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: 811-00204
AllianceBernstein Mid-Cap Growth Fund, Inc.
(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)
Mark R. Manley
Alliance Capital Management 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, 2005
Date of reporting period: July 31, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
[LOGO] ALLIANCEBERNSTEIN (R)
Investment Research and Management
AllianceBernstein Mid-Cap Growth Fund
Annual Report
July 31, 2005
ANNUAL REPORT
Investment Products Offered
- ---------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
- ---------------------------
The investment return and principal value of an investment in the Fund will
fluctuate as the prices of the individual securities in which it invests
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. You should consider the investment objectives, risks,
charges and expenses of the Fund carefully before investing. For a free copy of
the Fund's prospectus, which contains this and other information, visit our web
site at www.alliancebernstein.com or call your financial advisor or
AllianceBernstein at (800) 227-4618. Please read the prospectus carefully
before you invest.
You may obtain performance information current to the most recent month-end by
visiting www.alliancebernstein.com.
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 web site at
www.alliancebernstein.com, or go to the Securities and Exchange Commission's
(the "Commission") web site 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 web site 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 Investment Research and Management, Inc. is an affiliate of
Alliance Capital Management L.P., the manager of the funds, and is a member of
the NASD.
September 16, 2005
Annual Report
This report provides management's discussion of fund performance for
AllianceBernstein Mid-Cap Growth Fund (the "Fund") for the annual reporting
period ended July 31, 2005.
Investment Objective and Policies
The Fund is an open-end, diversified investment company that seeks long-term
growth of capital and income primarily through investments in common stocks
that Alliance Capital believes will appreciate in value. The Fund invests
predominantly in the stocks of mid-capitalization companies. This Fund can also
invest in foreign securities.
Investment Results
The table on page 4 shows the Fund's performance compared to its benchmark, the
Russell MidCap Growth Index, for the six- and 12-month periods ended July 31,
2005. The Fund underperformed the benchmark for both periods under review.
During both periods, sector weightings contributed both positively and
negatively to the Fund's performance, while stock selection detracted from
performance.
During the 12-month reporting period, the Fund's underweighted position in the
energy sector was the leading contributor to underperformance versus the
benchmark. The Fund's large overweighted position in the technology sector also
detracted from performance. A modest overweighted position in utilities, in
addition to an underweighted position in the auto & transportation sector,
contributed positively to the Fund's performance during the annual reporting
period. Stock selection also detracted from the Fund's performance over this
time frame.
The Fund's underweighted position in the energy sector was also the leading
contributor to the Fund's underperformance over the six-month period ended July
31, 2005. A large overweighted position in the technology sector also detracted
from the Fund's performance. An underweighted position in the auto &
transportation sector, in addition to a modest overweighted position in the
utilities sector, contributed to the Fund's performance during the six-month
period. Stock selection also detracted from performance during this time frame.
Market Review and Investment Strategy
The past year has been a busy one for the financial markets. The markets began
the period concerned over the winner of the U.S. presidential election,
contemplating the implications of a tightening U.S. Federal Reserve (the "Fed")
which had just begun to raise interest rates, worrying about higher oil prices
which had increased 36% from July 31, 2003, and struggling with a surprising
rise in inventories in the technology sector. Since that time, the Fed has
continued to tighten monetary policy, raising rates one quarter point every
meeting since June 30, 2004. The price of crude oil has risen from $43.80 on
July 31, 2004 to $60.75 one year later, which is an increase of another 39%,
and this despite crude oil inventories in the United States being at multi-year
highs. The technology inventories have been cleaned out, with some areas of
technology experiencing shortages of product. Finally, the U.S. economy
continued to expand at a generous clip, leaving some investors to wonder why
such concerns existed just a year ago.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 1
In response to these and other inputs, the Fund's portfolio manager has shifted
the Fund's position in the energy sector from a large overweighted position it
enjoyed just 12 months ago, to a markedly underweighted position as the
fundamentals, namely inventories, continue to deteriorate. The portfolio
manager has maintained the Fund's underweighted position in financials with the
assumption that tightening monetary policy and a flattening yield curve should
impact the earnings of the sector. The Fund's position in technology was
expanded as the sector suffered through last summer's inventory correction.
This correction benefited the Fund in the two months after President Bush's
re-election but has detracted from it since. Finally, the portfolio manager has
continued to purchase stocks for the Fund that should benefit the most from big
themes evolving in the U.S. and global economies. These themes included
broadband, the productivity super-cycle and deverticalization, personalized
medicine, and the development of the middle class in emerging markets.
During the six-month period ended July 31, 2005, the financial markets have
been dominated by one sector and topic, energy. Energy has been by far the
strongest sector of any benchmark, which has been especially true in the high
beta Russell MidCap Growth Index. Over the period stretching from January 31,
2005 through July 31, 2005, the price of crude oil was up 26%, with the energy
sector up a corresponding amount, and this despite crude oil inventories in the
U.S. being at multi-year highs. Over the same period, the Fed has increased
interest rates 0.25% four times, bringing the Fed Funds rate to 3.25%. Similar
to the 12-month period, technology inventories, which had been built last
summer, have been cleaned out, with some areas of technology experiencing
shortages of product.
The portfolio manager continued to shift the Fund's overweighted position in
energy to a markedly underweight position as the fundamentals, namely
inventories, continued to deteriorate during the six-month period. The Fund has
maintained its underweighted position in financials. An overweighted position
in the technology sector has been maintained as the fundamentals of two of the
Fund's major themes, namely the broadband revolution and the productivity
super-cycle, seem to be intact. Finally, though the Fund is underweighted in
health care, companies addressing personalized medicine in health care continue
to be emphasized.
The Fund's holdings are classified throughout this report according to Alliance
Capital's sector classification (for a visual representation of the Fund's
sector breakdown, please see the pie chart on page 7). For readers specifically
interested in the Russell sector classification of this Fund, the sector
breakdown according to Russell's classification is as follows: Technology
36.2%, Consumer Discretionary 27.7%, Health Care 14.0%, Producer Durables 8.6%,
Financial Services 7.1%, Utilities 3.9%, Autos & Transportation 0.9% and Cash
1.6%.
_______________________________________________________________________________
2 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Historical Performance
- -------------------------------------------------------------------------------
HISTORICAL PERFORMANCE
An Important Note About the Value of Historical Performance
The 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.
The investment return and principal value of an investment in the Fund will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. You should consider the investment objectives, risks,
charges and expenses of the Fund carefully before investing. For a free copy of
the Fund's prospectus, which contains this and other information, visit our web
site at www.alliancebernstein.com or call your financial advisor or
AllianceBernstein at (800) 227-4618. You should read the prospectus carefully
before you invest.
Returns are annualized for periods longer than one year. 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 Advisor Class, Class R, Class K and
Class I shares will vary due to different expenses associated with these
classes. Performance assumes reinvestment of distributions and does not account
for taxes.
Benchmark Disclosure
The unmanaged Russell MidCap Growth Index does not reflect fees and expenses
associated with the active management of a mutual fund portfolio. The Index
measures the performance of those Russell mid-cap companies with higher
price-to-book ratios and higher forecasted growth values. The stocks are also
members of the Russell 1000 Growth Index. Investors 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
The Fund can invest in foreign securities. Foreign markets can be more volatile
than the U.S. market due to increased risks of adverse issuer, political,
regulatory, market or economic developments. In addition, fluctuations in the
value of investments in foreign currency denominated securities may be
magnified by changes in foreign exchange rates. Please note, mid-cap stocks may
have limited marketability and may be subject to more abrupt or erratic market
movements than large-cap stocks. While the Fund invests principally in common
stocks and other equity securities, in order to achieve its investment
objectives, the Fund may at times use certain types of investment derivatives,
such as options, futures, forwards and swaps. These instruments involve risks
different from, and in certain cases, greater than, the risks presented by more
traditional investments. These risks are fully discussed in the Fund's
prospectus.
(Historical Performance continued on next page)
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 3
Historical Performance
- -------------------------------------------------------------------------------
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE FUND VS. ITS BENCHMARK -------------------------
PERIODS ENDED JULY 31, 2005 6 Months 12 Months
- -------------------------------------------------------------------------------
AllianceBernstein Mid-Cap Growth Fund
Class A 5.91% 19.89%
- -------------------------------------------------------------------------------
Class B 5.56% 19.01%
- -------------------------------------------------------------------------------
Class C 5.57% 19.05%
- -------------------------------------------------------------------------------
Advisor Class 6.15% 20.37%
- -------------------------------------------------------------------------------
Class R** 6.61%*
- -------------------------------------------------------------------------------
Class K** 6.61%*
- -------------------------------------------------------------------------------
Class I** 6.78%*
- -------------------------------------------------------------------------------
Russell MidCap Growth Index 10.60% 25.65%
- -------------------------------------------------------------------------------
* Since Inception. (See inception dates below.)
** Please note that this is a new share class offering for investors
purchasing shares through institutional pension plans. The inception date for
Class R, Class K and Class I shares is 3/1/05.
GROWTH OF A $10,000 INVESTMENT IN THE FUND
7/31/95 TO 7/31/05
AllianceBernstein Mid-Cap Growth Fund Class A: $19,220
Russell MidCap Growth Index: $24,527
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
AllianceBernstein Russell MidCap
Mid-Cap Growth Fund Class A Growth Index
- -------------------------------------------------------------------------------
7/31/95 $ 9,575 $ 10,000
7/31/96 $ 10,156 $ 10,725
7/31/97 $ 15,486 $ 14,982
7/31/98 $ 15,776 $ 16,230
7/31/99 $ 18,185 $ 19,750
7/31/00 $ 19,419 $ 28,393
7/31/01 $ 14,988 $ 19,361
7/31/02 $ 10,012 $ 13,808
7/31/03 $ 13,290 $ 17,005
7/31/04 $ 16,032 $ 19,520
7/31/05 $ 19,220 $ 24,527
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Mid-Cap Growth Fund Class A shares (from 7/31/95 to 7/31/05)
as compared to the performance of the Fund's benchmark. The chart reflects the
deduction of the maximum 4.25% sales charge from the initial $10,000 investment
in the Fund and assumes the reinvestment of dividends and capital gains.
See Historical Performance and Benchmark disclosures on previous page.
(Historical Performance continued on next page)
_______________________________________________________________________________
4 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Historical Performance
- -------------------------------------------------------------------------------
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF JULY 31, 2005
- --------------------------------------------------------------
NAV Returns SEC Returns
Class A Shares
1 Year 19.89% 14.77%
5 Years -0.21% -1.06%
10 Years 7.22% 6.75%
Class B Shares
1 Year 19.01% 15.01%
5 Years -1.04% -1.04%
10 Years(a) 6.47% 6.47%
Class C Shares
1 Year 19.05% 18.05%
5 Years -1.01% -1.01%
10 Years 6.29% 6.29%
Advisor Class Shares
1 Year 20.37%
5 Years 0.01%
Since Inception* 6.88%
Class R Shares+
Since Inception* 6.61%
Class K Shares+
Since Inception* 6.61%
Class I Shares+
Since Inception* 6.78%
SEC AVERAGE ANNUAL RETURNS (WITH SALES CHARGES)
AS OF THE MOST RECENT CALENDAR QUARTER-END (JUNE 30, 2005)
- --------------------------------------------------------------
Class A Shares
1 Year -3.05%
5 Years -1.71%
10 Years 6.47%
Class B Shares
1 Year -3.61%
5 Years -1.72%
10 Years(a) 6.20%
Class C Shares
1 Year -0.61%
5 Years -1.68%
10 Years 6.01%
(a) Assumes conversion of Class B shares into Class A shares after eight years.
* Inception Dates: 10/1/96 for Advisor Class shares; 3/1/05 for Class R, Class
K and Class I shares.
+ Please note that this is a new share class offering for investors purchasing
shares through institutional pension plans. The inception dates for these share
classes are listed above.
See Historical Performance disclosures on page 3.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 5
Fund Expenses
- -------------------------------------------------------------------------------
FUND EXPENSES
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 Ending
Account Value Account Value Expenses Paid
February 1, 2005 July 31, 2005 During Period*
------------------------------- ------------------------------- ---------------------------
Actual Hypothetical Actual Hypothetical** Actual Hypothetical
----------- ----------------- ----------- ----------------- ----------- -------------
Class A $1,000 $1,000 $1,059.12 $1,018.50 $ 6.48 $ 6.36
- ---------------------------------------------------------------------------------------------------------------
Class B $1,000 $1,000 $1,055.56 $1,014.43 $10.65 $10.44
- ---------------------------------------------------------------------------------------------------------------
Class C $1,000 $1,000 $1,055.66 $1,014.53 $10.55 $10.34
- ---------------------------------------------------------------------------------------------------------------
Advisor
Class $1,000 $1,000 $1,061.49 $1,019.59 $ 5.37 $ 5.26
- ---------------------------------------------------------------------------------------------------------------
Class R + $1,000 $1,000 $1,066.11 $1,014.91 $ 6.11 $ 5.96
- ---------------------------------------------------------------------------------------------------------------
Class K + $1,000 $1,000 $1,066.11 $1,016.07 $ 4.90 $ 4.79
- ---------------------------------------------------------------------------------------------------------------
Class I + $1,000 $1,000 $1,067.77 $1,016.99 $ 3.96 $ 3.86
- ---------------------------------------------------------------------------------------------------------------
* Expenses are equal to the classes' annualized expense ratios of 1.27%,
2.09%, 2.07%, 1.05%, 1.42%, 1.14% and 0.92%, respectively, multiplied by the
average account value over the period, multiplied by the number of days in the
period/365.
** Assumes 5% return before expenses.
+ The account value and expenses for Class R, Class K and Class I shares are
based on the period from March 1, 2005 (commencement of distribution) through
July 31, 2005.
_______________________________________________________________________________
6 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Portfolio Summary and Ten Largest Holdings
- -------------------------------------------------------------------------------
PORTFOLIO SUMMARY
July 31, 2005
PORTFOLIO STATISTICS
Net Assets ($mil): $816.5
SECTOR BREAKDOWN*
45.2% Technology
29.9% Consumer Services
16.4% Health Care [PIE CHART OMITTED]
5.6% Finance
1.5% Consumer Manufacturing
0.4% Transportation
1.0% Short-Term
TEN LARGEST HOLDINGS
July 31, 2005
Percent of
Company U.S. $ Value Net Assets
_______________________________________________________________________________
Amazon.com, Inc. $ 39,698,106 4.9%
- -------------------------------------------------------------------------------
Applera Corp. 38,417,639 4.7
- -------------------------------------------------------------------------------
KLA-Tencor Corp. 34,710,191 4.3
- -------------------------------------------------------------------------------
Juniper Networks, Inc. 34,269,571 4.2
- -------------------------------------------------------------------------------
CNET Networks, Inc. 34,237,568 4.2
- -------------------------------------------------------------------------------
Apollo Group, Inc. Cl.A 32,288,949 4.0
- -------------------------------------------------------------------------------
Broadcom Corp. Cl.A 32,270,821 3.9
- -------------------------------------------------------------------------------
Silicon Laboratories, Inc. 31,417,042 3.8
- -------------------------------------------------------------------------------
Network Appliance, Inc. 31,196,307 3.8
- -------------------------------------------------------------------------------
Wynn Resorts, Ltd. 30,992,587 3.8
- -------------------------------------------------------------------------------
$ 339,498,781 41.6%
* All data are as of July 31, 2005. The Fund's sector breakdown is expressed
as a percentage of total investments (excluding security lending collateral)
and may vary over time.
The Fund's sector breakdown is classified in the above pie chart and throughout
this report according to Alliance Capital's sector classification. For readers
specifically interested in the Russell sector classification of this Fund, the
sector breakdown according to Russell's classification is as follows:
Technology 36.2%, Consumer Discretionary 27.7%, Health Care 14.0%, Producer
Durables 8.6%, Financial Services 7.1%, Utilities 3.9%, Autos & Transportation
0.9% and Cash 1.6%.
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 7
Portfolio of Investments
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
July 31, 2005
Company Shares U.S. $ Value
- -------------------------------------------------------------------------------
COMMON STOCKS-98.5%
Technology-45.0%
Communication Equipment-8.2%
Corning, Inc.(a)* 734,750 $ 13,996,987
JDS Uniphase Corp.(a)* 12,108,270 18,283,488
Juniper Networks, Inc.(a) 1,428,494 34,269,571
-------------
66,550,046
-------------
Communication Services-3.2%
Level 3 Communications, Inc.(a)* 12,663,270 26,086,336
-------------
Computer Hardware/Storage-1.6%
Palm, Inc.(a)* 450,340 12,852,704
-------------
Computer Peripherals-3.8%
Network Appliance, Inc.(a) 1,222,905 31,196,307
-------------
Internet Infrastructure-3.4%
Akamai Technologies, Inc.(a)* 709,780 10,838,341
VeriSign, Inc.(a) 648,750 17,068,612
-------------
27,906,953
-------------
Internet Media-3.0%
RealNetworks, Inc.(a)* 4,996,210 24,831,164
-------------
Semiconductor Capital Equipment-6.0%
KLA-Tencor Corp.* 671,377 34,710,191
Novellus Systems, Inc.(a) 506,380 14,609,063
-------------
49,319,254
-------------
Semiconductor Components-11.2%
Advanced Micro Devices, Inc.(a)* 535,150 10,745,812
Broadcom Corp. Cl.A(a) 754,520 32,270,821
PMC-Sierra, Inc.(a) 1,711,280 16,821,882
Silicon Laboratories, Inc.(a) 1,073,353 31,417,042
-------------
91,255,557
-------------
Software-3.0%
Adobe Systems, Inc.* 273,280 8,100,019
NAVTEQ(a) 363,130 15,966,826
-------------
24,066,845
-------------
Miscellaneous-1.6%
Itron, Inc.(a) 273,670 13,259,311
-------------
367,324,477
-------------
Consumer Services-29.8%
Advertising-3.0%
Audible, Inc.(a)* 892,872 16,062,767
Getty Images, Inc.(a)* 102,810 8,301,908
-------------
24,364,675
-------------
Broadcasting & Cable-3.4%
XM Satellite Radio Holdings, Inc. Cl.A(a)* 784,995 27,969,372
-------------
_______________________________________________________________________________
8 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Portfolio of Investments
- -------------------------------------------------------------------------------
Company Shares U.S. $ Value
- -------------------------------------------------------------------------------
Cellular Communications-0.7%
NeuStar, Inc. Cl.A(a) 196,035 $ 5,488,980
-------------
Entertainment & Leisure-3.8%
Wynn Resorts, Ltd.(a)* 550,490 30,992,587
-------------
Retail-General Merchandise-6.0%
Amazon.com, Inc.(a) 878,860 39,698,106
Bed Bath & Beyond, Inc.(a) 87,510 4,016,709
Williams-Sonoma, Inc.(a) 117,000 5,166,720
-------------
48,881,535
-------------
Miscellaneous-12.9%
Apollo Group, Inc. Cl.A(a) 429,660 32,288,949
CNET Networks, Inc.(a)* 2,674,810 34,237,568
HomeStore, Inc.(a) 4,734,430 12,498,895
Shanda Interactive Entertainment, Ltd.
(Cayman Islands)(ADR)(a)* 444,800 14,549,363
SINA Corp. (Cayman Islands)(a) 434,170 12,074,268
-------------
105,649,043
-------------
243,346,192
-------------
Health Care-16.3%
Biotechnology-8.6%
Affymetrix, Inc.(a)* 522,265 24,384,553
Applera Corp.-Applied Biosystems Group 888,765 18,504,087
Applera Corp.-Celera Genomics Group(a) 1,613,740 19,913,552
Compugen, Ltd. (Israel)(a) 1,715,350 6,020,878
deCODE GENETICS, Inc. (Iceland)(a)* 100,900 988,820
-------------
69,811,890
-------------
Medical Products-4.6%
Cerus Corp.(a) 1,785,798 12,179,142
Given Imaging, Ltd. (Israel)(a)* 732,831 15,975,716
Kinetic Concepts, Inc.(a)* 162,800 9,763,116
-------------
37,917,974
-------------
Medical Services-3.1%
Cepheid, Inc.(a) 2,236,120 19,185,910
Covance, Inc.(a) 123,500 6,119,425
-------------
25,305,335
-------------
133,035,199
-------------
Finance-5.5%
Brokerage & Money Management-4.5%
Ameritrade Holding Corp.(a) 1,004,750 19,622,768
Calamos Asset Management, Inc. Cl.A 465,820 13,434,249
International Securities Exchange, Inc. Cl.A(a)* 157,300 3,762,616
-------------
36,819,633
-------------
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 9
Portfolio of Investments
- -------------------------------------------------------------------------------
Shares or
Principal
Amount
Company (000) U.S. $ Value
- -------------------------------------------------------------------------------
Miscellaneous-1.0%
Chicago Mercantile Exchange Holdings, Inc. 28,380 $ 8,543,799
-------------
45,363,432
-------------
Consumer Manufacturing-1.5%
Auto & Related-0.5%
Autoliv, Inc. (Sweden) 89,500 3,987,225
-------------
Building & Related-1.0%
D.R. Horton, Inc. 196,339 8,065,606
-------------
12,052,831
-------------
Transportation-0.4%
Air Freight-0.4%
UTI Worldwide, Inc. (British Virgin Islands) 47,100 3,361,056
-------------
Total Common Stocks
(cost $668,469,991) 804,483,187
-------------
SHORT-TERM INVESTMENT-1.0%
Time Deposit-1.0%
State Street Euro Dollar
2.60%, 8/01/05
(cost $7,908,000) $ 7,908 7,908,000
-------------
Total Investments Before Security Lending
Collateral-99.5%
(cost $676,377,991) 812,391,187
-------------
INVESTMENT OF CASH COLLATERAL FOR
SECURITIES LOANED-22.9%
Short-Term Investment
UBS Private Money Market Fund, LLC, 3.20%
(cost $186,957,689) 186,957,689 186,957,689
-------------
Total Investments-122.4%
(cost $863,335,680) 999,348,876
Other assets less liabilities-(22.4%) (182,874,608)
-------------
Net Assets-100% $ 816,474,268
=============
* Represents entire or partial securities out on loan. See Note E for
securities lending information.
(a) Non-income producing security.
Glossary:
ADR - American Depositary Receipt
See notes to financial statements.
_______________________________________________________________________________
10 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Statement of Assets & Liabilities
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
July 31, 2005
ASSETS
Investments in securities, at value (cost $863,335,680--
including investment of cash collateral for securities
loaned of $186,957,689) $ 999,348,876(a)
Cash 815
Receivable for investment securities sold 22,273,243
Receivable for capital stock sold 1,198,492
Dividends and interest receivable 337,917
--------------
Total assets 1,023,159,343
--------------
LIABILITIES
Payable for collateral on securities loaned 186,957,689
Payable for investment securities purchased 16,910,966
Payable for capital stock redeemed 1,828,137
Advisory fee payable 483,426
Distribution fee payable 198,420
Transfer Agent fee payable 95,506
Administrative fee payable 7,172
Accrued expenses and other liabilities 203,759
--------------
Total liabilities 206,685,075
--------------
Net Assets $ 816,474,268
==============
COMPOSITION OF NET ASSETS
Capital stock, at par $ 1,288,844
Additional paid-in capital 677,770,461
Accumulated net realized gain on investment transactions 1,401,767
Net unrealized appreciation of investments 136,013,196
--------------
$ 816,474,268
==============
CALCULATION OF MAXIMUM OFFERING PRICE PER SHARE
Net Asset Value and:
---------------------------- Maximum
Shares Offering Redemption Offering
Class Net Assets Outstanding Price Price Price*
- -------------------------------------------------------------------------------------------------
A $653,612,009 101,301,258 -- $6.45 $6.74
- -------------------------------------------------------------------------------------------------
B $ 70,236,721 12,752,403 $5.51 -- --
- -------------------------------------------------------------------------------------------------
C $ 24,098,417 4,381,986 $5.50 -- --
- -------------------------------------------------------------------------------------------------
Advisor $ 68,495,039 10,443,760 $6.56 $6.56 --
- -------------------------------------------------------------------------------------------------
R $ 10,746 1,667 $6.45 $6.45 --
- -------------------------------------------------------------------------------------------------
K $ 10,666 1,653 $6.45 $6.45 --
- -------------------------------------------------------------------------------------------------
I $ 10,670 1,652.89 $6.46 $6.46 --
- -------------------------------------------------------------------------------------------------
* The maximum offering price per share for Class A shares includes a sales
charge of 4.25%.
(a) Includes securities on loan with a value of $166,896,355 (see Note E).
See notes to financial statements.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 11
Statement of Operations
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended July 31, 2005
INVESTMENT INCOME
Securities lending income $ 1,942,733
Dividends 892,199
Interest 72,024 $ 2,906,956
------------
EXPENSES
Management fee 5,595,917
Distribution fee -- Class A 1,390,901
Distribution fee -- Class B 731,804
Distribution fee -- Class C 246,300
Distribution fee -- Class R 21
Distribution fee -- Class K 10
Transfer agency 1,674,746
Printing 259,777
Custodian 222,347
Registration 111,107
Administrative 83,335
Legal 64,024
Audit 58,031
Directors' fees 23,783
Miscellaneous 36,317
------------
Total expenses 10,498,420
Less: expense offset arrangement
(see Note B) (6,370)
------------
Net expenses 10,492,050
------------
Net investment loss (7,585,094)
------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENT TRANSACTIONS
Net realized gain on investment
transactions 97,402,126
Net change in unrealized
appreciation/depreciation
of investments 50,931,030
------------
Net gain on investment transactions 148,333,156
------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $140,748,062
============
See notes to financial statements.
_______________________________________________________________________________
12 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
July 31, July 31,
2005 2004
============== ==============
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment loss $ (7,585,094) $ (9,093,219)
Net realized gain on investment
transactions 97,402,126 206,659,498
Net change in unrealized
appreciation/depreciation
of investments 50,931,030 (71,196,765)
-------------- --------------
Net increase in net assets
from operations 140,748,062 126,369,514
CAPITAL STOCK TRANSACTIONS
Net decrease (80,151,890) (461,518)
-------------- --------------
Total increase 60,596,172 125,907,996
NET ASSETS
Beginning of period 755,878,096 629,970,100
-------------- --------------
End of period (including accumulated net
investment loss of ($0) and ($0),
respectively) $ 816,474,268 $ 755,878,096
============== ==============
See notes to financial statements.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 13
Notes to Financial Statements
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
July 31, 2005
NOTE A
Significant Accounting Policies
The AllianceBernstein Mid-Cap Growth Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a diversified, open-end management
investment company. The Fund offers Class A, Class B, Class C, 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.
Class B shares will automatically convert to Class A shares eight years after
the end of the calendar month of purchase. Class Cshares 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 each class bears
different distribution expenses and has exclusive voting rights with respect to
its distribution plan. The financial statements have been prepared in
conformity with U.S. generally accepted accounting principles which require
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities in the financial statements and amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates. Additional information about some of the items discussed
in these Notes to Financial Statements is contained in the Fund's Statement of
Additional Information, which is available upon request. 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 Fund's Board
of Directors.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or
_______________________________________________________________________________
14 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Notes to Financial Statements
- -------------------------------------------------------------------------------
call options are valued at the last sale price. If there has been no sale on
that day, such securities will be valued at the closing bid prices on that day;
open futures contracts and options thereon 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; securities traded in the
over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ)
are valued at the mean of the current bid and asked prices as reported by the
National Quotation Bureau or other comparable sources; 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, Alliance Capital Management, L.P. (the "Manager") 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; and OTC and other
derivatives are valued on the basis of a quoted bid price or spread from a
major broker/dealer in such security.
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. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 15
Notes to Financial Statements
- -------------------------------------------------------------------------------
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 investments
and foreign currency denominated assets and liabilities.
3. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required. 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.
4. 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 trade date securities are purchased or
sold. Investment gains and losses are determined on the identified cost basis.
The Fund amortizes premiums and accretes discounts as adjustments to interest
income.
5. Income and Expenses
All income earned and expenses incurred by the Fund are borne on a pro rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A, Advisor Class, Class R, Class K and Class I shares. Advisor Class
and Class I shares have no distribution fees.
6. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the
exdividend 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. generally accepted accounting principles. To
the extent these differences are permanent, such amounts are reclassified
within the capital accounts based on their federal tax basis treatment;
temporary differences, do not require such reclassification.
_______________________________________________________________________________
16 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Notes to Financial Statements
- -------------------------------------------------------------------------------
NOTE B
Management Fee and Other Transactions With Affiliates
Under the terms of the management agreement, the Fund pays the Manager a fee at
an annual rate of .75% on the first $500 million of average daily net assets,
..65% on the next $500 million of average daily net assets and .55% on average
daily net assets in excess of $1 billion. Such fee is accrued daily and paid
monthly.
Pursuant to the management agreement, the Fund paid $83,335 to the Manager
representing the cost of certain legal and accounting services provided to the
Fund by the Manager for the year ended July 31, 2005.
The Fund compensates Alliance Global Investor Services, Inc., (AGIS) a
wholly-owned subsidiary of the Manager, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Fund. Such compensation amounted to $1,140,662 for the year ended July 31, 2005.
For the year ended July 31, 2005, the Fund's expenses were reduced by $6,370,
under an expense offset arrangement with AGIS.
AllianceBernstein Investment Research and Management, Inc., (the
"Distributor"), a wholly-owned subsidiary of the Manager, serves as the
distributor of the Fund's shares. The Distributor has advised the Fund that it
has retained front-end sales charges of $13,103 from the sale of Class A shares
and received $6,259, $93,144 and $7,539 in contingent deferred sales charges
imposed upon redemptions by shareholders of Class A, Class B and Class C
shares, respectively, for the year ended July 31, 2005.
Brokerage commissions paid on investment transactions for the year ended July
31, 2005 amounted to $2,495,800 of which $1,525 and $0, respectively, was paid
to Sanford C. Bernstein &Co. LLC and Sanford C. Bernstein Limited, affiliates
of the Manager.
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays distribution and servicing fees to the Distributor at
an annual rate of up to .30% of the Fund's average daily net assets
attributable to Class A shares, 1% of the 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. The directors currently limit payments under the Class A plan to .22%
of average daily net assets
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 17
Notes to Financial Statements
- -------------------------------------------------------------------------------
attributable to Class A shares. The Agreement provides that the Distributor
will use such payments in their entirety for distribution assistance and
promotional activities. The Distributor has incurred expenses in excess of the
distribution costs reimbursed by the Fund in the amount of $6,709,620,
$2,127,279, $0 and $0, for Class B, Class C, Class R and Class K shares,
respectively. Such costs may be recovered from the Fund in future periods so
long as the Agreement is in effect. In accordance with the Agreement, there is
no provision for recovery of unreimbursed distribution costs incurred by the
Distributor beyond the current fiscal year for Class A shares. The Agreement
also provides that the Manager may use its own resources to finance the
distribution of the Fund's shares.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the period ended July 31, 2005, were as follows:
Purchases Sales
============== ==============
Investment securities (excluding
U.S. government securities) $ 687,742,847 $ 780,452,747
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes, gross unrealized
appreciation and unrealized depreciation are as follows:
Cost $ 898,311,096
==============
Gross unrealized appreciation $ 162,226,342
Gross unrealized depreciation (61,188,562)
--------------
Net unrealized appreciation $ 101,037,780
==============
NOTE E
Securities Lending
The Fund has entered into a securities lending agreement with UBS Warburg LLC
(the "Lending Agent"). Under the terms of the agreement, the Lending Agent, on
behalf of the Fund, administers the lending of portfolio securities to certain
broker-dealers. In return, the Fund receives fee income from the lending
transactions or it retains a portion of interest on the investment of any cash
received as collateral. The Fund also continues to receive dividends or
interest on the securities loaned. Unrealized gain or loss on the value of the
securities loaned that may occur during the term of the loan will be reflected
in the accounts of the Fund. All loans are continuously secured by collateral
exceeding the value of the securities loaned. All collateral consists of either
cash or U.S. Government securities. The Lending Agent may invest the cash
collateral received in an eligible money market vehicle in accordance with the
investment restrictions of the Fund. The Lending Agent will indemnify the Fund
for any loss resulting from a borrower's failure to return a loaned security
when due. As of July 31, 2005, the
_______________________________________________________________________________
18 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Notes to Financial Statements
- -------------------------------------------------------------------------------
Fund had loaned securities with a value of $166,896,355 and received cash
collateral which was invested in a money market fund valued at $186,957,689 as
included in the accompanying portfolio of investments. For the year ended July
31, 2005, the Fund earned fee income of $1,942,733 which is included in the
accompanying statement of operations.
NOTE F
Capital Stock
There are 21,000,000,000 shares of $0.01 par value capital stock authorized,
divided into seven classes, designated Class A, Class B, Class C, Advisor
Class, Class R, Class K and Class I shares. Each class consists of
3,000,000,000 authorized shares. Transactions in capital stock were as follows:
Shares Amount
--------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
July 31, July 31, July 31, July 31,
2005 2004 2005 2004
------------ ------------ -------------- --------------
Class A
Shares sold 8,269,711 22,242,280 $ 48,173,433 $121,051,440
- -------------------------------------------------------------------------------
Shares converted
from Class B 681,544 811,000 4,157,589 4,498,313
- -------------------------------------------------------------------------------
Shares redeemed (21,249,735) (30,623,278) (123,888,353) (163,486,244)
- -------------------------------------------------------------------------------
Net decrease (12,298,480) (7,569,998) $(71,557,331) $(37,936,491)
===============================================================================
Class B
Shares sold 2,187,239 8,239,640 $ 10,967,154 $ 38,206,484
- -------------------------------------------------------------------------------
Shares converted
to Class A (700,062) (816,813) (4,157,589) (4,498,313)
- -------------------------------------------------------------------------------
Shares redeemed (4,844,419) (5,115,444) (23,512,827) (23,593,092)
- -------------------------------------------------------------------------------
Net increase
(decrease) (3,357,242) 2,307,383 $(16,703,262) $ 10,115,079
===============================================================================
Class C
Shares sold 1,244,041 3,654,996 $ 6,279,521 $ 17,059,128
- -------------------------------------------------------------------------------
Shares redeemed (2,493,024) (1,751,807) (12,168,120) (8,317,397)
- -------------------------------------------------------------------------------
Net increase
(decrease) (1,248,983) 1,903,189 $ (5,888,599) $ 8,741,731
===============================================================================
Advisor Class
Shares sold 3,816,392 6,376,822 $ 22,967,670 $ 34,878,865
- -------------------------------------------------------------------------------
Shares redeemed (1,519,521) (2,933,093) (9,000,454) (16,260,702)
- -------------------------------------------------------------------------------
Net increase 2,296,871 3,443,729 $ 13,967,216 $ 18,618,163
===============================================================================
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 19
Notes to Financial Statements
- -------------------------------------------------------------------------------
Shares Amount
--------------------------- ------------------------------
March 1, March 1,
2005(a) to 2005(a) to
July 31, July 31,
2005 2005
------------ --------------
Class R
Shares sold 1,667 $ 10,086
- ---------------------------------------------------------------
Net increase 1,667 $ 10,086
===============================================================
Class K
Shares sold 1,653 $ 10,000
- ---------------------------------------------------------------
Net increase 1,653 $ 10,000
===============================================================
Class I
Shares sold 1,653 $ 10,000
- ---------------------------------------------------------------
Net increase 1,653 $ 10,000
===============================================================
(a) Commencement of distributions.
NOTE G
Risks Involved in Investing in the Fund
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include changes in foreign
exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable United States companies or of the United States Government.
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.
NOTE H
Components of Accumulated Earnings (Deficit)
As of July 31, 2005, the components of accumulated earnings/(deficit) on a tax
basis were as follows:
Undistributed long term capital gain $ 36,377,183(a)
Unrealized appreciation/(depreciation) 101,037,780(b)
--------------
Total accumulated earnings/(deficit) $ 137,414,963
==============
(a) During the year ended July 31, 2005, the Fund utilized $67,249,702 of
capital loss carryforward.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
_______________________________________________________________________________
20 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Notes to Financial Statements
- -------------------------------------------------------------------------------
During the current fiscal year, permanent differences, primarily due to net
operating loss, resulted in a decrease in accumulated net investment loss and a
corresponding decrease in additional paid-in capital. This reclassification had
no effect on net assets.
NOTE I
Legal Proceedings
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the NYAG have been investigating practices in the mutual
fund industry identified as "market timing" and "late trading" of mutual fund
shares. Certain other regulatory authorities have also been conducting
investigations into these practices within the industry and have requested that
the Adviser provide information to them. The Adviser has been cooperating and
will continue to cooperate with all of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the "Reimbursement
Fund") to compensate mutual fund shareholders for the adverse effects of market
timing attributable to market timing relationships described in the SEC Order.
According to the SEC Order, the Reimbursement Fund is to be paid, in order of
priority, to fund investors based on (i) their aliquot share of losses suffered
by the fund due to market timing, and (ii) a proportionate share of advisory
fees paid by such fund during the period of such market timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from some of
the AllianceBernstein long-term, open-end retail funds until December 31, 2008;
however, it is not expected that the Fund will have its fee reduced; and
(iii) The Adviser agreed to implement changes to its governance and compliance
procedures. Additionally, the SEC Order and the NYAG Order contemplate that the
Adviser's registered investment company clients, including the Fund, will
introduce governance and compliance changes.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 21
Notes to Financial Statements
- -------------------------------------------------------------------------------
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, is continuing to direct and oversee an internal
investigation and a comprehensive review of the facts and circumstances
relevant to the SEC's and the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled Hindo, et al.
v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, numerous additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants, and others
may be filed. On February 20, 2004, the Judicial Panel on Multidistrict
Litigation transferred all federal actions, and all removed state court
actions, to the United States District Court for the District of Maryland.
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
_______________________________________________________________________________
22 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Notes to Financial Statements
- -------------------------------------------------------------------------------
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages. The
Alliance defendants have moved to dismiss the complaints, and those motions are
pending.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commission") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the Hindo Complaint. On May 31, 2005, defendants removed the WVAG
Complaint to the United States District Court for the Northern District of West
Virginia. On July 12, 2005, plaintiff moved to remand. That motion is pending.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commission signed a "Summary Order to Cease and Desist, and Notice
of Right to Hearing" addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Hindo Complaint. The time for the Adviser and Alliance Holding to
respond to the Summary Order has been extended. The Adviser intends to
vigorously defend against the allegations in the WVAG Complaint and the Summary
Order.
As a result of the matters discussed above, investors in the AllianceBernstein
Mutual Funds may choose to redeem their investments. This may require the
AllianceBernstein Mutual Funds to sell investments held by those funds to
provide for sufficient liquidity and could also have an adverse effect on the
investment performance of the AllianceBernstein Mutual Funds.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 23
Notes to Financial Statements
- -------------------------------------------------------------------------------
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Capital Management Holding L.P., Alliance Capital
Management Corporation, AXA Financial, Inc., AllianceBernstein Investment
Research & Management, Inc., certain current and former directors of the
AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin
Complaint names certain of the AllianceBernstein mutual funds as nominal
defendants. The Aucoin Complaint was filed in the United States District Court
for the Southern District of New York by an alleged shareholder of an
AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other
things, (i) that certain of the defendants improperly authorized the payment of
excessive commissions and other fees from fund assets to broker-dealers in
exchange for preferential marketing services, (ii) that certain of the
defendants misrepresented and omitted from registration statements and other
reports material facts concerning such payments, and (iii) that certain
defendants caused such conduct as control persons of other defendants. The
Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and
48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act,
breach of common law fiduciary duties, and aiding and abetting breaches of
common law fiduciary duties. Plaintiffs seek an unspecified amount of
compensatory damages and punitive damages, rescission of their contracts with
the Adviser, including recovery of all fees paid to the Adviser pursuant to
such contracts, an accounting of all fund-related fees, commissions and soft
dollar payments, and restitution of all unlawfully or discriminatorily obtained
fees and expenses.
Since June 22, 2004, numerous additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants, and others may be filed.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the Fund's shares or
other adverse consequences to the Fund. However, the Adviser believes that
these matters are not likely to have a material adverse effect on its ability
to perform advisory services relating to the Fund.
_______________________________________________________________________________
24 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Financial Highlights
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class A
----------------------------------------------------------------------------
December 1,
Year Ended July 31, 2002 to Year Ended November 30,
------------------------ July 31, -------------------------------------
2005 2004 2003(a) 2002 2001 2000
----------- ----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $5.38 $4.46 $3.70 $4.79 $5.83 $7.55
INCOME FROM INVESTMENT
OPERATIONS
Net investment loss(b) (.05) (.06)(c) (.03) (.04) (.04) (.04)
Net realized and unrealized gain (loss)
on investment transactions 1.12 .98 .79 (1.05) (.71) (1.04)
Net increase (decrease) in net asset
value from operations 1.07 .92 .76 (1.09) (.75) (1.08)
LESS: DISTRIBUTIONS
Distributions from net realized gain
on investment transactions -0- -0- -0- -0- (.29) (.64)
Net asset value, end of period $6.45 $5.38 $4.46 $3.70 $4.79 $5.83
TOTAL RETURN
Total investment return based on net
asset value(d) 19.89% 20.63% 20.54% (22.76)% (13.64)% (15.73)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $653,612 $610,854 $540,843 $469,570 $686,445 $856,956
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.25% 1.25% 1.45%(e) 1.34% 1.22% 1.04%
Expenses, before waivers/
reimbursements 1.25% 1.26% 1.45%(e) 1.34% 1.22% 1.04%
Net investment loss (.88)% (1.06)%(c) (1.11)%(e) (1.03)% (.69)% (.55)%
Portfolio turnover rate 88% 135% 75% 183% 226% 86%
See footnote summary on page 31.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 25
Financial Highlights
- -------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class B
----------------------------------------------------------------------------
December 1,
Year Ended July 31, 2002 to Year Ended November 30,
------------------------ July 31, -------------------------------------
2005 2004 2003(a) 2002 2001 2000
----------- ----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $4.63 $3.87 $3.23 $4.22 $5.21 $6.87
INCOME FROM INVESTMENT
OPERATIONS
Net investment loss(b) (.09) (.09)(c) (.03) (.07) (.07) (.09)
Net realized and unrealized gain (loss)
on investment transactions .97 .85 .67 (.92) (.63) (.93)
Net increase (decrease) in net asset
value from operations .88 .76 .64 (.99) (.70) (1.02)
LESS: DISTRIBUTIONS
Distributions from net realized gain
on investment transactions -0- -0- -0- -0- (.29) (.64)
Net asset value, end of period $5.51 $4.63 $3.87 $3.23 $4.22 $5.21
TOTAL RETURN
Total investment return based on net
asset value(d) 19.01% 19.64% 19.81% (23.46)% (14.34)% (16.48)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $70,236 $74,567 $53,461 $41,096 $61,816 $81,569
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 2.07% 2.09% 2.32%(e) 2.20% 2.08% 1.87%
Expenses, before waivers/
reimbursements 2.07% 2.10% 2.32%(e) 2.20% 2.08% 1.87%
Net investment loss (1.71)% (1.90)%(c) (1.98)%(e) (1.89)% (1.54)% (1.39)%
Portfolio turnover rate 88% 135% 75% 183% 226% 86%
See footnote summary on page 31.
_______________________________________________________________________________
26 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Financial Highlights
- -------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class C
----------------------------------------------------------------------------
December 1,
Year Ended July 31, 2002 to Year Ended November 30,
------------------------ July 31, -------------------------------------
2005 2004 2003(a) 2002 2001 2000
----------- ----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $4.62 $3.87 $3.22 $4.21 $5.20 $6.86
INCOME FROM INVESTMENT
OPERATIONS
Net investment loss(b) (.08) (.09)(c) (.03) (.06) (.07) (.09)
Net realized and unrealized gain (loss)
on investment transactions .96 .84 .68 (.93) (.63) (.93)
Net increase (decrease) in net asset
value from operations .88 .75 .65 (.99) (.70) (1.02)
LESS: DISTRIBUTIONS
Distributions from net realized gain
on investment transactions -0- -0- -0- -0- (.29) (.64)
Net asset value, end of period $5.50 $4.62 $3.87 $3.22 $4.21 $5.20
TOTAL RETURN
Total investment return based on net
asset value(d) 19.05% 19.38% 20.19% (23.52)% (14.37)% (16.51)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $24,098 $26,017 $14,415 $10,860 $15,391 $20,068
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 2.05% 2.06% 2.27%(e) 2.16% 2.04% 1.86%
Expenses, before waivers/
reimbursements 2.05% 2.07% 2.27%(e) 2.16% 2.04% 1.86%
Net investment loss (1.68)% (1.87)%(c) (1.94)%(e) (1.85)% (1.51)% (1.34)%
Portfolio turnover rate 88% 135% 75% 183% 226% 86%
See footnote summary on page 31.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 27
Financial Highlights
- -------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Advisor Class
----------------------------------------------------------------------------
December 1,
Year Ended July 31, 2002 to Year Ended November 30,
------------------------ July 31, -------------------------------------
2005 2004 2003(a) 2002 2001 2000
----------- ----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $5.45 $4.52 $3.74 $4.83 $5.86 $7.58
INCOME FROM INVESTMENT
OPERATIONS
Net investment loss(b) (.04) (.05)(c) -0- (.03) (.03) (.02)
Net realized and unrealized gain (loss)
on investment transactions 1.15 .98 .78 (1.06) (.71) (1.06)
Net increase (decrease) in net asset
value from operations 1.11 .93 .78 (1.09) (.74) (1.08)
LESS: DISTRIBUTIONS
Distributions from net realized gain
on investment transactions -0- -0- -0- -0- (.29) (.64)
Net asset value, end of period $6.56 $5.45 $4.52 $3.74 $4.83 $5.86
TOTAL RETURN
Total investment return based on net
asset value(d) 20.37% 20.58% 20.86% (22.57)% (13.39)% (15.66)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $68,495 $44,440 $21,251 $13,092 $131,032 $8,304
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.04% 1.04% 1.23%(e) 1.08% 1.08% .83%
Expenses, before waivers/
reimbursements 1.04% 1.05% 1.23%(e) 1.08% 1.08% .83%
Net investment loss (.64)% (.85)%(c) (.89)%(e) (.81)% (.64)% (.35)%
Portfolio turnover rate 88% 135% 75% 183% 226% 86%
See footnote summary on page 31.
_______________________________________________________________________________
28 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Financial Highlights
- -------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout The Period
Class R
----------
March 1,
2005(f) to
July 31,
2005
----------
Net asset value, beginning of period $6.05
INCOME FROM INVESTMENT OPERATIONS
Net investment loss(b) (.02)
Net realized and unrealized gain on investment transactions .42
Net increase in net asset value from operations .40
Net asset value, end of period $6.45
TOTAL RETURN
Total investment return based on net asset value(d) 6.61%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $11
Ratio to average net assets of:
Expenses(e) 1.42%
Net investment loss(e) (.86)%
Portfolio turnover rate 88%
See footnote summary on page 31.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 29
Financial Highlights
- -------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout The Period
Class K
----------
March 1,
2005(f) to
July 31,
2005
----------
Net asset value, beginning of period $6.05
INCOME FROM INVESTMENT OPERATIONS
Net investment loss(b) (.01)
Net realized and unrealized gain on investment transactions .41
Net increase in net asset value from operations .40
Net asset value, end of period $6.45
TOTAL RETURN
Total investment return based on net asset value(d) 6.61%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $11
Ratio to average net assets of:
Expenses(e) 1.14%
Net investment loss(e) (.58)%
Portfolio turnover rate 88%
See footnote summary on page 31.
_______________________________________________________________________________
30 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Financial Highlights
- -------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout The Period
Class I
----------
March 1,
2005(f) to
July 31,
2005
----------
Net asset value, beginning of period $6.05
INCOME FROM INVESTMENT OPERATIONS
Net investment loss(b) (.01)
Net realized and unrealized gain on investment transactions .42
Net increase in net asset value from operations .41
Net asset value, end of period $6.46
TOTAL RETURN
Total investment return based on net asset value(d) 6.78%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $11
Ratio to average net assets of:
Expenses(e) .92%
Net investment loss(e) (.35)%
Portfolio turnover rate 88%
(a) The Fund changed its fiscal year end from November 30 to July 31.
(b) Based on average shares outstanding.
(c) Net of expenses waived/reimbursed by the Adviser and the Transfer Agent.
(d) 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.
(e) Annualized.
(f) Commencement of distributions.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 31
Report of Independent Registered Public Accounting Firm
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
AllianceBernstein Mid-Cap Growth Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AllianceBernstein Mid-Cap Growth
Fund, Inc. (the "Fund") at July 31, 2005, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
presented, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at July 31, 2005 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
September 16, 2005
_______________________________________________________________________________
32 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Board of Directors
- -------------------------------------------------------------------------------
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
OFFICERS
Marc O. Mayer, President
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer
Thomas J. Bardong, Vice President
Catherine Wood(2), Vice President
Mark R. Manley, Secretary
Mark D. Gersten, Treasurer and Chief Financial Officer
Vincent S. Noto, Controller
Custodian
State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02110
Principal Underwriter
AllianceBernstein Investment Research and Management, Inc.
1345 Avenue of the Americas
New York, NY 10105
Transfer Agent
Alliance Global Investor Services, Inc.
P.O. Box 786003
San Antonio, Texas 78278-6003
Toll-Free (800) 221-5672
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017
Legal Counsel
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
(1) Member of the Audit Committee, the Governance and Nominating Committee and
Independent Directors Committee.
(2) Ms. Wood is the person primarily responsible for the day-to-day management
of the Fund's investment portfolio.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 33
Management of the Fund
- -------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the
Board of Directors. Certain information concerning the Fund's Directors is set
forth below.
PORTFOLIOS
PRINCIPAL IN FUND OTHER
NAME, ADDRESS, OCCUPATION(S) COMPLEX DIRECTORSHIPS
AND DATE OF BIRTH DURING OVERSEEN BY HELD BY
(YEAR ELECTED*) PAST 5 YEARS DIRECTOR DIRECTOR
- ---------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
William H. Foulk, Jr., # Investment Adviser and an 108 None
2 Sound View Drive Independent Consultant. He was
Suite 100 formerly Senior Manager of Barrett
Greenwich, CT 06830 Associates, Inc., a registered
(Chairman of the Board) investment adviser, with which he
9/7/32 had been associated since prior to
(1993) 2000. He was formerly Deputy
Comptroller and Chief Investment
Officer of the State of New York and,
prior thereto, Chief Investment Officer
of the New York Bank for Savings.
Ruth Block, #** Formerly: Executive Vice President 105 None
500 S.E. Mizner Blvd. and Chief Insurance Officer of The
Boca Raton, FL 33432 Equitable Life Assurance Society of
11/7/30 the United States; Chairman and
(1990) Chief Executive Officer of Evlico
(insurance). A Director of Avon, BP
(oil and gas), Ecolab Incorporated
(specialty chemicals), Tandem Financial
Group and Donaldson, Lufkin &
Jenrette Securities Corporation and
Governor at Large, National
Association of Securities Dealers, Inc.
David H. Dievler, # Independent Consultant. Until 107 None
P.O. Box 167 December 1994, he was Senior Vice
Spring Lake, NJ 07762 President of Alliance Capital
10/23/29 Management Corporation ("ACMC")
(1982) responsible for mutual fund
administration. Prior to joining ACMC
in 1984, he was Chief Financial
Officer of Eberstadt Asset
Management since 1968. Prior to
that, he was a Senior Manager at
Price Waterhouse & Co. Member of
the American Institute of Certified
Public Accountants since 1953.
_______________________________________________________________________________
34 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Management of the Fund
- -------------------------------------------------------------------------------
PORTFOLIOS
PRINCIPAL IN FUND OTHER
NAME, ADDRESS, OCCUPATION(S) COMPLEX DIRECTORSHIPS
AND DATE OF BIRTH DURING OVERSEEN BY HELD BY
(YEAR ELECTED*) PAST 5 YEARS DIRECTOR DIRECTOR
- ---------------------------------------------------------------------------------------------------------------
John H. Dobkin, # Consultant. He was formerly 105 None
P.O. Box 12 President of Save Venice, Inc.
Annandale, NY 12504 (preservation organization) from
2/19/42 2001-2002, Senior Advisor from
(1992) June 1999-June 2000 and
President of Historic Hudson Valley
(historic preservation) from
December 1989-May 1999.
Previously, Director of the National
Academy of Design and during
1988-1992, he was Director and
Chairman of the Audit Committee
of ACMC.
* There is no stated term of office for the Fund's Directors.
# Member of the Audit Committee, Governance and Nominating Committee and
Independent Directors Committee.
** Ms. Block was an "interested person", as defined in the 1940 Act, from July
22, 1992 until October 21, 2004 by reason of her ownership of securities of a
control person of the Adviser. Ms. Block received shares of The Equitable
Companies Incorporated ("Equitable") as part of the demutualization of The
Equitable Life Assurance Society of the United States in 1992. Ms. Block's
Equitable shares were subsequently converted through a corporate action into
American Depositary Shares of AXA, which were sold for approximately $2,400 on
October 21, 2004. Equitable and AXA are control persons of the Adviser.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 35
Management of the Fund
- -------------------------------------------------------------------------------
Officer Information
Certain information concerning the Fund's Officers is listed below.
NAME,
ADDRESS* AND POSITION(S) PRINCIPAL OCCUPATION
DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS**
- -------------------------------------------------------------------------------------------------------------------
Marc O. Mayer President Executive Vice President of ACMC
10/2/57 since 2001; prior thereto, Chief
Executive Officer of Sanford C.
Bernstein & Co., LLC ("SCB & Co.")
and its predecessor since prior to 2000.
Philip L. Kirstein Senior Vice President Senior Vice President and Independent
5/29/45 and Independent Compliance Officer of the
Compliance Officer AllianceBernstein Funds with which he
has been associated since October
2004. Prior thereto, he was Of Counsel
to Kirkpatrick & Lockhart, LLP from
October 2003 to October 2004, and
General Counsel of Merrill Lynch
Investment Managers, L.P. since prior to
2000 until March 2003.
Thomas J. Bardong Vice President Senior Vice President of ACMC,** with
4/28/45 which he has been associated since
prior to 2000.
Catherine Wood Vice President Senior Vice President of ACMC,**
11/26/55 and Chief Investment Officer, Regent
Investor Services, a division of Alliance
Capital since 2001. Previously she was
a General Partner, co-managing global
equity-oriented portfolios at Tupelo
Capital Management since prior to
2000.
Mark R. Manley Secretary Senior Vice President, Deputy General
10/23/62 Counsel and Chief Compliance Officer
of ACMC,** with which he has been
associated since prior to 2000.
_______________________________________________________________________________
36 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Management of the Fund
- -------------------------------------------------------------------------------
NAME,
ADDRESS* AND POSITION(S) PRINCIPAL OCCUPATION
DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS**
- -------------------------------------------------------------------------------------------------------------------
Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global
10/4/50 Financial Officer Investor Services, Inc. ("AGIS")** and
Vice President of AllianceBernstein
Investment Research and
Management, Inc. ("ABIRM"),** with
which he has been associated since
prior to 2000.
Vincent S. Noto Controller Vice President of AGIS,** with which
12/14/64 he has been associated since prior to
2000.
* The address for each of the Fund's officers is 1345 Avenue of the Americas,
New York, NY 10105.
** ACMC, ABIRM, and AGIS are affiliates of the Fund.
The Fund's Statement of Additional Information (SAI) has additional information
about the Fund's Directors and Officers and is available without charge upon
request. Contact your financial representative or Alliance Capital at (800)
227-4618 for a free prospectus or SAI.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 37
INFORMATION REGARDING THE REVIEW AND APPROVAL OF THE FUND'S ADVISORY AGREEMENT
The Fund's disinterested directors (the "directors") unanimously approved the
continuance of the Advisory Agreement between the Fund and the Adviser at a
meeting held on June 15, 2005.
In preparation for the meeting, the directors had requested from the Adviser
and evaluated extensive materials, including performance and expense
information for other investment companies with similar investment objectives
derived from data compiled by Lipper Inc. ("Lipper"), which is not affiliated
with the Adviser. The directors also reviewed an independent evaluation from
the Fund's Senior Officer (who is also the Fund's Independent Compliance
Officer) of the reasonableness of the advisory fees (as contemplated by the
Assurance of Discontinuance between the Adviser and the New York Attorney
General) in the Fund's Advisory Agreement wherein the Senior Officer concluded
that such fees were reasonable. In addition, the directors received a
presentation from the Adviser and had an opportunity to ask representatives of
the Adviser various questions relevant to the proposed approval. The directors
noted that the Senior Officer's evaluation considered the following factors:
management fees charged to institutional and other clients of the Adviser for
like services; management fees charged by other mutual fund companies for like
services; cost to the Adviser and its affiliates of supplying services pursuant
to the management fee agreement, excluding any intra-corporate profit; profit
margins of the Adviser and its affiliates from supplying such services;
possible economies of scale as the Fund grows larger; and nature and quality of
the Adviser's services including the performance of the Fund.
Prior to voting, the directors reviewed the proposed continuance of the
Advisory Agreement with management and with experienced counsel who are
independent of the Adviser and received a memorandum from such counsel
discussing the legal standards for their consideration of the proposed
continuance. The directors also discussed the proposed continuance in three
private sessions at which only the directors, their independent counsel and the
Fund's Independent Compliance Officer were present. In reaching their
determinations relating to continuance of the Advisory Agreement, the directors
considered all factors they believed relevant, including the following:
1. information comparing the performance of the Fund to other investment
companies with similar investment objectives and to an index;
2. the nature, extent and quality of investment, compliance, administrative
and other services rendered by the Adviser;
3. payments received by the Adviser from all sources in respect of the Fund
and all investment companies in the AllianceBernstein Fund complex;
_______________________________________________________________________________
38 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
4. the costs borne by, and profitability of, the Adviser and its affiliates in
providing services to the Fund and to all investment companies in the
AllianceBernstein Fund complex;
5. comparative fee and expense data for the Fund and other investment
companies with similar investment objectives;
6. the extent to which economies of scale would be realized to the extent the
Fund grows and whether fee levels reflect any economies of scale for the
benefit of investors;
7. the Adviser's policies and practices regarding allocation of portfolio
transactions of the Fund, including the extent to which the Adviser benefits
from soft dollar arrangements;
8. information about "revenue sharing" arrangements that the Adviser has
entered into in respect of the Fund;
9. portfolio turnover rates for the Fund compared to other investment
companies with similar investment objectives;
10. fall-out benefits which the Adviser and its affiliates receive from their
relationships with the Fund;
11. information about fees charged by the Adviser to other clients with
similar investment objectives;
12. the Senior Officer's evaluation of the reasonableness of the fee payable
to the Adviser in the Advisory Agreement;
13. the professional experience and qualifications of the Fund's portfolio
management team and other senior personnel of the Adviser; and
14. the terms of the Advisory Agreement.
The directors also considered their knowledge of the nature and quality of the
services provided by the Adviser to the Fund gained from their experience as
directors or trustees of most of the funds advised by the Adviser, their
overall confidence in the Adviser's integrity and competence they have gained
from that experience and the Adviser's responsiveness to concerns raised by
them in the past, including the Adviser's willingness to consider and implement
organizational and operational changes designed to improve investment results
and the services provided to the AllianceBernstein Funds.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 39
In their deliberations, the directors did not identify any particular
information that was all-important or controlling, and each director attributed
different weights to the various factors.
The directors determined that the overall arrangements between the Fund and the
Adviser, as provided in the Advisory Agreement, were fair and reasonable in
light of the services performed, expenses incurred and such other matters as
the directors considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the directors
reaching their determinations to approve the continuance of the Advisory
Agreement (including their determinations that the Adviser should continue to
be the investment adviser for the Fund, and that the fees payable to the
Adviser pursuant to the Advisory Agreement are appropriate) were separately
discussed by the directors.
Nature, extent and quality of services provided by the Adviser
The directors noted that, under the Advisory Agreement, the Adviser, subject to
the control of the directors, administers the Fund's business and other
affairs. The Adviser manages the investment of the assets of the Fund,
including making purchases and sales of portfolio securities consistent with
the Fund's investment objective and policies. Under the Advisory Agreement, the
Adviser also provides the Fund with such office space, administrative and other
services (exclusive of, and in addition to, any such services provided by any
others retained by the Fund) and executive and other personnel as are necessary
for the Fund's operations. The Adviser pays all of the compensation of
directors of the Fund who are affiliated persons of the Adviser and of the
officers of the Fund.
The directors also considered that the Advisory Agreement provides that the
Fund will reimburse the Adviser for the cost of certain clerical, accounting,
administrative and other services provided at the Fund's request by employees
of the Adviser or its affiliates. Requests for these "at no more than cost"
reimbursements are approved by the directors on a quarterly basis and (to the
extent requested and paid) result in a higher rate of total compensation from
the Fund to the Adviser than the stated fee rates in the Fund's Advisory
Agreement.
The directors considered the scope and quality of services provided by the
Adviser under the Advisory Agreement and noted that the scope of services
provided by advisers of funds had expanded over time as a result of regulatory
and other developments. The directors noted, for example, that the Adviser is
responsible for maintaining and monitoring its own and, to varying degrees, the
Fund's compliance programs, and that these compliance programs have recently
been refined and enhanced in light of new regulatory requirements. The
directors considered the quality of the in-house investment research
capabilities of the Adviser and the other resources it has dedicated to
performing services for the
_______________________________________________________________________________
40 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Fund. The quality of administrative and other services, including the Adviser's
role in coordinating the activities of the Fund's other service providers, also
were considered. The directors also considered the Adviser's response to recent
regulatory compliance issues affecting a number of the investment companies in
the AllianceBernstein Fund complex. The directors concluded that, overall, they
were satisfied with the nature, extent and quality of services provided to the
Fund under the Advisory Agreement.
Costs of Services Provided and Profitability to the Adviser
The directors reviewed a schedule of the revenues, expenses and related notes
indicating the profitability of the Fund to the Adviser for calendar years 2003
and 2004. The directors reviewed the assumptions and methods of allocation used
by the Adviser in preparing fund-specific profitability data, and noted the
Adviser's representation to them that it believed that the methods of
allocation used in preparing the profitability information were reasonable and
appropriate and that the Adviser had previously discussed with the directors
that there is no generally accepted allocation methodology for information of
this type. The directors also noted that the methodology for preparing
fund-by-fund profitability information was being reviewed and that it was
expected that an updated methodology would be implemented later in the year,
and that it would differ in various respects from the methodology used
previously.
The directors recognized that it is difficult to make comparisons of
profitability from fund advisory contracts because comparative information is
not generally publicly available and is affected by numerous factors, including
the structure of the particular adviser, the types of funds it manages, its
business mix, numerous assumptions regarding allocations and the adviser's
capital structure and cost of capital. In considering profitability
information, the directors considered the effect of fall-out benefits on the
Adviser's expenses, as well as the "revenue sharing" arrangements the Adviser
has entered into with certain entities that distribute shares of the Fund. The
directors focused on the profitability of the Adviser's relationship with the
Fund before taxes and distribution expenses. The directors recognized that the
Adviser should generally be entitled to earn a reasonable level of profits for
the services it provides to the Fund and, based on their review, concluded that
they were satisfied that the Adviser's level of profitability from its
relationship with the Fund was not excessive.
Fall-Out Benefits
The directors considered that the Adviser benefits from soft dollar
arrangements whereby it receives brokerage and research services from many of
the brokers and dealers that execute purchases and sales of securities on
behalf of its clients, including the Fund. They noted that the Adviser makes
presentations to the directors regarding its trading practices and brokerage
allocation policies, including its policies with respect to soft dollar
arrangements, from time to time and had made a special presentation to the
directors in May 2005 on this subject.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 41
The directors noted that the Adviser has represented to them that all of its
soft dollar arrangements are consistent with applicable legal requirements
including the achievement of best execution. At the special presentation, the
directors received and reviewed information concerning the Adviser's soft
dollar arrangements, which included a description of the Adviser's policies and
procedures with respect to allocating portfolio transactions for brokerage and
research services, data on the dollar amount of commissions allocated for
third-party research and brokerage services and for proprietary research and
brokerage services, and a list of firms providing third-party research and
brokerage to the Adviser.
The directors also considered that the Distributor, which is a wholly-owned
subsidiary of the Adviser: receives 12b-1 fees from the Fund in respect of
classes of shares of the Fund that are subject to the Fund's 12b-1 plan;
retains a portion of the 12b-1 fees from the Fund; and receives all or a
portion of the sales charges on sales or redemptions of certain classes of
shares. The directors also noted that certain affiliates of the Adviser
distribute shares of the Fund and receive compensation in that connection, that
a subsidiary of the Adviser provides transfer agency services to the Fund and
receives compensation from the Fund for such services, and that brokers who are
affiliated with the Adviser are permitted to execute brokerage transactions for
the Fund subject to satisfaction of certain requirements.
The directors recognized that the Adviser's profitability would be somewhat
lower if it did not receive research for soft dollars or if the Adviser's
affiliates did not receive the other benefits described above. The directors
believe that the Adviser derives reputational and other benefits from its
association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the
meeting, the directors receive detailed comparative performance information for
the Fund at each regular Board meeting during the year. At the meeting, the
directors reviewed information prepared by the Adviser based on information
obtained from Lipper showing performance for Class A shares of the Fund as
compared to other funds in the Lipper Mid-Cap Growth Funds Average for periods
ending March 31, 2005 over the year to date ("YTD"), 1-, 3-, 5- and 10-year
periods and for each of the last ten calendar years and compared to the Russell
MidCap Growth Index. The directors also reviewed information from a report
prepared by Lipper showing performance for Class A shares of the Fund as
compared to a group of 15 to 6 funds (depending on the year) in its Lipper
category selected by Lipper (the "Performance Group") and as compared to a
universe of 115 to 35 funds (depending on the year) in its Lipper category
selected by Lipper (the "Performance Universe") for periods ended March 31,
2005 over the 1-, 3-, 5- and 10-year periods. The directors noted that the
Lipper category data showed the Fund's performance for the periods ending March
31, 2005 was significantly below the Lipper medians in the YTD and 1-year
periods,
_______________________________________________________________________________
42 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
somewhat below the Lipper median in the 10-year period and significantly above
the Lipper medians in the 3- and 5-year periods, and that the Fund's calendar
year performance was significantly above the Lipper medians in 2004, 2003 and
1997, somewhat above the Lipper medians in 2001, 1996 and 1995, and in all
other periods reviewed the Fund's performance was somewhat below or
significantly below the Lipper medians. The directors further noted that in the
Performance Group comparison, the Fund was in the fifth quintile in the 1-year
period and second quintile for all other periods reviewed, and in the
Performance Universe comparison, the Fund was in the fifth quintile in the
1-year period, first quintile in the 3-year period, second quintile in the
5-year period and fourth quintile in the 10-year period. Based on their review
and their discussions of the reasons for the Fund's recent underperformance
with the Adviser, the directors retained confidence in the Adviser's ability to
continue to advise the Fund and concluded that the Fund's investment
performance was understandable. The directors informed the Adviser that they
planned to closely monitor the Fund's performance.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate paid by the Fund to the Adviser
and information prepared by Lipper concerning fee rates paid by other funds in
the same Lipper category as the Fund at a common asset level. The directors
recognized that it is difficult to make comparisons of advisory fees because
there are variations in the services that are included in the fees paid by
other funds.
The directors also considered the fees the Adviser charges other clients with
investment objectives similar to those of the Fund. For this purpose, they
reviewed information in the Adviser's Form ADV and a chart prepared by the
Adviser disclosing the institutional fee schedule for institutional products
that have a substantially similar investment style as the Fund. They also
received an oral presentation from the Adviser that supplemented such
information. The Adviser manages accounts for institutional clients with a
comparable investment style to the Fund. The directors noted that the
institutional fee schedule for these accounts had much lower breakpoints than
the fee schedule in the Fund's Advisory Agreement. The directors also noted
that the application of such fee schedule to the level of assets of the Fund
would result in a fee rate that would be significantly lower than that in the
Fund's Advisory Agreement. The directors noted that the Adviser may, in some
cases, negotiate fee rates with large institutional clients that are lower than
those reviewed by the directors and discussed with the Adviser the level of
such negotiated fees for strategies similar to those of the Fund. The directors
also reviewed information that indicated that the Adviser sub-advises a
registered investment company that has investment strategies similar to the
Fund at lower fee rates than those paid by the Fund.
The Adviser reviewed with the directors the significant differences in the
scope of services it provides to institutional clients and to the Fund. For
example, the
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 43
Advisory Agreement requires the Adviser to provide, in addition to investment
advice, office facilities and officers (including officers to provide required
certifications). The Adviser also coordinates the provision of services to the
Fund by non-affiliated service providers and is responsible for the
compensation of the Fund's Independent Compliance Officer and certain related
expenses. The provision of these non-advisory services involves costs and
exposure to liability. The Adviser explained that many of these services
normally are not provided to non-investment company clients or to investment
company clients when the Adviser acts in a pure sub-advisory capacity, and that
fees charged to the Fund reflect the costs and risks of the additional
obligations. The Adviser also noted that since the Fund is constantly issuing
and redeeming its shares, it is more difficult to manage than an institutional
account, where the assets are relatively stable. In light of these facts, the
directors did not place significant weight on these fee comparisons.
The directors also considered the total expense ratio of the Class A shares of
the Fund in comparison to the fees and expenses of funds within two comparison
groups created by Lipper: an Expense Group and an Expense Universe. Lipper
described an Expense Group as a representative sample of comparable funds and
an Expense Universe as a broader group, consisting of all funds in the
investment classification/objective with a similar load type as the subject
Fund. The Class A expense ratio of the Fund was based on the Fund's latest
fiscal year expense ratio. The directors recognized that the expense ratio
information for the Fund potentially reflected on the Adviser's provision of
services, as the Adviser is responsible for coordinating services provided to
the Fund by others. The directors noted that it was likely that the expense
ratios of some funds in the Fund's Lipper category also were lowered by waivers
or reimbursements by those funds' investment advisers, which in some cases were
voluntary and perhaps temporary.
The directors noted that the Fund's at approximate current size contractual
effective fee rate of 71.5 basis points was the same as the median for the
Expense Group. The directors noted that the latest fiscal year administrative
expense reimbursement by the Fund pursuant to the Advisory Agreement was 1
basis point, and recognized that the Adviser's total compensation from the Fund
pursuant to the Advisory Agreement was slightly above the median for the
Expense Group as a result. The directors noted that the Fund's expense ratio
was close to the median for the Expense Group and somewhat lower than the
median for the Expense Universe. The directors concluded that the Fund's
expense ratio was satisfactory.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund contains
breakpoints so that, if assets were to increase over the breakpoint levels, the
fee rates would be reduced on the incremental assets. The directors also
considered a presentation by an independent consultant discussing economies of
scale issues in
_______________________________________________________________________________
44 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
the mutual fund industry. The directors believe that economies of scale are
realized (if at all) by the Adviser across a variety of products and services,
and not only in respect of a single fund. The directors noted that there is no
uniform methodology for establishing breakpoints that give effect to
fund-specific services provided by the Adviser and to the economies of scale
that the Adviser may realize in its overall mutual fund business or those
components of it which directly or indirectly affect the Fund's operations. The
directors observed that in the mutual fund industry as a whole, as well as
among funds similar to the Fund, there is no uniformity or pattern in the fees
and asset levels at which breakpoints (if any) apply. Depending on the age and
size of a particular fund and its adviser's cost structure, different
conclusions can be drawn as to whether there are economies of scale to be
realized at any particular level of assets, notwithstanding the intuitive
conclusion that such economies exist, or will be realized at some level of
total assets. Moreover, because different advisers have different cost
structures and service models, it is difficult to draw meaningful conclusions
from the comparison of a fund's advisory fee breakpoints with those of
comparable funds. The directors also noted that the advisory agreements for
many funds do not have breakpoints at all. Having taken these factors into
account, the directors concluded that the Fund's breakpoint arrangements would
result in a sharing of economies of scale in the event of a very significant
increase in the Fund's net assets.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 45
AllianceBernstein Family of Funds
- -------------------------------------------------------------------------------
ALLIANCEBERNSTEIN FAMILY OF FUNDS
- --------------------------------------------
Wealth Strategies Funds
- --------------------------------------------
Balanced Wealth Strategy
Wealth Appreciation Strategy
Wealth Preservation Strategy
Tax-Managed Balanced Wealth Strategy
Tax-Managed Wealth Appreciation Strategy
Tax-Managed Wealth Preservation Strategy
- --------------------------------------------
Blended Style Funds
- --------------------------------------------
U.S. Large Cap Portfolio
International Portfolio
Tax-Managed International Portfolio
- --------------------------------------------
Growth Funds
- --------------------------------------------
Domestic
Growth Fund
Mid-Cap Growth Fund
Large Cap Growth Fund*
Small Cap Growth Portfolio
Global & International
Global Health Care Fund*
Global Research Growth Fund
Global Technology Fund*
Greater China '97 Fund
International Growth Fund*
International Research Growth Fund*
- --------------------------------------------
Value Funds
- --------------------------------------------
Domestic
Balanced Shares
Focused Growth & Income Fund*
Growth & Income Fund
Real Estate Investment Fund
Small/Mid-Cap Value Fund*
Utility Income Fund
Value Fund
Global & International
Global Value Fund
International Value Fund
- --------------------------------------------
Taxable Bond Funds
- --------------------------------------------
Americas Government Income Trust
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Multi-Market Strategy Trust
Quality Bond Portfolio
Short Duration Portfolio
U.S. Government Portfolio
- --------------------------------------------
Municipal Bond Funds
- --------------------------------------------
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
- --------------------------------------------
Intermediate Municipal Bond Funds
- --------------------------------------------
Intermediate California
Intermediate Diversified
Intermediate New York
- --------------------------------------------
Closed-End Funds
- --------------------------------------------
All-Market Advantage Fund
ACM Income Fund
ACM Government Opportunity Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
California Municipal Income Fund
National Municipal Income Fund
New York Municipal Income Fund
The Spain Fund
World Dollar Government Fund
World Dollar Government Fund II
We also offer Exchange Reserves,** which serves as the money market fund
exchange vehicle for the AllianceBernstein mutual funds.
For more complete information on any AllianceBernstein mutual fund, including
investment objectives and policies, sales charges, expenses, risks and other
matters of importance to prospective investors, visit our web site at
www.alliancebernstein.com or call us at (800) 227-4618 for a current
prospectus. You should read the prospectus carefully before you invest.
* Prior to December 15, 2004, these Funds were named as follows: Global Health
Care Fund was Health Care Fund; Large Cap Growth Fund was Premier Growth Fund;
Global Technology Fund was Technology Fund; and Focused Growth & Income Fund
was Disciplined Value Fund. Prior to February 1, 2005, Small/Mid-Cap Value Fund
was named Small Cap Value Fund. Prior to May 16, 2005, International Growth
Fund was named Worldwide Privatization Fund and International Research Growth
Fund was named International Premier Growth Fund. On June 24, 2005, All-Asia
Investment Fund merged into International Research GrowthFund. On July 8, 2005,
New Europe Fund merged into International Research Growth Fund.
** An investment in the Fund 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.
_______________________________________________________________________________
46 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF
INVESTMENT ADVISORY AGREEMENT*
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P., (the "Adviser") and the
AllianceBernstein Mid-Cap Growth Fund, Inc., (the "Fund"), prepared by Philip
L. Kirstein, the Senior Officer, for the independent directors of the Fund, as
required by the Assurance of Discontinuance between the New York State Attorney
General and the Adviser. The Senior Officer's evaluation of the investment
advisory agreement is not meant to diminish the responsibility or authority of
the Boards of Directors to perform their 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 which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the Adviser
for like services.
2. Management 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 providing such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services, including the performance of
the Fund.
* It should be noted that the information in the fee summary was completed on
June 8, 2005 and presented to the Board of Directors and Trustees on June 15,
2005 in accordance with the Assurance of Discontinuance with the New York State
Attorney General. It also should be noted that references in the fee summary
pertaining to performance and expense ratios refer to Class A shares of the
Fund.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 47
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fee pursuant to the Investment
Advisory Agreement.
Advisory Fee Based on % of
Average Daily Net Assets
- -------------------------------------------------------------------------------------------
AllianceBernstein Mid-Cap Growth Fund, Inc. First $500 million .75%
Excess over $500 million
Up to $1 billion .65%
Excess over $1 billion .55%
The table below shows expense ratio information for the Fund for its most
recent fiscal year.
Fiscal
Expense Ratio Year End
- -------------------------------------------------------------------------------------------
AllianceBernstein Mid-Cap Growth Fund, Inc. Advisor - 1.01% July 31, 2004
Class A - 1.23%
Class B - 2.05%
Class C - 2.03%
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund as indicated below:
Latest
Fiscal Year As % of Average
Amount Daily Net Assets
- -------------------------------------------------------------------------------------------
AllianceBernstein Mid-Cap Growth Fund, Inc. $ 106,500.00 .01
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS OF THE ADVISER
The management fees charged to investment companies which the Adviser manages
and sponsors may be higher than those charged to institutional accounts,
including pension plans and sub-advised investment companies. 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 include
providing office space and personnel to serve as Fund Officers 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 and legal/compliance requirements for the Fund are
more costly than those for institutional assets due to the greater complexities
and time required for investment companies. A portion of the expenses related
to these services are reimbursed by the Fund to the Adviser. Managing the cash
flow of an investment company may be more difficult than for other accounts,
particularly if the Fund is in net redemptions, as the Adviser is forced to
sell securities to meet redemptions.
_______________________________________________________________________________
48 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
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 Senior Officer believes it is worth noting the
information from the Adviser's ADV regarding the advisory fees charged to
institutional accounts in the same asset class as the Fund.
Total Net Assets Alliance
03/31/05 Institutional
($MIL) Fee Schedule
- ----------------------------------------------------------------------------------------
AllianceBernstein Mid-Cap 757 Mid-Cap Growth Schedule
Growth Fund, Inc. 90 bp on 1st $25 m
70 bp on next $25 m
60 bp on next $50 m
50 bp on the balance
Minimum account size $10 m
The Adviser provides sub-advisory investment services to certain other
investment companies managed by other fund families that have similar
investment styles as the Fund. Set forth below is the name and fee schedule of
the only fund sub-advised by the Adviser that has the same investment style as
the Fund:
Sub-advised Fund Fee Schedule
- ------------------------------------------------------------------------------------------------
AllianceBernstein Mid- ING Alliance Mid-Cap Growth 0.75% on first $10 million
Cap Growth Fund, Inc. Portfolio 0.625% on next $10 million
0.50% on next $20 million
0.375% on next $20 million
0.25% thereafter
The Adviser also manages and sponsors retail mutual funds organized in
jurisdictions outside the United States, generally Luxembourg, and sold to
non-United States investors. With respect to the Fund, the Adviser represented
that there are no offshore retail mutual funds of similar investment style.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., 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 by other investment advisers. Lipper's analysis
included the
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 49
Fund's ranking with respect to the proposed advisory fees relative to the
Lipper group median at the approximate current asset level for the Fund.*
Lipper Group
Fee Median Rank
- ----------------------------------------------------------------------------------------------
AllianceBernstein Mid-Cap Growth Fund, Inc. 0.715 0.715 8/15
Lipper also analyzed the expense ratio of the Fund in comparison to its Lipper
Expense Group** and Lipper Expense Universe***. Lipper describes a Lipper
Expense Group as a representative sample of comparable funds and a Lipper
Universe as a broader group, consisting of all funds in the investment
classification/objective with a similar load type as the subject Fund. The
results of that analysis are set forth below:
Lipper Lipper Lipper
Expense Universe Universe Lipper Group
Ratio Median Rank Group Rank Median
- ------------------------------------------------------------------------------------------------------
AllianceBernstein Mid-Cap 1.251 1.470 18/87 6/15 1.266
Growth Fund, Inc.
Although the Fund has a favorable ranking on a total expense ratio basis the
directors are still interested in lowering non-management expenses.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE ADVISORY AGREEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
The profitability information for the Fund prepared by the Adviser for the
Board of the Directors was reviewed by the Senior Officer. An independent
consultant is working with the Adviser's personnel on a new system to produce
profitability information at the Fund level which will reflect the Adviser's
management reporting approach. It is possible that future Fund profitability
information may differ from previously reviewed information due to changes in
methodologies and allocations. See Section IV for additional discussion.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The Adviser's profitability for the Fund decreased during calendar 2004
relative to 2003 primarily as a result of the reduction in the advisory fee
schedule implemented early in 2004.
* A ranking of "1" means that the AllianceBernstein Fund has the lowest
effective fee rate in the Lipper peer group.
** Lipper uses the following criteria in screening funds to be included in
each Fund's expense group: fund type, investment classification/objective, load
type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, and
expense components and attributes. An expense group will typically consist of
seven to twenty funds.
*** Except for asset (size) comparability, Lipper uses the same criteria for
selecting an expense group when selecting an expense universe. Unlike an
expense group, an expense universe allows for the same advisor to be
represented by more than just one fund.
_______________________________________________________________________________
50 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
In addition to the Adviser's direct profits from managing the Fund pursuant to
the investment advisory agreement, certain of the Adviser's affiliates have
business relationships with the Fund and may earn a profit from providing other
services to the Fund. These affiliates provide transfer agency and distribution
related services and receive transfer agent fees, Rule 12b-1 payments,
front-end sales loads, contingent deferred sales charges ("CDSC") and
commissions for providing brokerage services. In addition, the Adviser benefits
from soft dollar arrangements which offset expenses the Adviser would otherwise
incur. Additional information regarding distribution related fees can be found
in the prospectus of the Fund.
Different classes of shares are charged different types of distribution fees.
The Adviser's affiliate, AllianceBernstein Investment Research and Management
Inc. ("ABIRM"), is the Fund's principal underwriter. ABIRM and the Adviser may
make payments* from their own resources, in addition to sales loads and Rule
12b-1 fees, to firms that sell shares of the Fund. In 2004, ABIRM paid from its
own resources approximately .04% of the average monthly assets of the Fund for
distribution services and educational support. For 2005, it is anticipated that
ABIRM will pay approximately .04% of average monthly assets of the Fund for
such purposes.
After payments to third party intermediaries, ABIRM retained the following
amount in Class A front-end load sales charges from sales of the Fund's shares
in the Fund's most recent fiscal year:
Amount Received
- -------------------------------------------------------------------------------
AllianceBernstein Mid-Cap Growth Fund, Inc. $28,688
ABIRM received the amounts set forth below in Rule 12b-1 fees and CDSC for the
Fund during the Fund's most recent fiscal year. A significant percentage of
such amounts were paid out to third party intermediaries by ABIRM.
12b-1Fee
Received** CDSC Received
- -------------------------------------------------------------------------------
AllianceBernstein Mid-Cap Growth Fund, Inc. $2,419,070 $171,273
Fees and reimbursements for out of pocket expenses charged by Alliance Global
Investor Services, Inc. ("AGIS"), the affiliated transfer agent, are based on
the level of the network account and the class of share held by the account.
AGIS also
* The total amount paid to the financial intermediary in connection with the
sale of shares will generally not exceed the sum of (a) .25% of the current
year's Fund sales by that firm and (b) .10% of the average daily net assets
attributable to that firm over the year.
** 12b-1 amounts are gross amounts paid to ABIRM.
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 51
receives a fee per shareholder sub-account for each account maintained by an
intermediary on an omnibus basis. AGIS' after-tax profitability decreased in
2004 in comparison to 2003.
AGIS received the following fee from the Fund in the most recent fiscal year:
AGIS Fee
- -------------------------------------------------------------------------------
AllianceBernstein Mid-Cap Growth Fund, Inc. $1,344,000
The Fund effected brokerage transactions through the Adviser's affiliate,
Sanford C. Bernstein & Co. LLC ("SCB"), and paid commissions during the Fund's
recent 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 third party clients.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule for the Fund
reflect a sharing of economies of scale to the extent they exist. Based on some
of the professional literature that have considered economies of scale in the
mutual fund industry it is thought that to the extent economies of scale exist,
they may more often exist across a fund family as opposed to a specific fund.
This is because the costs incurred by the Adviser, such as investment research
or technology for trading or compliance systems can be spread across a greater
asset base as the fund family increases in size. It is also possible that as
the level of services required to operate a successful investment company has
increased over time, and advisory firms have made such investments in their
business to provide improved services, there may be a sharing of economies of
scale without a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to the lack of cost
data which forced the researchers to infer facts about the costs from the
behavior of fund expenses, there was a lack of consensus among researchers as
to whether economies of scale were being passed on to the shareholders. It is
contemplated that additional work will be performed to determine if the
benefits of economies of scale or scope are being passed to shareholders by the
Adviser. In the meantime, it is clear that to the extent the Fund's assets
exceed the initial breakpoint its shareholders benefit from a lower fee rate.
_______________________________________________________________________________
52 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING PERFORMANCE OF THE
FUND.
With assets under management of $534.4 billion as of March 31, 2005, the
Adviser has the investment experience and resources necessary to effectively
manage the Fund and provide non-investment services (described in Section II)
to the Fund.
The information prepared by Lipper showed the 1, 3, 5 and 10 year performance
ranking of the Fund relative to its Lipper universe:
Performance Year
Rank in Performance Universe for Periods
Ended March 31, 2005
- ----------------------------------------------------------------------------------------------
1 3 5 10
- ----------------------------------------------------------------------------------------------
AllianceBernstein Mid-Cap Growth
Fund, Inc. 110/115 14/96 21/69 23/35
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-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: July 22, 2005
_______________________________________________________________________________
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 53
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO] ALLIANCEBERNSTEIN (R)
Investment Research and Management
ALLAR0705
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer and principal accounting
officer. A copy of the registrant's code of ethics is filed herewith as
Exhibit 12(a)(1).
(b) During the period covered by this report, no material amendments were made
to the provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers
to the provisions of the code of ethics adopted in 2(a) above were granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors has determined that independent directors
David H. Dievler and William H. Foulk, Jr. qualify as audit committee financial
experts.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) - (c) The following table sets forth the aggregate fees billed by the
independent registered public accounting firm PricewaterhouseCoopers LLP, for
the Fund's last two fiscal years for professional services rendered for: (i) the
audit of the Fund's annual financial statements included in the Fund's annual
report to stockholders; (ii) assurance and related services that are reasonably
related to the performance of the audit of the Fund's financial statements and
are not reported under (i), which include advice and education on accounting
and auditing issues, quarterly press release review (for those Funds that issue
quarterly press releases), and preferred stock maintenance testing (for those
Funds that issue preferred stock); and (iii) tax compliance, tax advice and tax
return preparation.
Audit Audit-Related Tax
Fees Fees Fees
--------- ------------- --------
2004 $ 39,000 $ 1,560 $ 14,790
2005 $ 42,000 $ 3,680 $ 6,100
(d) Not applicable.
(e) (1) Beginning with audit and non-audit service contracts entered into on or
after May 6, 2003, the Fund's Audit Committee policies and procedures require
the pre-approval of all audit and non-audit services provided to the Fund by
the Fund's independent registered public accounting firm. The Fund's Audit
Committee policies and procedures also require pre-approval of all audit and
non-audit services provided to the Adviser and Service Affiliates to the
extent that these services are directly related to the operations or
financial reporting of the Fund.
(e) (2) All of the amounts for Audit Fees, Audit-Related Fees and Tax Fees in
the table under Item 4 (a) - (c) are for services pre-approved by the Fund's
Audit Committee.
(f) Not applicable.
(g) The following table sets forth the aggregate non-audit services provided to
the Fund, the Fund's Adviser and entities that control, are controlled by or
under common control with the Adviser that provide ongoing services to the
Fund, which include conducting an annual internal control report pursuant to
Statement on Auditing Standards No. 70 ("Service Affiliates"):
Total Amount of
Foregoing Column Pre-
approved by the Audit
All Fees for Committee
Non-Audit Services (Portion Comprised of
Provided to the Audit Related Fees)
Portfolio, the Adviser (Portion Comprised of
and Service Affiliates Tax Fees)
- -------------------------------------------------------------------------------------------------------------
2004 $ 743,424 [ $16,350 ]
( $1,560 )
( $14,790 )
2005 $ 812,555 [ $9,780 ]
( $3,680 )
( $6,100 )
(h) The Audit Committee of the Fund has considered whether the provision of any
non-audit services not pre-approved by the Audit Committee provided by the
Fund's independent registered public accounting firm to the Adviser and
Service Affiliates is compatible with maintaining the independent registered
public accounting firm's independence.
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-2(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 significant changes in the registrant's internal controls
over financial reporting during the second fiscal quarter of the period that
could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
ITEM 12. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
12 (a) (1) Code of Ethics that is subject to the disclosure of Item 2
hereof
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): AllianceBernstein Mid-Cap Growth Fund, Inc.
By: /s/ Marc O. Mayer
-----------------
Marc O. Mayer
President
Date: September 28, 2005
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/ Marc O. Mayer
-----------------
Marc O. Mayer
President
Date: September 28, 2005
By: /s/ Mark D. Gersten
-------------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: September 28, 2005