance Money Market Fund Prime Portfolio Government Portfolio General Municipal Portfolio 19 ALLIANCE TECHNOLOGY FUND 1345 Avenue of the Americas New York, NY 10105 (800) 221-5672 ALLIANCE CAPITAL THIS REPORT IS INTENDED SOLELY FOR DISTRIBUTION TO CURRENT SHAREHOLDERS OF THE FUND. R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER, ALLIANCE CAPITAL MANAGEMENT L.P. TECSR -----END PRIVACY-ENHANCED MESSAGE-----