UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-05088
THE ALLIANCEBERNSTEIN PORTFOLIOS
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Joseph J. Mantineo
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant’s telephone number, including area code: (800) 221-5672
Date of fiscal year end: July 31, 2014
Date of reporting period: January 31, 2014
ITEM 1. REPORTS TO STOCKHOLDERS.
SEMI-ANNUAL REPORT
AllianceBernstein
Growth Fund
January 31, 2014
Semi-Annual Report
Investment Products Offered
• Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed |
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.alliancebernstein.com or contact your AllianceBernstein Investments representative. Please read the prospectus and/or summary prospectus carefully before investing.
This shareholder report must be preceded or accompanied by the Fund’s prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AllianceBernstein’s website at www.alliancebernstein.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AllianceBernstein at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. AllianceBernstein publishes full portfolio holdings for the Fund monthly at www.alliancebernstein.com.
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AllianceBernstein family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the manager of the funds.
AllianceBernstein® and the AB Logo are registered trademarks and service marks used by permission of the owner, AllianceBernstein L.P.
March 12, 2014
Semi-Annual Report
This report provides management’s discussion of fund performance for AllianceBernstein Growth Fund (the “Fund”) for the semi-annual reporting period ended January 31, 2014.
Investment Objective and Policies
The Fund’s investment objective is long-term growth of capital. The Fund invests primarily in a domestic portfolio of equity securities of companies selected by AllianceBernstein L.P. (the Fund’s “Adviser”) for their growth potential within various market sectors. When selecting securities, the Adviser looks for companies that have strong, experienced management teams, strong market positions, and the potential to deliver greater-than-expected earnings growth rates.
In managing the Fund, the Adviser allocates investments among broad sector groups and selects specific investments based on the fundamental company research conducted by the Adviser’s internal research staff, assessing the current and forecasted investment opportunities and conditions, as well as diversification and risk considerations. The Adviser’s research focus is on companies with high sustainable growth prospects, high or improving return on invested capital, transparent business models, and strong and lasting competitive advantages.
The Fund has the flexibility to invest across the capitalization spectrum. The Fund is designed for those seeking exposure to companies of various sizes, and typically has substantial investments in both large-capitalization companies
and mid-capitalization companies, and may also invest in small-capitalization companies.
The Fund may enter into derivatives transactions, such as options, futures contracts, forwards and swaps. The Fund may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, including on individual securities and stock indexes, futures contracts (including futures contracts on individual securities and stock indexes) or shares of exchange-traded funds. These transactions may be used, for example, in an effort to earn extra income, to adjust exposure to individual securities or markets, or to protect all or a portion of the Fund’s portfolio from a decline in value.
Investment Results
The table on page 4 shows the Fund’s performance compared to its current benchmark, the Russell 3000 Growth Index and its prior benchmark, the Russell 1000 Growth Index, for the six- and 12-month periods ended January 31, 2014.
For the six-month period, all share classes of the Fund outperformed both the current and prior benchmarks. Stock selection was the primary driver of returns, while sector selection also contributed. Health care stocks were the best performers during the six-month period, and the Fund’s overweight position versus the benchmark, in addition to stock selection in the sector was the largest contributor to returns. Stock selection was also strong in the technology and
ALLIANCEBERNSTEIN GROWTH FUND • | 1 |
consumer staples sectors, while it detracted in the industrials sector.
For the 12-month period, all share classes of the Fund underperformed the current benchmark. Compared to the prior benchmark, Class A, B, C and R shares underperformed while Class K, I and Advisor Class shares outperformed. During this period, the Fund altered its investment policies and is now placing more emphasis mid- and smaller-capitalization companies. Operational cash in a rising market was the leading detractor from returns. An overweight to the energy sector detracted, while an overweight to the health care sector contributed. Stock selection contributed in the financials and consumer staples sectors, and detracted in the technology and industrials sectors.
The Fund did not utilize derivatives during either the six- or 12-month periods.
Market Review and Investment Strategy
Global equities rallied during both the six- and 12-month periods, driven by macroeconomic improvements in key developed countries and the accommodative monetary policies of major central banks. During the reporting period, investors worried about how the U.S. Federal Reserve (the “Fed”) would rein in its asset purchase program—and how that would affect interest rates. Yet in December, stocks continued to rise after the Fed announced plans to taper the program by $10 billion a month. In the fourth quarter, solid data on jobs, consumer spending and housing provided fresh evidence that the U.S. economy was on the mend.
Despite new uncertainties and mixed macroeconomic signals, the Growth Investment Team believes the environment still appears favorable for stock pickers, as investors increasingly reward companies for their fundamental strengths.
2 | • ALLIANCEBERNSTEIN GROWTH FUND |
DISCLOSURES AND RISKS
Benchmark Disclosure
Neither the unmanaged Russell 3000® Growth Index nor the Russell 1000® Growth Index reflect fees and expenses associated with the active management of a mutual fund portfolio. The Russell 3000 Growth Index represents the performance of the broad growth market measuring the 3000 largest companies within the U.S. The Russell 1000 Index represents the performance of 1,000 large-cap companies within the U.S. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Fund.
A Word About Risk
Market Risk: The value of the Fund’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market. It includes the risk that a particular style of investing, such as growth, may underperform the market generally.
Capitalization Risk: Investments in small- and mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in small-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.
Derivatives Risk: Investments in derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Fund, and may be subject to counterparty risk to a greater degree than more traditional investments.
Focused Portfolio Risk: Investments in a limited number of companies may have more risk because changes in the value of a single security may have a more significant effect, either negative or positive, on the Fund’s net asset value, or NAV.
Management Risk: The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Fund, but there is no guarantee that its techniques will produce the intended results.
These risks are fully discussed in the Fund’s prospectus.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown on the following pages represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.alliancebernstein.com.
All fees and expenses related to the operation of the Fund have been deducted. NAV returns do not reflect sales charges; if sales charges were reflected, the Fund’s quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares; the applicable contingent deferred sales charge for Class B shares (4% year 1, 3% year 2, 2% year 3, 1% year 4); a 1% 1-year contingent deferred sales charge for Class C shares. Returns for the different share classes will vary due to different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.
ALLIANCEBERNSTEIN GROWTH FUND • | 3 |
Disclosures and Risks
HISTORICAL PERFORMANCE
THE FUND VS. ITS BENCHMARKS PERIODS ENDED JANUARY 31, 2014 (unaudited) | NAV Returns | |||||||||
6 Months | 12 Months | |||||||||
AllianceBernstein Growth Fund* | ||||||||||
Class A | 12.03% | 24.19% | ||||||||
| ||||||||||
Class B† | 11.63% | 23.23% | ||||||||
| ||||||||||
Class C | 11.66% | 23.34% | ||||||||
| ||||||||||
Advisor Class** | 12.21% | 24.59% | ||||||||
| ||||||||||
Class R** | 11.93% | 23.97% | ||||||||
| ||||||||||
Class K** | 12.14% | 24.36% | ||||||||
| ||||||||||
Class I** | 12.30% | 24.75% | ||||||||
| ||||||||||
Current Benchmark: Russell 3000 Growth Index | 10.26% | 24.95% | ||||||||
| ||||||||||
Prior Benchmark: Russell 1000 Growth Index | 10.15% | 24.35% | ||||||||
| ||||||||||
On April 1, 2013, the Fund changed certain of its investment policies as well as its benchmark from the Russell 1000 Growth Index to the Russell 3000 Growth Index. As a result, the performance shown for periods prior to April 1, 2013 may not be representative of the Fund’s performance under its current investment policies. | ||||||||||
* Includes the impact of proceeds received and credited to the Fund resulting from class action settlements, which enhanced the performance of all share classes of the Fund for the six- and 12-month periods ended January 31, 2014, by 0.09%. | ||||||||||
† Effective January 31, 2009, Class B shares are no longer available for purchase to new investors. Please see Note A for more information. | ||||||||||
** Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Funds.
Please keep in mind that high, double-digit returns are highly unusual and cannot be sustained. Investors should also be aware that these returns were primarily achieved during favorable market conditions. | ||||||||||
See Disclosures, Risks and Note about Historical Performance on page 3.
(Historical Performance continued on next page)
4 | • ALLIANCEBERNSTEIN GROWTH FUND |
Historical Performance
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF JANUARY 31, 2014 (unaudited) | ||||||||
NAV Returns | SEC Returns (reflects applicable sales charges) | |||||||
Class A Shares | ||||||||
1 Year | 24.19 | % | 18.90 | % | ||||
5 Years | 19.01 | % | 17.98 | % | ||||
10 Years | 5.75 | % | 5.29 | % | ||||
Class B Shares | ||||||||
1 Year | 23.23 | % | 19.23 | % | ||||
5 Years | 18.07 | % | 18.07 | % | ||||
10 Years(a) | 5.09 | % | 5.09 | % | ||||
Class C Shares | ||||||||
1 Year | 23.34 | % | 22.34 | % | ||||
5 Years | 18.15 | % | 18.15 | % | ||||
10 Years | 4.99 | % | 4.99 | % | ||||
Advisor Class Shares† | ||||||||
1 Year | 24.59 | % | 24.59 | % | ||||
5 Years | 19.37 | % | 19.37 | % | ||||
10 Years | 6.07 | % | 6.07 | % | ||||
Class R Shares† | ||||||||
1 Year | 23.97 | % | 23.97 | % | ||||
5 Years | 18.87 | % | 18.87 | % | ||||
Since Inception* | 5.73 | % | 5.73 | % | ||||
Class K Shares† | ||||||||
1 Year | 24.36 | % | 24.36 | % | ||||
5 Years | 19.25 | % | 19.25 | % | ||||
Since Inception* | 6.05 | % | 6.05 | % | ||||
Class I Shares† | ||||||||
1 Year | 24.75 | % | 24.75 | % | ||||
5 Years | 19.62 | % | 19.62 | % | ||||
Since Inception* | 6.39 | % | 6.39 | % |
The Fund’s current prospectus fee table shows the Fund’s total annual expense ratios as 1.44%, 2.22%, 2.16%, 1.14%, 1.59%, 1.28% and 0.95% for Class A, Class B, Class C, Advisor Class, Class R, Class K and Class I shares, respectively. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
(a) | Assumes conversion of Class B shares into Class A shares after eight years. |
† | These share classes are offered at NAV to eligible investors and their SEC returns are the same as the NAV returns. Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Funds. The inception date for Class R, Class K and Class I shares is listed below. |
* | Inception date: 3/1/05. |
See Disclosures, Risks and Note about Historical Performance on page 3.
(Historical Performance continued on next page)
ALLIANCEBERNSTEIN GROWTH FUND • | 5 |
Historical Performance
HISTORICAL PERFORMANCE
(continued from previous page)
SEC AVERAGE ANNUAL RETURNS AS OF THE MOST RECENT CALENDAR QUARTER-END DECEMBER 31, 2013 (unaudited) | ||||
SEC Returns (reflects applicable sales charges) | ||||
Class A Shares | ||||
1 Year | 27.74 | % | ||
5 Years | 17.82 | % | ||
10 Years | 6.19 | % | ||
Class B Shares | ||||
1 Year | 28.41 | % | ||
5 Years | 17.91 | % | ||
10 Years(a) | 5.98 | % | ||
Class C Shares | ||||
1 Year | 31.45 | % | ||
5 Years | 17.99 | % | ||
10 Years | 5.89 | % | ||
Advisor Class Shares† | ||||
1 Year | 33.83 | % | ||
5 Years | 19.21 | % | ||
10 Years | 6.98 | % | ||
Class R Shares† | ||||
1 Year | 33.17 | % | ||
5 Years | 18.72 | % | ||
Since Inception* | 6.10 | % | ||
Class K Shares† | ||||
1 Year | 33.62 | % | ||
5 Years | 19.10 | % | ||
Since Inception* | 6.42 | % | ||
Class I Shares† | ||||
1 Year | 34.01 | % | ||
5 Years | 19.48 | % | ||
Since Inception* | 6.77 | % |
(a) | Assumes conversion of Class B shares into Class A shares after eight years. |
† | Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Funds. The inception date for Class R, Class K and Class I shares is listed below. |
* | Inception date: 3/1/05. |
See Disclosures, Risks and Note about Historical Performance on page 3.
6 | • ALLIANCEBERNSTEIN GROWTH FUND |
Historical Performance
EXPENSE EXAMPLE
(unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the hypothetical example is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value August 1, 2013 | Ending Account Value January 31, 2014 | Expenses Paid During Period* | Annualized Expense Ratio* | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,120.30 | $ | 7.48 | 1.40 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,018.15 | $ | 7.12 | 1.40 | % | ||||||||
Class B | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,116.30 | $ | 11.63 | 2.18 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,014.22 | $ | 11.07 | 2.18 | % | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,116.60 | $ | 11.31 | 2.12 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,014.52 | $ | 10.76 | 2.12 | % | ||||||||
Advisor Class | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,122.10 | $ | 5.88 | 1.10 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,019.66 | $ | 5.60 | 1.10 | % | ||||||||
Class R | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,119.30 | $ | 8.55 | 1.60 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.14 | $ | 8.13 | 1.60 | % | ||||||||
Class K | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,121.40 | $ | 6.63 | 1.24 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,018.95 | $ | 6.31 | 1.24 | % | ||||||||
Class I | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,123.00 | $ | 5.14 | 0.96 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,020.37 | $ | 4.89 | 0.96 | % |
* | Expenses are equal to the classes’ annualized expense ratios multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
** | Assumes 5% annual return before expenses. |
ALLIANCEBERNSTEIN GROWTH FUND • | 7 |
Expense Example
PORTFOLIO SUMMARY
January 31, 2014 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $654.6
TEN LARGEST HOLDINGS**
January 31, 2014 (unaudited)
Company | U.S. $ Value | Percent of Net Assets | ||||||
Google, Inc. – Class A | $ | 35,575,540 | 5.4 | % | ||||
Apple, Inc. | 27,873,408 | 4.3 | ||||||
Comcast Corp. – Class A | 21,854,596 | 3.3 | ||||||
Gilead Sciences, Inc. | 21,410,155 | 3.3 | ||||||
Visa, Inc. – Class A | 19,763,548 | 3.0 | ||||||
Biogen Idec, Inc. | 19,286,762 | 2.9 | ||||||
Schlumberger Ltd. | 19,100,768 | 2.9 | ||||||
IntercontinentalExchange Group, Inc. | 16,694,848 | 2.6 | ||||||
Cognizant Technology Solutions Corp. – Class A | 16,677,025 | 2.6 | ||||||
CVS Caremark Corp. | 14,578,084 | 2.2 | ||||||
$ | 212,814,734 | 32.5 | % |
* | All data are as of January 31, 2014. The Fund’s sector breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. |
** | Long-term investments. |
Please note: The sector classifications presented herein are based on the Global Industry Classification Standard (GICS) which was developed by Morgan Stanley Capital International and Standard & Poor’s. The components are divided into sector, industry group, and industry sub-indices as classified by the GICS for each of the market capitalization indices in the broad market. These sector classifications are broadly defined. The “Portfolio of Investments” section of the report reflects more specific industry information and is consistent with the investment restrictions discussed in the Fund’s prospectus.
8 | • ALLIANCEBERNSTEIN GROWTH FUND |
Portfolio Summary and Ten Largest Holdings
PORTFOLIO OF INVESTMENTS
January 31, 2014 (unaudited)
Company | Shares | U.S. $ Value | ||||||
| ||||||||
COMMON STOCKS – 95.5% | ||||||||
Information Technology – 24.1% | ||||||||
Communications Equipment – 0.5% | ||||||||
F5 Networks, Inc.(a) | 31,400 | $ | 3,359,800 | |||||
|
| |||||||
Computers & Peripherals – 4.3% | ||||||||
Apple, Inc. | 55,680 | 27,873,408 | ||||||
|
| |||||||
Internet Software & Services – 9.3% | ||||||||
eBay, Inc.(a) | 227,120 | 12,082,784 | ||||||
Facebook, Inc. – Class A(a) | 138,830 | 8,686,593 | ||||||
Google, Inc. – Class A(a) | 30,124 | 35,575,540 | ||||||
LinkedIn Corp. – Class A(a) | 21,920 | 4,717,403 | ||||||
|
| |||||||
61,062,320 | ||||||||
|
| |||||||
IT Services – 5.6% | ||||||||
Cognizant Technology Solutions Corp. – Class A(a) | 172,070 | 16,677,025 | ||||||
Visa, Inc. – Class A | 91,740 | 19,763,548 | ||||||
|
| |||||||
36,440,573 | ||||||||
|
| |||||||
Software – 4.4% | ||||||||
ANSYS, Inc.(a) | 114,620 | 9,001,109 | ||||||
Aspen Technology, Inc.(a) | 178,860 | 8,150,650 | ||||||
Cadence Design Systems, Inc.(a) | 358,560 | 5,062,867 | ||||||
ServiceNow, Inc.(a) | 73,750 | 4,677,963 | ||||||
Tableau Software, Inc. – Class A(a) | 25,970 | 2,098,895 | ||||||
|
| |||||||
28,991,484 | ||||||||
|
| |||||||
157,727,585 | ||||||||
|
| |||||||
Health Care – 19.6% | ||||||||
Biotechnology – 9.6% | ||||||||
Biogen Idec, Inc.(a) | 61,690 | 19,286,762 | ||||||
Celgene Corp.(a) | 53,810 | 8,175,353 | ||||||
Gilead Sciences, Inc.(a) | 265,470 | 21,410,155 | ||||||
Quintiles Transnational Holdings, Inc.(a) | 218,793 | 10,421,110 | ||||||
Vertex Pharmaceuticals, Inc.(a) | 47,040 | 3,718,042 | ||||||
|
| |||||||
63,011,422 | ||||||||
|
| |||||||
Health Care Equipment & Supplies – 1.8% | ||||||||
HeartWare International, Inc.(a) | 48,340 | 4,795,811 | ||||||
Intuitive Surgical, Inc.(a) | 17,660 | 7,197,863 | ||||||
|
| |||||||
11,993,674 | ||||||||
|
| |||||||
Health Care Providers & Services – 3.3% | ||||||||
McKesson Corp. | 68,800 | 11,999,408 | ||||||
UnitedHealth Group, Inc. | 127,710 | 9,230,879 | ||||||
|
| |||||||
21,230,287 | ||||||||
|
| |||||||
Life Sciences Tools & Services – 1.7% | ||||||||
Illumina, Inc.(a) | 71,680 | 10,895,360 | ||||||
|
|
ALLIANCEBERNSTEIN GROWTH FUND • | 9 |
Portfolio of Investments
Company | Shares | U.S. $ Value | ||||||
| ||||||||
Pharmaceuticals – 3.2% | ||||||||
Allergan, Inc./United States | 121,150 | $ | 13,883,790 | |||||
Bristol-Myers Squibb Co. | 140,940 | 7,042,772 | ||||||
|
| |||||||
20,926,562 | ||||||||
|
| |||||||
128,057,305 | ||||||||
|
| |||||||
Consumer Discretionary – 19.3% | ||||||||
Automobiles – 1.4% | ||||||||
Harley-Davidson, Inc. | 148,450 | 9,157,881 | ||||||
|
| |||||||
Distributors – 0.5% | ||||||||
LKQ Corp.(a) | 118,360 | 3,204,005 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure – 1.7% | ||||||||
Starbucks Corp. | 161,150 | 11,460,988 | ||||||
|
| |||||||
Internet & Catalog Retail – 3.4% | ||||||||
Amazon.com, Inc.(a) | 26,990 | 9,681,043 | ||||||
priceline.com, Inc.(a) | 10,975 | 12,565,168 | ||||||
|
| |||||||
22,246,211 | ||||||||
|
| |||||||
Leisure Equipment & Products – 0.7% | ||||||||
Polaris Industries, Inc. | 37,790 | 4,731,308 | ||||||
|
| |||||||
Media – 6.4% | ||||||||
AMC Networks, Inc. – Class A(a) | 68,762 | 4,431,023 | ||||||
Comcast Corp. – Class A | 401,370 | 21,854,596 | ||||||
Liberty Media Corp.(a) | 52,030 | 6,846,628 | ||||||
Viacom, Inc. – Class B | 105,580 | 8,668,118 | ||||||
|
| |||||||
41,800,365 | ||||||||
|
| |||||||
Specialty Retail – 3.4% | ||||||||
Five Below, Inc.(a) | 73,760 | 2,703,304 | ||||||
Lowe’s Cos., Inc. | 272,380 | 12,608,470 | ||||||
Lumber Liquidators Holdings, Inc.(a) | 30,940 | 2,753,351 | ||||||
Tractor Supply Co. | 61,430 | 4,085,709 | ||||||
|
| |||||||
22,150,834 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods – 1.8% | ||||||||
Michael Kors Holdings Ltd.(a) | 69,233 | 5,533,794 | ||||||
NIKE, Inc. – Class B | 84,300 | 6,141,255 | ||||||
|
| |||||||
11,675,049 | ||||||||
|
| |||||||
126,426,641 | ||||||||
|
| |||||||
Industrials – 11.9% | ||||||||
Aerospace & Defense – 3.2% | ||||||||
Boeing Co. (The) | 98,410 | 12,326,837 | ||||||
Precision Castparts Corp. | 34,510 | 8,791,422 | ||||||
|
| |||||||
21,118,259 | ||||||||
|
| |||||||
Air Freight & Logistics – 0.7% | ||||||||
Expeditors International of Washington, Inc. | 111,450 | 4,553,847 | ||||||
|
| |||||||
Airlines – 1.2% | ||||||||
Copa Holdings SA – Class A | 60,200 | 7,868,140 | ||||||
|
|
10 | • ALLIANCEBERNSTEIN GROWTH FUND |
Portfolio of Investments
Company | Shares | U.S. $ Value | ||||||
| ||||||||
Electrical Equipment – 1.1% | ||||||||
AMETEK, Inc. | 148,340 | $ | 7,330,963 | |||||
|
| |||||||
Industrial Conglomerates – 2.0% | ||||||||
Danaher Corp. | 175,100 | 13,025,689 | ||||||
|
| |||||||
Machinery – 0.9% | ||||||||
Parker Hannifin Corp. | 54,580 | 6,187,735 | ||||||
|
| |||||||
Marine – 0.6% | ||||||||
Kirby Corp.(a) | 40,880 | 4,079,415 | ||||||
|
| |||||||
Professional Services – 0.7% | ||||||||
Robert Half International, Inc. | 108,210 | 4,521,014 | ||||||
|
| |||||||
Road & Rail – 0.8% | ||||||||
JB Hunt Transport Services, Inc. | 67,930 | 5,098,146 | ||||||
|
| |||||||
Trading Companies & Distributors – 0.7% | ||||||||
WW Grainger, Inc. | 18,890 | 4,429,327 | ||||||
|
| |||||||
78,212,535 | ||||||||
|
| |||||||
Consumer Staples – 10.1% | ||||||||
Beverages – 1.2% | ||||||||
Monster Beverage Corp.(a) | 115,710 | 7,856,709 | ||||||
|
| |||||||
Food & Staples Retailing – 4.4% | ||||||||
Costco Wholesale Corp. | 129,230 | 14,520,283 | ||||||
CVS Caremark Corp. | 215,270 | 14,578,084 | ||||||
|
| |||||||
29,098,367 | ||||||||
|
| |||||||
Food Products – 3.7% | ||||||||
Green Mountain Coffee Roasters, Inc.(b) | 94,230 | 7,632,630 | ||||||
Hershey Co. (The) | 100,940 | 10,033,436 | ||||||
Mead Johnson Nutrition Co. – Class A | 83,600 | 6,428,004 | ||||||
|
| |||||||
24,094,070 | ||||||||
|
| |||||||
Personal Products – 0.8% | ||||||||
Estee Lauder Cos., Inc. (The) – Class A | 75,160 | 5,166,499 | ||||||
|
| |||||||
66,215,645 | ||||||||
|
| |||||||
Energy – 5.6% | ||||||||
Energy Equipment & Services – 3.6% | ||||||||
Oceaneering International, Inc. | 64,850 | 4,419,528 | ||||||
Schlumberger Ltd. | 218,120 | 19,100,768 | ||||||
|
| |||||||
23,520,296 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels – 2.0% | ||||||||
Antero Resources Corp.(a) | 83,732 | 4,918,418 | ||||||
Noble Energy, Inc. | 131,610 | 8,203,251 | ||||||
|
| |||||||
13,121,669 | ||||||||
|
| |||||||
36,641,965 | ||||||||
|
|
ALLIANCEBERNSTEIN GROWTH FUND • | 11 |
Portfolio of Investments
Company | Shares | U.S. $ Value | ||||||
| ||||||||
Financials – 4.9% | ||||||||
Capital Markets – 2.3% | ||||||||
Affiliated Managers Group, Inc.(a) | 40,410 | $ | 8,051,288 | |||||
BlackRock, Inc. – Class A | 23,880 | 7,175,224 | ||||||
|
| |||||||
15,226,512 | ||||||||
|
| |||||||
Diversified Financial Services – 2.6% | ||||||||
InterdcontinentalExchange Group, Inc. | 79,960 | 16,694,848 | ||||||
|
| |||||||
31,921,360 | ||||||||
|
| |||||||
Total Common Stocks | 625,203,036 | |||||||
|
| |||||||
SHORT-TERM INVESTMENTS – 4.4% | ||||||||
Investment Companies – 4.4% | ||||||||
AllianceBernstein Fixed-Income Shares, Inc. – Government STIF Portfolio, 0.07%(c) | 28,658,251 | 28,658,251 | ||||||
|
| |||||||
Total Investments Before Security Lending Collateral for Securities Loaned – 99.9% | 653,861,287 | |||||||
|
| |||||||
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED – 1.0% | ||||||||
Investment Companies – 1.0% | ||||||||
AllianceBernstein Exchange Reserves – | 6,924,313 | 6,924,313 | ||||||
|
| |||||||
Total Investments – 100.9% | 660,785,600 | |||||||
Other assets less liabilities – (0.9)% | (6,183,711 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 654,601,889 | ||||||
|
|
(a) | Non-income producing security. |
(b) | Represents entire or partial securities out on loan. See Note E for securities lending information. |
(c) | Investment in affiliated money market mutual fund. The rate shown represents the 7-day yield as of period end. |
See notes to financial statements.
12 | • ALLIANCEBERNSTEIN GROWTH FUND |
Portfolio of Investments
STATEMENT OF ASSETS & LIABILITIES
January 31, 2014 (unaudited)
Assets | ||||
Investments in securities, at value | ||||
Unaffiliated issuers (cost $480,501,712) | $ | 625,203,036 | (a) | |
Affiliated issuers (cost $35,582,564—including investment of cash collateral for securities loaned of $6,924,313) | 35,582,564 | |||
Foreign currencies, at value (cost $116,890) | 120,100 | |||
Receivable for investment securities sold | 9,639,129 | |||
Dividends and interest receivable | 170,567 | |||
Receivable for shares of beneficial interest sold | 98,575 | |||
|
| |||
Total assets | 670,813,971 | |||
|
| |||
Liabilities | ||||
Payable for investment securities purchased | 7,784,720 | |||
Payable for collateral received on securities loaned | 6,924,313 | |||
Payable for shares of beneficial interest redeemed | 484,535 | |||
Advisory fee payable | 454,224 | |||
Distribution fee payable | 234,696 | |||
Transfer Agent fee payable | 197,722 | |||
Accrued expenses | 131,872 | |||
|
| |||
Total liabilities | 16,212,082 | |||
|
| |||
Net Assets | $ | 654,601,889 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest, at par | $ | 129 | ||
Additional paid-in capital | 548,182,653 | |||
Accumulated net investment loss | (4,071,616 | ) | ||
Accumulated net realized loss on investment and foreign currency transactions | (34,213,811 | ) | ||
Net unrealized appreciation on investments and foreign currency denominated assets and liabilities | 144,704,534 | |||
|
| |||
$ | 654,601,889 | |||
|
|
Net Asset Value Per Share—unlimited shares authorized, $.00001 par value
Class | Net Assets | Shares Outstanding | Net Asset Value | |||||||||
| ||||||||||||
A | $ | 552,600,030 | 10,144,539 | $ | 54.47 | * | ||||||
| ||||||||||||
B | $ | 20,626,339 | 583,872 | $ | 35.33 | |||||||
| ||||||||||||
C | $ | 65,999,234 | 1,853,093 | $ | 35.62 | |||||||
| ||||||||||||
Advisor | $ | 12,041,170 | 209,016 | $ | 57.61 | |||||||
| ||||||||||||
R | $ | 1,274,467 | 23,579 | $ | 54.05 | |||||||
| ||||||||||||
K | $ | 2,043,177 | 36,791 | $ | 55.53 | |||||||
| ||||||||||||
I | $ | 17,472 | 305.71 | $ | 57.15 | |||||||
|
(a) | Includes securities on loan with a value of $6,945,750 (see Note E). |
* | The maximum offering price per share for Class A shares was $56.89 which reflects a sales charge of 4.25%. |
See notes to financial statements.
ALLIANCEBERNSTEIN GROWTH FUND • | 13 |
Statement of Assets & Liabilities
STATEMENT OF OPERATIONS
Six Months Ended January 31, 2014 (unaudited)
Investment Income | ||||||||
Dividends | ||||||||
Unaffiliated issuers | $ | 2,572,847 | ||||||
Affiliated issuers | 9,514 | |||||||
Securities lending income | 11,619 | $ | 2,593,980 | |||||
|
| |||||||
Expenses | ||||||||
Advisory fee (see Note B) | 2,454,048 | |||||||
Distribution fee—Class A | 830,785 | |||||||
Distribution fee—Class B | 108,056 | |||||||
Distribution fee—Class C | 329,068 | |||||||
Distribution fee—Class R | 3,247 | |||||||
Distribution fee—Class K | 2,642 | |||||||
Transfer agency—Class A | 733,178 | |||||||
Transfer agency—Class B | 36,949 | |||||||
Transfer agency—Class C | 92,237 | |||||||
Transfer agency—Advisor Class | 12,826 | |||||||
Transfer agency—Class R | 1,689 | |||||||
Transfer agency—Class K | 1,651 | |||||||
Transfer agency—Class I | 10 | |||||||
Custodian | 79,531 | |||||||
Printing | 73,873 | |||||||
Registration fees | 47,569 | |||||||
Trustees’ fees | 30,070 | |||||||
Audit | 20,084 | |||||||
Legal | 19,914 | |||||||
Miscellaneous | 7,920 | |||||||
|
| |||||||
Total expenses | 4,885,347 | |||||||
|
| |||||||
Net investment loss | (2,291,367 | ) | ||||||
|
| |||||||
Realized and Unrealized Gain on Investment and Foreign Currency Transactions | ||||||||
Net realized gain on investment transactions | 43,015,626 | |||||||
Net change in unrealized appreciation/depreciation of: | ||||||||
Investments | 31,409,540 | |||||||
Foreign currency denominated assets and liabilities | 1,634 | |||||||
|
| |||||||
Net gain on investment and foreign currency transactions | 74,426,800 | |||||||
|
| |||||||
Net Increase in Net Assets from Operations | $ | 72,135,433 | ||||||
|
|
See notes to financial statements.
14 | • ALLIANCEBERNSTEIN GROWTH FUND |
Statement of Operations
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended January 31, 2014 (unaudited) | Year Ended July 31, 2013 | |||||||
Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment loss | $ | (2,291,367 | ) | $ | (1,652,540 | ) | ||
Net realized gain on investment and foreign currency transactions | 43,015,626 | 31,639,794 | ||||||
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | 31,411,174 | 79,625,277 | ||||||
|
|
|
| |||||
Net increase in net assets from operations | 72,135,433 | 109,612,531 | ||||||
Transactions in Shares of Beneficial Interest | ||||||||
Net decrease | (24,288,573 | ) | (78,393,152 | ) | ||||
|
|
|
| |||||
Total increase | 47,846,860 | 31,219,379 | ||||||
Net Assets | ||||||||
Beginning of period | 606,755,029 | 575,535,650 | ||||||
|
|
|
| |||||
End of period (including accumulated net investment loss of ($4,071,616) and ($1,780,249), respectively) | $ | 654,601,889 | $ | 606,755,029 | ||||
|
|
|
|
See notes to financial statements.
ALLIANCEBERNSTEIN GROWTH FUND • | 15 |
Statement of Changes in Net Assets
NOTES TO FINANCIAL STATEMENTS
January 31, 2014 (unaudited)
NOTE A
Significant Accounting Policies
AllianceBernstein Growth Fund (the “Fund”), a series of The AllianceBernstein Portfolios (the “Trust”), 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, Advisor Class, Class R, Class K and Class I 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. Effective January 31, 2009, sales of Class B shares of the Fund to new investors were suspended. Class B shares will only be issued (i) upon the exchange of Class B shares from another AllianceBernstein Mutual Fund, (ii) for purposes of dividend reinvestment, (iii) through the Fund’s Automatic Investment Program (the “Program”) for accounts that established the Program prior to January 31, 2009, and (iv) for purchases of additional shares by Class B shareholders as of January 31, 2009. The ability to establish a new Program for accounts containing Class B shares was suspended as of January 31, 2009. 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. Class R and Class K shares are sold without an initial or contingent deferred sales charge. Advisor Class and Class I shares are sold without an initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. All seven classes of shares have identical voting, dividend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) 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 are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Trust’s Board of Trustees (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc.
16 | • ALLIANCEBERNSTEIN GROWTH FUND |
Notes to Financial Statements
(“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g. last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Investment companies are valued at their net asset value each day.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a
ALLIANCEBERNSTEIN GROWTH FUND • | 17 |
Notes to Financial Statements
three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of January 31, 2014:
Investments in | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Common Stocks* | $ | 625,203,036 | $ | – 0 | – | $ | – 0 | – | $ | 625,203,036 | ||||||
Short-Term Investments | 28,658,251 | – 0 | – | – 0 | – | 28,658,251 | ||||||||||
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | 6,924,313 | – 0 | – | – 0 | – | 6,924,313 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in | 660,785,600 | – 0 | – | – 0 | – | 660,785,600 | ||||||||||
Other Financial | – 0 | – | – 0 | – | – 0 | – | – 0 | – | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total^ | $ | 660,785,600 | $ | – 0 | – | $ | – 0 | – | $ | 660,785,600 | ||||||
|
|
|
|
|
|
|
|
18 | • ALLIANCEBERNSTEIN GROWTH FUND |
Notes to Financial Statements
* | See Portfolio of Investments for sector classifications. |
** | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument. |
^ | There were no transfers between Level 1 and Level 2 during the reporting period. |
The Fund recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.
The Adviser has established a Valuation Committee (the “Committee”) which is responsible for overseeing the pricing and valuation of all securities held in the Fund. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and a third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates
ALLIANCEBERNSTEIN GROWTH FUND • | 19 |
Notes to Financial Statements
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 gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized 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 or depreciation of foreign currency denominated assets and liabilities.
4. 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. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Fund’s financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes discounts as adjustments to interest income.
6. Class Allocations
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 for class specific expenses which are allocated to the respective class. Expenses of the Trust are charged proportionately to each series or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
20 | • ALLIANCEBERNSTEIN GROWTH FUND |
Notes to Financial Statements
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, 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 U.S. GAAP. 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 the investment advisory agreement, the Fund pays the Adviser an advisory fee at an annual rate of .75% of the first $2.5 billion, .65% of the next $2.5 billion and .60% in excess of $5 billion, of the Fund’s average daily net assets. The fee is accrued daily and paid monthly.
The Fund compensates AllianceBernstein Investor Services, Inc. (“ABIS”), 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. ABIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. Such compensation retained by ABIS amounted to $433,424 for the six months ended January 31, 2014.
AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, serves as the distributor of the Fund’s shares. The Distributor has advised the Fund that it has retained front-end sales charges of $3,508 from the sale of Class A shares and received $1,330, $7,656 and $681 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A, Class B and Class C shares, respectively, for the six months ended January 31, 2014.
The Fund may invest in the AllianceBernstein Fixed-Income Shares, Inc.—Government STIF Portfolio (“Government STIF Portfolio”), an open-end management investment company managed by the Adviser. The Government STIF Portfolio is offered as a cash management option to mutual funds and other institutional accounts of the Adviser, and is not available for direct purchase by members of the public. The Government STIF Portfolio pays no investment management fees but does bear its own expenses. A summary of the Fund’s transactions in shares of the Government STIF Portfolio for the six months ended January 31, 2014 is as follows:
Market Value July 31, 2013 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value January 31, 2014 (000) | Dividend Income (000) | ||||||||||||
$13,680 | $ | 98,445 | $ | 83,467 | $ | 28,658 | $ | 8 |
Brokerage commissions paid on investment transactions for the six months ended January 31, 2014 amounted to $187,034, of which $3,739 and $0,
ALLIANCEBERNSTEIN GROWTH FUND • | 21 |
Notes to Financial Statements
respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the “Agreement”) pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Fund pays distribution and servicing fees to the Distributor at an annual rate of up to .50% of the Fund’s average daily net assets attributable to Class A shares, 1% of the Fund’s average daily net assets attributable to both Class B and Class C shares, .50% of the Fund’s average daily net assets attributable to Class R shares and .25% of the Fund’s average daily net assets attributable to Class K shares. There are no distribution and servicing fees on the Advisor Class and Class I shares. The fees are accrued daily and paid monthly. Payments under the Class A plan are currently limited to .30% of the Fund’s average daily net assets attributable to Class A shares. The Fund is not obligated under the Agreement to pay any distribution services fee in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Agreement is to compensate the Distributor for its distribution services with respect to the sale of the Fund’s shares. Since the Distributor’s compensation is not directly tied to its expenses, the amount of compensation received by it under the Agreement during any year may be more or less than its actual expenses. For this reason, the Agreement is characterized by the staff of the Securities Exchange Commission as being a “compensation” plan.
In the event that the Agreement is terminated or not continued, no distribution services fees (other than current amounts accrued but not yet paid) would be owed by the Fund to the Distributor with respect to the relevant class. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Fund’s shares.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the six months ended January 31, 2014 were as follows:
Purchases | Sales | |||||||
Investment securities (excluding U.S. government securities) | $ | 202,871,518 | $ | 245,543,662 | ||||
U.S. government securities | – 0 | – | – 0 | – |
22 | • ALLIANCEBERNSTEIN GROWTH FUND |
Notes to Financial Statements
The cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes. Accordingly, gross unrealized appreciation and unrealized depreciation (excluding foreign currency transactions) are as follows:
Gross unrealized appreciation | $ | 148,261,331 | ||
Gross unrealized depreciation | (3,560,007 | ) | ||
|
| |||
Net unrealized appreciation | $ | 144,701,324 | ||
|
|
1. Derivative Financial Instruments
The Fund may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The Fund did not engage in derivatives transactions for the six months ended January 31, 2014.
2. Currency Transactions
The Fund may invest in non-U.S. dollar securities on a currency hedged or unhedged basis. The Fund may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Fund may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Fund and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Fund may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
NOTE E
Securities Lending
The Fund may enter into securities lending transactions. Under the Fund’s securities lending program, all loans of securities will be collateralized continually by cash. The Fund will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Fund in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. It is the policy of the Fund to receive collateral consisting of cash in an amount exceeding the value of the securities loaned. The Fund will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities.
ALLIANCEBERNSTEIN GROWTH FUND • | 23 |
Notes to Financial Statements
While the securities are on loan, the borrower is obligated to pay the Fund amounts equal to any income or other distributions from the securities. The Fund will not have the right to vote on any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. The lending agent has agreed to indemnify the Fund in the case of default of any securities borrower. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent will invest the cash collateral received in AllianceBernstein Exchange Reserves, an eligible money market vehicle, in accordance with the investment restrictions of the Fund, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the statement of assets and liabilities. When the Fund lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. At January 31, 2014, the Fund had securities on loan with a value of $6,945,750 and had received cash collateral which has been invested into AllianceBernstein Exchange Reserves of $6,924,313. The cash collateral will be adjusted on the next business day to maintain the required collateral amount. The Fund earned securities lending income of $11,619 and $1,484 from the borrowers and AllianceBernstein Exchange Reserves, respectively, for the six months ended January 31, 2014; these amounts are reflected in the statement of operations. A principal risk of lending portfolio securities is that the borrower will fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. A summary of the Fund’s transactions in shares of AllianceBernstein Exchange Reserves for the six months ended January 31, 2014 is as follows:
Market Value July 31, 2013 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value January 31, 2014 (000) | |||||||||
$ 4,084 | $ | 47,663 | $ | 44,822 | $ | 6,925 |
NOTE F
Shares of Beneficial Interest
Transactions in shares of beneficial interest for each class were as follows:
Shares | Amount | |||||||||||||||||||
Six Months Ended January 31, 2014 (unaudited) | Year Ended July 31, 2013 | Six Months Ended January 31, 2014 (unaudited) | Year Ended July 31, 2013 | |||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||
Class A | ||||||||||||||||||||
Shares sold | 265,993 | 214,441 | $ | 13,447,625 | $ | 9,409,626 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Shares converted from Class B | 44,382 | 111,399 | 2,302,712 | 4,859,565 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Shares redeemed | (738,409 | ) | (1,734,142 | ) | (38,537,548 | ) | (75,820,455 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net decrease | (428,034 | ) | (1,408,302 | ) | $ | (22,787,211 | ) | $ | (61,551,264 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
24 | • ALLIANCEBERNSTEIN GROWTH FUND |
Notes to Financial Statements
Shares | Amount | |||||||||||||||||||
Six Months Ended January 31, 2014 (unaudited) | Year Ended July 31, 2013 | Six Months Ended January 31, 2014 (unaudited) | Year Ended July 31, 2013 | |||||||||||||||||
Class B | ||||||||||||||||||||
Shares sold | 20,806 | 51,535 | $ | 705,391 | $ | 1,468,149 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Shares converted to Class A | (68,290 | ) | (170,424 | ) | (2,302,712 | ) | (4,859,565 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Shares redeemed | (41,985 | ) | (137,733 | ) | (1,420,631 | ) | (3,937,487 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net decrease | (89,469 | ) | (256,622 | ) | $ | (3,017,952 | ) | $ | (7,328,903 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Class C | ||||||||||||||||||||
Shares sold | 45,041 | 58,604 | $ | 1,528,970 | $ | 1,719,008 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Shares redeemed | (114,312 | ) | (343,360 | ) | (3,884,525 | ) | (9,878,956 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net decrease | (69,271 | ) | (284,756 | ) | $ | (2,355,555 | ) | $ | (8,159,948 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Advisor Class | ||||||||||||||||||||
Shares sold | 93,968 | 39,569 | $ | 5,231,311 | $ | 1,823,126 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Shares redeemed | (20,098 | ) | (66,564 | ) | (1,124,665 | ) | (3,055,301 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net increase (decrease) | 73,870 | (26,995 | ) | $ | 4,106,646 | $ | (1,232,175 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Class R | ||||||||||||||||||||
Shares sold | 2,611 | 4,470 | $ | 134,351 | $ | 192,091 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Shares redeemed | (3,583 | ) | (21,225 | ) | (188,569 | ) | (910,801 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net decrease | (972 | ) | (16,755 | ) | $ | (54,218 | ) | $ | (718,710 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Class K | ||||||||||||||||||||
Shares sold | 1,177 | 22,411 | $ | 61,991 | $ | 996,276 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Shares redeemed | (4,479 | ) | (9,132 | ) | (242,274 | ) | (398,427 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net increase (decrease) | (3,302 | ) | 13,279 | $ | (180,283 | ) | $ | 597,849 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Class I | ||||||||||||||||||||
Shares redeemed | – 0 | – | – 0 | –(a) | $ | – 0 | – | $ | (1 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net decrease | – 0 | – | – 0 | –(a) | $ | – 0 | – | $ | (1 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
(a) | Share amount is less than one full share. |
NOTE G
Risks Involved in Investing in the Fund
Capitalization Risk—Investments in small- and mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in small-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.
Derivatives Risk—The Fund may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Fund, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are
ALLIANCEBERNSTEIN GROWTH FUND • | 25 |
Notes to Financial Statements
far greater than the value of the derivatives reflected in the statement of assets and liabilities.
Focused Portfolio Risk—Investments in a limited number of companies may have more risk because changes in the value of a single security may have a more significant effect, either negative or positive, on the Fund’s net asset value, or NAV.
Indemnification Risk—In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.
NOTE H
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $140 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 expenses in the statement of operations. The Fund did not utilize the Facility during the six months ended January 31, 2014.
NOTE I
Components of Accumulated Earnings (Deficit)
As of July 31, 2013, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Accumulated capital and other losses | $ | (78,748,567 | )(a) | |
Unrealized appreciation/(depreciation) | 113,032,241 | (b) | ||
|
| |||
Total accumulated earnings/(deficit) | $ | 34,283,674 | ||
|
|
(a) | On July 31, 2013, the Fund had a net capital loss carryforward of $76,968,318. During the fiscal year, the Fund utilized $29,548,542 of capital loss carryforwards to offset current year net realized gains. At July 31, 2013, the Fund had a qualified late-year ordinary loss deferral of $1,780,249. These losses are deemed to arise on August 1, 2013. |
(b) | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales. |
For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Under the Regulated Investment Company Modernization Act of 2010, funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an indefinite period. These post-enactment capital losses must be utilized prior to the pre-enactment capital losses, which are subject to expiration. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous regulation.
26 | • ALLIANCEBERNSTEIN GROWTH FUND |
Notes to Financial Statements
As of July 31, 2013, the Fund had a net capital loss carryforward of $76,968,318 which will expire as follows:
SHORT-TERM | LONG-TERM | EXPIRATION | ||
$ 76,968,318 | n/a | 2017 |
NOTE J
Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.
ALLIANCEBERNSTEIN GROWTH FUND • | 27 |
Notes to Financial Statements
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
Class A | ||||||||||||||||||||||||
Six Months Ended January 31, 2014 (unaudited) | Year Ended July 31, | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ 48.62 | $ 40.28 | $ 38.67 | $ 31.40 | $ 27.73 | $ 35.95 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||
Net investment | (.16 | ) | (.08 | ) | (.06 | ) | (.16 | ) | (.09 | ) | .03 | |||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 6.01 | 8.42 | 1.67 | 7.43 | 3.76 | (8.25 | ) | |||||||||||||||||
|
| |||||||||||||||||||||||
Net increase (decrease) in net asset value | 5.85 | 8.34 | 1.61 | 7.27 | 3.67 | (8.22 | ) | |||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ 54.47 | $ 48.62 | $ 40.28 | $ 38.67 | $ 31.40 | $ 27.73 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||
Total investment return based on net asset value(b)* | 12.03 | % | 20.70 | % | 4.16 | % | 23.15 | % | 13.23 | % | (22.87 | )% | ||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||
Net assets, end of | $552,600 | $513,991 | $482,561 | $526,113 | $492,014 | $494,401 | ||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||
Expenses | 1.40 | %^ | 1.44 | % | 1.46 | % | 1.51 | %+ | 1.54 | %+ | 1.57 | % | ||||||||||||
Net investment income (loss) | (.61 | )%^ | (.18 | )% | (.17 | )% | (.43 | )%+ | (.28 | )%+ | .11 | % | ||||||||||||
Portfolio turnover rate | 33 | % | 70 | % | 103 | % | 145 | % | 229 | % | 189 | % |
See footnote summary on page 35.
28 | • ALLIANCEBERNSTEIN GROWTH FUND |
Financial Highlights
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
Class B | ||||||||||||||||||||||||
Six Months Ended January 31, 2014 (unaudited) | Year Ended July 31, | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ 31.65 | $ 26.43 | $ 25.58 | $ 20.94 | $ 18.64 | $ 24.37 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||
Net investment | (.24 | ) | (.27 | ) | (.25 | ) | (.29 | ) | (.22 | ) | (.14 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 3.92 | 5.49 | 1.10 | 4.93 | 2.52 | (5.59 | ) | |||||||||||||||||
|
| |||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | 3.68 | 5.22 | .85 | 4.64 | 2.30 | (5.73 | ) | |||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ 35.33 | $ 31.65 | $ 26.43 | $ 25.58 | $ 20.94 | $ 18.64 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||
Total investment return based on net asset value(b)* | 11.63 | % | 19.75 | % | 3.32 | % | 22.16 | % | 12.34 | % | (23.51 | )% | ||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period | $20,626 | $21,313 | $24,578 | $33,929 | $41,044 | $54,600 | ||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||
Expenses | 2.18 | %^ | 2.22 | % | 2.27 | % | 2.31 | %+ | 2.35 | %+ | 2.41 | % | ||||||||||||
Net investment | (1.38 | )%^ | (.95 | )% | (.97 | )% | (1.22 | )%+ | (1.08 | )%+ | (.78 | )% | ||||||||||||
Portfolio turnover rate | 33 | % | 70 | % | 103 | % | 145 | % | 229 | % | 189 | % |
See footnote summary on page 35.
ALLIANCEBERNSTEIN GROWTH FUND • | 29 |
Financial Highlights
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
Class C | ||||||||||||||||||||||||
Six Months Ended January 31, 2014 (unaudited) | Year Ended July 31, | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ 31.90 | $ 26.62 | $ 25.74 | $ 21.06 | $ 18.73 | $ 24.47 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||
Net investment | (.23 | ) | (.26 | ) | (.23 | ) | (.28 | ) | (.21 | ) | (.11 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 3.95 | 5.54 | 1.11 | 4.96 | 2.54 | (5.63 | ) | |||||||||||||||||
|
| |||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | 3.72 | 5.28 | .88 | 4.68 | 2.33 | (5.74 | ) | |||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ 35.62 | $ 31.90 | $ 26.62 | $ 25.74 | $ 21.06 | $ 18.73 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||
Total investment return based on net asset value(b)* | 11.66 | % | 19.84 | % | 3.42 | % | 22.22 | % | 12.44 | % | (23.46 | )% | ||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period | $65,999 | $61,326 | $58,755 | $64,319 | $62,462 | $62,069 | ||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||
Expenses | 2.12 | %^ | 2.16 | % | 2.18 | % | 2.24 | %+ | 2.27 | %+ | 2.31 | % | ||||||||||||
Net investment | (1.32 | )%^ | (.90 | )% | (.89 | )% | (1.15 | )%+ | (1.01 | )%+ | (.64 | )% | ||||||||||||
Portfolio turnover rate | 33 | % | 70 | % | 103 | % | 145 | % | 229 | % | 189 | % |
See footnote summary on page 35.
30 | • ALLIANCEBERNSTEIN GROWTH FUND |
Financial Highlights
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
Advisor Class | ||||||||||||||||||||||||
Six Months Ended January 31, 2014 (unaudited) | Year Ended July 31, | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ 51.34 | $ 42.40 | $ 40.59 | $ 32.86 | $ 28.93 | $ 37.39 | ||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||
Net investment | (.09 | ) | .05 | .05 | (.05 | ) | .01 | .08 | ||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 6.36 | 8.89 | 1.76 | 7.78 | 3.92 | (8.54 | ) | |||||||||||||||||
|
| |||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | 6.27 | 8.94 | 1.81 | 7.73 | 3.93 | (8.46 | ) | |||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ 57.61 | $ 51.34 | $ 42.40 | $ 40.59 | $ 32.86 | $ 28.93 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||
Total investment return based on net asset value(b)* | 12.21 | % | 21.09 | % | 4.46 | % | 23.52 | % | 13.58 | % | (22.63 | )% | ||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period | $12,041 | $6,938 | $6,875 | $8,915 | $9,513 | $10,129 | ||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||
Expenses | 1.10 | %^ | 1.14 | % | 1.16 | % | 1.21 | %+ | 1.24 | %+ | 1.27 | % | ||||||||||||
Net investment income (loss) | (.31 | )%^ | .12 | % | .13 | % | (.12 | )%+ | .03 | %+ | .30 | % | ||||||||||||
Portfolio turnover rate | 33 | % | 70 | % | 103 | % | 145 | % | 229 | % | 189 | % |
See | footnote summary on page 35. |
ALLIANCEBERNSTEIN GROWTH FUND • | 31 |
Financial Highlights
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
Class R | ||||||||||||||||||||||||
Six Months Ended January 31, 2014 (unaudited) | Year Ended July 31, | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ 48.29 | $ 40.06 | $ 38.52 | $ 31.32 | $ 27.67 | $ 35.87 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||
Net investment | (.21 | ) | (.12 | ) | (.12 | ) | (.19 | ) | (.11 | ) | .04 | |||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 5.97 | 8.35 | 1.66 | 7.39 | 3.76 | (8.24 | ) | |||||||||||||||||
|
| |||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | 5.76 | 8.23 | 1.54 | 7.20 | 3.65 | (8.20 | ) | |||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ 54.05 | $ 48.29 | $ 40.06 | $ 38.52 | $ 31.32 | $ 27.67 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||
Total investment return based on net asset value(b)* | 11.93 | % | 20.55 | % | 4.00 | % | 22.99 | % | 13.19 | % | (22.86 | )% | ||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period | $1,275 | $1,186 | $1,655 | $1,394 | $1,122 | $1,001 | ||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||
Expenses | 1.60 | %^ | 1.59 | % | 1.60 | % | 1.60 | %+ | 1.62 | %+ | 1.56 | % | ||||||||||||
Net investment income (loss) | (.80 | )%^ | (.29 | )% | (.32 | )% | (.53 | )%+ | (.37 | )%+ | .16 | % | ||||||||||||
Portfolio turnover rate | 33 | % | 70 | % | 103 | % | 145 | % | 229 | % | 189 | % |
See footnote summary on page 35.
32 | • ALLIANCEBERNSTEIN GROWTH FUND |
Financial Highlights
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
Class K | ||||||||||||||||||||||||
Six Months (unaudited) | Year Ended July 31, | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ 49.52 | $ 40.97 | $ 39.25 | $ 31.81 | $ 28.03 | $ 36.21 | ||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||
Net investment | (.12 | ) | (.03 | ) | .00 | (c) | (.08 | ) | (.01 | ) | .08 | |||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 6.13 | 8.58 | 1.72 | 7.52 | 3.79 | (8.26 | ) | |||||||||||||||||
|
| |||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | 6.01 | 8.55 | 1.72 | 7.44 | 3.78 | (8.18 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ 55.53 | $ 49.52 | $ 40.97 | $ 39.25 | $ 31.81 | $ 28.03 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||
Total investment return based on net asset value(b)* | 12.14 | % | 20.87 | % | 4.38 | % | 23.39 | % | 13.49 | % | (22.59 | )% | ||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period | $2,043 | $1,985 | $1,099 | $1,375 | $1,387 | $1,258 | ||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||
Expenses | 1.24 | %^ | 1.28 | % | 1.28 | % | 1.31 | %+ | 1.31 | %+ | 1.26 | % | ||||||||||||
Net investment income (loss) | (.45 | )%^ | (.06 | )% | .01 | % | (.21 | )%+ | (.04 | )%+ | .29 | % | ||||||||||||
Portfolio turnover rate | 33 | % | 70 | % | 103 | % | 145 | % | 229 | % | 189 | % |
See | footnote summary on page 35. |
ALLIANCEBERNSTEIN GROWTH FUND • | 33 |
Financial Highlights
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
Class I | ||||||||||||||||||||||||
Six Months Ended January 31, 2014 (unaudited) | Year Ended July 31, | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ 50.89 | $ 41.96 | $ 40.08 | $ 32.38 | $ 28.43 | $ 36.61 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||
Net investment | (.05 | ) | .13 | .13 | .04 | .03 | .34 | |||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 6.31 | 8.80 | 1.75 | 7.66 | 3.92 | (8.52 | ) | |||||||||||||||||
|
| |||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | 6.26 | 8.93 | 1.88 | 7.70 | 3.95 | (8.18 | ) | |||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ 57.15 | $ 50.89 | $ 41.96 | $ 40.08 | $ 32.38 | $ 28.43 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||
Total investment return based on net asset value(b)* | 12.30 | % | 21.28 | % | 4.69 | % | 23.78 | % | 13.89 | % | (22.34 | )% | ||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period | $18 | $16 | $13 | $12 | $10 | $2,499 | ||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||
Expenses | .96 | %^ | .95 | % | .96 | % | .97 | %+ | .83 | %+ | .97 | % | ||||||||||||
Net investment income (loss) | (.18 | )%^ | .29 | % | .33 | % | .10 | %+ | .32 | %+ | 1.37 | % | ||||||||||||
Portfolio turnover rate | 33 | % | 70 | % | 103 | % | 145 | % | 229 | % | 189 | % |
See footnote summary on page 35.
34 | • ALLIANCEBERNSTEIN GROWTH FUND |
Financial Highlights
(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 return does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Total investment return calculated for a period of less than one year is not annualized. |
(c) | Amount is less than $.005. |
* | Includes the impact of proceeds received and credited to the Fund resulting from class action settlements, which enhanced the Fund’s performance for the six months ended January 31, 2014 and years ended July 31, 2013, July 31, 2012, July 31, 2011, July 31, 2010 and July 31, 2009 by 0.09%, 0.06%, 0.38%, 0.25%, 0.25% and 0.55%, respectively. |
Includes the impact of proceeds received and credited to the Fund resulting from third party regulatory settlements, which enhanced the Fund’s performance for the years ended July 31, 2012 and July 31, 2011 by 0.08% and 0.02%, respectively. |
^ | Annualized. |
+ | The ratio includes expenses attributable to costs of proxy solicitation. |
See notes to financial statements.
ALLIANCEBERNSTEIN GROWTH FUND • | 35 |
Financial Highlights
TRUSTEES
Marshall C. Turner, Jr.,(1) Chairman John H. Dobkin(1) Michael J. Downey(1) William H. Foulk, Jr.,(1) D. James Guzy(1) | Nancy P. Jacklin(1) Robert M. Keith, President and Chief Executive Officer Garry L. Moody(1) Earl D. Weiner(1) |
OFFICERS
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer Bruce K. Aronow(2), Vice President Frank V. Caruso(2), Vice President John H. Fogarty(2), Vice President | Emilie D. Wrapp, Clerk Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller and Chief Accounting Officer Vincent S. Noto, Chief Compliance Officer |
Custodian and Accounting Agent State Street Bank and Trust Company
Principal Underwriter AllianceBernstein Investments, Inc.
Legal Counsel Seward & Kissel LLP | Transfer Agent AllianceBernstein Investor
| |
Independent Registered Public Accounting Firm Ernst & Young LLP
| ||
(1) | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. Mr. Foulk and Ms. Jacklin are members of the Fair Value Pricing Committee. |
(2) | The day-to-day management of, and investment decisions for, the Portfolio’s portfolio are made by the Adviser’s Growth Investment Team. Messrs. Aronow, Caruso and Forgarty are the investment professionals with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
36 | • ALLIANCEBERNSTEIN GROWTH FUND |
Trustees
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER’S EVALUATION OF INVESTMENT ADVISORY AGREEMENT1
The following is a summary of the evaluation of the Investment Advisory Agreement between AllianceBernstein L.P. (the “Adviser”) and The AllianceBernstein Portfolios (the “Trust”) in respect of AllianceBernstein Growth Fund (the “Fund”).2 The evaluation of the Investment Advisory Agreement was prepared by Philip L. Kirstein, the Senior Officer of the Fund, for the Trustees of the Fund, as required by a September 2004 agreement between the Adviser and the New York State Attorney General (the “NYAG”). The Senior Officer’s evaluation of the Investment Advisory Agreement is not meant to diminish the responsibility or authority of the Board of Trustees of the Fund to perform its duties pursuant to Section 15 of the Investment Company Act of 1940 (the “40 Act”) and applicable state law. The purpose of the summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees proposed to be paid by the Fund which was provided to the Trustees in connection with their review of the proposed approval of the continuance of the Investment Advisory Agreement. The Senior Officer’s evaluation considered the following factors:
1. | Advisory fees charged to institutional and other clients of the Adviser for like services; |
2. | Advisory fees charged by other mutual fund companies for like services; |
3. | Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit; |
4. | Profit margins of the Adviser and its affiliates from supplying such services; |
5. | Possible economies of scale as the Fund grows larger; and |
6. | Nature and quality of the Adviser’s services including the performance of the Fund. |
These factors, with the exception of the first factor, are generally referred to as the “Gartenberg factors,” which were articulated by the United States Court of Appeals for the Second Circuit in 1982. Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F. 2d 923 (2d Cir. 1982). On March 30, 2010, the Supreme Court held the Gartenberg decision was correct in its basic formulation of what §36(b) requires: to face liability under §36(b), “an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable
1 | It should be noted that the information in the fee evaluation was completed on April 22, 2013 and discussed with the Board of Trustees on April 30-May 2, 2013. |
2 | Future references to the Trust/Fund do not include “AllianceBernstein.” References in the fee summary pertaining to performance and expense ratio rankings refer to the Class A shares of the Fund. |
ALLIANCEBERNSTEIN GROWTH FUND • | 37 |
relationship to the services rendered and could not have been the product of arm’s length bargaining.” Jones v. Harris Associates L.P., 130 S. Ct. 1418 (2010). In Jones, the Court stated the Gartenberg approach fully incorporates the correct understanding of fiduciary duty within the context of section 36(b) and noted with approval that “Gartenberg insists that all relevant circumstances be taken into account” and “uses the range of fees that might result from arm’s length bargaining as the benchmark for reviewing challenged fees.”3
FUND ADVISORY FEES, NET ASSETS & EXPENSE RATIOS
The Adviser proposed that the Fund pays the advisory fee set forth in the table below for receiving the services to be provided pursuant to the Investment Advisory Agreement. The fee schedule below, implemented in January 2004 in consideration of the Adviser’s settlement with the NYAG in December 2003, is based on a master schedule that contemplates eight categories of funds with almost all funds in each category having the same advisory fee schedule.4
Category | Advisory Fee Schedule5 | March 31, 2013 Net Assets ($MM) | Fund | |||||
Growth | 0.75% on 1st $2.5 billion 0.65% on next $2.5 billion 0.60% on the balance | $ | 589.4 | Growth Fund |
Set forth below are the Fund’s annualized semi-annual total expense ratios:6
Fund | Total Expense Ratio7 | Fiscal Year End | ||||||
Growth Fund | Advisor Class A Class B Class C Class R Class K Class I |
| 1.18 1.48 2.26 2.20 1.60 1.29 0.96 | % % % % % % % | July 31 (ratio as of January 31, 2013) |
I. | ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS |
The advisory fees charged to investment companies which the Adviser manages and sponsors are normally higher than those charged to similar sized institutional accounts, including pension plans and sub-advised investment companies.
3 | Jones v. Harris at 1427. |
4 | Most of the AllianceBernstein Mutual Funds, which the Adviser manages, were affected by the Adviser’s settlement with the NYAG. |
5 | The advisory fee of the Fund is based on the percentage of the Fund’s average daily net assets and is paid on a monthly basis. |
6 | Semi-annual total expense ratios are unaudited. |
7 | Annualized. |
38 | • ALLIANCEBERNSTEIN GROWTH FUND |
The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services provided by the Adviser to the Fund that are not provided to non-investment company clients and sub-advised investment companies include providing office space and personnel to serve as Fund Officers, who among other responsibilities make the certifications required under the Sarbanes–Oxley Act of 2002, and coordinating with and monitoring the Fund’s third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative, legal and compliance requirements for the Fund are more costly than those for institutional assets due to the greater complexities and time required for investment companies. Also, retail mutual funds managed by the Adviser are widely held. Servicing the Fund’s investors is more time consuming and labor intensive compared to institutional clients since the Adviser needs to communicate with a more extensive network of financial intermediaries and shareholders. The Adviser also believes that it incurs substantial entrepreneurial risk when offering a new mutual fund since establishing a new mutual fund requires a large upfront investment and it may take a long time for the fund to achieve profitability since the fund must be priced to scale from inception in order to be competitive and assets are acquired one account at a time. In addition, managing the cash flow of an investment company may be more difficult than managing that of a stable pool of assets, such as an institutional account with little cash movement in either direction, particularly, if a fund is in net redemption and the Adviser is frequently forced to sell securities to raise cash for redemptions. However, managing a fund with positive cash flow may be easier at times than managing a stable pool of assets. Finally, in recent years, investment advisers have been sued by institutional clients and have suffered reputational damage both by the attendant publicity and outcomes other than complete victories. Accordingly, the legal and reputational risks associated with institutional accounts are greater than previously thought, although still not equal to those related to the mutual fund industry.
Notwithstanding the Adviser’s view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Supreme Court has indicated consideration should be given to the advisory fees charged to institutional accounts with a substantially similar investment style as the Fund.8 In addition to the AllianceBernstein institutional fee schedule, set forth below is what would have been the effective
8 | The Supreme Court stated that “courts may give such comparisons the weight that they merit in light of the similarities and differences between the services that the clients in question require, but the courts must be wary of inapt comparisons.” Among the significant differences the Supreme Court noted that may exist between services provided to mutual funds and institutional accounts are “higher marketing costs.” Jones v. Harris at 1428. |
ALLIANCEBERNSTEIN GROWTH FUND • | 39 |
advisory fee of the Fund had the AllianceBernstein institutional fee schedule been applicable to the Fund based on the Fund’s March 31, 2013 net assets:9
Fund | Net 3/31/13 ($MIL) | AllianceBernstein Institutional Fee Schedule | Effective AB Inst. Adv. Fee | Effective Fund Adv. Fee | ||||||||
Growth Fund | $589.4 | U.S. Growth | 0.305% | 0.750% | ||||||||
0.80% on 1st $25 million | ||||||||||||
0.50% on next $25 million | ||||||||||||
0.40% on next $50 million | ||||||||||||
0.30% on next $100 million | ||||||||||||
0.25% on the balance | ||||||||||||
Minimum Account Size: $25m |
The adviser also manages the AllianceBernstein Variable Products Series Fund, Inc. (“AVPS”), which is available through variable annuity and variable life contracts offered by other financial institutions and offers policyholders the option to utilize certain AVPS portfolios as the investment option underlying their insurance contracts. Set forth below is the fee schedule of the AVPS portfolio that has a substantially similar investment style as the Fund.10 Also shown is the Fund’s advisory fee and what would have been the effective advisory fee of the Fund had the AVPS fee schedule been applicable to the Fund based on March 31, 2013 net assets:
Fund | AVPS Portfolio | Fee Schedule | Effective AVPS Adv. Fee | Effective Fund Adv. Fee | ||||||||
Growth Fund | Growth Portfolio | 0.75% on first $2.5 billion 0.65% on next $2.5 billion 0.60% on the balance | 0.750% | 0.750% |
The AllianceBernstein Investment Trust Management mutual funds (“ITM”), which are offered to investors in Japan, have an “all-in” fee to compensate the Adviser for investment advisory as well as fund accounting and administrative related services. The fee schedule of the ITM mutual fund that has a somewhat similar investment style as the Fund is as follows:
Fund | ITM Mutual Fund | Fee | ||
Growth Fund | AllianceBernstein U.S. Growth Stock Fund A, B- Hedged/ Unhedged | 0.75% |
9 | The Adviser has indicated that with respect to institutional accounts with assets greater than $300 million, it will negotiate a fee schedule. Discounts that are negotiated vary based upon each client relationship. |
10 | The AVPS portfolio was also affected by the settlement between the Adviser and the NYAG. As a result, the Fund has the same breakpoints in its advisory fee schedule as the AVPS portfolio. |
40 | • ALLIANCEBERNSTEIN GROWTH FUND |
The Adviser represented that it does not sub-advise any registered investment company with a substantially similar investment style as the Fund.
II. | MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES. |
Lipper, Inc. (“Lipper”), an analytical service that is not affiliated with the Adviser, compared the fees charged to the Fund with fees charged to other investment companies for similar services offered by other investment advisers.11 Lipper’s analysis included the comparison of the Fund’s contractual management fee, estimated at the approximate current asset level of the Fund, to the median of the Fund’s Lipper Expense Group (“EG”) and the Fund’s contractual management fee ranking.12,13
Lipper describes an EG as a representative sample of comparable funds. Lipper’s standard methodology for screening funds to be included in an EG entails the consideration of several fund criteria, including fund type, investment classification/objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, expense components and attributes. An EG will typically consist of seven to twenty funds.
Fund | Contractual Fee (%) | Lipper EG Median (%) | Lipper Rank | |||||||||
Growth Fund | 0.750 | 0.750 | 4/17 |
Lipper also compared the Fund’s most recently completed fiscal year total expense ratio to the medians of the Fund’s EG and Lipper Expense Universe (“EU”). The EU is as a broader group compared to the EG, consisting of all funds that have the same investment classification/objective and load type as the
11 | The Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since “these comparisons are problematic because these fees, like those challenged, may not be the product of negotiations conducted at arm’s length.” Jones v. Harris at 1429. |
12 | Lipper does not consider average account size when constructing EGs. Funds with relatively small average account sizes tend to have higher transfer agent expense ratio than comparable sized funds that have relatively large average account sizes. Note that there are limitations on Lipper expense category data because different funds categorize expenses differently. |
13 | The contractual management fee is calculated by Lipper using the Fund’s contractual management fee rate at a hypothetical asset level. The hypothetical asset level is based on the combined net assets of all classes of the Fund, rounded up to the next $25 million. Lipper’s total expense ratio information is based on the most recent annual report except as otherwise noted. A ranking of “1” would mean that the Fund had the lowest effective fee rate in the Lipper peer group. |
ALLIANCEBERNSTEIN GROWTH FUND • | 41 |
subject Fund.14 Set forth below is Lipper’s comparison of the Fund’s total expense ratio and the median of the Fund’s EG and EU. The Fund’s total expense ratio ranking is also shown.
Fund | Total Expense Ratio (%)15 | Lipper EG Median (%) | Lipper EG Rank | Lipper EU Median (%) | Lipper EU Rank | |||||||||||||
Growth Fund | 1.456 | 1.244 | 14/17 | 1.235 | 88/102 |
Based on this analysis, the Fund has a more favorable ranking on a contractual management fee basis than it does on a total expense ratio basis.
III. | COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE ADVISORY FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT. |
The Adviser utilizes two profitability reporting systems, which operate independently but are aligned with each other, to estimate the Adviser’s profitability in connection with investment advisory services provided to the Fund. The Senior Officer has retained a consultant to provide independent advice regarding the alignment of the two profitability systems as well as the methodologies and allocations utilized by both profitability systems. See Section IV for additional discussion.
IV. | PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES. |
The Fund’s profitability information, prepared by the Adviser for the Board of Trustees, was reviewed by the Senior Officer and the consultant. The Adviser’s profitability from providing investment advisory services to the Fund decreased during calendar year 2012, relative to 2011.
In addition to the Adviser’s direct profits from managing the Fund, certain of the Adviser’s affiliates have business relationships with the Fund and may earn a profit from providing other services to the Fund. The courts have referred to this type of business opportunity as “fall-out benefits” to the Adviser and indicated that such benefits should be factored into the evaluation of the total relationship between the Fund and the Adviser. Neither case law nor common business practice precludes the Adviser’s affiliates from earning a reasonable profit on this type of relationship provided the affiliates’ charges and services are competitive and the relationship otherwise complies with the 40 Act restrictions. These affiliates provide transfer agent, distribution and brokerage related services to the Fund
14 | Except for asset (size) comparability, Lipper uses the same criteria for selecting an EG peer when selecting an EU peer. Unlike the EG, the EU allows for the same adviser to be represented by more than just one fund. |
15 | Most recently completed fiscal year end Class A total expense ratio. |
42 | • ALLIANCEBERNSTEIN GROWTH FUND |
and receive transfer agent fees, Rule 12b-1 payments, front-end sales loads, contingent deferred sales charges (“CDSC”) and brokerage commissions. In addition, the Adviser benefits from soft dollar arrangements which offset expenses the Adviser would otherwise incur.
AllianceBernstein Investments, Inc. (“ABI”), an affiliate of the Adviser, is the Fund’s principal underwriter. ABI and the Adviser have disclosed in the Fund’s prospectus that they may make revenue sharing payments from their own resources, in addition to resources derived from sales loads and Rule 12b-1 fees, to firms that sell shares of the Fund. In 2012, ABI paid approximately 0.05% of the average monthly assets of the AllianceBernstein Mutual Funds or approximately $19 million for distribution services and educational support (revenue sharing payments).
During the Fund’s most recently completed fiscal year, ABI received from the Fund $5,096, $2,359,062 and $24,291 in front-end sales charges, Rule 12b-1 and CDSC fees, respectively.
Fees and reimbursements for out of pocket expenses charged by AllianceBernstein Investor Services, Inc. (“ABIS”), the affiliated transfer agent for the Fund, are charged on a per account basis, based on the level of service provided and the class of share held by the account. ABIS also receives a fee per shareholder sub-account for each account maintained by an intermediary on an omnibus basis. During the Fund’s most recently completed fiscal year, ABIS received $1,179,154 in fees from the Fund.
The Fund effected brokerage transactions through the Adviser’s affiliate, Sanford C. Bernstein & Co., LLC (“SCB & Co.”) and/or its U.K. affiliate, Sanford C. Bernstein Limited (“SCB Ltd.”), collectively “SCB,” and paid commissions during the Fund’s most recently completed fiscal year. The Adviser represented that SCB’s profitability from business conducted with the Fund is comparable to the profitability of SCB’s dealings with other similar third party clients. In the ordinary course of business, SCB receives and pays liquidity rebates from electronic communications networks (“ECNs”) derived from trading for its clients, including the Fund. These credits and charges are not being passed onto any SCB client. The Adviser also receives certain soft dollar benefits from brokers that execute agency trades for the Fund and other clients. These soft dollar benefits reduce the Adviser’s cost of doing business and increase its profitability.
V. | POSSIBLE ECONOMIES OF SCALE |
The Adviser has indicated that economies of scale are being shared with shareholders through pricing to scale, breakpoints, fee reductions/waivers and enhancement to services.
ALLIANCEBERNSTEIN GROWTH FUND • | 43 |
In May 2012, an independent consultant, retained by the Senior Officer, provided the Board of Trustees information on the Adviser’s firm-wide average costs from 2005 through 2011 and the potential economies of scale. The independent consultant noted that from 2005 through 2007 the Adviser experienced significant growth in assets under management (“AUM”). During this period, operating expenses increased, in part to keep up with growth, and in part reflecting market returns. However, from 2008 through the first quarter of 2009, AUM rapidly and significantly decreased due to declines in market value and client withdrawals. When AUM rapidly decreased, some operating expenses categories, including base compensation and office space, adjusted more slowly during this period, resulting in an increase in average costs. Since 2009, AUM has experienced less significant changes. The independent consultant noted that changes in operating expenses reflect changes in business composition and business practices in response to changes in financial markets. Finally, the independent consultant concluded that the increase in average cost and the decline in net operating margin across the Adviser since late 2008 are inconsistent with the view that there are currently reductions in average costs due to economies of scale that can be shared with the AllianceBernstein Mutual Funds managed by the Adviser through lower fees.
Previously, in February 2008, the independent consultant provided the Board of Trustees an update of the Deli16 study on advisory fees and various fund characteristics.17 The independent consultant first reiterated the results of his previous two dimensional comparison analysis (fund size and family size) with the Board of Trustees.18 The independent consultant then discussed the results of the regression model that was utilized to study the effects of various factors on advisory fees. The regression model output indicated that the bulk of the variation in fees predicted were explained by various factors, but substantially by fund AUM, family AUM, index fund indicator and investment style. The independent consultant also compared the advisory fees of the AllianceBernstein Mutual Funds to similar funds managed by 19 other large asset managers, regardless of the fund size and each Adviser’s proportion of mutual fund assets to non-mutual fund assets.
16 | The Deli study, originally published in 2002 based on 1997 data and updated for the February 2008 Presentation, may be of diminished value due to the age of the data used in the presentation and the changes experienced in the industry over the last four years. |
17 | As mentioned previously, the Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since the fees may not be the product of negotiations conducted at arm’s length. See Jones V. Harris at 1429. |
18 | The two dimensional analysis showed patterns of lower advisory fees for funds with larger asset sizes and funds from larger family sizes compared to funds with smaller asset sizes and funds from smaller family sizes, which according to the independent consultant is indicative of a sharing of economies of scale and scope. However, in less liquid and active markets, such is not the case, as the empirical analysis showed potential for diseconomies of scale in those markets. The empirical analysis also showed diminishing economies of scale and scope as funds surpassed a certain high level of assets. |
44 | • ALLIANCEBERNSTEIN GROWTH FUND |
VI. | NATURE AND QUALITY OF THE ADVISER’S SERVICES, INCLUDING THE PERFORMANCE OF THE FUND |
With assets under management of approximately $443 billion as of March 31, 2013, the Adviser has the investment experience to manage and provide non-investment services (described in Section I) to the Fund.
The information prepared by Lipper shows the 1, 3, 5 and 10 year performance returns and rankings of the Fund19 relative to its Lipper Performance Group (“PG”) and Lipper Performance Universe (“PU”)20 for the periods ended February 28, 2013.21
Fund | PG Median | PU Median | PG Rank | PU Rank | ||||||||||||
Growth Fund | ||||||||||||||||
1 year | 7.29 | 8.13 | 7.54 | 11/17 | 65/121 | |||||||||||
3 year | 12.04 | 12.06 | 11.79 | 9/15 | 46/113 | |||||||||||
5 year | 4.65 | 4.98 | 4.77 | 8/13 | 56/104 | |||||||||||
10 year | 7.60 | 7.60 | 7.55 | 5/9 | 35/75 |
Set forth below are the 1, 3, 5, 10 year and since inception performance returns of the Fund (in bold)22 versus its benchmark. 23 Fund and benchmark volatility and reward-to-variability ratio (“Sharpe Ratio”) information is also shown.24
19 | The performance rankings are for the Class A shares of the Fund. The Fund’s performance returns shown were provided by Lipper. |
20 | The Fund’s PG is identical to the Fund’s EG. The Fund’s PU is not identical to the Fund’s EU as the criteria for including/excluding a fund from a PU is somewhat different from that of an EU. |
21 | Lipper investment classification/objective dictates the PG and PU throughout the life of the fund even if a fund had a different investment classification/objective at a different point in time. |
22 | The performance returns and risk measures shown in the table are for the Class A shares of the Fund. |
23 | The Adviser provided Fund and benchmark performance return information for periods through February 28, 2013. |
24 | Fund and benchmark volatility and Sharpe Ratio information was obtained through Lipper LANA, a database maintained by Lipper. Volatility is a statistical measure of the tendency of a market price or yield to vary over time. The Sharpe Ratio is a risk adjusted measure of return that divides a fund’s return in excess of the riskless return by the fund’s standard deviation. A fund with a greater volatility would be viewed as more risky than a fund with equivalent performance but lower volatility; for that reason, a greater return would be demanded for the more risky fund. A fund with a higher Sharpe Ratio would be viewed as better performing than a fund with a lower Sharpe Ratio. |
ALLIANCEBERNSTEIN GROWTH FUND • | 45 |
Periods Ending February 28, 2012 Annualized Performance | ||||||||||||||||||||||||||||||||
1 Year (%) | 3 Year (%) | 5 Year (%) | 10 Year (%) | Since Inception (%) | Annualized | Risk Period (Year) | ||||||||||||||||||||||||||
Volatility (%) | Sharpe (%) | |||||||||||||||||||||||||||||||
Growth Fund | 7.29 | 12.04 | 4.65 | 7.60 | 8.83 | 17.01 | 0.41 | 10 | ||||||||||||||||||||||||
Russell 1000 Growth Index25 | 9.60 | 13.80 | 6.38 | 8.42 | 8.97 | 15.00 | 0.50 | 10 | ||||||||||||||||||||||||
Russell 3000 Growth Index | 9.71 | 13.95 | 6.50 | 8.63 | 8.89 | N/A | N/A | N/A | ||||||||||||||||||||||||
Inception Date: September 4, 1990 |
CONCLUSION:
Based on the factors discussed above the Senior Officer’s conclusion is that the proposed advisory fee for the Fund is reasonable and within the range of what would have been negotiated at arm’s-length in light of all the surrounding circumstances. This conclusion in respect of the Fund is based on an evaluation of all of these factors and no single factor was dispositive.
Dated: May 29, 2013
25 | Prior to November 3, 2008, the Fund’s benchmark was the Russell 3000 Growth Index. |
46 | • ALLIANCEBERNSTEIN GROWTH FUND |
THIS PAGE IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
ALLIANCEBERNSTEIN FAMILY OF FUNDS
US Equity
US Core
Core Opportunities Fund
Growth & Income Fund
Select US Equity Portfolio
US Growth
Concentrated Growth Fund
Discovery Growth Fund
Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
US Value
Discovery Value Fund
Equity Income Fund
Value Fund
International/Global Equity
International/Global Core
Global Equity & Covered Call Strategy Fund
Global Thematic Growth Fund
International Portfolio
Tax-Managed International Portfolio
International/Global Growth
International Discovery Equity Portfolio
International Growth Fund
International/Global Value
Global Value Fund
International Value Fund
Fixed Income
Municipal
High Income Municipal Portfolio
Intermediate California Portfolio
Intermediate Diversified Portfolio
Intermediate New York Portfolio
Municipal Bond Inflation Strategy
Tax-Aware Fixed Income Portfolio
National Portfolio
Arizona Portfolio
California Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
New York Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
Fixed Income (continued)
Taxable
Bond Inflation Strategy
Global Bond Fund
High Income Fund
Intermediate Bond Portfolio
Limited Duration High Income Portfolio
Short Duration Portfolio
Alternatives
Dynamic All Market Fund
Global Real Estate Investment Fund
Global Risk Allocation Fund
Market Neutral Strategy-Global
Market Neutral Strategy-U.S.
Real Asset Strategy
Select US Long/Short Portfolio
Unconstrained Bond Fund
Asset Allocation/Multi-Asset
Multi-Asset
Emerging Markets Multi-Asset Portfolio
Retirement Strategies
2000 Retirement Strategy
2005 Retirement Strategy
2010 Retirement Strategy
2015 Retirement Strategy
2020 Retirement Strategy
2025 Retirement Strategy
2030 Retirement Strategy
2035 Retirement Strategy
2040 Retirement Strategy
2045 Retirement Strategy
2050 Retirement Strategy
2055 Retirement Strategy
Wealth Strategies
Balanced Wealth Strategy
Conservative Wealth Strategy
Wealth Appreciation Strategy
Tax-Managed Balanced Wealth Strategy
Tax-Managed Conservative Wealth Strategy
Tax-Managed Wealth Appreciation Strategy
Closed-End Funds
Alliance California Municipal Income Fund
Alliance New York Municipal Income Fund
AllianceBernstein Global High Income Fund
AllianceBernstein Income Fund
AllianceBernstein National Municipal Income Fund
We also offer Exchange Reserves, which serves as the money market fund exchange vehicle for the AllianceBernstein mutual funds. An investment in Exchange Reserves is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.alliancebernstein.com or contact your AllianceBernstein investments representative. Please read the prospectus and/or summary prospectus carefully before investing.
ALLIANCEBERNSTEIN GROWTH FUND • | 47 |
AllianceBernstein Family of Funds
NOTES
48 | • ALLIANCEBERNSTEIN GROWTH FUND |
NOTES
ALLIANCEBERNSTEIN GROWTH FUND • | 49 |
NOTES
50 | • ALLIANCEBERNSTEIN GROWTH FUND |
NOTES
ALLIANCEBERNSTEIN GROWTH FUND • | 51 |
NOTES
52 | • ALLIANCEBERNSTEIN GROWTH FUND |
ALLIANCEBERNSTEIN GROWTH FUND
1345 Avenue of the Americas
New York, NY 10105
800.221.5672
GRO-0152-0114 |
ITEM 2. CODE OF ETHICS.
Not applicable when filing a semi-annual report to shareholders.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable when filing a semi-annual report to shareholders.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable when filing a semi-annual report to shareholders.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the registrant.
ITEM 6. SCHEDULE OF INVESTMENTS.
Please see Schedule of Investments contained in the Report to Shareholders included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board of Directors since the Fund last provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective at the reasonable assurance level based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.
(b) There were no changes in the registrant’s internal controls over financial reporting that occurred during the second fiscal quarter of the period that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
ITEM 12. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
EXHIBIT | DESCRIPTION OF EXHIBIT | |
12 (b) (1) | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
12 (b) (2) | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
12 (c) | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): The AllianceBernstein Portfolios | ||
By: | /s/ Robert M. Keith | |
Robert M. Keith President | ||
Date: | March 17, 2014 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Robert M. Keith | |
Robert M. Keith President | ||
Date: | March 17, 2014 |
By: | /s/ Joseph J. Mantineo | |
Joseph J. Mantineo Treasurer and Chief Financial Officer | ||
Date: | March 17, 2014 |