--------------------------------------------------------------------------------
LARGE CAP GROWTH
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Alliance
Special Equity
Institutional Fund
Semi-Annual Report
April 30, 2000
Alliance Capital [LOGO](R)
The Investment Professional's Choice
<PAGE>
Investment Products Offered
---------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
---------------------------
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
LETTER TO SHAREHOLDERS
June 4, 2000
Dear Shareholder:
We are pleased to report on the performance and investment strategy of the
Alliance Special Equity Institutional Fund (the "Fund") for the semi-annual
reporting period ended April 30, 2000.
Investment Objective and Policies
Alliance Special Equity Institutional Fund seeks investments in companies that
have superior relative earnings growth that are selling at reasonable
valuations. Its investment objective is capital appreciation. The Fund invests
primarily in equity securities. Although the Fund typically invests for the
long-term, it also may take advantage of short-term opportunities.
Investment Results
The following table provides performance data for the Fund and its benchmark,
the Standard & Poor's ("S&P") 500 Stock Index, for the six- and 12-month periods
ended April 30, 2000.
--------------------------------------------------------------------------------
INVESTMENT RESULTS*
Periods Ended April 30, 2000
-----------------------
Total Return
-----------------------
6 Months 12 Months
--------------------------------------------------------------------------------
Alliance
Special Equity
Institutional
Fund 16.18% 25.36%
--------------------------------------------------------------------------------
S & P 500
Stock Index 7.18% 10.12%
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* The Fund's investment results are total returns for the periods shown and
are based on the net asset value of the Fund is as of April 30, 2000. All
fees and expenses related to the operation of the Fund have been deducted.
Returns for the Fund include the reinvestment of any distributions paid
during the period. Past performance is no guarantee of future results.
The Standard & Poor's 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. An investor cannot invest directly in an index and its
results are not indicative of any specific investment, including the
Alliance Special Equity Institutional Fund.
--------------------------------------------------------------------------------
During the six- and 12-month periods ended April 30, 2000, the Fund outperformed
its benchmark as a result of a prominent representation in technology. As of
April 30, 2000, technology made up 37% of the Fund's portfolio. Strong demand
for technology is driven by corporations' determination to reduce costs,
increase productivity and thereby maintain or raise margins. We believe this
demand will continue unabated for the foreseeable future. Thus, we have taken
advantage of recent price weakness to add to this sector. Holdings in
technology, which have contributed positively to performance include Altera
Corp., Cisco Systems Inc., Dell Computer Corp., Intel Corp. and Sanmina Corp.
At the same time, we recognize that modest relative valuations in many leading
non-technology stocks argue for a balanced, diversified investment approach. In
this regard, the recovery now underway in Europe and Asia is likely to produce
broad-based profit growth, particularly for multi-national companies.
Interestingly, this group now includes the financial services sec-
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ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND o 1
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
tor, which benefited from merger and acquisition activity underway in Europe and
from industry consolidation occurring in Japan and Europe. Although rising
interest rates create an uncomfortable environment for financial stocks, current
multiples are at levels that prevailed during the 1997 and 1998 global crises,
despite earnings growth of 15% to 20% for many of these companies. As of April
30, 2000 financial holdings represented 14% of the Fund's portfolio. Outstanding
performance by Citigroup Inc. and Merrill Lynch & Co. Inc. contributed to
performance during the period under review.
[PHOTO] John D. Carifa
[PHOTO] Jane Mack Gould
Portfolio Manager, Jane Mack Gould, has over 40 years of investment experience.
Selected stocks in the consumer services sector also outperformed for the six-
and 12-month periods ended April 30, 2000. These included Harley-Davidson Inc.,
Kohl's Corp. and Time Warner Inc.
For the six-month period ended April 30, 2000, the Fund also benefited from well
above average returns in health care holdings such as Guidant Corp, Medtronic
Inc, Stryker Corp. and Warner Lambert. Despite underperformance by drug stocks,
these holdings showed excellent returns.
Thank you for your interest in Alliance Special Equity Institutional Fund. We
look forward to reporting to you on market activity and your Fund's investment
results in the coming periods.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman and President
/s/ Jane Mack Gould
Jane Mack Gould
Executive Vice President
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2 o ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
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PORTFOLIO SUMMARY
-----------------
PORTFOLIO SUMMARY
INCEPTION DATE PORTFOLIO STATISTICS
(Class I Shares) Assets ($mil): $546.9
5/3/99
[GRAPHIC OMITTED]
[The following table was represented by a pie chart in the printed material.]
SECTOR BREAKDOWN
37.25% Technology
14.90% Consumer Services
14.62% Finance
12.31% Health Care
8.40% Utilities
5.72% Multi-Industry Companies
2.49% Consumer Staples
1.52% Basic Industry
0.99% Transportation
0.98% Energy
0.54% Consumer Manufacturing
0.28% Short-Term
All data as of April 30, 2000. The Fund's sector breakdown may vary over time.
This breakdown is expressed as a percentage of total investments.
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ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND o 3
<PAGE>
--------------------
TEN LARGEST HOLDINGS
--------------------
TEN LARGEST HOLDINGS
April 30, 2000 (unaudited)
----------------------------
Shares
----------------------------
Percentage of
Company Value Net Assets
--------------------------------------------------------------------------------
Cisco Systems, Inc. $ 29,499,117 5.4%
--------------------------------------------------------------------------------
Solectron Corp. 22,029,962 4.0
--------------------------------------------------------------------------------
Dell Computer Corp. 21,172,800 3.9
--------------------------------------------------------------------------------
Citigroup, Inc. 20,997,664 3.8
--------------------------------------------------------------------------------
Tyco International, Ltd. 19,890,937 3.6
--------------------------------------------------------------------------------
AT&T Corp.-Liberty Media Group 19,365,663 3.5
--------------------------------------------------------------------------------
Warner-Lambert Co. 16,662,150 3.1
--------------------------------------------------------------------------------
Kohl's Corp. 14,208,000 2.6
--------------------------------------------------------------------------------
Oracle Corp. 13,997,056 2.6
--------------------------------------------------------------------------------
Sprint Corp. 13,499,250 2.5
--------------------------------------------------------------------------------
$191,322,599 35.0%
MAJOR PORTFOLIO CHANGES
Six Months Ended April 30, 2000 (unaudited)
----------------------------
Shares*
----------------------------
Purchases Bought Holdings 4/30/00
-------------------------------------------------------------------------------
American Home Products Corp. 159,400 159,400
-------------------------------------------------------------------------------
Bank One Corp. 227,800 227,800
-------------------------------------------------------------------------------
Flextronics International, Ltd. 165,000 165,000
-------------------------------------------------------------------------------
Nokia Corp. (ADR) 206,400 206,400
-------------------------------------------------------------------------------
Oracle Corp. 175,100 175,100
-------------------------------------------------------------------------------
Sprint Corp. 149,500 219,500
-------------------------------------------------------------------------------
U S WEST, Inc. 108,000 108,000
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VeriSign, Inc. 37,400 37,400
-------------------------------------------------------------------------------
Vodafone AirTouch PLC (ADR) 168,000 168,000
-------------------------------------------------------------------------------
Warner-Lambert Co. 146,400 146,400
-------------------------------------------------------------------------------
Sales Sold Holdings 4/30/00
-------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 241,000 -0-
-------------------------------------------------------------------------------
Computer Sciences Corp. 121,500 -0-
-------------------------------------------------------------------------------
Devon Energy Corp. 192,000 108,800
-------------------------------------------------------------------------------
Harley-Davidson, Inc. 400 224,200
-------------------------------------------------------------------------------
IMS Health, Inc. 316,400 -0-
-------------------------------------------------------------------------------
Intel Corp. 186,000 100,000
-------------------------------------------------------------------------------
International Business Machines Corp. 110,900 -0-
-------------------------------------------------------------------------------
MCI WorldCom, Inc. 181,500 -0-
-------------------------------------------------------------------------------
Microsoft Corp. 197,400 -0-
-------------------------------------------------------------------------------
Motorola, Inc. 71,700 -0-
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* Adjusted for stock splits.
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4 o ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
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------------------------
PORTFOLIO OF INVESTMENTS
------------------------
PORTFOLIO OF INVESTMENTS
April 30, 2000 (unaudited)
Company Shares Value
--------------------------------------------------------------------------------
Common Stocks-97.7%
Technology-36.5%
Communication Equipment-3.2%
E-Tek Dynamics, Inc.(a) .................... 6,000 $ 1,228,500
JDS Uniphase Corp.(a) ...................... 43,000 4,458,563
Nokia Corp. (ADR) (Finland) ................ 206,400 11,739,000
------------
17,426,063
------------
Computer Hardware-4.4%
Dell Computer Corp.(a) ..................... 422,400 21,172,800
Sun Microsystems, Inc.(a) .................. 33,800 3,107,488
------------
24,280,288
------------
Computer Software-4.6%
Amdocs, Ltd.(a) ............................ 91,000 6,159,563
Mercury Interactive Corp.(a) ............... 32,600 2,934,000
Oracle Corp.(a) ............................ 175,100 13,997,056
VERITAS Software Corp.(a) .................. 19,800 2,123,859
------------
25,214,478
------------
Contract Manufacturing-8.4%
Flextronics International, Ltd.(a) ......... 165,000 11,591,250
Sanmina Corp.(a) ........................... 201,600 12,108,600
Solectron Corp.(a) ......................... 470,600 22,029,962
------------
45,729,812
------------
Internet-1.5%
VeriSign, Inc.(a) .......................... 37,400 5,212,625
Yahoo!, Inc.(a) ............................ 22,800 2,969,700
------------
8,182,325
------------
Networking Software-5.7%
Cisco Systems, Inc.(a) ..................... 425,500 29,499,117
Foundry Networks, Inc.(a) .................. 18,300 1,665,300
------------
31,164,417
------------
Semi-Conductor Capital Equipment-2.0%
Applied Materials, Inc.(a) ................. 108,600 11,056,838
------------
Semi-Conductor Components-6.7%
Altera Corp.(a) ............................ 121,400 12,413,150
Fairchild Semiconductor Int'l. Cl.A(a) ..... 187,500 8,906,250
Intel Corp. ................................ 100,000 12,681,250
PMC-Sierra, Inc.(a) ........................ 13,900 2,667,062
------------
36,667,712
------------
199,721,933
------------
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ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND o 5
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Company Shares Value
--------------------------------------------------------------------------------
Consumer Services-14.6%
Broadcasting & Cable-7.3%
AMFM, Inc.(a) .............................. 77,000 $ 5,110,875
AT&T Corp.-Liberty Media Group(a) .......... 387,798 19,365,663
Comcast Corp. Cl.A ......................... 181,400 7,267,337
Vodafone AirTouch PLC (ADR)
(United Kingdom) ........................ 168,000 7,896,000
------------
39,639,875
------------
Entertainment & Leisure-3.0%
Harley-Davidson, Inc. ...................... 224,200 8,925,962
Time Warner, Inc. .......................... 84,000 7,554,750
------------
16,480,712
------------
Printing & Publishing-0.3%
IDG Books Worldwide, Inc.(a) ............... 183,200 1,843,450
------------
Retail - General Merchandise-4.0%
Home Depot, Inc. ........................... 33,850 1,897,716
Kohl's Corp.(a) ............................ 296,000 14,208,000
Tiffany & Co. .............................. 80,400 5,844,075
------------
21,949,791
------------
79,913,828
------------
Finance-14.3%
Banking - Money Center-6.7%
Chase Manhattan Corp. ...................... 138,000 9,944,625
Citigroup, Inc. ............................ 353,273 20,997,664
U.S. Trust Corp. ........................... 35,700 5,493,337
------------
36,435,626
------------
Banking - Regional-1.3%
Bank One Corp. ............................. 227,800 6,947,900
------------
Brokerage & Money Management-1.0%
Merrill Lynch & Co., Inc. .................. 56,000 5,708,500
------------
Insurance-4.0%
AFLAC, Inc. ................................ 186,000 9,079,125
American International Group, Inc. ......... 119,281 13,083,635
------------
22,162,760
------------
Miscellaneous-1.3%
MBNA Corp. ................................. 269,800 7,166,563
------------
78,421,349
------------
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6 o ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Company Shares Value
--------------------------------------------------------------------------------
Health Care-12.1%
Drugs-6.0%
American Home Products Corp. ............... 159,400 $ 8,956,287
Schering-Plough Corp. ...................... 174,000 7,014,375
Warner-Lambert Co. ......................... 146,400 16,662,150
------------
32,632,812
------------
Medical Products-6.1%
Guidant Corp. .............................. 187,500 10,757,813
Medtronic, Inc. ............................ 192,388 9,992,152
Stryker Corp. .............................. 175,300 12,599,687
------------
33,349,652
------------
65,982,464
------------
Utilities-8.2%
Telephone Utility-6.0%
Global TeleSystems Group, Inc.(a) .......... 100,000 1,456,250
MediaOne Group, Inc.(a) .................... 137,900 10,428,687
Sprint Corp. ............................... 219,500 13,499,250
U S WEST, Inc. ............................. 108,000 7,688,250
------------
33,072,437
------------
Miscellaneous-2.2%
AES Corp.(a) ............................... 133,400 11,997,663
------------
45,070,100
------------
Multi-Industry Companies-5.6%
Honeywell International, Inc. .............. 192,600 10,785,600
Tyco International, Ltd. ................... 433,000 19,890,937
------------
30,676,537
------------
Consumer Staples-2.4%
Cosmetics-1.1%
The Estee Lauder Co., Inc. ................. 144,000 6,354,000
------------
Retail - Food & Drug-1.3%
Kroger Co.(a) .............................. 378,000 7,016,625
------------
13,370,625
------------
Basic Industry-1.5%
Containers-1.5%
Sealed Air Corp.(a) ........................ 146,100 8,126,813
------------
Transportation-1.0%
Shipping-1.0%
United Parcel Service, Inc. Cl.B ........... 80,000 5,320,000
------------
Energy-1.0%
Domestic Producers-1.0%
Devon Energy Corp. ......................... 108,800 5,242,800
------------
--------------------------------------------------------------------------------
ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND o 7
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Shares or
Principal
Amount
Company (000) U.S. $ Value
--------------------------------------------------------------------------------
Consumer Manufacturing-0.5%
Building & Related-0.5%
Masco Corp. ................................ 128,000 $ 2,872,000
------------
Total Common Stocks
(cost $364,081,605) ..................... 534,718,449
------------
Short-Term Investment-0.3%
Time Deposit-0.3%
State Street Euro Dollar
5.50%, 5/01/00
(amortized cost $1,482,000) ............. $1,482 1,482,000
------------
Total Investments-98.0%
(cost $365,563,605) ..................... 536,200,449
Other assets less liabilities-2.0% ......... 10,714,230
------------
Net Assets-100% ............................ $546,914,679
============
(a) Non-income producing security.
Glossary:
ADR - American Depositary Receipt
See notes to financial statements.
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8 o ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
<PAGE>
----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
----------------------------------
STATEMENT OF ASSETS & LIABILITIES
April 30, 2000 (unaudited)
Assets
Investments in securities, at value (cost $365,563,605) ..... $ 536,200,449
Cash ........................................................ 257,158
Receivable for investment securities sold ................... 14,188,250
Receivable for capital stock sold ........................... 372,050
Dividends and interest receivable ........................... 232,010
Other assets ................................................ 337
-------------
Total assets ................................................ 551,250,254
-------------
Liabilities
Payable for investment securities purchased ................. 3,770,823
Advisory fee payable ........................................ 253,981
Accrued expenses ............................................ 310,771
-------------
Total liabilities ........................................... 4,335,575
-------------
Net Assets .................................................. $ 546,914,679
=============
Composition Of Net Assets
Capital stock, at par ....................................... $ 43,948
Additional paid-in capital .................................. 312,178,522
Net investment loss ......................................... (729,862)
Accumulated net realized gain on investments ................ 64,785,227
Net unrealized appreciation of investments .................. 170,636,844
-------------
$ 546,914,679
=============
Calculation Of Maximum Offering Price
Class I Shares
Net asset value, redemption and offering price per share
($546,914,679 / 43,947,651 shares of capital stock
issued and outstanding) .................................. $12.44
======
See notes to financial statements.
--------------------------------------------------------------------------------
ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND o 9
<PAGE>
-----------------------
STATEMENT OF OPERATIONS
-----------------------
STATEMENT OF OPERATIONS
Six Months Ended April 30, 2000 (unaudited)
Investment Income
Dividends (net of foreign taxes withheld
$4,139) ................................. $ 971,644
Interest ................................... 76,919 $ 1,048,563
------------
Expenses
Advisory fee ............................... 1,492,019
Custodian .................................. 87,455
Audit and legal ............................ 70,388
Administrative ............................. 64,500
Registration ............................... 26,567
Printing ................................... 21,379
Transfer agency ............................ 9,357
Directors' fees ............................ 7,803
Miscellaneous .............................. 31,207
------------
Total expenses ............................. 1,810,675
Less: expenses waived by adviser
(see Note B) ............................ (32,250)
------------
Net expenses ............................... 1,778,425
------------
Net investment loss ........................ (729,862)
------------
Realized and Unrealized Gain on
Investment Transactions
Net realized gain on investment
transactions ............................ 64,980,380
Net change in unrealized appreciation/
depreciation of investments ............. 14,022,937
------------
Net gain on investment transactions ........ 79,003,317
------------
Net Increase in Net Assets from
Operations .............................. $ 78,273,455
============
See notes to financial statements
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10 o ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
<PAGE>
----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
----------------------------------
STATEMENT OF CHANGES
IN NET ASSETS
Six Months May 3,
Ended 1999(a) to
April 30, 2000 October 31,
(unaudited) 1999
------------- -------------
Increase (Decrease) in Net Assets
from Operations
Net investment loss ........................ $ (729,862) $ (806,690)
Net realized gain on investment
transactions ............................ 64,980,380 3,704,621
Net change in unrealized appreciation/
depreciation of investments ............. 14,022,937 156,613,907
------------- -------------
Net increase in net assets from operations . 78,273,455 159,511,838
Distributions to Shareholders from:
Net realized gain on investments
Class I ................................. (3,899,774) -0-
Capital Stock Transactions
Net increase (decrease) .................... (27,304,517) 340,333,677
------------- -------------
Total increase ............................. 47,069,164 499,845,515
Net Assets
Beginning of period ........................ 499,845,515 -0-
------------- -------------
End of period .............................. $ 546,914,679 $ 499,845,515
============= =============
(a) Commencement of operations.
See notes to financial statements.
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ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND o 11
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTES TO FINANCIAL STATEMENTS
April 30, 2000 (unaudited)
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 April 30, 2000 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 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, on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) or on the
Nasdaq Stock Market, Inc. 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 (but
excluding securities traded on the Nasdaq Stock Market, Inc.) 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
--------------------------------------------------------------------------------
12 o ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
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. 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.
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
--------------------------------------------------------------------------------
ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND o 13
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
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 six months ended April 30, 2000, such
fees amounted to $64,500. In addition, the adviser agreed to waive a portion of
its fees for such services. Such waiver amounted to $32,250.
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 $8,924 for the six months ended April 30, 2000.
Brokerage commissions paid on investment transactions for the six months ended
April 30, 2000, amounted to $456,988, 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 $247,337,697 and $290,350,955,
respectively, for the six months ended April 30, 2000. There were no purchases
and sales of U.S. government and government agency obligations for the six
months ended April 30, 2000.
At April 30, 2000, 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 $182,777,595 and
gross unrealized depreciation of investments was $12,140,751 resulting in net
unrealized appreciation of $170,636,844.
NOTE E
Capital Stock
There are 6,000,000,000 shares of $.001 par value capital stock authorized for
--------------------------------------------------------------------------------
14 o ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
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:
<TABLE>
<CAPTION>
---------------------------------- ----------------------------------
Shares Amount
---------------------------------- ----------------------------------
Six Months Ended May 3, 1999(a) Six Months Ended May 3, 1999(a)
April 30, 2000 to October 31, April 30, 2000 to October 31,
(unaudited) 1999 (unaudited) 1999
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold 1,327,083 49,247,297 $ 15,405,171 $ 370,728,404
-----------------------------------------------------------------------------------------
Shares issued in
reinvestment of
distributions 353,240 -0- 3,899,773 -0-
-----------------------------------------------------------------------------------------
Shares redeemed (4,048,913) (2,931,056) (46,609,461) (30,394,727)
-----------------------------------------------------------------------------------------
Net increase
(decrease) (2,368,590) 46,316,241 $ (27,304,517) $ 340,333,677
=========================================================================================
</TABLE>
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 April 30, 2000.
(a) Commencement of operations.
--------------------------------------------------------------------------------
ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND o 15
<PAGE>
--------------------
FINANCIAL HIGHLIGHTS
--------------------
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
----------------------------
Class I
----------------------------
Six Months May 3,
Ended 1999(a) to
April 30, October
2000 31, 1999
----------------------------
<S> <C> <C>
Net asset value, beginning of period ...................... $ 10.79 $ 10.00
----------------------------
Income from Investment Operations
Net investment loss(b) .................................... (.02) (.02)
Net realized and unrealized gain on investment transactions 1.76 .81
----------------------------
Net increase in net asset value from operations ........... 1.74 .79
----------------------------
Less: Distributions
Distributions from net realized gains ..................... (.09) -0-
----------------------------
Net asset value, end of period ............................ $ 12.44 $ 10.79
============================
Total Return
Total investment return based on net asset value(c) ....... 16.18% 7.90%
Ratio/Supplemental Data
Net assets, end of period (000's omitted) ................. $ 546,915 $ 499,846
Ratio to average net assets of:
Expenses, net of waivers(d) ............................ .68% .73%
Expenses, before waivers(d) ............................ .69% .75%
Net investment loss(d) ................................. (.28)% (.33)%
Portfolio turnover rate ................................... 47% 35%
</TABLE>
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment grade
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.
--------------------------------------------------------------------------------
16 o ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
<PAGE>
----------------------------
GLOSSARY OF INVESTMENT TERMS
----------------------------
GLOSSARY OF INVESTMENT TERMS
benchmark
A standard by which a fund's performance can be measured. A benchmark is usually
an unmanaged index, such as the Standard & Poor's 500 Stock Index or the Lehman
Brothers Aggregate Bond Index.
equity
Another term for stock.
index
A compilation of securities of similar types of companies that is used to
measure the investment performance of securities within that specific market. An
index is often used as a benchmark for a mutual fund. An investor cannot invest
directly in an index.
share
A unit which represents ownership in a mutual fund or stock.
--------------------------------------------------------------------------------
ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND o 17
<PAGE>
----------------
ALLIANCE CAPITAL
----------------
ALLIANCE CAPITAL
The Investment Professional's Choice
Alliance Capital is a leading global investment management firm with over $394
billion in assets under management. In recognition of our far-reaching
investment capabilities, Alliance Capital has been selected by employee benefit
plans for 28 of the FORTUNE 100 companies and public retirement funds in 33
states as well as by hundreds of foundations, endowments and foreign
institutions. By sharing this institutional money management experience with
millions of mutual fund investors as well, Alliance stands out as a "manager of
choice" for thousands of investment professionals around the world.
At Alliance Capital, we place a premium on investment research. We carefully
select securities based on our proprietary research, conducted by over 276
investment professionals in 22 investment offices worldwide. Our commitment to
this process means that our mutual fund shareholders have their portfolios
managed by the same experienced analysts and portfolio managers who manage the
pension funds of some of America's largest institutional in
All information on Alliance Capital is as of 3/31/00.
--------------------------------------------------------------------------------
18 o ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
<PAGE>
------------------
BOARD OF DIRECTORS
------------------
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
Jane Mack Gould, Executive Vice President
Alden M. Stewart, Executive Vice President
Kathleen A. Corbet, Senior Vice President
Thomas J. Bardong, Vice President
Daniel Nordby, 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 LLP
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.
--------------------------------------------------------------------------------
ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND o 19
<PAGE>
--------------------------------
ALLIANCE CAPITAL FAMILY OF FUNDS
--------------------------------
ALLIANCE CAPITAL FAMILY OF FUNDS
Domestic Equity Funds
Balanced Shares
Conservative Investors Fund
Disciplined Value Fund
Growth & Income Fund
Growth Fund
Growth Investors Fund
Health Care Fund
Premier Growth Fund
Quasar Fund
Real Estate Investment Fund
Technology Fund
The Alliance Fund
Utility Income Fund
Global & International Equity Funds
All-Asia Investment Fund
Global Small Cap Fund
Greater China '97 Fund
International Fund
International Premier Growth Fund
New Europe Fund
Worldwide Privatization Fund
Select Investor Series
Premier Portfolio
Technology Portfolio
Fixed Income Funds
Corporate Bond Portfolio
Global Dollar Government Fund
Global Strategic Income Trust
High Yield Fund
Limited Maturity Government Fund
Mortgage Securities Income Fund
Multi-Market Strategy Trust
North American Government Income Trust
Quality Bond Portfolio
U.S. Government Portfolio
Municipal Income Funds
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
Alliance also offers AFD Exchange Reserves, which serves as the money market
fund exchange vehicle for the Alliance mutual funds.
To obtain a prospectus for any Alliance Capital fund, call your investment
professional, or call Alliance at (800) 227-4618.
--------------------------------------------------------------------------------
20 o ALLIANCE SPECIAL EQUITY INSTITUTIONAL FUND
<PAGE>
---------------
Alliance Special Equity Institutional Fund BULK RATE
1345 Avenue of the Americas U.S. POSTAGE
New York, NY 10105 PAID
(800) 221-5672 New York, NY
Permit No. 7131
---------------
Alliance Capital [LOGO](R)
The Investment Professional's Choice
(R) These registered service marks used under license from the owner, Alliance
Capital Management L.P.
SEISR400
