ALLIANCE INSTITUTIONAL FUNDS
ANNUAL REPORT
OCTOBER 31, 1998
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE INSTITUTIONAL FUNDS
_______________________________________________________________________________
December 16, 1998
Dear Shareholder:
We are pleased to provide you with an update on the performance and investment
activity of the portfolios of Alliance Institutional Funds, Inc. for the fiscal
year ended October 31, 1998.
ALLIANCE PREMIER GROWTH INSTITUTIONAL FUND
Portfolio Manager: Al Harrison
The following table provides performance information for the Alliance Premier
Growth Institutional Fund (the "Fund") for the six-month and since-inception
(January 7, 1998) periods ended October 31, 1998. For comparison, we have also
provided the returns for the Standard & Poor's 500 Stock Index (the "S&P 500"),
a common measure of the broad stock market, and your Fund's benchmark, the
Russell 1000 Growth Stock Index, which measures the performance of large-cap
U.S. stocks.
Notwithstanding the severe erosion in equity prices from mid-August to early
October of 1998, your Fund has provided a return since inception well in excess
of that of the S&P 500 and the Russell 1000 Growth Stock Index, as shown. This
performance was the result of good individual stock selection outweighing
losses in the global financial sector which came under pressure during the late
summer.
INVESTMENT RESULTS*
Periods Ended October 31, 1998
TOTAL RETURNS
6 MONTHS SINCE INCEPTION**
--------- -----------------
ALLIANCE PREMIER GROWTH
INSTITUTIONAL FUND
Class I 1.28% 26.20%
Class II 1.04% 25.80%
S&P 500 STOCK INDEX -0.40% 14.65%
RUSSELL 1000 GROWTH STOCK INDEX 1.28% 18.24%
* THE FUND'S INVESTMENT RESULTS REPRESENT TOTAL RETURNS AND ARE BASED ON THE
NET ASSET VALUE OF EACH CLASS OF SHARES AS OF OCTOBER 31, 1998. ALL FEES AND
EXPENSES RELATED TO THE OPERATION OF THE FUND HAVE BEEN DEDUCTED. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THE S&P 500 STOCK INDEX IS AN UNMANAGED INDEX OF 500 U.S. COMPANIES, AND IS
A COMMON MEASURE OF THE PERFORMANCE OF THE OVERALL U.S. STOCK MARKET. THE
RUSSELL 1000 GROWTH STOCK INDEX CONSISTS OF 1000 OF THE LARGEST STOCKS
REPRESENTING APPROXIMATELY 87% OF THE U.S. EQUITY MARKET. AN INVESTOR CANNOT
INVEST DIRECTLY IN AN INDEX.
** THE INCEPTION DATE FOR ALLIANCE PREMIER GROWTH INSTITUTIONAL FUND CLASS I
AND CLASS II IS JANUARY 7, 1998. RETURNS FOR THE SHARE CLASSES OF THE FUND ARE
FOR THE JANUARY 7, 1998 - OCTOBER 31, 1998 PERIOD. RETURNS FOR THE S&P 500 AND
THE RUSSELL 1000 INDEXES ARE FOR THE DECEMBER 31, 1997 - OCTOBER 31, 1998
PERIOD.
ECONOMIC REVIEW
We continue to express ourselves as being "cautiously bullish." The caution
stems from the continued problems being faced in Asia and Russia, together with
the unknown impact on world economic growth from the Year 2000 (the "Y2K")
computer conversion at the end of 1999.
Having said that, we believe that the fundamentals behind U.S. economic and
corporate prosperity are still largely in place. U.S. companies enjoy worldwide
leadership in terms of technology, cost cutting, and managerial skills.
Corporate earnings have been strong over the last several years and balance
sheets are in excellent shape to weather any slowdown that may ensue. Likewise,
in a macro sense fiscal policy now has the luxury of dealing with a surplus
rather than a deficit, while monetary policy is being finely tuned by Alan
Greenspan to accommodate modest changes in the economic and inflation outlook.
Accordingly, although stock prices have reached price to earnings ("P/E")
multiples that are higher than those in the last decade, these valuations would
seem justified based on corporate health and by reference to a long bond yield
of only 5.25%.
REVIEW OF INVESTMENT STRATEGY
The Alliance Premier Growth Institutional Fund continues to emphasize stock
selection particularly in the technology, health care, and consumer services
areas. It is important, however, for us to continue to be extremely price
conscious when looking at one stock against another, and we will continue to
adjust the sizes of our positions as relative prices change. Since we continue
to expect market volatility, this strategy of taking profits
1
ALLIANCE INSTITUTIONAL FUNDS
_______________________________________________________________________________
during bouts of enthusiasm, while adding to holdings during periods of
weakness, should continue to provide a layer of value over and above our
foremost requirement of good stock selection based on fundamentals.
ALLIANCE QUASAR INSTITUTIONAL FUND
Portfolio Manager: Randall Haase
The following table provides performance for the Alliance Quasar Institutional
Fund (the "Fund") for the six-month and since-inception (March 17, 1998)
periods ended October 31, 1998. For comparison, we have also included the
returns for the Standard & Poor's 500 Stock Index (the "S&P 500"), a common
measure of the broad stock market, and the Fund's benchmark, represented by the
Russell 2000 Index, which measures the performance of small-cap U.S. stocks.
For the six-months and since-inception periods ended October 31, 1998, your
Fund underperformed its benchmark. This underperformance can be attributed to
the Fund's overweighting in several growth cyclical industries, particularly
the airline and rental car industries, relative to the benchmark. If the U.S.
enters a recession in the next 12 months, many investors believe that these
industries' earnings would be hurt disproportionately. As a result, during the
most recent small-cap sell-off, stocks in these industries underperformed
considerably. However, we believe that any economic uncertainty is already
priced into these stocks, and that they offer investors tremendous
opportunities given their strong fundamentals and low stock valuations.
INVESTMENT RESULTS*
Periods Ended October 31, 1998
TOTAL RETURNS
6 MONTHS SINCE INCEPTION**
---------- -----------------
ALLIANCE QUASAR
INSTITUTIONAL FUND
Class I -27.54% -25.80%
Class II -27.74% -26.00%
S&P 500 STOCK INDEX -0.40% 0.62%
RUSSELL 2000 INDEX -21.20% -20.76%
* THE FUND'S INVESTMENT RESULTS REPRESENT TOTAL RETURNS AND ARE BASED ON THE
NET ASSET VALUE OF EACH CLASS OF SHARES AS OF OCTOBER 31, 1998. ALL FEES AND
EXPENSES RELATED TO THE OPERATION OF THE FUND HAVE BEEN DEDUCTED. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THE S&P 500 STOCK INDEX IS AN UNMANAGED INDEX OF 500 U.S. COMPANIES, AND IS
A COMMON MEASURE OF THE PERFORMANCE OF THE OVERALL U.S. STOCK MARKET. THE
RUSSELL 2000 INDEX IS A CAPITALIZATION-WEIGHTED INDEX THAT INCLUDES 2000 OF THE
SMALLEST STOCKS REPRESENTING APPROXIMATELY 11% OF THE U.S. EQUITY MARKET. AN
INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX.
** THE INCEPTION DATE FOR ALLIANCE QUASAR INSTITUTIONAL FUND CLASS I AND CLASS
II IS MARCH 17, 1998. RETURNS FOR THE SHARE CLASSES OF THE FUND ARE FOR THE
MARCH 17, 1998 - OCTOBER 31, 1998 PERIOD. RETURNS FOR THE S&P 500 AND THE
RUSSELL 2000 INDEXES ARE FOR THE MARCH 31, 1998 - OCTOBER 31, 1998 PERIOD.
REVIEW OF INVESTMENT STRATEGY
Our basic investment strategy remains unchanged. We continue to adjust the
Fund's portfolio composition to reflect our perception of those smaller, highly
competitive companies that will, in our judgment, exhibit long-term price
appreciation through superior earnings growth. During the last several months,
there has been a tremendous amount of volatility and nervousness in the
marketplace. We have not changed our style or strategy at all, but instead are
trying to take advantage of inefficiencies in the marketplace.
With the economy slowing, there is a belief that the U.S. may potentially enter
a recession. As you know, several of the overseas markets are already
experiencing recessionary times, and if the U.S. economy continues to slow,
there could be some downward pressure on the level of discretionary spending in
the U.S. With that as a backdrop, several of our growth names with a cyclical
or consumer orientation have not performed well during the last six months
because of the belief that the level of consumer spending in the U.S. will slow
down.
Specifically, our airline stocks and rental car stocks have done poorly. While
the fundamentals for both the airline and rental car industries are quite
strong, with both showing record pricing and record profitability, these stocks
have given up all of their gains achieved over the last several years in just
the last few months. Nevertheless, within the airline industry, we currently
hold positions in Alaska Air Group, Inc., AmericaWest Holdings Corp.,
2
ALLIANCE INSTITUTIONAL FUNDS
_______________________________________________________________________________
and Mesa Air Group, Inc. Furthermore, within the rental car group, we still
hold positions in Budget Group, Inc. and Dollar Thrifty Automotive Group, Inc.
At less than 10 times earnings, we believe these companies should perform well
over the next several years.
On the consumer side, Bally Total Fitness Holding Corp., Men's Wearhouse, Inc.,
Premier Parks, Inc. and United Rentals, Inc. also have underperformed the
broader small-cap market. However, we have strong conviction in each of these
companies and still believe they offer investors tremendous value.
In addition, companies with strong franchises and brand names such as Tiffany &
Co. and Tommy Hilfiger Corp. were also caught in this downward pressure in
retail stocks. Hence, with both companies growing their earnings at 20% + with
price to earnings ("P/E") multiples at less than 12 times earnings, we believe
they offer investors a good value in a difficult retail environment.
On a positive note, the health care sector held up relatively well during the
small-cap sell-off. The Fund still has a strong focus on late stage
biotechnology companies that have clearly demonstrated the ability to get
products through the Food and Drug Administration. Within the biotechnology
group, we currently hold positions in Centocor, Inc., GelTex Pharmaceuticals,
Inc., and MedImmune, Inc.
Within the real estate investment trust ("REIT") sector, we continue to build
positions in strong, well capitalized REITs. Chelsea GCA Realty, Inc. is a
leading operator of outlet centers and Taubman Centers, Inc. is a leading
operator of malls in the U.S. At current valuations, these investments are
yielding between 7% and 8% before capital appreciation. We currently hold
positions in both companies.
On the automotive side, we still continue to be encouraged by the consolidation
unfolding on the retail dealership side of the business. Manufacturers and
large scale retailers both want to consolidate the number of automobile
dealerships that currently exist in the United States. Eventually, a one-price
shopping experience should replace traditional haggling and this, coupled with
lower prices, should enrich the car buying experience the consumer has to face.
Both Group 1 Automotive, Inc. and Circuit City Stores, Inc.--CarMax Group
should be beneficiaries of this trend and we currently hold positions in both
companies.
We also continue to believe that the oil tanker industry will rebound within
the next several years because when tanker rates are forced upwards, older
tanks are retired, and new construction fails to keep up with demand. We
continue to hold positions in OMI Corp., Teekay Shipping Corp., and
Knightsbridge Tankers, Ltd.
Lastly, the Fund has been weighted between 12% and 14% in the technology sector
over the last several months. Not having an aggressive weighting in this sector
actually helped us during the difficult period for small-cap stocks. Going
forward, we are comfortable with a market weighting in technology focusing on
those companies with strong franchises with proprietary positions.
In summary, we cannot overemphasize how volatile and difficult the last several
months have been for small-cap managers. While we are extremely proud of our
long-term results, we are quite disappointed with short-term results and feel
comfortable that we are very well positioned going forward. We continue to be
quite bullish on small-cap stocks and believe the opportunity and valuations
for small-cap stocks are extremely compelling relative to large-cap stocks.
Hence, we believe we are very well positioned to participate in any small-cap
rally.
ALLIANCE REAL ESTATE INVESTMENT INSTITUTIONAL FUND
Portfolio Manager: Dan Pine
Publicly traded companies that own income producing real estate underwent a
correction in 1998. This market, as measured by the National Association of
Real Estate Investment Trusts ("NAREIT") Equity Index, suffered a 13.38%
decline during this period. This added to weakness earlier in the year, leaving
the Fund's benchmark index down 14.63% for the fiscal year-to-date period. As
the following table shows, your Fund and its benchmark both performed poorly
during the six-month and since-inception periods ended October 31, 1998. Not
fully captured on the table was the sharp decline and startling intra-period
recovery of the overall stock market as represented by the Standard & Poor's
500 Stock Index (the "S&P 500").
3
ALLIANCE INSTITUTIONAL FUNDS
_______________________________________________________________________________
The overall stock market was down as a result of fears of a possible recession.
The real estate investment trust ("REIT") market was caught in a downdraft
caused by investors focusing on larger blue chip stocks as a perceived "flight
to safety." Your Fund, which was overweight in the hotel and office property
sectors of the REIT market, underperformed its benchmark because these sectors
were harder hit in the stock market than other sectors of real estate. Even
though these two sectors of the REIT market were down during the period under
review, we continue to believe that the underlying real estate fundamentals of
the market continue to be positive for the overall REIT market and for these
two sectors, in particular.
INVESTMENT RESULTS*
Periods Ended October 31, 1998
TOTAL RETURNS
6 MONTHS SINCE INCEPTION**
---------- -----------------
ALLIANCE REAL ESTATE INVESTMENT
INSTITUTIONAL FUND
Class I -16.36% -18.61%
Class II -16.59% -19.02%
S&P 500 STOCK INDEX -0.40% 16.62%
NAREIT EQUITY INDEX -13.38% -14.63%
* THE FUND'S INVESTMENT RESULTS REPRESENT TOTAL RETURNS AND ARE BASED ON THE
NET ASSET VALUE OF EACH CLASS OF SHARES AS OF OCTOBER 31, 1998. ALL FEES AND
EXPENSES RELATED TO THE OPERATION OF THE FUND HAVE BEEN DEDUCTED. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THE S&P 500 STOCK INDEX IS AN UNMANAGED INDEX OF 500 U.S. COMPANIES, AND IS
A COMMON MEASURE OF THE PERFORMANCE OF THE OVERALL U.S. STOCK MARKET. THE
NAREIT EQUITY INDEX IS A MARKET VALUE WEIGHTED INDEX BASED UPON THE LAST
CLOSING PRICE OF THE MONTH FOR TAX-QUALIFIED REITS LISTED ON THE NYSE, AMEX,
AND NASDAQ. INDEX RETURNS ARE NOT ADJUSTED FOR SALES CHARGES OR OPERATING
EXPENSES. AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX.
** THE INCEPTION DATE FOR ALLIANCE REAL ESTATE INVESTMENT INSTITUTIONAL FUND
CLASS I AND CLASS II IS DECEMBER 9, 1997. RETURNS FOR THE SHARE CLASSES OF THE
FUND ARE FOR THE DECEMBER 9, 1997- OCTOBER 31, 1998 PERIOD. RETURNS FOR THE S&P
500 AND THE NAREIT EQUITY INDEX ARE FOR THE NOVEMBER 30, 1997 - OCTOBER 31,
1998 PERIOD.
MARKET OVERVIEW
The recent steep decline of real estate companies' stock prices is almost
unprecedented. The last time the benchmark index showed such a precipitous
six-month decline was in the midst of the recession of 1973-74. At that time,
the U.S. economy was reeling from the first global oil shocks, increasing
competition from Europe and Japan, and slowing productivity brought on from the
entrance of the baby boom generation into the work force. Real estate markets
were at the tail end of a vast construction cycle which was financed largely by
bank (and mortgage REIT) debt.
By comparison, the U.S. economy is one of the strongest growth engines in the
world today. Although financial turmoil in Asia and Russia will likely slow
U.S. growth prospects, it is not at all clear that we are headed into a
recession at this point. Lately, some new construction has begun. Whether or
not this turns into a full fledged cycle remains to be seen. Arguably, real
estate markets are broadly in equilibrium. As a result, solid rent growth seems
likely for most owners of real estate for the foreseeable future. This should
bode well for the companies held in your Fund's portfolio.
In fact, the average real estate company is posting excellent profit growth. We
anticipate 13.5% and 11.0% growth for the average REIT in 1998 and 1999,
respectively. These expectations are based on properties already owned or under
development and market conditions, more or less, as they currently exist.
Valuation levels are at historic lows. The average REIT trades at about 8.5
times 1999 funds from operations (the REIT equivalent of earnings per share), a
10-15% discount to the value of the real estate assets that it owns, and with a
7.2% current dividend yield.
These valuation metrics suggest either a severe real estate pullback or stock
market over-reaction. We believe it is the latter of these alternatives. We
track real estate market supply and demand changes very closely. Our research
shows that supply is undeniably increasing, albeit slowly, and demand growth is
slowing. However, the balance has not yet tipped toward the negative. In fact,
recent capital market turmoil appears to be preventing real estate markets from
overheating. This should allow company growth to continue and share prices to
recover from recent lows.
4
ALLIANCE INSTITUTIONAL FUNDS
_______________________________________________________________________________
INVESTMENT STRATEGY
Your Fund was designed to identify and invest in companies that have the
optimal exposure to the country's strongest real estate markets and which will
benefit most from the significant shifts in real estate financing and
ownership, which are sweeping across the United States today.
The most economically sensitive part of the real estate world is hotels. This
is because supply is relatively easy to build, demand is closely linked to
gross domestic product ("GDP") growth and rental rates reprice every day. In
the past six months, we have lowered our portfolio exposure to hotels by 20%
and we have increased our exposure to downtown office companies by 50%. Long
lease terms cushion economic downturns because rent is a contractual obligation
which must be paid even during periods of business softness. Downtown office
buildings have the longest lease terms in the REIT world. New supply is more
constrained in the northeastern U.S. because of population density and
bureaucratic logjams. To minimize supply risk we increased our exposure to the
northeast by 22% in the past six months.
MARKET OUTLOOK AND CONCLUSIONS
Our outlook for real estate remains positive. Supply of and demand for space
remains roughly in balance in most markets. We believe the market has
overreacted to the beginning of a normal construction cycle and slowing
economic growth. The widespread weakness and subsequent recovery of the U.S.
stock market has damaged REIT shares even though the fundamentals do not
justify such weakness. As a result, we are optimistic about both near- and
long-term results. We believe we are well positioned for any coming rebound in
real estate stocks.
In conclusion, we would like to thank you for the continued confidence you have
shown in the portfolios of Alliance Institutional Funds, Inc., and we look
forward to reporting their progress to you in the future.
Sincerely,
Alfred Harrison
Executive Vice President
Randall E. Haase
Senior Vice President
Daniel G. Pine
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.
5
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE PREMIER GROWTH INSTITUTIONAL FUND
_______________________________________________________________________________
Alliance Premier Growth Institutional Fund is an open-ended, diversified
investment company that seeks long-term growth of capital by investing in the
common stocks of a limited number of large, carefully selected, high-quality
U.S. companies that are judged likely to achieve superior earnings growth.
Normally, about 40 companies will be represented in the portfolio, with the 25
most highly regarded of these usually constituting 70% of the Fund's net assets.
INVESTMENT RESULTS
_______________________________________________________________________________
TOTAL RETURNS
CLASS I SHARES
PERIOD ENDED PERIOD ENDED
OCTOBER 31, SEPTEMBER 30,
1998 1998
------------- -------------
Six Months 1.28% -5.52%
Since Inception* 26.20% 14.60%
CLASS II SHARES
PERIOD ENDED PERIOD ENDED
OCTOBER 31, SEPTEMBER 30,
1998 1998
------------- -------------
Six Months 1.04% -5.62%
Since Inception* 25.80% 14.30%
The Fund's investment results represent total returns. The returns reflect
reinvestment of dividends and/or capital gains distributions in additional
shares.
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: 1/7/98 Class I & Class II.
6
ALLIANCE PREMIER GROWTH INSTITUTIONAL FUND
_______________________________________________________________________________
ALLIANCE PREMIER GROWTH INSTITUTIONAL FUND
GROWTH OF A $10,000 INVESTMENT
1/31/98* TO 10/31/98
$13,000
$12,000
$11,000
$10,000
$9,000
PREMIER GROWTH INSTITUTIONAL FUND CLASS I: $11,928
RUSSELL 1000 GROWTH STOCK INDEX: $11,481
S&P 500: $11,340
1/31/98 2/28/98 3/31/98 4/30/98 5/31/98 6/30/98
7/31/98 8/31/98 9/30/98 10/31/98
This chart illustrates the total value of an assumed $10,000 investment in
Alliance Premier Growth Institutional Fund Class I shares (from 1/31/98 to
10/31/98) as compared to the performance of appropriate broad-based indices.
The chart assumes the reinvestment of dividends and capital gains. Performance
for Class II shares will vary from the results shown above due to differences
in expenses charged to that class. Past performance is not indicative of future
results, and is not representative of future gain or loss in capital value or
dividend income.
The unmanaged Standard & Poor's 500 Stock Index includes 500 U.S. stocks and is
a common measure of the performance of the overall U.S. stock market.
The unmanaged Russell 1000 Growth Stock Index consists of 1000 of the largest
stocks representing approximately 87% of the U.S. equity market.
Premier Growth Institutional Fund
Russell 1000 Growth Stock Index
Standard &Poor's 500 Stock Index
* Month-end nearest to Fund's inception date of 1/7/98.
7
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE QUASAR INSTITUTIONAL FUND
_______________________________________________________________________________
Alliance Quasar Institutional Fund seeks growth of capital by pursuing
aggressive investment policies. Alliance Quasar Institutional Fund invests
primarily in a diversified portfolio of equity securities of any company and
industry and in any type of security which is believed to offer possibilities
for capital appreciation.
INVESTMENT RESULTS
_______________________________________________________________________________
TOTAL RETURNS
CLASS I SHARES
PERIOD ENDED PERIOD ENDED
OCTOBER 31, SEPTEMBER 30,
1998 1998
------------ -------------
Six Months -27.54% -29.07%
Since Inception* -25.80% -28.50%
CLASS II SHARES
PERIOD ENDED PERIOD ENDED
OCTOBER 31, SEPTEMBER 30,
1998 1998
------------ -------------
Six Months -27.74% -29.17%
Since Inception* -26.00% -28.60%
The Fund's investment results represent total returns. The returns reflect
reinvestment of dividends and/or capital gains distributions in additional
shares.
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: 3/17/98 Class I & Class II.
8
ALLIANCE QUASAR INSTITUTIONAL FUND
_______________________________________________________________________________
ALLIANCE QUASAR INSTITUTIONAL FUND
GROWTH OF A $10,000 INVESTMENT
3/31/98* TO 10/31/98
$11,000
$10,000
$9,000
$8,000
$7,000
$6,000
S&P 500: $10,062
RUSSELL 2000 INDEX: $7,924
QUASAR INSTITUTIONAL FUND CLASS I: $7,361
3/31/98 4/30/98 5/31/98 6/30/98 7/31/98 8/31/98
9/30/98 10/31/98
This chart illustrates the total value of an assumed $10,000 investment in
Alliance Quasar Institutional Fund Class I shares (from 3/31/98 to 10/31/98) as
compared to the performance of appropriate broad-based indices. The chart
assumes the reinvestment of dividends and capital gains. Performance for Class
II shares will vary from the results shown above due to differences in expenses
charged to that class. Past performance is not indicative of future results,
and is not representative of future gain or loss in capital value or dividend
income.
The unmanaged Standard & Poor's 500 Stock Index includes 500 U.S. stocks and is
a common measure of the performance of the overall U.S. stock market.
The unmanaged Russell 2000 Index measures small-cap stock performance.
Quasar Institutional Fund
Russell 2000 Index
Standard &Poor's 500 Stock Index
* Month-end nearest to Fund's inception date of 3/17/98.
9
ALLIANCE REAL ESTATE INVESTMENT
INVESTMENT OBJECTIVE AND POLICIES INSTITUTIONAL FUND
_______________________________________________________________________________
Alliance Real Estate Investment Institutional Fund seeks a total return on its
assets from long-term growth of capital and from income principally through
investing in a portfolio of equity securities of issuers that are primarily
engaged in or related to the real estate industry.
INVESTMENT RESULTS
_______________________________________________________________________________
TOTAL RETURNS
CLASS I SHARES
PERIOD ENDED PERIOD ENDED
OCTOBER 31, SEPTEMBER 30,
1998 1998
------------ -------------
Six Months -16.36 -17.65
Since Inception* -18.61 -16.52
CLASS II SHARES
PERIOD ENDED PERIOD ENDED
OCTOBER 31, SEPTEMBER 30,
1998 1998
------------ -------------
Six Months -16.59% -17.96%
Since Inception* -19.02% -16.94%
The Fund's investment results represent total returns. The returns reflect
reinvestment of dividends and/or capital gains distributions in additional
shares.
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: 12/9/97 Class I & Class II.
10
ALLIANCE REAL ESTATE INVESTMENT
INSTITUTIONAL FUND
_______________________________________________________________________________
ALLIANCE REAL ESTATE INVESTMENT INSTITUTIONAL FUND
GROWTH OF A $10,000 INVESTMENT
12/31/97* TO 10/31/98
$12,000
$11,000
$10,000
$9,000
$8,000
$7,000
S&P 500: $11,465
NAREIT EQUITY INDEX: $8,339
REAL ESTATE INVESTMENT INSTITUTIONAL FUND CLASS I: $8,019
12/31/97 1/31/98 2/28/98 3/31/98 4/30/98 5/31/98
6/30/98 7/31/98 8/31/98 9/30/98 10/31/98
This chart illustrates the total value of an assumed $10,000 investment in
Alliance Real Estate Investment Institutional Fund Class I shares (from
12/31/97 to 10/31/98) as compared to the performance of appropriate broad-based
indices. The chart assumes the reinvestment of dividends and capital gains.
Performance for Class II shares will vary from the results shown above due to
differences in expenses charged to that class. Past performance is not
indicative of future results, and is not representative of future gain or loss
in capital value or dividend income.
The unmanaged Standard & Poor's 500 Stock Index includes 500 U.S. stocks and is
a common measure of the performance of the overall U.S. stock market.
The unmanaged NAREITEquity Index is a market value weighted index, based upon
the last closing price of the month for tax-qualified REITs listed on NYSE,
AMEX and the NASDAQ.
Real Estate Investment Institutional Fund
NAREIT Equity Index
Standard &Poor's 500 Stock Index
* Month-end nearest to Fund's inception date of 12/9/97.
11
TEN LARGEST HOLDINGS
OCTOBER 31, 1998 ALLIANCE PREMIER GROWTH INSTITUTIONAL FUND
_______________________________________________________________________________
COMPANY VALUE PERCENT OF NET ASSETS
- -------------------------------------------------------------------------------
Nokia Corp. (ADR) $ 3,852,787 6.4%
Dell Computer Corp. 3,700,750 6.2
AirTouch Communications, Inc. 3,320,800 5.5
Pfizer, Inc. 2,918,900 4.9
Wal-Mart Stores, Inc. 2,891,100 4.8
Cisco Systems, Inc. 2,781,450 4.6
Home Depot, Inc. 2,640,450 4.4
Tyco International, Ltd. 2,446,531 4.1
EMC Corp. 1,712,375 2.9
Intel Corp. 1,591,997 2.7
$27,857,140 46.5%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED OCTOBER 31, 1998
_______________________________________________________________________________
SHARES*
PURCHASES BOUGHT HOLDINGS 10/31/98
- -------------------------------------------------------------------------------
AirTouch Communications, Inc. 32,300 59,300
Delta Air Lines, Inc. 10,000 10,000
EMC Corp. 26,600 26,600
Lucent Technologies, Inc. 18,100 19,800
Nokia Corp. (ADR) 18,700 41,400
Pfizer, Inc. 18,000 27,200
Schering-Plough Corp. 10,600 14,400
UAL Corp. 14,400 23,300
U.S. Bancorp 27,100 27,100
Wal-Mart Stores, Inc. 36,800 41,900
SALES SOLD HOLDINGS 10/31/98
- -------------------------------------------------------------------------------
Banc One Corp. 8,560 -0-
Compaq Computer Corp. 19,000 -0-
Ericsson (L.M.) Telephone Co. Cl.B (ADR) 11,300 -0-
Household International, Inc. 2,150 -0-
MCI Communications Corp. 5,200 -0-
Merck & Co., Inc. 7,650 -0-
MGIC Investment Corp. 6,250 -0-
Philip Morris Cos., Inc. 23,600 24,400
Schlumberger, Ltd. 8,850 -0-
Walt Disney Co. 9,650 -0-
* Adjusted for Stock Splits and a Spin-Off.
12
TEN LARGEST HOLDINGS
OCTOBER 31, 1998 ALLIANCE QUASAR INSTITUTIONAL FUND
_______________________________________________________________________________
COMPANY VALUE PERCENT OF NET ASSETS
- -------------------------------------------------------------------------------
Bethlehem Steel Corp. $ 695,700 3.4%
Budget Group, Inc. Cl.A 597,319 2.9
Alaska Air Group, Inc. 575,000 2.8
Chelsea GCA Realty, Inc. 560,313 2.7
Premier Parks, Inc. 548,031 2.7
Centocor, Inc. 498,400 2.4
GelTex Pharmaceuticals, Inc. 482,500 2.4
Mohawk Industries, Inc. 470,925 2.3
Tommy Hilfiger Corp. 464,375 2.3
America West Holdings Corp. 459,712 2.2
$5,352,275 26.1%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED OCTOBER 31, 1998
_______________________________________________________________________________
SHARES*
PURCHASES BOUGHT HOLDINGS 10/31/98
- -------------------------------------------------------------------------------
Alaska Air Group, Inc. 12,500 16,000
America West Holdings Corp. 22,900 29,900
Bethlehem Steel Corp. 50,700 77,300
Budget Group, Inc. Cl.A 24,600 33,300
Centocor, Inc. 11,200 11,200
Legg Mason, Inc. 15,300 15,300
Premier Parks, Inc. 21,700 24,700
Renaissance Worldwide, Inc. 17,200 17,200
Taubman Centers, Inc. 27,500 27,500
Tiffany & Co. 7,900 12,900
SALES SOLD HOLDINGS 10/31/98
- -------------------------------------------------------------------------------
Avis Rent A Car, Inc. 6,700 -0-
Fore Systems, Inc. 6,100 -0-
Level One Communications, Inc. 4,200 -0-
Mid Atlantic Medical Services, Inc. 9,800 -0-
National Surgery Centers, Inc. 7,300 -0-
Nautica Enterprises, Inc. 4,800 -0-
Neurex Corp. 12,100 -0-
Physio-Control International Corp. 5,300 -0-
Security Capital Group, Inc. Cl.B 6,200 -0-
Valero Energy Corp. 5,400 -0-
* Adjusted for Stock Splits.
13
TEN LARGEST HOLDINGS ALLIANCE REAL ESTATE INVESTMENT
OCTOBER 31, 1998 INSTITUTIONAL FUND
_______________________________________________________________________________
COMPANY VALUE PERCENT OF NET ASSETS
- -------------------------------------------------------------------------------
Equity Office Properties Trust $ 909,600 5.0%
Pan Pacific Retail Properties, Inc. 725,075 4.0
SL Green Realty Corp. 721,519 4.0
Essex Property Trust, Inc. 715,350 3.9
Crescent Real Estate Equities Co. 696,737 3.8
AvalonBay Communities, Inc. 690,688 3.8
Public Storage, Inc. 677,863 3.7
Arden Realty Group, Inc. 642,262 3.5
Glenborough Realty Trust, Inc. 640,981 3.5
Vornado Realty Trust 626,588 3.5
$7,046,663 38.7%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED OCTOBER 31, 1998
_______________________________________________________________________________
SHARES
PURCHASES BOUGHT HOLDINGS 10/31/98
- -------------------------------------------------------------------------------
Arden Realty Group, Inc. 8,200 29,700
Boston Properties, Inc. 9,400 18,100
Brookfield Properties Corp. 43,000 55,500
Burnham Pacific Properties, Inc. 31,900 31,900
Crescent Real Estate Equities Co. 9,200 27,800
Equity Office Properties Trust 9,000 37,900
Pan Pacific Retail Properties, Inc. 10,200 38,800
Patriot American Hospitality, Inc. 18,100 45,000
SL Green Realty Corp. 10,000 38,100
Vornado Realty Trust 18,600 18,600
SALES SOLD HOLDINGS 10/31/98
- -------------------------------------------------------------------------------
American General Hospitality Corp. 17,000 -0-
Avalon Properties, Inc. 12,800 -0-
Bay Apartment Communities, Inc. 7,300 -0-
Duke Realty Investments, Inc. 600 15,200
Excel Legacy Corp. 6,800 5,000
Golf Trust of America, Inc. 1,200 14,600
Highwoods Properties, Inc. 1,500 16,900
Meridian Industrial Trust, Inc 9,600 -0-
Security Capital Pacific Trust 22,900 -0-
Sunstone Hotel Investors, Inc. 17,000 9,600
14
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998 ALLIANCE PREMIER GROWTH INSTITUTIONAL FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-97.3%
TECHNOLOGY-31.2%
COMMUNICATION EQUIPMENT-11.9%
EMC Corp. (a) 26,600 $ 1,712,375
Lucent Technologies, Inc. 19,800 1,587,713
Nokia Corp. (ADR) (b) 41,400 3,852,787
------------
7,152,875
COMPUTER HARDWARE-7.1%
Dell Computer Corp. (a) 56,500 3,700,750
International Business Machines Corp. 3,700 549,219
------------
4,249,969
COMPUTER SOFTWARE-3.4%
HBO & Co. 33,300 874,125
Microsoft Corp. (a) 11,100 1,175,213
------------
2,049,338
NETWORKING SOFTWARE-6.1%
America Online, Inc. 6,900 876,731
Cisco Systems, Inc. (a) 44,150 2,781,450
------------
3,658,181
SEMI-CONDUCTOR COMPONENTS-2.7%
Intel Corp. 17,850 1,591,997
------------
18,702,360
CONSUMER SERVICES-28.2%
AIRLINES-7.4%
Continental Airlines, Inc. C1.B (a) 12,400 491,350
Delta Air Lines, Inc. 10,000 1,055,625
KLM Royal Dutch Air 17,300 522,244
Northwest Airlines Corp. (a) 31,700 831,134
UAL Corp. (a) 23,300 1,513,044
------------
4,413,397
BROADCASTING & CABLE-6.8%
AirTouch Communications, Inc. (a) 59,300 3,320,800
Tele-Communications, Inc. -
Liberty Media Group Cl.A (a) 20,100 765,056
------------
4,085,856
RETAIL - GENERAL MERCHANDISE-14.0%
Dayton Hudson Corp. 30,400 1,288,200
Home Depot, Inc. 60,700 2,640,450
Kohl's Corp. (a) 18,800 898,875
May Department Stores Co. 10,800 658,800
Wal-Mart Stores, Inc. 41,900 2,891,100
------------
8,377,425
------------
16,876,678
FINANCE-15.0%
BANKING - REGIONAL-3.9%
BankAmerica Corp. 15,118 868,340
Fifth Third Bancorp 7,300 483,625
U.S. Bancorp 27,100 989,150
------------
2,341,115
BROKERAGE & MONEY MANAGEMENT-0.9%
Morgan Stanley, Dean Witter and Co. 8,250 534,188
INSURANCE-1.7%
American International Group, Inc. 7,100 605,275
Progressive Corp. 2,800 412,300
------------
1,017,575
MORTGAGE BANKING-4.3%
Federal Home Loan Mortgage Corp. 21,800 1,253,500
Federal National Mortgage Assn. 5,300 375,306
Washington Mutual, Inc. 24,832 929,648
------------
2,558,454
MISCELLANEOUS-4.2%
Associates First Capital Corp. Cl.A 18,388 1,296,354
MBNA Corp. 54,425 1,241,570
------------
2,537,924
------------
8,989,256
15
PORTFOLIO OF INVESTMENTS
(CONTINUED) ALLIANCE PREMIER GROWTH INSTITUTIONAL FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
HEALTH CARE-11.8%
DRUGS-10.4%
Bristol-Myers Squibb Co. 9,200 $ 1,017,175
Pfizer, Inc. 27,200 2,918,900
Schering-Plough Corp. 14,400 1,481,400
Warner-Lambert Co. 10,400 815,100
------------
6,232,575
MEDICAL SERVICES-1.4%
IMS Health, Inc. 12,400 824,600
------------
7,057,175
MULTI INDUSTRY COMPANY-4.1%
Tyco International, Ltd. 39,500 2,446,531
CONSUMER STAPLES-3.6%
HOUSEHOLD PRODUCTS-0.9%
Colgate-Palmolive Co. 6,050 534,669
RETAIL-FOOD-0.6%
Kroger Co. (a) 7,100 394,050
TOBACCO-2.1%
Philip Morris Cos., Inc. 24,400 1,247,450
------------
2,176,169
CAPITAL GOODS-2.6%
ELECTRICAL EQUIPMENT-1.2%
General Electric Co. 8,500 743,750
MISCELLANEOUS-1.4%
United Technologies Corp. 8,700 828,675
------------
1,572,425
UTILITIES-0.8%
TELEPHONE UTILITY-0.8%
MCI WorldCom, Inc. (a) 8,600 475,150
Total Common Stocks (cost $53,088,449) 58,295,744
SHORT-TERM INVESTMENT-2.7%
COMMERCIAL PAPER-2.7%
General Electric Capital Corp.
5.70%, 11/02/98
(amortized cost $1,631,741) $1,632 1,631,741
TOTAL INVESTMENTS-100.0%
(cost $54,720,190) 59,927,485
Other assets less liabilities-0.0% (19,175)
NET ASSETS-100% $59,908,310
(a) Non-income producing security.
(b) Country of origin--Finland.
Glossary:
ADR - American Depositary Receipt
See notes to financial statements.
16
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998 ALLIANCE QUASAR INSTITUTIONAL FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-87.5%
CONSUMER PRODUCTS & SERVICES-36.2%
AIRLINES-6.7%
Alaska Air Group, Inc. (a) 16,000 $ 575,000
America West Holdings Corp. 29,900 459,712
Continental Airlines, Inc. C1.B (a) 5,700 225,863
Mesa Air Group, Inc. (a) 21,500 108,844
------------
1,369,419
APPAREL-2.3%
Tommy Hilfiger Corp. (a) 10,000 464,375
BROADCASTING & CABLE-1.3%
Sinclair Broadcast Group, Inc. Cl.A (a) 10,800 140,400
Young Broadcasting, Inc. Cl.A (a) 4,400 138,875
------------
279,275
BUSINESS SERVICES-4.8%
Carriage Services, Inc. C1.A (a) 6,900 161,288
Century Business Services, Inc. (a) 17,500 243,906
FirstService Corp. (a) 6,500 75,766
Provant, Inc. (a) 100 1,144
Renaissance Worldwide, Inc. (a) 17,200 162,325
TeleSpectrum Worldwide, Inc. (a) 32,600 340,262
------------
984,691
ENTERTAINMENT & LEISURE-5.8%
Bally Total Fitness Holding Corp. (a) 14,700 277,463
N2K, Inc. (a) 2,800 13,825
Premier Parks, Inc. (a) 24,700 548,031
Preview Travel, Inc. (a) 7,300 99,006
Sunterra Corp. (a) 27,200 258,400
------------
1,196,725
RESTAURANTS & LODGING-1.7%
Florida Panthers Holdings, Inc. (a) 12,700 123,825
MeriStar Hospitality Corp. 11,800 218,300
------------
342,125
RETAILING-12.8%
Brylane, Inc. (a) 5,600 $90,300
Circuit City Stores, Inc. - CarMax Group (a) 28,300 171,569
Furniture Brands International, Inc. (a) 10,200 219,300
Industrie Natuzzi SpA (ADR) (b) 13,800 250,987
Men's Wearhouse, Inc. (a) 9,300 225,525
Movado Group, Inc. 8,700 164,212
Pacific Sunwear of California, Inc. (a) 5,600 121,100
Sports Authority, Inc. (a) 19,600 149,450
Stage Stores, Inc. (a) 13,600 180,200
Tiffany & Co. 12,900 416,831
Trans World Entertainment Corp. (a) 7,900 162,938
United Rentals, Inc. (a) 11,400 306,375
Venator Group, Inc. (a) 18,900 159,469
------------
2,618,256
MISCELLANEOUS-0.8%
Central Garden & Pet Co. (a) 8,800 173,800
------------
7,428,666
BASIC INDUSTRIES-11.1%
BUILDING & RELATED-0.4%
Associated Materials, Inc. (a) 6,700 73,700
METAL HARDWARE-3.4%
Bethlehem Steel Corp. (a) 77,300 695,700
METALS & MINING-0.2%
Royal Oak Mines, Inc. (a) 82,400 51,500
TEXTILE PRODUCTS-2.3%
Mohawk Industries, Inc. (a) 15,600 470,925
TRANSPORTATION & SHIPPING-4.8%
AMERCO (a) 100 2,350
Carey International, Inc. (a) 10,800 193,050
Consolidated Freightways Corp. (a) 28,400 307,075
Knightsbridge Tankers, Ltd. 3,000 65,250
OMI Corp. (a) 66,200 248,250
Teekay Shipping Corp. 9,900 173,250
------------
989,225
------------
2,281,050
17
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE QUASAR INSTITUTIONAL FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
TECHNOLOGY-10.4%
COMMUNICATION EQUIPMENT-1.1%
Comverse Technology, Inc. (a) 4,600 $ 211,600
COMPUTER SOFTWARE & SERVICES-3.5%
DBT Online, Inc. (a) 9,700 196,425
Harbinger Corp. (a) 17,580 116,468
Information Management Resources, Inc. (a) 4,400 103,400
Insight Enterprises, Inc. (a) 3,650 105,850
Saville Systems Plc (ADR) (a)(c) 3,800 64,125
Transaction Systems Architects, Inc. C1.A (a) 3,800 137,156
------------
723,424
NETWORKING SOFTWARE-2.2%
Apex PC Solutions, Inc. (a) 12,500 326,562
Xylan Corp. (a) 8,025 128,400
------------
454,962
SEMI-CONDUCTOR EQUIPMENT-1.5%
Uniphase Corp. (a) 3,200 158,400
Vitesse Semiconductor Corp. (a) 4,700 151,575
------------
309,975
TELECOMMUNICATIONS-1.6%
GST Telecommunications, Inc. (a) 12,000 83,250
Millicom International Cellular, SA (a)(d) 7,400 246,975
------------
330,225
MISCELLANEOUS-0.5%
Engineering Animation, Inc. (a) 1,400 61,338
Excalibur Technologies Corp. (a) 8,200 47,150
------------
108,488
------------
2,138,674
HEALTH CARE-9.6%
BIOTECHNOLOGY-6.4%
Centocor, Inc. (a) 11,200 498,400
GelTex Pharmaceuticals, Inc. (a) 19,300 482,500
Gensia Sicor, Inc. (a) 11,500 43,125
MedImmune, Inc. (a) 4,100 275,725
------------
1,299,750
DRUGS, HOSPITAL SUPPLIES &
MEDICAL SERVICES-3.2%
Aradigm Corp. (a) 10,400 120,900
St. Jude Medical, Inc. (a) 6,400 180,800
Synetic, Inc. (a) 4,400 189,750
Veterinary Centers of America, Inc. (a) 9,200 163,300
------------
654,750
------------
1,954,500
FINANCIAL SERVICES-9.2%
BROKERAGE & MONEY MANAGEMENT-2.0%
Legg Mason, Inc. 15,300 406,406
INSURANCE-0.4%
Reinsurance Group of America, Inc. 2,000 95,000
REAL ESTATE-6.8%
Chelsea GCA Realty, Inc. 16,300 560,313
Glenborough Realty Trust, Inc. 11,500 246,531
Golf Trust of America, Inc. 7,700 205,975
Taubman Centers, Inc. 27,500 376,406
------------
1,389,225
------------
1,890,631
CONSUMER MANUFACTURING-8.3%
AUTO & RELATED-8.3%
Budget Group, Inc. Cl.A (a) 33,300 597,319
Dollar Thrifty Automotive Group, Inc. (a) 25,200 341,775
Group 1 Automotive, Inc. (a) 16,700 285,987
Miller Industries, Inc. (a) 13,600 71,400
Monaco Coach Corp. (a) 8,550 259,706
United Auto Group, Inc. (a) 10,800 148,500
------------
1,704,687
ENERGY-2.7%
OIL & GAS SERVICES-2.7%
Parker Drilling Co. (a) 24,800 122,450
Southern Union Co. 18,200 422,013
------------
544,463
Total Common Stocks (cost $21,392,880) 17,942,671
18
ALLIANCE QUASAR INSTITUTIONAL FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
SHORT-TERM INVESTMENT-17.5%
U.S. GOVERNMENT & AGENCY-17.5%
Student Loan Marketing Assn.
5.42%, 11/02/98
(amortized cost $3,599,458) $3,600 $ 3,599,458
TOTAL INVESTMENTS-105.0%
(cost $24,992,338) $21,542,129
Other assets less liabilities-(5.0%) (1,029,101)
NET ASSETS-100% $20,513,028
(a) Non-income producing security.
(b) Country of origin--Italy.
(c) Country of origin--Ireland.
(d) Country of origin--Luxembourg.
Glossary:
ADR - American Depositary Receipt
See notes to financial statements.
19
PORTFOLIO OF INVESTMENTS ALLIANCE REAL ESTATE INVESTMENT
OCTOBER 31, 1998 INSTITUTIONAL FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-97.3%
REAL ESTATE INVESTMENT TRUSTS-97.3%
APARTMENTS-8.5%
AvalonBay Communities, Inc. 21,500 $ 690,688
Essex Property Trust, Inc. 22,800 715,350
Irvine Apartment Communities, Inc. 5,400 141,750
------------
1,547,788
CORRECTIONAL FACILITIES-2.2%
Correctional Properties Trust 21,100 410,131
DIVERSIFIED-11.6%
Entertainment Properties Trust 27,200 452,200
Glenborough Realty Trust, Inc. 29,900 640,981
Golf Trust of America, Inc. 14,600 390,550
Vornado Realty Trust 18,600 626,588
------------
2,110,319
HOTELS & RESTAURANTS-10.6%
Innkeepers USA Trust 33,700 387,550
MeriStar Hospitality Corp. 25,755 476,468
Patriot American Hospitality, Inc. 45,000 399,375
Starwood Hotels & Resorts 20,200 571,912
Sunstone Hotel Investors, Inc. 9,600 87,000
------------
1,922,305
OFFICE-26.0%
Arden Realty, Inc. 29,700 642,262
Boston Properties, Inc. 18,100 515,850
Brookfield Properties Corp. (a) 55,500 593,487
Crescent Real Estate Equities Co. 27,800 696,737
Equity Office Properties Trust 37,900 909,600
Great Lakes REIT, Inc. 14,400 236,700
Mack-Cali Realty Corp. 14,000 414,750
SL Green Realty Corp. 38,100 721,519
------------
4,730,905
OFFICE - INDUSTRIAL MIX-13.5%
Brandywine Realty Trust 28,500 509,437
Duke Realty Investments, Inc. 15,200 362,900
Highwoods Properties, Inc. 16,900 472,144
Reckson Associates Realty
Corp. 24,400 553,575
Spieker Properties, Inc. 16,100 555,450
------------
2,453,506
REAL ESTATE DEVELOPMENT & MANAGEMENT-.2%
Excel Legacy Corp. (b) 5,000 13,750
Reckson Services Industries, Inc. (b) 10,416 20,181
------------
33,931
REGIONAL MALLS-6.1%
Macerich Co. 21,400 589,837
Mills Corp. 24,200 524,838
------------
1,114,675
SHOPPING CENTERS-9.0%
Burnham Pacific Properties, Inc. 31,900 418,687
New Plan Excel Realty Trust, Inc. 18,260 415,415
Pacific Retail Trust Co. (b)(c) 7,500 82,800
Pan Pacific Retail Properties, Inc. 38,800 725,075
------------
1,641,977
STORAGE-3.7%
Public Storage, Inc. 25,400 677,863
WAREHOUSE & INDUSTRIAL-5.9%
Cabot Industrial Trust 23,400 468,000
ProLogis Trust 27,600 602,025
------------
1,070,025
Total Common Stocks (cost $21,740,670) 17,713,425
SHORT-TERM INVESTMENT-4.3%
TIME DEPOSIT-4.3%
State Street Cayman Islands
4.75%, 11/02/98
(cost $778,000) $778 778,000
TOTAL INVESTMENTS-101.6%
(cost $22,518,670) 18,491,425
Other assets less liabilities-(1.6%) (298,082)
NET ASSETS-100% $18,193,343
(a) Country of origin--Canada.
(b) Non-income producing security.
(c) Illiquid security, valued at fair market value (see Note A).
See notes to financial statements.
20
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 1998 ALLIANCE INSTITUTIONAL FUNDS
_______________________________________________________________________________
<TABLE>
<CAPTION>
REAL ESTATE
PREMIER GROWTH QUASAR INVESTMENT
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
FUND FUND FUND
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at value
(cost $54,720,190, $24,992,338 and
$22,518,670, respectively) $59,927,485 $21,542,129 $ 18,491,425
Cash 500 129,765 2,074
Receivable for capital stock sold 549,317 6,139,085 59,455
Receivable for investment securities sold 129,313 80,883 58,482
Deferred organization expenses 61,218 63,938 60,098
Interest and dividends receivable 19,671 3,059 25,042
Receivable due from adviser 27,685 17,741 2,822
Total assets 60,715,189 27,976,600 18,699,398
LIABILITIES
Payable for investment securities purchased 587,186 1,453,412 193,240
Payable for capital stock redeemed 53,279 5,883,750 196,807
Distribution fee payable 649 467 -0-
Accrued expenses 165,765 125,943 116,008
Total liabilities 806,879 7,463,572 506,055
NET ASSETS $59,908,310 $20,513,028 $ 18,193,343
COMPOSITION OF NET ASSETS
Capital stock, at par $ 4,748 $ 2,766 $ 2,340
Additional paid-in capital 55,567,622 25,245,229 22,501,152
Undistributed net investment income 16,136 2,356 40,785
Accumulated net realized loss on
investments and foreign currency
transactions (887,491) (1,287,114) (323,689)
Net unrealized appreciation
(depreciation) of investments 5,207,295 (3,450,209) (4,027,245)
$59,908,310 $20,513,028 $18,193,343
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS I SHARES
Net asset value, redemption and offering
price per share ($56,893,921 / 4,508,047,
$20,512,745 / 2,765,729 and $18,193,023 /
2,339,663 shares of capital stock issued
and outstanding, respectively) $12.62 $ 7.42 $ 7.78
CLASS II SHARES
Net asset value, redemption and offering
price per share ($3,014,389 / 239,539,
$283 / 38.2 and $320 / 41.2 shares of
capital stock issued and outstanding,
respectively) $12.58 $ 7.40 $ 7.77
</TABLE>
See notes to financial statements.
21
STATEMENTS OF OPERATIONS
PERIOD ENDED OCTOBER 31, 1998 ALLIANCE INSTITUTIONAL FUNDS
_______________________________________________________________________________
<TABLE>
<CAPTION>
REAL ESTATE
PREMIER GROWTH QUASAR INVESTMENT
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
FUND(A) FUND(B) FUND(C)
-------------- ------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends (Net of foreign taxes withheld
of $5,953, $1,197 and $250, respectively) $ 201,882 $ 67,134 $ 799,152
Interest 66,174 47,911 34,834
Total income 268,056 115,045 833,986
EXPENSES
Advisory fee 274,226 93,387 123,142
Distribution fee - Class II 3,838 468 1
Administrative 102,500 71,750 112,750
Audit and legal 71,176 63,757 61,936
Custodian 66,455 47,624 51,166
Printing 41,874 21,246 21,809
Registration 29,926 20,539 18,171
Transfer agency 15,683 5,408 7,508
Directors' fees 13,000 5,000 13,000
Amortization of organization expenses 11,880 9,160 13,000
Miscellaneous 2,640 749 976
Total expenses 633,198 339,088 423,459
Less: expenses waived and reimbursed
by adviser (See Note B) (381,278) (226,399) (286,633)
Net expenses 251,920 112,689 136,826
Net investment income 16,136 2,356 697,160
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Net realized loss on investment transactions (887,491) (1,287,114) (323,689)
Net realized loss on foreign currency
transactions -0- -0- (1,254)
Net unrealized appreciation (depreciation)
of investments 5,207,295 (3,450,209) (4,027,245)
Net gain (loss) on investments and foreign
currency transactions 4,319,804 (4,737,323) (4,352,188)
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $4,335,940 $(4,734,967) $(3,655,028)
</TABLE>
(a) Commencement of operations, January 7, 1998.
(b) Commencement of operations, March 17, 1998.
(c) Commencement of operations, December 9, 1997.
22
STATEMENT OF CHANGES IN NET ASSETS
PERIOD ENDED OCTOBER 31, 1998 ALLIANCE INSTITUTIONAL FUNDS
_______________________________________________________________________________
<TABLE>
<CAPTION>
REAL ESTATE
PREMIER GROWTH QUASAR INVESTMENT
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
FUND(A) FUND(B) FUND(C)
-------------- ------------- -------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 16,136 $ 2,356 $ 697,160
Net realized loss on investments and
foreign currency transactions (887,491) (1,287,114) (324,943)
Net unrealized appreciation (depreciation)
of investments 5,207,295 (3,450,209) (4,027,245)
Net increase (decrease) in net assets
from operations 4,335,940 (4,734,967) (3,655,028)
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class I -0- -0- (655,108)
Class II -0- -0- (13)
CAPITAL STOCK TRANSACTIONS
Net increase 55,539,040 25,214,665 22,470,152
Total increase 59,874,980 20,479,698 18,160,003
NET ASSETS
Beginning of period 33,330 33,330 33,340
End of period (including undistributed net
investment income of $16,136, $2,356
and $114,408, respectively) $59,908,310 $20,513,028 $18,193,343
</TABLE>
(a) Commencement of operations, January 7, 1998.
(b) Commencement of operations, March 17, 1998.
(c) Commencement of operations, December 9, 1997.
23
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 ALLIANCE INSTITUTIONAL FUNDS
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Institutional Funds, Inc. (the "Company") was organized as a Maryland
corporation on October 3, 1997 and is registered under the Investment Company
Act of 1940 as an open-end series investment company. The Company is comprised
of three funds, Alliance Premier Growth Institutional Fund, Alliance Quasar
Institutional Fund and Alliance Real Estate Investment Institutional Fund (the
"Funds"). Each Fund has different investment objectives and policies. Prior to
the commencement of operations on January 7, 1998, March 17, 1998 and December
9, 1997, respectively, the Funds had no operations other than the sale to
Alliance Capital Management L.P. (the "Adviser") of 3,300 shares of Class I
common stock of each Fund for $33,000, and 33 shares of Class II common stock
of the Alliance Premier Growth Institutional Fund and the Alliance Quasar
Institutional Fund for $330 and 34 shares of Class II common stock of the
Alliance Real Estate Investment Institutional Fund for $340 in each case on
November 12, 1997. Each Fund offers Class I and Class II shares. Sales are made
without a sales charge, at each Fund's net asset value per share. Each class 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 Funds.
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 sale price or if no sale occurred, at the
mean of the closing bid and asked price 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. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized foreign currency gains and losses represent foreign exchange gains
and losses from sales and maturities of securities, closed forward exchange
currency contracts, holding of foreign currencies, options on foreign
currencies, exchange gains and losses realized between the trade and settlement
dates on security transactions, and the difference between the amounts of
interest and dividends recorded on the Fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net currency gains and losses
from valuing foreign currency denominated assets and liabilities at period end
exchange rates are reflected as a component of net unrealized appreciation
(depreciation) of investments and foreign currency denominated assets and
liabilities.
3. ORGANIZATION EXPENSES
Organization expenses of approximately $73,099 for the Real Estate Investment
Institutional Fund, $73,098 for the Premier Growth Institutional Fund and
$73,098 for the Quasar Institutional Fund have been deferred and are being
amortized on a straight-line basis through December 2002, January and March
2003, respectively.
24
ALLIANCE INSTITUTIONAL FUNDS
_______________________________________________________________________________
4. TAXES
It is each 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.
5. 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 trade date securities
are purchased or sold. The Fund accretes discounts and amortizes premiums as
adjustments to interest income. Investment gains and losses are determined on
the identified cost basis.
6. 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 Class II
shares bear higher transfer agent fees. Expenses of the Trust are charged to
each Fund in proportion to net assets.
7. 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 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 Funds pay Alliance
Capital Management L.P. (the "Adviser"), an advisory fee at an annual rate of
.90% of the Real Estate Investment Institutional Fund's average daily net
assets and 1% of the Premier Growth Institutional Fund and Quasar Institutional
Fund's average daily net assets. Such fees are accrued daily and paid monthly.
The Adviser has agreed to voluntarily waive its fees and bear certain expenses
so that total expenses do not exceed on an annual basis .90% and 1.30% of
average daily net assets for Class I and Class II of the Premier Growth
Institutional Fund; 1.20% and 1.60% of average daily net assets for Class I and
Class IIof the Quasar Institutional Fund and 1.00% and 1.40% of average daily
net assets for Class Iand Class II for the Real Estate Investment Institutional
Fund. Effective November 1, 1998, the voluntary fee was increased so that total
expenses do not exceed on an annual basis 1.35% of average daily net assets for
Class II of the Quasar Institutional Fund. For the period ended October 31,
1998 such reimbursement amounted to: Premier Growth Institutional Fund
$278,778; Quasar Institutional Fund $154,649 and Real Estate Investment
Institutional Fund $173,883.
Pursuant to the advisory agreement, the Adviser provides to each Fund certain
legal and accounting services. For the period ended October 31, 1998, the
Adviser agreed to waive its fees for such services. Such waiver amounted to:
Premier Growth Institutional Fund $102,500; Quasar Institutional Fund $71,750
and Real Estate Investment Institutional Fund $112,750.
The Funds compensate 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 Funds. Such compensation
amounted to $14,991, $4,825 and $6,841, respectively for the Premier Growth
Institutional Fund, the Quasar Institutional Fund and the Real Estate
Investment Institutional Fund for the period ended October 31, 1998.
Brokerage commissions paid on investment transactions for the period ended
October 31, 1998 amounted to $85,675 for the Premier Growth Institutional Fund;
$58,337 for the Quasar Institutional Fund and $51,639 for the Real Estate
Investment Institutional Fund, of which $660 for the Premier Growth
Institutional Fund was paid to the Pershing Division of Donaldson, Lufkin &
Jenrette Securities Corp., an affiliate of the Adviser and $115 for the Quasar
Institutional Fund was paid to Donaldson, Lufkin & Jenrette Securities Corp.,
directly.
25
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE INSTITUTIONAL FUNDS
_______________________________________________________________________________
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Funds have adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Funds pay a distribution fee to the Distributor at an annual
rate of up to .30% of average daily net assets attributable to Class II shares.
There is no distribution fee on Class I 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. 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 II 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)
for the period ended October 31, 1998 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------------------------------- -----------------------------------
STOCKS AND U.S. GOVERNMENT STOCKS AND U.S. GOVERNMENT
FUND DEBT OBLIGATIONS AND AGENCIES DEBT OBLIGATIONS AND AGENCIES
- ------------------------------------ ---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Premier Growth Institutional $83,703,108 $1,676,700 $29,727,168 $347,108
Quasar Institutional 31,168,054 -0- 8,488,059 -0-
Real Estate Investment Institutional 23,790,192 -0- 1,649,731 -0-
</TABLE>
At October 31, 1998, the cost of investments for federal income tax purposes
and the tax basis gross unrealized appreciation, depreciation and net
unrealized appreciation (depreciation), excluding foreign currency
transactions, were as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED NET UNREALIZED
------------------------------- APPRECIATION
FUND COST APPRECIATION DEPRECIATION (DEPRECIATION)
- ------------------------------------ --------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Premier Growth Institutional $55,008,826 $6,826,419 $(1,907,760) $4,918,659
Quasar Institutional 25,284,080 550,698 (4,292,649) (3,741,951)
Real Estate Investment Institutional 22,634,636 9,548 (4,152,759) (4,143,211)
</TABLE>
For Federal income tax purposes at October 31, 1998, the Fund had capital
loss carry forwards for the Portfolios as follows: $598,855 expiring in 2006
for the Premier Growth Institutional Fund $995,373 expiring 2006 for the Quasar
Institutional Fund, and $280,232 expiring in 2006 for the Real Estate
Investment Institutional Fund.
26
ALLIANCE INSTITUTIONAL FUNDS
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 18,000,000,000 shares of $.001 par value capital stock authorized,
6,000,000,000 shares each for Premier Growth Institutional Fund, Quasar
Institutional Fund and Real Estate Investment Institutional Fund. Each Fund
consists of two classes designated Class I and Class II, each with
3,000,000,000 authorized shares. Transactions in shares of capital stock were
as follows:
PREMIER GROWTH INSTITUTIONAL FUND
--------------------------------------
SHARES AMOUNT
------------------ ------------------
JANUARY 7, 1998(A) JANUARY 7, 1998(A)
TO TO
OCTOBER 31, 1998 OCTOBER 31, 1998
------------------ ------------------
CLASS I
Shares sold 4,846,318 $56,837,599
Shares redeemed (341,571) (4,198,789)
Net increase 4,504,747 $52,638,810
CLASS II
Shares sold 307,955 $3,782,004
Shares redeemed (68,449) (881,774)
Net increase 239,506 $2,900,230
QUASAR INSTITUTIONAL FUND
-------------------------------------
SHARES AMOUNT
----------------- -----------------
MARCH 17, 1998(A) MARCH 17, 1998(A)
TO TO
OCTOBER 31, 1998 OCTOBER 31, 1998
----------------- -----------------
CLASS I
Shares sold 3,009,763 $27,395,135
Shares redeemed (247,334) (1,985,986)
Net increase 2,762,429 $25,409,149
CLASS II
Shares sold 785,381 $ 5,617,297
Shares redeemed (785,376) (5,811,781)
Net increase (decrease) 5 $ (194,484)
(a) Commencement of operations.
27
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE INSTITUTIONAL FUNDS
_______________________________________________________________________________
REAL ESTATE INVESTMENT
INSTITUTIONAL FUND
---------------------------------
SHARES AMOUNT
--------------- ---------------
DEC. 9, 1997(A) DEC. 9, 1997(A)
TO TO
OCT. 31, 1998 OCT. 31, 1998
--------------- ---------------
CLASS I
Shares sold 2,486,932 $23,779,985
Shares issued in reinvestment of dividends 78,721 655,108
Shares redeemed (229,290) (1,965,003)
Net increase 2,336,363 $22,470,090
CLASS II
Shares sold 6 $ 50
Shares issued in reinvestment of dividends 1 12
Net increase 7 $ 62
(a) Commencement of operations.
28
FINANCIAL HIGHLIGHTS ALLIANCE INSTITUTIONAL FUNDS
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
REAL ESTATE
PREMIER GROWTH QUASAR INVESTMENT
INSTITUTIONAL FUND INSTITUTIONAL FUND INSTITUTIONAL FUND
CLASS I CLASS I CLASS I
JANUARY 7, 1998(A) MARCH 17, 1998(A) DECEMBER 9, 1997(A)
TO TO TO
OCTOBER 31, 1998 OCTOBER 31, 1998 OCTOBER 31, 1998
------------------ ------------------ -------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.00 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .01 -0- .43
Net realized and unrealized gain (loss)
on investment transactions 2.61 (2.58) (2.26)
Net increase (decrease) in net asset
value from operations 2.62 (2.58) (1.83)
LESS: DIVIDENDS
Dividends from net investment income -0- -0- (.39)
Net asset value, end of period $12.62 $7.42 $7.78
TOTAL RETURN
Total investment return based on net
asset value (c) 26.20% (25.80)% (18.61)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $56,894 $20,513 $18,193
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements (d) .90% 1.20% 1.00%
Expenses, before waivers/
reimbursements (d) 2.29% 3.82% 3.09%
Net investment income (d) .08% .03% 5.62%
Portfolio turnover rate 86% 61% 11%
</TABLE>
See footnote summary on page 30.
29
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE INSTITUTIONAL FUNDS
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
REAL ESTATE
PREMIER GROWTH QUASAR INVESTMENT
INSTITUTIONAL FUND INSTITUTIONAL FUND INSTITUTIONAL FUND
CLASS II CLASS II CLASS II
JANUARY 7, 1998(A) MARCH 17, 1998(A) DECEMBER 9, 1997(A)
TO TO TO
OCTOBER 31, 1998 OCTOBER 31, 1998 OCTOBER 31, 1998
------------------ ------------------ -------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.00 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (b) (.03) (5.89) .41
Net realized and unrealized gain (loss)
on investment transactions 2.61 3.29 (2.28)
Net increase (decrease) in net asset
value from operations 2.58 (2.60) (1.87)
LESS: DIVIDENDS
Dividends from net investment income -0- -0- (.36)
Net asset value, end of period $12.58 $7.40 $7.77
TOTAL RETURN
Total investment return based on net
asset value (c) 25.80% (26.00)% (19.02)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $3,014 (e) $283$320
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements (d) 1.30% 1.60% 1.40%
Expenses, before waivers/
reimbursements (d) 2.65% 4.62% 3.59%
Net investment income (loss) (d) (.38)% (.14)% 5.04%
Portfolio turnover rate 86% 61% 11%
</TABLE>
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total investment return calculated
for a period of less than one year is not annualized.
(d) Annualized.
(e) 000's omitted.
30
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE INSTITUTIONAL FUNDS
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS ALLIANCE INSTITUTIONAL FUNDS
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the Alliance Institutional Funds
(comprising, respectively, the Alliance Premier Growth Institutional Fund,
Alliance Quasar Institutional Fund and Alliance Real Estate Investment
Institutional Fund) as of October 31, 1998, and the related statements of
operations, changes in net assets and financial highlights for the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1998, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective funds constituting the Alliance Institutional Funds as of
October 31, 1998, the results of their operations, changes in their net assets,
and the financial highlights for the periods indicated therein, in conformity
with generally accepted accounting principles.
New York, New York
December 9, 1998
31
ALLIANCE INSTITUTIONAL FUNDS
_______________________________________________________________________________
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)
DR. JAMES M. HESTER (1)
CLIFFORD L. MICHEL (1)
DONALD J. ROBINSON (1)
OFFICERS
ALFRED HARRISON, EXECUTIVE VICE PRESIDENT
ALDEN M. STEWART, EXECUTIVE VICE PRESIDENT
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
RANDALL E. HAASE, SENIOR VICE PRESIDENT
DANIEL G. PINE, SENIOR VICE PRESIDENT
THOMAS BARDONG, VICE PRESIDENT
DAVID A. KRUTH, 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 02116
PRINCIPAL UNDERWRITER
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
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY 10019
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-free 1-(800) 221-5672
(1) Member of the Audit Committee.
32
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 U.S. Government Fund
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
Select Investors Series - Premier Portfolio
GROWTH & INCOME
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors 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
INSTITUTIONAL
Premier Growth
Quasar
Real Estate Investment
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
33
ALLIANCE INSTITUTIONAL FUNDS
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.
AIFAR
