ALLIANCE GLOBAL SMALL CAP FUND
ANNUAL REPORT
JULY 31, 1999
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
September 28, 1999
Dear Shareholder:
We are pleased to report on the performance and investment strategy of the
Alliance Global Small Cap Fund (the "Fund") for the annual reporting period
ended July 31, 1999.
INVESTMENT RESULTS
The following table provides performance data for the Morgan Stanley Capital
International ("MSCI") World Index, and the Lipper Global Small Company ("GSC")
Funds Average for the six- and 12-month periods ended July 31, 1999. During the
six-month period ended July 31, 1999, your Fund's Class A shares returned
10.42%, outperforming its benchmark, the MSCI World Index, which returned
6.04%, and underperforming the Lipper GSC Funds Average, which returned 11.73%.
During the 12-month period ended July 31, 1999, the Fund's Class A shares
returned 7.51%, underperforming the MSCI World Index's return of 15.91%, while
outperforming the Lipper GSC Funds Average, which returned 5.98%.
For the U.S. portion of the Fund's portfolio, the Fund's underperformance
versus its benchmark over the 12-month period under review was attributable to
an underweighting in technology, and a lack of participation in the internet
mania. Over the six-month period, the Fund outperformed its benchmark as those
same internet stocks and other areas of technology sold off appreciably from
their highs.
For the international portion of the Fund's portfolio, the Fund's 12-month
underperformance versus its benchmark was largely due to the general
underperformance experienced by small-cap stocks relative to large-cap stocks.
Over the six-month period under review, the Fund's positive performance was
helped by strong positive stock selection in Europe and Japan, equity exposure
in emerging markets, an overweight position in international small-cap stocks,
and strong performance by these small-cap stocks relative to larger
capitalization stocks.
INVESTMENT RESULTS*
Periods Ended July 31, 1999
TOTAL RETURNS
6 MONTHS 12 MONTHS
---------- ----------
ALLIANCE GLOBAL SMALL CAP FUND
Class A 10.42% 7.51%
Class B 10.10% 6.74%
Class C 9.97% 6.72%
MSCI WORLD INDEX 6.04% 15.91%
LIPPER GLOBAL SMALL COMPANY ("GSC") FUNDS AVERAGE 11.73% 5.98%
* THE FUND'S INVESTMENT RESULTS REPRESENT TOTAL RETURNS AND ARE BASED ON THE
NET ASSET VALUE AS OF JULY 31, 1999. ALL FEES AND EXPENSES RELATED TO THE
OPERATION OF THE FUND HAVE BEEN DEDUCTED, BUT NO ADJUSTMENT HAS BEEN MADE FOR
SALES CHARGES THAT MAY APPLY WHEN SHARES ARE PURCHASED OR REDEEMED. RETURNS FOR
THE FUND INCLUDE THE REINVESTMENT OF ANY DISTRIBUTIONS PAID DURING THE PERIOD.
TOTAL RETURNS FOR ADVISOR CLASS SHARES WILL DIFFER DUE TO DIFFERENT EXPENSES
ASSOCIATED WITH THAT CLASS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THE MSCI WORLD INDEX IS A MARKET-CAPITALIZATION WEIGHTED INDEX THAT
MEASURES THE PERFORMANCE OF STOCK MARKETS IN 22 COUNTRIES. THE LIPPER GLOBAL
SMALL COMPANY ("GSC") FUNDS AVERAGE REFLECTS PERFORMANCE OF 42 AND 40 FUNDS FOR
THE SIX- AND 12-MONTH PERIODS, RESPECTIVELY. THESE FUNDS HAVE GENERALLY SIMILAR
INVESTMENT OBJECTIVES TO YOUR FUND, ALTHOUGH INVESTMENT POLICIES FOR THE
VARIOUS FUNDS MAY DIFFER. THE MSCI WORLD INDEX IS UNMANAGED AND REFLECTS NO
FEES OR EXPENSES. AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX OR AN AVERAGE.
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 4.
U.S. INVESTMENTS
In the U.S. portion of the Fund's portfolio, the Fund continues to maintain
several positions in the retail and apparel sectors. The companies in these
sectors typically have strong franchises, dominant market share positions,
earnings per share growth between 20% and 30%, and price to earnings (P/E)
ratios between 10 and 20 times earnings. The Fund's holdings in these sectors
include Tiffany & Co., a leading jewelry retailer; Mens Wearhouse, Inc., a
leading men's retailer of formal wear; and BJ's Wholesale Club, Inc., a leading
membership based warehouse club chain.
1
ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
Within the leisure category, we are looking for professionally managed
consolidators of fragmented industries who are able to leverage their strengths
in building dominant, national franchises. These include Bally Total Fitness
Holding Corp., which, with over four million members, is the largest health
club provider in the U.S., and Premier Parks, Inc., the largest amusement park
operator after The Walt Disney Company. In the consumer manufacturing category,
the Fund maintains a holding in Monaco Coach Corp., a leading manufacturer of
recreational vehicles in the U.S.
Healthcare continues to be an area of focus for the Fund. The congressional
balancing of the federal budget and various managed care concerns have put a
lot of pressure on the healthcare service sector, which in turn has depressed
stock prices in this sector. Nonetheless, we have used this as an opportunity
to add to the Fund's holdings. These include Health Management Associates,
Inc., a leading operator of acute care hospitals in rural markets, and
Lifepoint Hospitals, Inc., a recently spun-out company from Columbia/HCA
Healthcare Corp. In addition, the Fund holds a position in Medical Manager
Corp., an intranet healthcare company focusing on managing drug prescriptions
via a closed loop architecture.
In the turnaround category, we believe that the sports retailing industry has
seen its worst days and that Venator Group, Inc., the parent company of both
Foot Locker and Champs, should benefit. As the industry becomes more rational,
the aggressive expansion in square footage seen over the last five years has
essentially come to a halt. In addition, Nike, Inc. is seeing its business
turning. These factors, as well as the Olympics being only a year away, should
help Foot Locker and Champs see a turn in their business and we consequently
believe that Venator Group, Inc. should do very well.
Within the real estate sector, we believe that the stocks of real estate
investment trusts ("REITs") have come under a lot of pressure as investors
focus more on momentum growth and less on yield. There are several well-run
companies yielding over 10% with internal growth of 10% to 20%. Therefore, we
have about 4% of the Fund's portfolio invested in REITs and currently hold
positions in Chelsea GCA Realty, Inc., Taubman Centers, Inc., and MeriStar
Hospitality Corp.
On the cyclical side, we continue to favor the airline industry. We have been
bullish on this group since 1995. 1999 should mark the fifth consecutive year
of profitability for the industry after a period of losses from 1990 to 1994.
Furthermore, this industry is more fundamentally sound than at any point since
World War II, with load factors over 70% for four years in a row--levels never
attained before by this industry.
During past good periods of business, carriers took their excess cash flow and
bought more planes. However, this only added to their existing capacity and
took away their pricing power. Today, the carriers are using their cash flow to
pay down debt, buy back stock, and restructure their balance sheets. As demand
outpaces capacity growth, pricing power should continue to increase, allowing
carriers to maximize both revenues and earnings. Thus, the Fund's holdings
continue to include positions in America West Airlines, Inc., Alaska Air Group,
Inc., and Atlas Air, Inc.
In addition, we also like the rental car industry and have positions in Budget
Group, Inc. and Dollar Thrifty Automotive Group, Inc. This industry has gone
through a major change in ownership from the auto manufacturers to financial
entrepreneurs. We are now seeing real pricing power, better yield management,
greater inventory efficiencies, and as a result, a higher level of
profitability. We believe these companies have strong fundamentals that are not
yet being recognized in the marketplace.
INTERNATIONAL INVESTMENTS
International small capitalization stocks have outperformed large
capitalization stocks as investor interest in smaller companies has grown.
Investor optimism about global economic growth prospects translated to strong
earnings forecast upgrades for smaller capitalized stocks. Interest in smaller
capitalization stocks increased further as investors became more appreciative
of the attractive valuations of small companies when compared to the large
capitalization class.
Overall European equity returns, although positive, were subdued. After initial
enthusiasm for the European currency unit (the "Euro"), European equity markets
were hit by the failure of European economies to show clear signs of recovery.
European smaller capitalization stocks experienced strong performance relative
to the broader
2
ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
market. We maintain our belief that European smaller capitalization stocks
still offer excellent value to the investor.
The Japanese equity market appears to have started rising out of the doldrums.
The market has been boosted by economic figures that positively surprised and
increased foreign investor interest in the market. The strength of Japanese
equity returns has been apparent across all levels of market capitalization.
The emerging equity markets posted particularly strong returns during the
period under review with the Asian markets leading the way. Underlying
investment fundamentals are improving as developing economies restructure and
economic growth recovers.
INTERNATIONAL PORTFOLIO REVIEW
The international portion of your Fund's portfolio continues to focus its
investments in companies with higher than average earnings growth while
maintaining a lower exposure to more stable but low growth companies.
Within the European portion of the Fund's portfolio, we maintain significant
positions in the technology, telecommunications, broadcasting and business
services sectors. We continue to emphasize European cable. In particular, we
like companies that are positioned to gain from consolidation within the
industry and have the technology and assets to take advantage of industry
developments such as the introduction of broadband internet. Our favored
technology stocks are within the information technology ("IT") services sector.
In particular, we like IT service companies that are strategically well
positioned on a geographical, industry or product basis and exhibit visible
earnings growth prospects combined with attractive relative valuations. Within
our telecommunications investments, we favor companies that have strong
regional and global network capabilities and that are most likely to benefit
from a potential rapid increase in data traffic.
The Japanese portion of the Fund's portfolio also continues to invest in growth
oriented names. While we have reduced the Fund's exposure to retailers, we have
raised its weighting in financial stocks that are focused on consumer finance
and trust business. We have also added to the Fund's technology stocks,
initiating positions within the internet sector.
Your Fund's portfolio invests in developing markets that show both compelling
growth and valuation. Telecommunications and financial companies are still the
major themes in this asset class.
The initial public offerings ("IPO") market for international small
capitalization issues has been particularly active within Europe during the
past months. Your Fund has participated in a number of very successful IPO
transactions. We believe that the strength of the smaller capitalization IPO
market illustrates the positive outlook for international smaller companies. We
expect that the high activity levels seen in Europe will spread to the other
international markets in the coming months, and we look forward to these new
opportunities.
As always, we appreciate your investment in Alliance Global Small Cap Fund and
look forward to reporting its progress to you in coming periods.
Sincerely,
John D. Carifa
Chairman and President
Alden M. Stewart
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.
3
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
Alliance Global Small Cap Fund seeks long-term growth of capital. It invests
principally in a diversified global portfolio of equity securities issued by
small capitalization companies.
INVESTMENT RESULTS
_______________________________________________________________________________
NAV AND SEC AVERAGE ANNUAL TOTAL RETURNS AS OF JULY 31, 1999
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 7.51% 2.93%
Five Years 13.80% 12.82%
Ten Years 6.66% 6.20%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 6.74% 2.96%
Five Years 12.98% 12.98%
Since Inception* (a) 9.83% 9.83%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 6.72% 5.77%
Five Years 12.98% 12.98%
Since Inception* 11.86% 11.86%
SEC AVERAGE ANNUAL TOTAL RETURNS AS OF THE MOST RECENT QUARTER-END
(JUNE 30, 1999)
CLASS A CLASS B CLASS C
------------ ------------ ------------
1 Year -4.44% -4.36% -1.81%
5 Years 12.69% 12.87% 12.87%
10 Years 6.50% 9.69%**(a) 11.71%**
The Fund's investment results represent average annual total returns. The NAV
and SEC returns reflect reinvestment of dividends and/or capital gains
distributions in additional shares without (NAV) and with (SEC) the effect of
the 4.25% maximum front-end sales charge for Class A shares or applicable
contingent deferred sales charge for Class B shares (4% year 1, 3% year 2, 2%
year 3, 1% year 4); and for Class C shares (1% year 1). Returns for Class A
shares do not reflect the imposition of the 1 year 1% contingent deferred sales
charge for accounts over $1,000,000. Total return for Advisor Class shares will
differ due to different expenses associated with that class.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
* Since Inception: 9/17/90, Class B; 5/3/93, Class C.
** Since Inception.
(a) Assumes conversion of Class B shares into Class A shares after 8 years.
4
ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
ALLIANCE GLOBAL SMALL CAP FUND
GROWTH OF A $10,000 INVESTMENT
7/31/89 TO 7/31/99
$28,000
$24,000
$20,000
$16,000
$12,000
$10,000
$8,000
MSCIWORLD INDEX: $27,882
LIPPER GLOBAL SMALL COMPANY FUNDS AVERAGE: $22,692
ALLIANCE GLOBAL SMALL CAP FUND CLASS A: $18,244
7/31/89 7/31/90 7/31/91 7/31/92 7/31/93 7/31/94 7/31/95 7/31/96
7/31/97 7/31/98 7/31/99
This chart illustrates the total value of an assumed $10,000 investment in
Alliance Global Small Cap Fund Class A shares (from 7/31/89 to 7/31/99) as
compared to the performance of an appropriate broad-based index. The chart
reflects the deduction of the maximum 4.25% sales charge from the initial
$10,000 investment in the Fund and assumes the reinvestment of dividends and
capital gains. Performance for Class B, Class C and Advisor Class shares will
vary from the results shown above due to differences in expenses charged to
those classes. Past performance is not indicative of future results, and is not
representative of future gain or loss in capital value or dividend income.
The Morgan Stanley Capital International ("MSCI") World Index is an unmanaged,
market capitalization-weighted index that measures the performance of stock
markets in 22 countries.
The Lipper Global Small Company Funds Average reflects the performance of 4
funds (based on the number of funds in the average from 7/31/89 to 7/31/99).
These funds have generally similar investment objectives to Alliance Global
Small Cap Fund, although the investment policies of some funds included in the
average may vary.
When comparing Alliance Global Small Cap Fund to the index and average shown
above, you should note that no charges or expenses are reflected in the
performance of the index. Lipper results include fees and expenses.
Alliance Global Small Cap Fund
MSCI World Index
Lipper Global Small Company Funds Average
5
TEN LARGEST HOLDINGS
JULY 31, 1999 ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
COMPANY COUNTRY U.S. $ VALUE % OF NET ASSETS
- -------------------------------------------------------------------------------
Daiwa Securities Co., Ltd. Japan $ 2,013,520 1.8%
Premier Parks, Inc. United States 1,984,669 1.7
United Pan-Europe
Communications NV Netherlands 1,974,081 1.7
Legg Mason, Inc. United States 1,879,500 1.7
United News & Media Plc United Kingdom 1,641,290 1.4
Sankyo Co., Ltd. Japan 1,592,743 1.4
Equant NV Netherlands 1,579,025 1.4
Chelsea GCA Realty, Inc. United States 1,508,150 1.3
Alps Electric Co., Ltd. Japan 1,491,997 1.3
Autoliv, Inc. (ADR) Sweden 1,478,734 1.3
$17,143,709 15.0%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED JULY 31, 1999
_______________________________________________________________________________
SHARES*
- -------------------------------------------------------------------------------
HOLDINGS
PURCHASES COUNTRY BOUGHT 7/31/99
- -------------------------------------------------------------------------------
Alps Electric Co., Ltd. Japan 55,000 55,000
Daito Trust Construction
Co., Ltd. Japan 92,000 93,400
Fukuyama Transporting Co.,
Ltd. Japan 217,000 217,000
Hornbach Holdings AG pfd. Germany 28,730 28,730
Hoya Corp. Japan 19,000 19,000
Kokuyo Co. Japan 63,000 63,000
Mikuni Coca-Cola Bottling
Co., Ltd. Japan 41,000 41,000
Next Plc United Kingdom 124,000 124,000
Shiseido Co., Ltd. Japan 84,000 84,000
United Pan-Europe
Communications NV Netherlands 30,400 30,400
HOLDINGS
SALES COUNTRY SOLD 7/31/99
- -------------------------------------------------------------------------------
Bethlehem Steel Corp. United States 200,800 -0-
British Airways Plc United Kingdom 217,400 -0-
CheckFree Holdings Corp. United States 29,600 -0-
Dixons Group Plc United Kingdom 81,382 -0-
Fortum Corp. Finland 179,631 -0-
Seat-Pagine Gialle SpA Italy 589,000 502,000
Thomson Travel Group Plc United Kingdom 372,500 -0-
Tiffany & Co. United States 12,200 14,400
Tommy Hilfiger Corp. United States 15,600 -0-
Union Electrica Fenosa, SA Spain 88,000 -0-
* Adjusted for stock splits.
6
TEN LARGEST COUNTRY HOLDINGS
JULY 31, 1999 ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
PERCENT OF
COUNTRY VALUE NET ASSETS
- -------------------------------------------------------------------------------
United States $37,412,142 32.7%
Japan 16,307,205 14.2
United Kingdom 13,599,994 11.9
Germany 6,495,368 5.7
Netherlands 4,993,902 4.4
Spain 4,834,444 4.2
France 4,270,158 3.7
Austria 2,993,306 2.6
Italy 2,788,693 2.4
Sweden 2,129,875 1.9
$95,825,087 83.7%
SECTOR DIVERSIFICATION
JULY 31, 1999
_______________________________________________________________________________
PERCENT OF
U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Basic Industry $ 1,226,266 1.1%
Capital Goods 4,199,372 3.7
Consumer Manufacturing 8,166,008 7.1
Consumer Services 34,282,434 29.9
Consumer Staples 7,327,485 6.4
Energy 1,732,096 1.5
Finance 15,935,156 13.9
Healthcare 7,014,216 6.1
Multi Industry 2,886,259 2.5
Technology 19,891,676 17.4
Transportation 4,795,616 4.2
Utilities 5,872,135 5.1
Total Investments* 113,328,719 98.9
Cash and receivables, net of liabilities 1,286,330 1.1
Net Assets $114,615,049 100.0%
* Excludes short-term obligations.
7
PORTFOLIO OF INVESTMENTS
JULY 31, 1999 ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-98.9%
UNITED STATES INVESTMENTS-32.7%
CONSUMER SERVICES-13.7%
AIRLINES-2.0%
Alaska Air Group, Inc. (a) 27,800 $ 1,233,625
America West Airlines, Inc.
Cl.B (a) 39,300 778,631
Atlas Air, Inc. (a) 9,000 288,563
------------
2,300,819
APPAREL-0.9%
Mens Wearhouse, Inc. (a) 24,800 616,900
Stage Stores, Inc. (a) 61,300 394,619
------------
1,011,519
BROADCASTING & CABLE-1.1%
Citadel Communications
Corp. (a) 4,500 144,000
Entercom Communications
Corp. (a) 3,900 157,950
RCN Corp. (a) 5,700 239,400
SFX Entertainment, Inc.
Cl.A (a) 15,000 672,188
------------
1,213,538
ENTERTAINMENT & LEISURE-3.7%
Bally Total Fitness Holding
Corp. (a) 24,600 696,488
Premier Parks, Inc. (a) 51,300 1,984,669
Sunterra Corp. (a) 83,800 1,126,062
Trans World Entertainment
Corp. (a) 34,750 432,203
------------
4,239,422
PRINTING & PUBLISHING-0.0%
Creo Products, Inc. (a) 2,300 47,006
RETAIL - GENERAL MERCHANDISE-4.3%
BJ's Wholesale Club,
Inc. (a) 24,800 759,500
Furniture Brands
International, Inc. (a) 15,900 429,300
Movado Group, Inc. 19,600 475,300
Sharper Image Corp. (a) 6,700 68,675
Shopko Stores, Inc. (a) 11,900 455,918
Tiffany & Co. 14,400 724,500
Tweeter Home
Entertainment Group,
Inc. (a) 2,700 89,944
Venator Group, Inc. (a) 107,400 1,127,700
Zale Corp. (a) 20,100 804,000
------------
4,934,837
MISCELLANEOUS-1.7%
Carriage Services, Inc. (a) 19,400 320,100
Century Business Services,
Inc. (a) 47,500 724,375
Insight Enterprises,
Inc. (a) 14,800 429,200
Nielsen Media Research,
Inc. 13,300 432,250
TeleTech Holdings,
Inc. (a) 2,400 28,950
------------
1,934,875
------------
15,682,016
TECHNOLOGY-4.4%
COMMUNICATIONS EQUIPMENT-0.6%
Focal Communications
Corp. (a) 2,800 53,200
Tekelec (a) 12,900 129,806
TeleSpectrum Worldwide,
Inc. (a) 69,600 491,550
------------
674,556
8
ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMPUTER HARDWARE-0.8%
Apex, Inc. (a) 36,550 $ 954,869
Digital Origin, Inc. (a) 15 90
------------
954,959
COMPUTER SERVICES-1.1%
DBT Online, Inc. (a) 29,400 887,512
IMRglobal Corp. (a) 12,700 217,488
Visual Networks, Inc. (a) 2,800 100,975
------------
1,205,975
COMPUTER SOFTWARE-0.4%
Digex, Inc. Cl.A (a) 7,300 162,881
Sapient Corp. (a) 4,900 270,725
------------
433,606
SEMI-CONDUCTOR CAPITAL EQUIPMENT-0.3%
MKS Instruments,
Inc. (a) 14,500 309,031
SEMI-CONDUCTOR COMPONENTS-0.7%
MIPS Technologies,
Inc. (a) 7,400 273,800
SDL, Inc. (a) 5,100 346,481
Triquint Semiconductor,
Inc. (a) 4,800 199,200
------------
819,481
MISCELLANEOUS-0.5%
Excalibur Technologies
Corp. (a) 19,400 209,763
Harman International
Industries, Inc. 9,200 404,800
------------
614,563
------------
5,012,171
FINANCE-4.2%
BROKERAGE & MONEY MANAGEMENT-1.7%
Legg Mason, Inc. 53,700 1,879,500
REAL ESTATE-2.5%
Chelsea GCA Realty, Inc. 43,400 1,508,150
MeriStar Hospitality
Corp. 21,400 409,275
Taubman Centers, Inc. 71,900 952,675
------------
2,870,100
------------
4,749,600
CONSUMER MANUFACTURING-3.1%
AUTO & RELATED-2.6%
Budget Group, Inc.
Cl.A (a) 34,300 315,131
Circuit City Stores, Inc.-
CarMaxGroup (a) 74,000 296,000
Dollar Thrifty Automotive
Group, Inc. (a) 20,700 445,050
Group 1 Automotive,
Inc. (a) 40,800 895,050
Monaco Coach Corp. (a) 38,137 1,008,247
------------
2,959,478
TEXTILE PRODUCTS-0.5%
K-Swiss, Inc. Cl.A 16,300 528,731
------------
3,488,209
HEALTH CARE-2.7%
BIOTECHNOLOGY-0.4%
Geltex Pharmaceuticals,
Inc. (a) 9,300 130,781
Human Genome Sciences,
Inc. (a) 5,600 291,550
------------
422,331
MEDICAL PRODUCTS-0.8%
Novoste Corp. (a) 19,400 447,412
St. Jude Medical, Inc. (a) 9,800 364,438
Women First Healthcare,
Inc. (a) 9,600 109,200
------------
921,050
9
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
MEDICAL SERVICES-1.5%
Health Management
Associates, Inc. (a) 62,300 $ 513,975
Lifepoint Hospitals,
Inc. (a) 52,900 522,387
Medical Manager
Corp. (a) 5,800 368,300
Orthodontic Centers of
America, Inc. (a) 23,500 390,688
------------
1,795,350
------------
3,138,731
CAPITAL GOODS-2.0%
MACHINERY-0.7%
United Rentals, Inc. (a) 29,000 841,000
MISCELLANEOUS-1.3%
Applied Power, Inc. Cl.A 11,000 313,500
Mohawk Industries,
Inc. (a) 41,400 1,156,612
------------
1,470,112
------------
2,311,112
TRANSPORTATION-1.6%
SHIPPING-0.4%
Teekay Shipping Corp. 29,500 494,125
TRUCKING-0.6%
Consolidated Freightways
Corp. (a) 61,000 644,313
MISCELLANEOUS-0.6%
Carey International,
Inc. (a) 37,200 732,375
------------
1,870,813
ENERGY-0.6%
PIPELINES-0.6%
Southern Union Co. 36,402 723,490
CONSUMER STAPLES-0.3%
RETAIL - FOOD & DRUG-0.3%
Whole Foods Market,
Inc. (a) 7,000 308,000
MULTI-INDUSTRY COMPANIES-0.1%
Playtex Products, Inc. (a) 8,000 128,000
Total United States
Investments
(cost $34,320,184) 37,412,142
FOREIGN INVESTMENTS-66.2%
AUSTRALIA-1.7%
Publishing & Broadcasting,
Ltd. 75,000 505,102
Qantas Airways, Ltd. 125,900 418,238
Smith (Howard), Ltd. 65,000 502,704
Woodside Petroleum, Ltd. 77,000 555,006
------------
1,981,050
AUSTRIA-2.6%
Austria Tabakwerke AG 14,100 785,132
Bank Austria AG 15,000 798,178
S & T System Integration &
Technology Distribution
AG (a) 7,000 647,764
Uproar, Ltd. 30,000 762,232
------------
2,993,306
BELGIUM-0.6%
Mobistar NV, SA Cl.A (a) 13,770 704,149
BRAZIL-0.9%
Tele Sudeste Celular
Participacoes, SA
(ADR) 12,900 317,663
Telesp Participacoes, SA
(ADR) 36,500 647,875
------------
965,538
CANADA-1.2%
Cinar Films, Inc. Cl.B
(ADR) (a) 16,100 456,838
FirstService Corp. (a) 25,000 331,250
GST Telecommunications,
Inc. (a) 22,600 339,000
Imax Corp. (a) 9,000 223,875
------------
1,350,963
10
ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
FINLAND-0.9%
Merita OYJ Cl.A 193,900 $ 1,047,543
FRANCE-3.7%
CNP Assurances 33,020 888,419
Essilor International 2,330 760,254
SEITA 22,770 1,311,751
Unibail, SA 5,100 675,450
Union des Assurances
Federales 5,500 634,284
------------
4,270,158
GERMANY-5.7%
B.U.S. Berzelius Umwelt-
Service AG 63,070 870,393
Fresenius AG pfd. 5,190 993,855
Hornbach Holdings
AG pfd. 28,730 1,247,856
MVV Energie AG (a) 36,500 546,668
Primacom AG (ADR) 25,000 1,203,525
Software AG (a) 27,200 925,334
Stinnes AG (a) 44,400 707,737
------------
6,495,368
GREECE-0.3%
Antenna TV, SA
(ADR) (a) 30,000 363,750
HONG KONG-1.6%
Amoy Properties, Ltd. 780,000 723,562
Ng Fung Hong, Ltd. 836,000 608,560
Television Broadcasting,
Ltd. 100,000 462,534
------------
1,794,656
HUNGARY-0.7%
Magyar Tavkozlesirt
(ADS) 12,100 376,613
Mol Magyar Olaj-es
Gazipari Rt 16,800 453,600
------------
830,213
INDIA-0.3%
Mahanagar Telephone
Nigam, Ltd. (GDR) 27,200 287,640
ISRAEL-0.2%
BackWeb Technologies,
Ltd. (a) 8,400 215,775
ITALY-2.4%
Acea SpA (a) 55,500 709,518
Banca Nazionale del
Lavoro 302,000 872,315
Industrie Natuzzi SpA
(ADR) 27,800 503,875
Seat-Pagine Gialle SpA 502,000 702,985
------------
2,788,693
JAPAN-14.2%
Ajinomoto Co., Inc. 45,000 554,625
Alps Electric Co., Ltd. 55,000 1,491,997
Banyu Pharmaceutical Co.,
Ltd. 53,000 1,040,167
Daito Trust Construction
Co., Ltd. 93,400 986,588
Daiwa Securities Co.,
Ltd. 232,000 2,013,520
Familymart Co. 20,200 1,030,747
Fukuyama Transporting
Co., Ltd. 217,000 1,287,104
Hoya Corp. 19,000 1,153,474
Kokuyo Co. 63,000 1,076,514
Mikuni Coca-Cola Bottling
Co., Ltd. 41,000 795,717
Sankyo Co., Ltd. 27,500 1,592,743
Santen Pharmaceutical
Co. 48,420 1,081,209
Shiseido Co., Ltd. 84,000 1,161,324
Uni-Charm Corp. 20,000 1,041,476
------------
16,307,205
11
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
LUXEMBOURG-0.6%
Millicom International
Cellular, SA (a) 23,600 $ 722,750
MALAYSIA-0.1%
Lingkaran Trans Kota
Holdings (a) 40,000 40,948
Metacorp Berhad 30,000 22,607
Sime Darby Berhad 43,000 46,872
Star Publications 10,000 20,142
UMW Holdings Bhd 16,000 31,279
------------
161,848
MEXICO-0.4%
Cifra SA, de CV (ADR) 28,400 487,344
NETHERLANDS-4.4%
Equant NV (a) 18,000 1,579,025
Meta4 NV (a) 19,200 322,480
PinkRoccade NV (a) 19,400 575,927
United Pan-Europe
Communications NV (a) 30,400 1,974,081
Versatel Telecom
International NV (a) 39,000 542,389
------------
4,993,902
NORWAY-0.0%
Frontline Limited, Wts (a) 15,216 23,115
PEOPLES REPUBLIC OF CHINA-0.3%
Beijing Datang Power
Generation Co., Ltd. 1,344,000 350,649
POLAND-0.7%
Kredyt Bank, SA
(GDR) (a) 34,000 850,000
PORTUGAL-0.4%
Telecel-Comunicacaoes
Pessoais, SA (b) 3,200 409,605
SINGAPORE-0.9%
Development Bank of
Singapore 82,000 1,067,340
SOUTH AFRICA-0.5%
M-Cell, Ltd. 115,400 210,669
Usko, Ltd. 1,824,900 355,356
------------
566,025
SOUTH KOREA-1.2%
Housing & Commercial
Bank (a) 23,000 561,861
SK Telecom Co., Ltd.
(ADR) 59,860 849,264
SK Telecom Co., Ltd.
(ADR) Rights (a) 13 38
------------
1,411,163
SPAIN-4.2%
Aldeasa, SA 25,300 748,373
Endesa, SA 34,780 683,877
Indra Sistemas, SA 67,000 672,327
Portland Valderrivas, SA 23,900 750,683
Sogecable, SA (a) 33,000 930,245
Tabacalera, SA Series A 53,000 1,048,939
------------
4,834,444
SWEDEN-1.9%
Autoliv, Inc. (ADR) 42,900 1,478,734
Securitas AB Series B 44,000 651,141
------------
2,129,875
SWITZERLAND-1.0%
SEZ Holding AG 3,600 1,170,163
THAILAND-0.7%
CMIC Finance & Security
Public Co. (a) (c) 110,000 -0-
Siam Commercial Bank
Plc pfd. (a) 329,000 406,773
Total Access
Communication Plc 141,000 335,580
------------
742,353
12
ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
UNITED KINGDOM-11.9%
BPB Plc 205,300 $ 1,330,920
CMG Plc 36,300 1,011,901
Cordiant Communications
Group Plc 292,000 802,150
Energis Plc (a) 36,400 968,673
Filtronic Comtek Plc 83,800 1,109,606
Future Network Plc (a) 150,000 1,045,352
Kingston Communication
(Hull) Plc (a) 123,200 612,988
Next Plc 124,000 1,364,565
Slough Estates Plc 122,000 718,732
Stagecoach Holdings Plc 225,900 795,388
Tomkins Plc 281,600 1,291,582
United News & Media Plc 150,700 1,641,290
WPP Group Plc 101,000 906,847
------------
13,599,994
Total Foreign Investments
(cost $66,914,704) 75,916,577
Total Common Stocks &
Other Investments
(cost $101,234,888) 113,328,719
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
SHORT-TERM INVESTMENT-2.3%
TIME DEPOSIT-2.3%
State Street Bank Euro
Dollar
4.75%, 8/02/99
(amortized cost
$2,688,000) $ 2,688 $ 2,688,000
TOTAL INVESTMENTS-101.2%
(cost $103,922,888) 116,016,719
Other assets less
liabilities-(1.2%) (1,401,670)
NET ASSETS-100% $ 114,615,049
(a) Non-income producing security.
(b) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At July 31, 1999,
these securities amounted to $409,605 representing .36% of net assets.
(c) Illiquid security, valued at fair market value (see Note A).
Glossary of Terms:
ADR - American Depositary Receipt
ADS - American Depositary Shares
GDR - Global Depositary Receipt
See notes to financial statements.
13
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1999 ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $103,922,888) $ 116,016,719
Cash, at value (cost $12,812) 13,595
Receivable for investment securities sold 758,906
Foreign tax receivable 61,199
Dividends and interest receivable 37,685
Total assets 116,888,104
LIABILITIES
Payable for investment securities purchased 976,691
Unclaimed dividends 634,082
Payable for capital stock redeemed 326,855
Management fee payable 97,768
Distribution fee payable 51,582
Accrued expenses and other liabilities 186,077
Total liabilities 2,273,055
NET ASSETS $ 114,615,049
COMPOSITION OF NET ASSETS
Capital stock, at par $ 101,559
Additional paid-in capital 103,059,534
Accumulated net investment loss (25,115)
Accumulated net realized loss on investments and foreign
currency transactions (617,108)
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 12,096,179
$ 114,615,049
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($77,163,563/6,615,487 shares of capital stock issued
and outstanding) $11.66
Sales charge--4.25% of public offering price .52
Maximum offering price $12.18
CLASS B SHARES
Net asset value and offering price per share
($30,204,567/2,857,724 shares of capital stock issued
and outstanding) $10.57
CLASS C SHARES
Net asset value and offering price per share
($7,058,338/666,351 shares of capital stock issued
and outstanding) $10.59
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($188,581/16,058 shares of capital stock issued
and outstanding) $11.74
See notes to financial statements.
14
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1999 ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld
of $112,311) $ 1,488,999
Interest 202,047
$ 1,691,046
EXPENSES
Advisory fee 1,104,000
Distribution fee - Class A 215,726
Distribution fee - Class B 310,184
Distribution fee - Class C 72,574
Transfer agency 481,236
Custodian 288,116
Printing 151,604
Administrative 128,000
Audit and legal 71,849
Registration 44,885
Directors' fees 23,000
Miscellaneous 15,692
Total expenses 2,906,866
Less: expense offset arrangement (see Note B) (33,696)
Net expenses 2,873,170
Net investment loss (1,182,124)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions 3,594,930
Net realized loss on foreign currency
transactions (1,775,265)
Net change in unrealized appreciation of:
Investments 5,258,819
Foreign currency denominated assets and
liabilities (152,624)
Net gain on investments and foreign currency
transactions 6,925,860
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 5,743,736
See notes to financial statements.
15
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1999 1998
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $ (1,182,124) $ (1,518,977)
Net realized gain on investments and foreign
currency transactions 1,819,665 14,877,192
Net change in unrealized appreciation of
investments and foreign currency denominated
assets and liabilities 5,106,195 (10,503,261)
Net increase in net assets from operations 5,743,736 2,854,954
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments
Class A (7,496,012) (6,916,095)
Class B (3,620,259) (3,117,806)
Class C (837,402) (796,527)
Advisor Class (18,180) (28,565)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (10,689,478) 13,322,160
Total increase (decrease) (16,917,595) 5,318,121
NET ASSETS
Beginning of year 131,532,644 126,214,523
End of year $ 114,615,049 $ 131,532,644
See notes to financial statements.
16
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999 ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Global Small Cap Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Fund offers Class A, Class B, Class C and Advisor Class shares.
Class A shares are sold with a front-end sales charge of up to 4.25% for
purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or
more, Class A shares redeemed within one year of purchase may be subject to a
contingent deferred sales charge of 1%. Class B shares are currently sold with
a contingent deferred sales charge which declines from 4% to zero depending on
the period of time the shares are held. Class B shares will automatically
convert to Class A shares eight years after the end of the calendar month of
purchase. Class C shares are subject to a contingent deferred sales charge of
1%
on redemptions made within the first year after purchase. Advisor Class shares
are sold without an initial or contingent deferred sales charge and are not
subject to ongoing distribution expenses. Advisor Class shares are offered to
investors participating in fee-based programs and to certain retirement plan
accounts. All four classes of shares have identical voting, dividend,
liquidation and other rights, except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan. The financial statements have been prepared in conformity
with generally accepted accounting principles which require management to make
certain estimates and assumptions that affect the reported amounts of assets
and liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are
generally valued at the last reported sales price or if no sale occurred, at
the mean of the closing bid and asked prices on that day. Readily marketable
securities traded in the over-the-counter market, securities listed on a
foreign securities exchange whose operations are similar to the U.S.
over-the-counter market, and securities listed on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked prices. U.S. government and fixed income
securities which mature in 60 days or less are valued at amortized cost, unless
this method does not represent fair value. Securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith by, or in accordance with procedures adopted by, the
Board of Directors. Fixed income securities may be valued on the basis of
prices obtained from a pricing service when such prices are believed to reflect
the fair market value of such securities.
2. 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 debt securities and foreign exchange
currency contracts, currency gains and losses realized between the trade and
settlement dates on security transactions, and the difference between the
amounts of interest recorded on the Fund's books and the U.S. dollar equivalent
amounts actually received or paid. The Fund does not isolate the effect of
fluctuations in foreign currency exchange rates when determining the gain or
loss upon the sale of equity securities. 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 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
17
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
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 the
securities are purchased or sold. The Fund accretes discounts as adjustments to
interest income. Investment gains and losses are determined on the identified
cost basis.
5. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisor Class shares have no distribution fees.
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 and the tax treatment of foreign currency losses, resulted in a
net decrease in accumulated net investment loss and accumulated net realized
gains/loss on investments and foreign currency denominated assets and
liabilities and a corresponding increase in additional paid-in capital. This
reclassification had no effect on net assets.
NOTE B: MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Manager") a management fee at an annual rate of
1% of the average daily net assets of the Fund. Such fee is accrued daily and
paid monthly.
Pursuant to the management agreement, the Fund paid $128,000 to the Manager
representing the cost of certain legal and accounting services provided to the
Fund by the Manager for the year ended July 31, 1999.
The Fund compensates Alliance Fund Services, Inc., a wholly-owned subsidiary of
the Manager, in accordance with a Services Agreement for providing personnel
and facilities to perform transfer agency services for the Fund. Such
compensation amounted to $302,942 for the year ended July 31, 1999.
In addition, for the year ended July 31, 1999, the Fund's expenses were reduced
by $33,696 under an expense offset arrangement with Alliance Fund Services.
Transfer agency fees reported in the statement of operations exclude these
credits.
Alliance Fund Distributors, Inc., (the "Distributor"), a wholly-owned
subsidiary of the Manager, serves as the Distributor of the Fund's shares. The
Distributor received front-end sales charges of $17,766 from the sales of Class
A shares and $1,306, $93,920 and $4,056 in contingent deferred sales charges
imposed upon redemptions by shareholders of Class A, Class B and Class C
shares, respectively, for the year ended July 31, 1999.
Brokerage commissions paid on investment transactions for the year ended July
31, 1999, amounted to $620,564, 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 Manager, 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 a distribution fee to the Distributor at an annual
rate of up to .30 of 1% of the Fund's average
18
ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
daily net assets attributable to Class A shares and 1% of the average daily net
assets attributable to both Class B and Class C shares. There is no
distribution fee on the Advisor Class shares. The fees are accrued daily and
paid monthly. The Agreement provides that the Distributor will use such
payments in their entirety for distribution assistance and promotional
activities. The Distributor has incurred expenses in excess of the distribution
costs reimbursed by the Fund in the amount of $2,907,082 and $811,488 for Class
B and Class C shares, respectively; such costs may be recovered from the Fund
in future periods so long as the Agreement is in effect. In accordance with the
Agreement, there is no provision for recovery of unreimbursed distribution
costs incurred by the Distributor beyond the current fiscal year for Class A
shares. The Agreement also provides that the Manager 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 $128,998,961 and $149,279,652,
respectively, for the year ended July 31, 1999. There were no purchases or
sales of U.S. government and government agency obligations for the year ended
July 31, 1999.
At July 31, 1999, the cost of investments for federal income tax purposes was
$105,260,005. Accordingly, gross unrealized appreciation of investments was
$18,592,758 and gross unrealized depreciation of investments was $7,836,044,
resulting in net unrealized appreciation of $10,756,714, excluding foreign
currency transactions.
The Fund elects to treat net realized securities losses from 11/1/98 through
7/31/99 as having occurred in the following fiscal year.
FORWARD EXCHANGE CURRENCY CONTRACTS
The Fund enters into forward exchange currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on foreign portfolio
holdings and to hedge certain firm purchase and sale commitments denominated in
foreign currencies. A forward exchange currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The gain or loss arising from the difference between the original
contracts and the closing of such contracts is included in net realized gain or
loss on foreign currency transactions.
Fluctuations in the value of forward exchange currency contracts are recorded
for financial reporting purposes as unrealized gains or losses by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or other liquid assets in a separate account of the Fund having a value equal
to the aggregate amount of the Fund's commitments under forward exchange
currency contracts entered into with respect to position hedges.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
There were no forward exchange currency contracts outstanding at July 31, 1999.
19
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 12,000,000,000 shares of $.01 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C, and Advisor
Class shares. Each class consists of 3,000,000,000 authorized shares.
Transactions in capital stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, JULY 31, JULY 31, JULY 31,
1999 1998 1999 1998
------------ ------------ -------------- --------------
CLASS A
Shares sold 623,396 1,542,623 $ 6,806,663 $19,248,639
Shares issued in
reinvestment of
distributions 629,890 491,450 6,097,336 5,622,159
Shares converted
from Class B 73,883 78,190 780,932 969,207
Shares redeemed (1,536,869) (1,908,638) (16,383,463) (23,505,697)
Net increase
(decrease) (209,700) 203,625 $(2,698,532) $ 2,334,308
CLASS B
Shares sold 657,798 1,841,143 $ 6,355,692 $21,462,154
Shares issued in
reinvestment of
distributions 370,560 257,260 3,268,436 2,725,087
Shares converted
to Class A (77,917) (84,225) (780,932) (969,207)
Shares redeemed (1,559,407) (1,202,471) (14,943,035) (13,793,910)
Net increase
(decrease) (608,966) 811,707 $(6,099,839) $ 9,424,124
CLASS C
Shares sold 265,399 620,351 $ 2,571,782 $ 7,209,073
Shares issued in
reinvestment of
distributions 87,168 69,804 770,565 741,394
Shares redeemed (530,032) (569,558) (5,072,717) (6,465,829)
Net increase
(decrease) (177,465) 120,597 $(1,730,370) $ 1,484,638
ADVISOR CLASS
Shares sold 4,127 6,144 $ 44,310 $ 77,324
Shares issued in
reinvestment of
distributions 1,319 2,093 12,857 24,004
Shares redeemed (21,501) (1,981) (217,904) (22,238)
Net increase
(decrease) (16,055) 6,256 $ (160,737) $ 79,090
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") to
provide short-term financing if necessary, subject to certain restrictions in
connection with abnormal redemption activity. Commitment fees related to the
Facility are paid by the participating funds and are included in the
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the year ended July 31, 1999.
20
ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
NOTE G: CONCENTRATION OF RISK
Investing in securities of foreign companies involves special risks which
include revaluation of currencies and the possibility of future political and
economic developments which could adversely affect the value of such
securities. Moreover securities of many foreign companies and their markets may
be less liquid and their prices more volatile than those of comparable United
States companies.
21
FINANCIAL HIGHLIGHTS ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
YEAR ENDED JULY 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.14 $12.87 $11.61 $10.38 $11.08
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.08)(a) (.11)(a) (.15)(a) (.14)(a) (.09)
Net realized and unrealized gain on
investments and foreign currency
transactions .76 .37 2.97 1.90 1.50
Net increase in net asset value from
operations .68 .26 2.82 1.76 1.41
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.16) (.99) (1.56) (.53) (1.99)
Tax return of capital -0- -0- -0- -0- (.12)
Total distributions (1.16) (.99) (1.56) (.53) (2.11)
Net asset value, end of year $11.66 $12.14 $12.87 $11.61 $10.38
TOTAL RETURN
Total investment return based on net
asset value (b) 7.51% 2.49% 26.47% 17.46% 16.62%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $77,164 $82,843 $85,217 $68,623 $60,057
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements 2.37%(c) 2.16%(c) 2.41%(c) 2.51% 2.54%(d)
Net investment loss (.79)% (.88)% (1.25)% (1.22)% (1.17)%
Portfolio turnover rate 120% 113% 129% 139% 128%
</TABLE>
See footnote summary on page 25.
22
ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------
YEAR ENDED JULY 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $11.20 $12.03 $11.03 $ 9.95 $10.78
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.15)(a) (.18)(a) (.21)(a) (.20)(a) (.12)
Net realized and unrealized gain on
investments and foreign currency
transactions .68 .34 2.77 1.81 1.40
Net increase in net asset value from
operations .53 .16 2.56 1.61 1.28
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.16) (.99) (1.56) (.53) (1.99)
Tax return of capital -0- -0- -0- -0- (.12)
Total distributions (1.16) (.99) (1.56) (.53) (2.11)
Net asset value, end of year $10.57 $11.20 $12.03 $11.03 $ 9.95
TOTAL RETURN
Total investment return based on net
asset value (b) 6.74% 1.80% 25.42% 16.69% 15.77%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $30,205 $38,827 $31,946 $14,247 $5,164
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements 3.14%(c) 2.88%(c) 3.11%(c) 3.21% 3.20%(d)
Net investment loss (1.59)% (1.58)% (1.92)% (1.88)% (1.92)%
Portfolio turnover rate 120% 113% 129% 139% 128%
</TABLE>
See footnote summary on page 25.
23
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------------------
YEAR ENDED JULY 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $11.22 $12.05 $11.05 $ 9.96 $10.79
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.16)(a) (.19)(a) (.22)(a) (.20)(a) (.17)
Net realized and unrealized gain on
investments and foreign currency
transactions .69 .35 2.78 1.82 1.45
Net increase in net asset value from
operations .53 .16 2.56 1.62 1.28
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.16) (.99) (1.56) (.53) (1.99)
Tax return of capital -0- -0- -0- -0- (.12)
Total distributions (1.16) (.99) (1.56) (.53) (2.11)
Net asset value, end of year $10.59 $11.22 $12.05 $11.05 $ 9.96
TOTAL RETURN
Total investment return based on net
asset value (b) 6.72% 1.79% 25.37% 16.77% 15.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $7,058 $9,471 $8,718 $4,119 $1,407
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements 3.15%(c) 2.88%(c) 3.10%(c) 3.19% 3.25%(d)
Net investment loss (1.61)% (1.59)% (1.93)% (1.85)% (2.10)%
Portfolio turnover rate 120% 113% 129% 139% 128%
</TABLE>
See footnote summary on page 25.
24
ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ADVISOR CLASS
------------------------------------
OCTOBER 2,
1996(E)
YEAR ENDED JULY 31, TO
------------------------ JULY 31,
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period $12.20 $12.89 $12.56
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (a) (.07) (.07) (.08)
Net realized and unrealized gain on
investments and foreign currency
transactions .77 .37 1.97
Net increase in net asset value from
operations .70 .30 1.89
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.16) (.99) (1.56)
Net asset value, end of period $11.74 $12.20 $12.89
TOTAL RETURN
Total investment return based on net
asset value (b) 7.63% 2.82% 17.08%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $189 $392 $333
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements (c) 2.13% 1.87% 2.05%(f)
Net investment loss (.63)% (.57)% (.84)%(f)
Portfolio turnover rate 120% 113% 129%
</TABLE>
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(c) Ratios reflect expenses grossed up for expense offset arrangement with the
Transfer Agent. For the periods ended July 31, 1999, July 31, 1998 and July 31,
1997, the ratios of expenses net of waivers/reimbursements were 2.33%, 2.14%
and 2.38% for Class A shares, 3.11%, 2.86% and 3.08% for Class B shares, 3.12%,
2.85% and 3.08% for Class C shares and 2.10%, 1.84% and 2.04% for Advisor Class
shares, respectively.
(d) If the Fund had borne all expenses, the expense ratios would have been
2.61%, 3.27%, and 3.31% for Class A, Class B and Class C shares, respectively.
(e) Commencement of distribution.
(f) Annualized.
25
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS ALLIANCE GLOBAL SMALL CAP FUND, INC.
We have audited the accompanying statement of assets and liabilities of Alliance
Global Small Cap Fund, Inc., including the portfolio of investments, as of July
31, 1999, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods indicated therein.
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 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 July 31, 1999, by correspondence with the custodian and
others. 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
Alliance Global Small Cap Fund, Inc. at July 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the indicated periods, in conformity with generally accepted accounting
principles.
New York, New York
September 8, 1999
TAX INFORMATION (UNAUDITED)
_______________________________________________________________________________
In order to meet certain requirements of the Internal Revenue Code we are
advising you that $528,853 of the capital gain distributions paid by the Fund
during the fiscal year July 31, 1999 are subject to maximum tax rates of 20%.
In addition, the Fund intends to make an election under Internal Revenue Code
Section 853 to pass through foreign taxes paid by the Fund to its shareholders.
The total amount of foreign taxes that may be passed through to the
shareholders for the fiscal year ended July 31, 1999 is $112,311. The foreign
source income for information reporting purposes is $112,311.
Shareholders should not use the above information to prepare their tax returns.
The information necessary to complete your income tax returns will be included
with your Form 1099 DIV which will be sent to you separately in January 2000.
26
ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
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
ALDEN M. STEWART, SENIOR VICE PRESIDENT-INVESTMENTS
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
THOMAS BARDONG, VICE PRESIDENT
MARK BREEDON, VICE PRESIDENT
RANDALL E. HAASE, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
VINCENT S. NOTO, CONTROLLER
CUSTODIAN
STATE STREET BANK & TRUST COMPANY
225 Franklin Street
Boston, MA 02110
DISTRIBUTOR
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
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.
27
ALLIANCE GLOBAL SMALL CAP 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.
GSCAR799
