ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
ALLIANCE CAPITAL
ANNUAL REPORT
OCTOBER 31, 1999
TEN LARGEST HOLDINGS
OCTOBER 31, 1999 ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
_______________________________________________________________________________
PERCENT OF
COMPANY VALUE NET ASSETS
- -------------------------------------------------------------------------------
Cisco Systems, Inc. $ 23,069,500 4.6%
Intel Corp. 22,147,125 4.4
Solectron Corp. 21,920,325 4.4
Citigroup, Inc. 21,448,276 4.3
Bristol-Myers Squibb Co. 18,511,812 3.7
Microsoft Corp. 18,271,838 3.7
AT&T Corp.-Liberty Media Group 18,010,108 3.6
Dell Computer Corp. 17,671,050 3.5
Tyco International, Ltd. 17,253,000 3.5
MCI WorldCom, Inc. 15,574,969 3.1
$193,878,003 38.8%
MAJOR PORTFOLIO CHANGES
MAY 3, 1999 (A) TO OCTOBER 31, 1999
_______________________________________________________________________________
SHARES*
- -------------------------------------------------------------------------------
PURCHASES BOUGHT HOLDINGS 10/31/99
- -------------------------------------------------------------------------------
Allied-Signal, Inc. 183,600 183,600
Bristol-Myers Squibb Co. 241,000 241,000
Devon Energy Corp. 300,800 300,800
IMS Health, Inc. 316,400 316,400
Intel Corp. 286,000 286,000
International Business Machines Corp. 110,900 110,900
Kroger Co. 439,000 439,000
Microsoft Corp. 197,400 197,400
Schering-Plough Corp. 210,000 210,000
Sealed Air Corp. 189,100 189,100
* Adjusted for stock splits and spin-offs.
(a) Commencement of operations.
1
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999 ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-99.8%
TECHNOLOGY-31.1%
COMMUNICATION EQUIPMENT-1.4%
Motorola, Inc. 71,700 $6,986,269
COMPUTER HARDWARE-5.7%
Dell Computer Corp. (a) 440,400 17,671,050
International Business
Machines Corp. 110,900 10,909,787
------------
28,580,837
COMPUTER SERVICES-1.7%
Computer Sciences Corp. (a) 121,500 8,345,531
COMPUTER SOFTWARE-3.7%
Microsoft Corp. (a) 197,400 18,271,838
INTERNET SOFTWARE-1.0%
America Online, Inc. 38,500 4,992,969
NETWORKING SOFTWARE-4.6%
Cisco Systems, Inc. (a) 311,750 23,069,500
SEMI-CONDUCTORS & COMPONENTS-5.8%
Altera Corp. (a) 138,400 6,729,700
Intel Corp. 286,000 22,147,125
------------
28,876,825
MISCELLANEOUS-7.2%
Sanmina Corp. (a) 158,800 14,301,925
Solectron Corp. (a) 291,300 21,920,325
------------
36,222,250
------------
155,346,019
CONSUMER SERVICES-20.3%
BROADCASTING & CABLE-8.1%
AMFM, Inc. (a) 125,000 8,750,000
AT&T Corp.-Liberty Media Group (a) 453,798 18,010,108
Comcast Corp. Cl.A 186,400 7,852,100
MediaOne Group, Inc. (a) 79,000 5,613,938
------------
40,226,146
ENTERTAINMENT & LEISURE-5.3%
Carnival Corp. 120,000 5,340,000
Harley-Davidson, Inc. 224,600 13,321,587
Time Warner, Inc. 114,000 7,944,375
------------
26,605,962
PRINTING & PUBLISHING-0.6%
IDG Books Worldwide, Inc. Cl.A (a) 179,800 3,213,925
RETAIL - GENERAL MERCHANDISE-6.3%
Home Depot, Inc. 72,300 5,458,650
Kohl's Corp. (a) 188,000 14,064,750
Tiffany & Co. 128,200 7,627,900
Wal-Mart Stores, Inc. 79,020 4,479,446
------------
31,630,746
------------
101,676,779
FINANCE-13.4%
BANKING - MONEY CENTER-5.7%
Chase Manhattan Corp. 79,000 6,902,625
Citigroup, Inc. 396,273 21,448,276
------------
28,350,901
BANKING - REGIONAL-0.2%
BankAmerica Corp. 18,147 1,168,213
BROKERAGE & MONEY MANAGEMENT-0.5%
Merrill Lynch & Co., Inc. 33,000 2,590,500
INSURANCE-3.8%
AFLAC, Inc. 149,000 7,617,625
American International Group, Inc. 109,281 11,249,113
------------
18,866,738
2
ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
MISCELLANEOUS-3.2%
Associates First Capital Corp. Cl.A 238,500 $8,705,250
MBNA Corp. 260,400 7,193,550
------------
15,898,800
------------
66,875,152
HEALTH CARE-12.0%
DRUGS-5.8%
Bristol-Myers Squibb Co. 241,000 18,511,812
Schering-Plough Corp. 210,000 10,395,000
------------
28,906,812
MEDICAL PRODUCTS-4.2%
Guidant Corp. 128,000 6,320,000
Medtronic, Inc. 246,888 8,548,497
Stryker Corp. 99,000 6,113,250
------------
20,981,747
MEDICAL SERVICES-2.0%
Cardinal Health, Inc. 21,000 905,625
IMS Health, Inc. 316,400 9,175,600
------------
10,081,225
------------
59,969,784
UTILITIES-6.2%
TELEPHONE UTILITY-6.2%
Global TeleSystems Group, Inc. (a) 220,000 5,266,250
MCI WorldCom, Inc. (a) 181,500 15,574,969
Qwest Communications International, Inc. (a) 132,000 4,752,000
Sprint Corp. 70,000 5,201,875
------------
30,795,094
ENERGY-5.8%
DOMESTIC PRODUCERS-3.7%
Apache Corp. 180,000 7,020,000
Devon Energy Corp. 300,800 11,693,600
------------
18,713,600
OIL SERVICE-0.8%
BJ Services Co. (a) 115,000 3,945,937
MISCELLANEOUS-1.3%
AES Corp. (a) 110,400 6,230,700
------------
28,890,237
MULTI-INDUSTRY COMPANIES-3.4%
Tyco International, Ltd. 432,000 17,253,000
CONSUMER STAPLES-2.4%
COSMETICS-0.6%
The Estee Lauder Co., Inc. 60,000 2,797,500
RETAIL - FOOD & DRUG-1.8%
Kroger Co. (a) 439,000 9,136,688
------------
11,934,188
BASIC INDUSTRY-2.1%
CONTAINERS-2.1%
Sealed Air Corp. (a) 189,100 10,471,413
CAPITAL GOODS-2.1%
MISCELLANEOUS-2.1%
Allied-Signal, Inc. 183,600 10,453,725
CONSUMER MANUFACTURING-1.0%
BUILDING & RELATED-1.0%
Masco Corp. 166,000 5,063,000
TOTAL INVESTMENTS-99.8%
(cost $342,114,484) 498,728,391
Other assets less liabilities-0.2% 1,117,124
NET ASSETS-100% $499,845,515
(a) Non-income producing security
3
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999 ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value
(cost $342,114,484) $498,728,391
Receivable for investment securities sold 2,392,296
Receivable for capital stock sold 740,891
Dividends receivable 193,714
Other assets 31,021
Total assets 502,086,313
LIABILITIES
Due to custodian 405,171
Payable for investment securities purchased 690,831
Payable for capital stock redeemed 605,273
Advisory fee payable 236,112
Accrued expenses 303,411
Total liabilities 2,240,798
NET ASSETS $499,845,515
COMPOSITION OF NET ASSETS
Capital stock, at par $46,316
Additional paid-in capital 339,480,671
Accumulated net realized gain on investments 3,704,621
Net unrealized appreciation of investments 156,613,907
$499,845,515
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS I SHARES
Net asset value, redemption and offering price per share
($499,845,515 / 46,316,241 shares of capital stock
issued and outstanding) $10.79
See notes to financial statements.
4
STATEMENT OF OPERATIONS
MAY 3, 1999 (A) TO OCTOBER 31, 1999
ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends $ 850,937
Interest 115,811 $ 966,748
EXPENSES
Advisory fee 1,412,169
Registration 127,100
Audit and legal 81,267
Custodian 70,744
Administrative 64,500
Printing 24,998
Transfer agency 11,486
Directors' fees 5,000
Miscellaneous 40,674
Total expenses 1,837,938
Less: expenses waived by adviser See Note B) (64,500)
Net expenses 1,773,438
Net investment loss (806,690)
REALIZED AND UNREALIZED GAIN ON
INVESTMENT TRANSACTIONS
Net realized gain on investment
transactions 3,704,621
Net unrealized appreciation of
investments 156,613,907
Net gain on investment
transactions 160,318,528
NET INCREASE IN NET ASSETS FROM
OPERATIONS $159,511,838
(a) Commencement of operations.
See notes to financial statements.
5
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
_______________________________________________________________________________
MAY 3, 1999 (A) TO
OCTOBER 31,
1999
------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $(806,690)
Net realized gain on investment transactions 3,704,621
Net unrealized appreciation of investments 156,613,907
Net increase in net assets from operations 159,511,838
CAPITAL STOCK TRANSACTIONS
Net increase 340,333,677
Total increase 499,845,515
NET ASSETS
Beginning of period -0-
End of period $499,845,515
(a) Commencement of operations.
See notes to financial statements.
6
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Special Equity Institutional Fund, Inc. (the "Fund"), is one of the
series of the Alliance Institutional Funds, Inc. (the "Company"), which was
organized as a Maryland corporation on October 3, 1997 and is registered under
the Investment Company Act of 1940 as an open-ended series investment company.
The Company is comprised of three other funds, Alliance Premier Growth
Institutional Fund, Alliance Quasar Institutional Fund and Alliance Real Estate
Investment Institutional Fund. Each fund has different investment objectives
and policies. The Fund commenced operations on May 3, 1999 offering Class I and
Class II shares. As of October 31, 1999 there were no Class II shares
outstanding. Sales are made without a sales charge, at the Fund's net asset
value per share. Each class of shares has 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 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. 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.
4. 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.
7
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
_______________________________________________________________________________
Investment gains and losses are determined on the identified cost basis.
5. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the net assets of such class, except that Class II
shares bear higher transfer agent fees. Expenses of the Company are charged to
the Fund in proportion to net assets.
6. 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. During the current fiscal year, permanent
differences, primarily due to net investment loss, resulted in a net decrease
in accumulated net investment loss and a corresponding decrease in additional
paid-in capital. This reclassification had no effect on net assets.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser") an advisory fee at an annualized rate
of 1% of the first $50 million, .75 of 1% of the excess over $50 million up to
$100 million and .50 of 1% of the excess over $100 million of the average daily
value of the Fund's net assets. The fee is accrued daily and paid monthly.
Pursuant to the advisory agreement, the Adviser provides to the Fund certain
legal and accounting services. For the period ended October 31, 1999, the
Adviser agreed to waive its fees for such services. Such waiver amounted to
$64,500.
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 $9,000 for the period ended October 31, 1999.
Brokerage commissions paid on investment transactions for the period ended
October 31, 1999, amounted to $297,248, none of which was paid to brokers
utilizing the services of the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corp. ("DLJ"), an affiliate of the Adviser, nor to DLJ directly.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays distribution and servicing fees to the Distributor at
an annual rate of up to .30% of average daily net assets attributable to Class
II shares. There are no distribution and servicing fees 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
and U.S. government securities) aggregated $485,285,495 and $146,875,456,
respectively, for the period ended October 31, 1999. There were no purchases
and sales of U.S. government and
8
ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
_______________________________________________________________________________
government agency obligations for the period ended October 31, 1999.
At October 31, 1999, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes.
Accordingly, gross unrealized appreciation of investments was $161,307,660 and
gross unrealized depreciation of investments was $4,693,753 resulting in net
unrealized appreciation of $156,613,907.
NOTE E: CAPITAL STOCK
There are 6,000,000,000 shares of $.001 par value capital stock authorized for
the Fund. The Fund consists of two classes designated Class I and Class II,
each with 3,000,000,000 authorized shares. Transactions in capital stock were
as follows:
SHARES AMOUNT
----------------------------------
MAY 3, 1999(A) MAY 3, 1999(A)
TO TO
OCT. 31, 1999 OCT. 31, 1999
------------- -------------
CLASS I
Shares sold 49,247,297 $370,728,404
Shares redeemed (2,931,056) (30,394,727)
Net increase 46,316,241 $340,333,677
NOTE F: BANK BORROWING
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $750 million revolving credit facility (the "Facility")
intended to provide short-term financing if necessary, subject to certain
restrictions in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
miscellaneous expense in the statement of operations. The Fund did not utilize
the Facility during the period ended October 31, 1999.
(a) Commencement of operations.
9
FINANCIAL HIGHLIGHTS ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD
CLASS I
--------------
MAY 3, 1999 (A)
TO
OCTOBER 31,
1999
--------------
Net asset value, beginning of period $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (b) (.02)
Net realized and unrealized gain on
investment transactions .81
Net increase in net asset value
from operations .79
Net asset value, end of period $10.79
TOTAL RETURN
Total investment return based on
net asset value (c) 7.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $499,846
Ratios to average net assets of:
Expenses, net of waivers (d) .73%
Expenses, before waivers (d) .75%
Net investment loss (d) (.33)%
Portfolio turnover rate 35%
(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.
10
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
_______________________________________________________________________________
To the Shareholders and Board of Directors Alliance Special Equity
Institutional Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Alliance Special Equity Institutional Fund
(one of the series comprising Alliance Institutional Fund, Inc.) as of October
31, 1999, and the related statement of operations, changes in net assets and
financial highlights for the period from May 3, 1999 (commencement of
operations) to October 31, 1999. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1999, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Alliance Special Equity Institutional Fund as of October 31, 1999, the results
of its operations, changes in its net assets, and the financial highlights for
the period from May 3, 1999 to October 31, 1999, in conformity with generally
accepted accounting principles.
New York, New York
December 2, 1999
11
ALLIANCE SPECIAL EQUITY INSTITUTIONAL 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.
SEIAR1099
