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, 2006
Date of reporting period: January 31, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
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SEMI-ANNUAL REPORT
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AllianceBernstein Mid-Cap Growth Fund
Semi-Annual Report
January 31, 2006
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
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
AllianceBernsteinR 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 Investments, Inc. is an affiliate of AllianceBernstein L.P.,
the manager of the funds, and is a member of the NASD.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
March 27, 2006
Semi-Annual Report
This report provides management's discussion of fund performance for
AllianceBernstein Mid-Cap Growth Fund (the "Fund") for the semi-annual
reporting period ended January 31, 2006.
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 AllianceBernstein 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 January
31, 2006.
The Fund outperformed its benchmark during both periods under review. During
both the six- and 12-month periods ended January 31, 2006, the Fund's
significant overweighted position in the technology sector made the largest
contribution to its outperformance relative to its benchmark. A slight
underweight in the producer durables sector also contributed to performance in
both periods. The Fund's large underweighted position in the energy sector was
the largest detractor from performance, followed by the impact of an
overweighted position in the consumer discretionary sector. Stock selection was
a contributor to performance during both the six- and 12-month periods ended
January 31, 2006.
Market Review and Investment Strategy
Over the past year, the equity markets produced relatively strong returns,
helped by a fourth quarter rally that carried into 2006. Energy prices rose for
much of 2005, declining modestly from September to November before resuming
their uptrend. Despite the rise in the price of oil and other commodities, core
inflation, as measured by the Consumer Price Index (CPI), excluding food and
energy, remained at a relatively low historical level, approximately 2%. The
U.S. Federal Reserve, for its part, continued to raise interest rates in steady
25 basis point increments. Economic growth remained strong for much of the
year, both domestically and abroad, although a preliminary estimate of the U.S.
fourth quarter gross domestic product (GDP) was decidedly weaker. Corporate
profit growth in the U.S. continued at a healthy pace, further adding to
already impressive cash levels. Final demand in the technology sector continued
to rise from depressed levels of a few years prior, driven by strong demand for
consumer electronics and broadband-enabling equipment.
Over the 12-month period ended January 31, 2006, the Fund maintained an
underweight position in the energy sector in response to continued indications
of ample supply and increasing reports that demand had declined. The Fund's
portfolio manager (the "man-
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 1
ager") decreased the Fund's underweight in financials during the 12-month
period, increasing exposure in the form of select electronic financial
exchanges, which benefited from a migration of volume from floor-based trading
pits to electronic venues. The Fund continued to hold a significant overweight
position in technology, taking encouragement from data indicating underlying
demand remained quite healthy. The Fund also continued to be overweight in the
consumer discretionary sector with a focus on internet-related companies.
At the onset of the six-month period ended January 31, 2006, the market
environment was characterized by equity markets which posted muted returns, as
commodities prices rose and the U.S. Federal Reserve continued to raise
interest rates. The markets turned decidedly higher as oil prices retreated
from their highs, falling approximately $10 in a two month period. The markets
also had to digest President Bush's selection of Ben Bernanke as his nominee to
succeed Alan Greenspan as Chairman of the Federal Reserve Board. Certain
economic indicators weakened over the course of this period, including money
growth, durable goods orders and housing prices. This was in contrast to the
continued strength seen in many commodities, U.S. payrolls and the Institute
for Supply Management (ISM) Index, among others.
In response to this environment over the six-month period, the manager
maintained the Fund's underweighted position in the energy sector, as supply
continued to rise and demand continued to decelerate in many areas around the
world. As energy prices rose, consumer-related stocks underperformed,
particularly traditional retail stocks, creating a buying opportunity which the
manager took advantage of. The Fund continues to emphasize companies in its
investment portfolio that are exposed to such themes as the broadband
revolution, productivity super-cycle and personalized medicine.
The Fund's holdings are classified throughout this report according to
AllianceBernstein's sector classification scheme (for a visual representation
of the Fund's sector breakdown, please see the pie chart on page 8). For
readers specifically interested in the Russell sector classification of this
Fund, the sector breakdown according to Russell's classification scheme is as
follows: Technology 35.2%, Consumer Discretionary 24.3%, Health Care 14.1%,
Financial Services 9.6%, Utilities 6.5%, Producer Durables 6.2%, Autos &
Transportation 1.2%, Energy 1.0%, Materials & Processing 0.9% and Cash 1.0%.
2 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
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 the different share classes will vary
due to different expenses associated with each class. Performance assumes
reinvestment of distributions and does not account for taxes.
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
(continued from previous page)
THE FUND VS. ITS BENCHMARK
PERIODS ENDED JANUARY 31, 2006
Returns
6 Months 12 Months
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AllianceBernstein Mid-Cap Growth Fund
Class A 18.52% 25.53%
Class B 17.86% 24.41%
Class C 17.87% 24.43%
Advisor Class 18.52% 25.81%
Class R** 18.20% 26.01%*
Class K** 18.52% 26.36%*
Class I** 18.66% 26.70%*
Russell Mid Cap Growth Index 10.38% 22.08%
* 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.
See Historical Performance and Benchmark disclosures on previous page.
(Historical Performance continued on next page)
4 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF JANUARY 31, 2006
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NAV Returns SEC Returns
Class A Shares
1 Year 25.53% 20.20%
5 Years 5.10% 4.21%
10 Years 8.17% 7.69%
Class B Shares
1 Year 24.41% 20.41%
5 Years 4.23% 4.23%
10 Years(a) 7.43% 7.43%
Class C Shares
1 Year 24.43% 23.43%
5 Years 4.23% 4.23%
10 Years 7.22% 7.22%
Advisor Class Shares#
1 Year 25.81% 25.81%
5 Years 5.32% 5.32%
Since Inception* 8.45% 8.45%
Class R Shares#
Since Inception* 26.01% 26.01%
Class K Shares#
Since Inception* 26.36% 26.36%
Class I Shares#
Since Inception* 26.70% 26.70%
(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.
# These share classes are offered at net asset value (NAV) to eligible
investors and their SEC returns are the same as the NAV returns. Please note
that Class R, Class K and Class I shares are new share class offerings 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.
(Historical Performance continued on next page)
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 5
HISTORICAL PERFORMANCE
(continued from previous page)
SEC AVERAGE ANNUAL RETURNS (WITH ANY APPLICABLE SALES CHARGES)
AS OF THE MOST RECENT CALENDAR QUARTER-END (DECEMBER 31, 2005)
- -------------------------------------------------------------------------------
SEC Returns
Class A Shares
1 Year 2.16%
5 Years 2.20%
10 Years 6.91%
Class B Shares
1 Year 2.03%
5 Years 2.15%
10 Years(a) 6.64%
Class C Shares
1 Year 4.89%
5 Years 2.19%
10 Years 6.44%
Advisor Class Shares
1 Year 6.92%
5 Years 3.29%
Since Inception* 7.42%
Class R Shares#
Since Inception* 14.48%
Class K Shares#
Since Inception* 14.82%
Class I Shares#
Since Inception* 14.99%
(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.
6 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
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
August 31, 2005 January 31, 2006 During Period*
------------------------------ ------------------------------ ------------------------------
Actual Hypothetical Actual Hypothetical** Actual Hypothetical
-------------- -------------- -------------- -------------- -------------- --------------
Class A $1,000 $1,000 $1,185.23 $1,018.70 $ 7.11 $ 6.56
Class B $1,000 $1,000 $1,178.59 $1,014.62 $11.53 $10.66
Class C $1,000 $1,000 $1,178.72 $1,014.72 $11.42 $10.56
Advisor
Class $1,000 $1,000 $1,185.20 $1,019.81 $ 5.89 $ 5.45
Class R $1,000 $1,000 $1,182.00 $1,016.99 $ 8.96 $ 8.29
Class K $1,000 $1,000 $1,185.23 $1,018.65 $ 7.16 $ 6.61
Class I $1,000 $1,000 $1,186.62 $1,020.62 $ 5.02 $ 4.63
* Expenses are equal to the classes' annualized expense ratios of 1.29%,
2.10%, 2.08%, 1.07%, 1.63%, 1.30% and 0.91%, respectively, multiplied by the
average account value over the period, multiplied by 184/365 (to reflect the
one-half year period).
** Assumes 5% return before expenses.
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 7
PORTFOLIO SUMMARY
January 31, 2006 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $936.9
SECTOR BREAKDOWN*
[ ] 45.8% Technology [PIE CHART OMITTED]
[ ] 27.2% Consumer Services
[ ] 16.1% Health Care
[ ] 7.6% Finance
[ ] 1.9% Energy
[ ] 1.4% Short-Term
TEN LARGEST HOLDINGS
January 31, 2006 (unaudited)
Percent of
Company U.S. $ Value Net Assets
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Applera Corp. $ 40,753,019 4.4%
Level 3 Communications, Inc. 40,372,504 4.3
KLA-Tencor Corp. 39,518,315 4.2
Silicon Laboratories, Inc. 37,808,049 4.0
Juniper Networks, Inc. 37,034,894 4.0
XM Satellite Radio Holdings, Inc., Cl.A 30,013,983 3.2
Apollo Group, Inc., Cl.A 29,160,614 3.1
NAVTEQ 28,433,554 3.0
JDS Uniphase Corp. 27,875,057 3.0
Amazon.com, Inc. 27,412,136 2.9
$338,382,125 36.1%
* All data are as of January 31, 2006. 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 AllianceBernstein's sector classification
scheme. For readers specifically interested in the Russell sector
classification of this Fund, the sector breakdown according to Russell's
classification scheme is as follows: technology 35.2%, consumer discretionary
24.3%, health care 14.1%, financial services 9.6%, utilities 6.5%, producer
durables 6.2%, autos & transportation 1.2%, energy 1.0%, materials & processing
0.9% and cash 1.0%.
8 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS
January 31, 2006 (unaudited)
Company Shares U.S. $ Value
- -------------------------------------------------------------------------------
COMMON STOCKS-99.0%
Technology-46.0%
Communication Equipment-6.9%
JDS Uniphase Corp.(a)* 8,905,769 $ 27,875,057
Juniper Networks, Inc.(a) 2,042,741 37,034,894
------------
64,909,951
Communication Services-4.3%
Level 3 Communications, Inc.(a) 10,766,001 40,372,504
Computer Hardware/Storage-1.8%
Sun Microsystems, Inc.(a)* 3,663,113 16,484,009
Computer Peripherals-2.5%
Network Appliance, Inc.(a)* 760,945 23,741,484
Internet Infrastructure-2.5%
VeriSign, Inc.(a) 981,617 23,313,404
Internet Media-3.0%
Equinix, Inc.(a)* 203,702 9,559,735
RealNetworks, Inc.(a) 2,308,352 18,582,233
------------
28,141,968
Semiconductor Capital Equipment-7.3%
FormFactor, Inc.(a) 359,419 10,717,874
KLA-Tencor Corp.* 760,260 39,518,315
Lam Research Corp.(a) 392,616 18,229,161
------------
68,465,350
Semiconductor Components-10.8%
Advanced Micro Devices, Inc.(a) 341,432 14,292,344
Broadcom Corp. Cl.A(a) 276,351 18,847,138
PMC-Sierra, Inc.(a)* 2,237,458 21,166,353
Silicon Laboratories, Inc.(a)* 767,988 37,808,049
Spansion, Inc. Cl.A(a) 677,531 8,807,903
------------
100,921,787
Software-4.1%
Citrix Systems, Inc.(a) 329,379 10,158,048
NAVTEQ(a)* 633,123 28,433,554
------------
38,591,602
Miscellaneous-2.8%
Harman International Industries, Inc.* 101,877 11,206,470
Trimble Navigation Ltd.(a) 368,238 14,736,885
------------
25,943,355
------------
430,885,414
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 9
Company Shares U.S. $ Value
- -------------------------------------------------------------------------------
Consumer Services-27.3%
Advertising-1.8%
Audible, Inc.(a)* 1,040,103 $ 11,399,529
Focus Media Holding, Ltd. (ADR)(a) 101,000 5,513,590
------------
16,913,119
Airlines-1.3%
Continental Airlines, Inc. Cl.B(a)* 556,409 11,634,512
Broadcasting & Cable-3.2%
XM Satellite Radio Holdings, Inc. Cl.A(a)* 1,146,447 30,013,983
Cellular Communications-2.2%
NeuStar, Inc. Cl.A(a) 711,319 20,635,364
Entertainment & Leisure-3.5%
Eastman Kodak Co. 355,733 8,928,898
Wynn Resorts, Ltd.(a)* 367,374 23,725,013
------------
32,653,911
Retail - General Merchandise-6.1%
Amazon.com, Inc.(a) 611,605 27,412,136
Bed Bath & Beyond, Inc.(a) 545,509 20,407,492
Williams-Sonoma, Inc.(a)* 242,797 9,658,464
------------
57,478,092
Miscellaneous-9.2%
Apollo Group, Inc. Cl.A(a)* 523,812 29,160,614
CNET Networks, Inc.(a)* 1,321,936 19,855,479
HomeStore, Inc.(a) 3,102,799 18,740,906
Shanda Interactive Entertainment,
Ltd. (ADR)(a)* 1,114,548 18,668,679
------------
86,425,678
------------
255,754,659
Health Care-16.2%
Biotechnology-9.7%
Affymetrix, Inc.(a) 567,939 21,683,911
Applera Corp.-Applied Biosystems Group 696,150 19,728,891
Applera Corp.-Celera Genomics Group(a) 1,787,766 21,024,128
Compugen, Ltd.(a) 1,715,350 8,576,750
deCODE GENETICS, Inc.(a)* 1,080,450 10,307,493
Myriad Genetics, Inc.(a) 205,532 4,406,606
Vertex Pharmaceuticals, Inc.(a) 135,129 4,826,808
------------
90,554,587
Medical Products-4.5%
Cerus Corp.(a)* 1,469,523 21,014,179
Given Imaging, Ltd.(a)* 801,143 21,254,324
------------
42,268,503
Medical Services-2.0%
Cepheid, Inc.(a) 1,923,457 18,946,051
------------
151,769,141
10 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Shares or
Principal
Amount
Company (000) U.S. $ Value
- -------------------------------------------------------------------------------
Finance-7.6%
Brokerage & Money Management-3.3%
International Securities Exchange,
Inc. Cl.A(a) 532,487 $ 19,781,892
TD Ameritrade Holding Corp. 555,233 11,237,916
------------
31,019,808
Miscellaneous-4.3%
Chicago Mercantile Exchange Holdings,
Inc.* 41,986 17,770,575
Nasdaq Stock Market, Inc.(a)* 530,041 22,214,018
------------
39,984,593
------------
71,004,401
Energy-1.9%
Miscellaneous-1.9%
Energy Conversion Devices, Inc.(a)* 169,591 8,540,602
Plug Power, Inc.(a)* 1,551,024 9,228,593
------------
17,769,195
Total Common Stocks
(cost $702,921,717) 927,182,810
SHORT-TERM INVESTMENT-1.3%
Time Deposit-1.3%
State Street Euro Dollar
3.60%, 2/01/06
(cost $12,666,000) $ 12,666 12,666,000
Total Investments Before Security Lending
Collateral-100.3%
(cost $715,587,717) 939,848,810
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED-22.1%
Short-Term Investment
UBS Private Money Market Fund, LLC, 4.35%
(cost $207,322,390) 207,322,390 207,322,390
Total Investments-122.4%
(cost $922,910,107) 1,147,171,200
Other assets less liabilities-(22.4%) (210,252,522)
Net Assets-100% $ 936,918,678
* 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.
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 11
STATEMENT OF ASSETS & LIABILITIES
January 31, 2006 (unaudited)
Assets
Investments in securities, at value
(cost $922,910,107-including investment of
cash collateral for securities loaned of
$207,322,390) $1,147,171,200(a)
Cash 972
Receivable for investment securities sold 19,496,678
Receivable for capital stock sold 3,486,254
Dividends and interest receivable 1,267
Total assets 1,170,156,371
Liabilities
Payable for collateral on securities loaned 207,322,390
Payable for investment securities purchased 22,494,982
Payable for capital stock redeemed 1,742,648
Advisory fee payable 540,073
Distribution fee payable 217,858
Transfer Agent fee payable 193,056
Administrative fee payable 7,898
Accrued expenses 718,788
Total liabilities 233,237,693
Net Assets $936,918,678
Composition of Net Assets
Capital stock, at par $1,363,482
Additional paid-in capital 727,034,794
Accumulated net investment loss (2,400,196)
Accumulated net realized loss on investment
transactions (13,340,495)
Net unrealized appreciation of investments 224,261,093
---------------
$ 936,918,678
Calculation of Maximum Offering Price Per Share
Net Asset Value and:
---------------------------
Shares Offering Redemption
Class Net Assets Outstanding Price Price
- -------------------------------------------------------------------------------
A $ 743,376,066 106,075,405 $ 7.32* $ 7.01
B $ 71,820,364 12,250,428 $ 5.86 --
C $ 30,965,847 5,289,843 $ 5.85 --
Advisor $ 78,587,772 11,001,052 $ 7.14 $ 7.14
R $ 189,989 27,194 $ 6.99 $ 6.99
K $ 11,982 1,710 $ 7.01 $ 7.01
I $ 11,966,658 1,702,615 $ 7.03 $ 7.03
* Represents the maximum offering price per share which includes a sales
charge of 4.25%.
(a) Includes securities on loan with a value of $196,458,088 (see Note E).
See notes to financial statements.
12 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
STATEMENT OF OPERATIONS
Six Months Ended January 31, 2006 (unaudited)
Investment Income
Dividends $ 2,721,524
Securities lending income 694,803
Interest 156,336 $ 3,572,663
Expenses
Management fee 3,009,033
Distribution fee--Class A 741,527
Distribution fee--Class B 346,548
Distribution fee--Class C 127,658
Distribution fee--Class R 94
Distribution fee--Class K 13
Transfer agency--Class A 698,635
Transfer agency--Class B 83,353
Transfer agency--Class C 28,225
Transfer agency--Advisor Class 73,223
Transfer agency--Class R 48
Transfer agency--Class K 11
Transfer agency--Class I 1,699
Printing 550,147
Custodian 121,691
Registration 58,667
Administrative 45,726
Legal 39,500
Audit 32,230
Directors' fees 12,596
Miscellaneous 17,290
Total expenses 5,987,914
Less: expense offset arrangement
(see Note B) (15,055)
Net expenses 5,972,859
Net investment loss (2,400,196)
Realized and Unrealized Gain on
Investment Transactions
Net realized gain on investment
transactions 60,451,179
Net change in unrealized
appreciation/depreciation
of investments 88,247,897
Net gain on investment transactions 148,699,076
Net Increase in Net Assets
from Operations $146,298,880
See notes to financial statements.
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 13
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended Year Ended
January 31, 2006 July 31,
(unaudited) 2005
----------------- -------------
Increase (Decrease) in Net Assets
from Operations
Net investment loss $ (2,400,196) $ (7,585,094)
Net realized gain on investment
transactions 60,451,179 97,402,126
Net change in unrealized
appreciation/depreciation
investments and foreign currency
of investments 88,247,897 50,931,030
Net increase in net assets
from operations 146,298,880 140,748,062
Distributions to Shareholders from
Net realized gain on investment
transactions
Class A (58,655,957) -0-
Class B (6,996,484) -0-
Class C (2,585,689) -0-
Advisor Class (6,024,760) -0-
Class R (1,092) -0-
Class K (982) -0-
Class I (928,477) -0-
Capital Stock Transactions
Net increase (decrease) 49,338,971 (80,151,890)
Total increase 120,444,410 60,596,172
Net Assets
Beginning of period 816,474,268 755,878,096
End of period (including accumulated
net investment loss of ($2,400,196)
and $0, respectively) $936,918,678 $816,474,268
See notes to financial statements.
14 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
January 31, 2006 (unaudited)
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
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 15
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") (see Note J) 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.
16 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
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 for class
specific expenses which are allocated to the respective class. Realized and
unrealized gains and losses are allocated among the various share classes based
on their relative net assets.
6. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the
ex-dividend date. Income dividends and capital gains distributions are
determined in accordance with federal tax regulations and may differ from those
determined in accordance with U.S. 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.
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 17
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 $45,726 to the Manager
representing the cost of certain legal and accounting services provided to the
Fund by the Manager for the six months ended January 31, 2006.
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 (see Note J). AGIS may make payments to intermediaries that provide
omnibus account services, sub accounting services and/or networking services.
Such compensation retained by AGIS amounted to $529,694 for the six months
ended January 31, 2006.
For the six months ended January 31, 2006, the Fund's expenses were reduced by
$15,055, 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 (see Note J). The Distributor has advised the
Fund that it has retained front-end sales charges of $7,737 from the sale of
Class A shares and received $3,604, $33,781 and $1,669 in contingent deferred
sales charges imposed upon redemptions by shareholders of Class A, Class B and
Class C shares, respectively, for the six months ended January 31, 2006.
Brokerage commissions paid on investment transactions for the six months ended
January 31, 2006 amounted to $1,795,500 of which $35,713 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
18 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
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 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
$6,551,500, $2,188,455, $0 and $27, 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 six months ended January 31, 2006, were as follows:
Purchases Sales
-------------- --------------
Investment securities (excluding
U.S. government securities) $551,809,511 $577,536,816
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation are as follows:
Gross unrealized appreciation $236,751,979
Gross unrealized depreciation (12,490,886)
Net unrealized appreciation $224,261,093
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
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 19
borrower's failure to return a loaned security when due. As of January 31,
2006, the Fund had loaned securities with a value of $196,458,088 and received
cash collateral which was invested in a money market fund valued at
$207,322,390 as included in the accompanying portfolio of investments. For the
six months ended January 31, 2006, the Fund earned fee income of $694,803 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
------------------------- -----------------------------
Six Months Six Months
Ended Ended
January 31, Year Ended January 31, Year Ended
2006 July 31, 2006 July 31,
(unaudited) 2005 (unaudited) 2005
----------- ----------- -------------- -------------
Class A
Shares sold 6,603,837 8,269,711 $ 43,690,270 $ 48,173,433
Shares issued in
reinvestment of
dividends and
distributions 7,517,363 -0- 49,313,899 -0-
Shares converted
from Class B 552,058 681,544 3,627,677 4,157,589
Shares redeemed (9,899,111) (21,249,735) (64,579,093) (123,888,353)
Net increase
(decrease) 4,774,147 (12,298,480) $ 32,052,753 $ (71,557,331)
Class B
Shares sold 705,034 2,187,239 $ 3,918,410 $ 10,967,154
Shares issued in
reinvestment of
dividends and
distributions 1,160,749 -0- 6,372,514 -0-
Shares converted
to Class A (655,011) (700,062) (3,627,677) (4,157,589)
Shares redeemed (1,712,747) (4,844,419) (9,458,742) (23,512,827)
Net decrease (501,975) (3,357,242) $ (2,795,495) $ (16,703,262)
20 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Shares Amount
------------------------- -----------------------------
Six Months Six Months
Ended Ended
January 31, Year Ended January 31, Year Ended
2006 July 31, 2006 July 31,
(unaudited) 2005 (unaudited) 2005
----------- ----------- -------------- -------------
Class C
Shares sold 1,104,611 1,244,041 $ 6,184,429 $ 6,279,521
Shares issued in
reinvestment of
dividends and
distributions 403,673 -0- 2,216,165 -0-
Shares redeemed (600,427) (2,493,024) (3,319,474) (12,168,120)
Net increase
(decrease) 907,857 (1,248,983) $ 5,081,120 $ (5,888,599)
Advisor Class
Shares sold 992,503 3,816,392 $ 6,717,423 $ 22,967,670
Shares issued in
reinvestment of
dividends and
distributions 888,634 -0- 5,936,074 -0-
Shares redeemed (1,323,845) (1,519,521) (8,759,557) (9,000,454)
Net increase 557,292 2,296,871 $ 3,893,940 $ 13,967,216
March 1, March 1,
2005(a) 2005(a)
to July 31, to July 31,
2005 2005
----------- -------------
Class R
Shares sold 25,511 1,667 $ 165,167 $ 10,086
Shares issued in
reinvestment of
dividends and
distributions 16 -0- 107 -0-
Shares redeemed -0- -0- (3) -0-
Net increase 25,527 1,667 $ 165,271 $ 10,086
Class K
Shares sold 57 1,653 $ 391 $ 10,000
Net increase 57 1,653 $ 391 $ 10,000
Class I
Shares sold 1,561,444 1,653 $ 10,024,240 $ 10,000
Shares issued in
reinvestment of
dividends and
distributions 141,171 -0- 927,495 -0-
Shares redeemed (1,653) -0- (10,744) -0-
Net increase 1,700,962 1,653 $ 10,940,991 $ 10,000
(a) Commencement of distribution.
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 21
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)
The tax character of distributions to be paid for the year ending July 31, 2006
will be determined at the end of the current fiscal year. 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.
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
22 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
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.
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
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 23
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. The plaintiffs in such lawsuits have asserted a variety of
theories for recovery including, but not limited to, violations of the
Securities Act, the Exchange Act, the Advisers Act, the Investment Company Act,
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
certain state securities laws and common law. All state court actions against
the Adviser either were voluntarily dismissed or removed to federal court. On
February 20, 2004, the Judicial Panel on Multidistrict Litigation transferred
all federal actions to the United States District Court for the District of
Maryland (the "Mutual Fund MDL"). All of the actions removed to federal court
were also transferred to the Mutual Fund MDL. The plaintiffs in the removed
actions have since moved for remand, and that motion is pending.
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
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
24 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
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. On October 19, 2005, the
WVAG Complaint was transferred to the Mutual Fund MDL.
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 Commission Order and the NYAGOrder. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. The Adviser
intends to vigorously defend against the allegations in the WVAG Complaint.
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 Holding, 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
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 25
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, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiff's claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. Plaintiffs have moved for leave to
amend their consolidated complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. 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. 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 AllianceBernstein Mutual Funds.
NOTE J
Subsequent Event
Effective February 24, 2006, the names of Alliance Capital Management L.P.,
AllianceBernstein Investment Research and Management, Inc. and Alliance Global
Investor Services, Inc. were changed to AllianceBernstein L.P.,
AllianceBernstein Investments, Inc. and AllianceBernstein Investor Services,
Inc., respectively.
26 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class A
---------------------------------------------------------------------------------------------
Six Months
Ended December 1,
January 31, Year Ended July 31, 2002 to Year Ended November 30,
2006 ------------------------- July 31, -----------------------------------
(unaudited) 2005 2004 2003(a) 2002 2001 2000
------------ ------------ ------------ ----------- ---------- ---------- -----------
Net asset value,
beginning of period $ 6.45 $ 5.38 $ 4.46 $ 3.70 $ 4.79 $ 5.83 $ 7.55
Income From Investment
Operations
Net investment loss(b) (.02) (.05) (.06)(c) (.03) (.04) (.04) (.04)
Net realized and unrealized
gain (loss) on investment
transactions 1.17 1.12 .98 .79 (1.05) (.71) (1.04)
Net increase (decrease) in
net asset value from
operations 1.15 1.07 .92 .76 (1.09) (.75) (1.08)
Less: Distributions
Distributions from net realized
gain on investment
transactions (.59) -0- -0- -0- -0- (.29) (.64)
Net asset value, end of period $ 7.01 $ 6.45 $ 5.38 $ 4.46 $ 3.70 $ 4.79 $ 5.83
Total Return
Total investment return based
on net asset value(d) 18.52% 19.89% 20.63% 20.54% (22.76)% (13.64)% (15.73)%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $743,376 $653,612 $610,854 $540,843 $469,570 $686,445 $856,956
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.29%(e)(f) 1.25% 1.25% 1.45%(e) 1.34% 1.22% 1.04%
Expenses, before waivers/
reimbursements 1.29%(e)(f) 1.25% 1.26% 1.45%(e) 1.34% 1.22% 1.04%
Net investment loss (.45)%(e)(f) (.88)% (1.06)%(c) (1.11)%(e) (1.03)% (.69)% (.55)%
Portfolio turnover rate 66% 88% 135% 75% 183% 226% 86%
See footnote summary on page 33.
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 27
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class B
---------------------------------------------------------------------------------------------
Six Months
Ended December 1,
January 31, Year Ended July 31, 2002 to Year Ended November 30,
2006 ------------------------- July 31, -----------------------------------
(unaudited) 2005 2004 2003(a) 2002 2001 2000
------------ ------------ ------------ ----------- ---------- ---------- -----------
Net asset value,
beginning of period $ 5.51 $ 4.63 $ 3.87 $ 3.23 $ 4.22 $ 5.21 $ 6.87
Income From Investment
Operations
Net investment loss(b) (.04) (.09) (.09)(c) (.03) (.07) (.07) (.09)
Net realized and unrealized
gain (loss) on investment
transactions .98 .97 .85 .67 (.92) (.63) (.93)
Net increase (decrease) in
net asset value from
operations .94 .88 .76 .64 (.99) (.70) (1.02)
Less: Distributions
Distributions from net realized
gain on investment
transactions (.59) -0- -0- -0- -0- (.29) (.64)
Net asset value, end of period $ 5.86 $ 5.51 $ 4.63 $ 3.87 $ 3.23 $ 4.22 $ 5.21
Total Return
Total investment return based
on net asset value(d) 17.86% 19.01% 19.64% 19.81% (23.46)% (14.34)% (16.48)%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $71,820 $70,236 $74,567 $53,461 $41,096 $61,816 $81,569
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 2.10%(e)(f) 2.07% 2.09% 2.32%(e) 2.20% 2.08% 1.87%
Expenses, before waivers/
reimbursements 2.10%(e)(f) 2.07% 2.10% 2.32%(e) 2.20% 2.08% 1.87%
Net investment loss (1.29)%(e)(f) (1.71)% (1.90)%(c) (1.98)%(e) (1.89)% (1.54)% (1.39)%
Portfolio turnover rate 66% 88% 135% 75% 183% 226% 86%
See footnote summary on page 33.
28 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class C
---------------------------------------------------------------------------------------------
Six Months
Ended December 1,
January 31, Year Ended July 31, 2002 to Year Ended November 30,
2006 ------------------------- July 31, -----------------------------------
(unaudited) 2005 2004 2003(a) 2002 2001 2000
------------ ------------ ------------ ----------- ---------- ---------- -----------
Net asset value,
beginning of period $ 5.50 $ 4.62 $ 3.87 $ 3.22 $ 4.21 $ 5.20 $ 6.86
Income From Investment
Operations
Net investment loss(b) (.03) (.08) (.09)(c) (.03) (.06) (.07) (.09)
Net realized and unrealized
gain (loss) on investment
transactions .97 .96 .84 .68 (.93) (.63) (.93)
Net increase (decrease) in
net asset value from
operations .94 .88 .75 .65 (.99) (.70) (1.02)
Less: Distributions
Distributions from net realized
gain on investment
transactions (.59) -0- -0- -0- -0- (.29) (.64)
Net asset value, end of period $ 5.85 $ 5.50 $ 4.62 $ 3.87 $ 3.22 $ 4.21 $ 5.20
Total Return
Total investment return based
on net asset value(d) 17.87% 19.05% 19.38% 20.19% (23.52)% (14.37)% (16.51)%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $30,966 $24,098 $26,017 $14,415 $10,860 $15,391 $20,068
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 2.08%(e)(f) 2.05% 2.06% 2.27%(e) 2.16% 2.04% 1.86%
Expenses, before waivers/
reimbursements 2.08%(e)(f) 2.05% 2.07% 2.27%(e) 2.16% 2.04% 1.86%
Net investment loss (1.21)%(e)(f) (1.68)% (1.87)%(c) (1.94)%(e) (1.85)% (1.51)% (1.34)%
Portfolio turnover rate 66% 88% 135% 75% 183% 226% 86%
See footnote summary on page 33.
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 29
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Advisor Class
---------------------------------------------------------------------------------------------
Six Months
Ended December 1,
January 31, Year Ended July 31, 2002 to Year Ended November 30,
2006 ------------------------- July 31, -----------------------------------
(unaudited) 2005 2004 2003(a) 2002 2001 2000
------------ ------------ ------------ ----------- ---------- ---------- -----------
Net asset value,
beginning of period $ 6.56 $ 5.45 $ 4.52 $ 3.74 $ 4.83 $ 5.86 $ 7.58
Income From Investment
Operations
Net investment loss(b) (.01) (.04) (.05)(c) -0- (.03) (.03) (.02)
Net realized and unrealized
gain (loss) on investment
transactions 1.18 1.15 .98 .78 (1.06) (.71) (1.06)
Net increase (decrease) in
net asset value from
operations 1.17 1.11 .93 .78 (1.09) (.74) (1.08)
Less: Distributions
Distributions from net realized
gain on investment
transactions (.59) -0- -0- -0- -0- (.29) (.64)
Net asset value, end of period $ 7.14 $ 6.56 $ 5.45 $ 4.52 $ 3.74 $ 4.83 $ 5.86
Total Return
Total investment return based
on net asset value(d) 18.52% 20.37% 20.58% 20.86% (22.57)% (13.39)% (15.66)%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $78,588 $68,495 $44,440 $21,251 $13,092 $131,032 $8,304
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.07%(e)(f) 1.04% 1.04% 1.23%(e) 1.08% 1.08% .83%
Expenses, before waivers/
reimbursements 1.07%(e)(f) 1.04% 1.05% 1.23%(e) 1.08% 1.08% .83%
Net investment loss (.22)%(e)(f) (.64)% (.85)%(c) (.89)%(e) (.81)% (.64)% (.35)%
Portfolio turnover rate 66% 88% 135% 75% 183% 226% 86%
See footnote summary on page 33.
30 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class R
------------------------
Six Months
Ended March 1,
January 31, 2005(g) to
2006 July 31,
(unaudited) 2005
----------- ----------
Net asset value, beginning of period $ 6.45 $ 6.05
Income From Investment Operations
Net investment income (loss)(b) .03 (.02)
Net realized and unrealized gain on
investment transactions 1.10 .42
Net increase in net asset value from
operations 1.13 .40
Less: Distributions
Distributions from net realized gain on
investment transactions (.59) -0-
Net asset value, end of period $ 6.99 $ 6.45
Total Return
Total investment return based on net
asset value(d) 18.20% 6.61%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $190 $11
Ratio to average net assets of:
Expenses(e) 1.63%(f) 1.42%
Net investment income (loss)(e) 1.10%(f) (.86)%
Portfolio turnover rate 66% 88%
See footnote summary on page 33
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 31
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class K
------------------------
Six Months
Ended March 1,
January 31, 2005(g) to
2006 July 31,
(unaudited) 2005
----------- ----------
Net asset value, beginning of period $ 6.45 $ 6.05
Income From Investment Operations
Net investment loss(b) (.02) (.01)
Net realized and unrealized gain on
investment transactions 1.17 .41
Net increase in net asset value from
operations 1.15 .40
Less: Distributions
Distributions from net realized gain on
investment transactions (.59) -0-
Net asset value, end of period $ 7.01 $ 6.45
Total Return
Total investment return based on net
asset value(d) 18.52% 6.61%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $12 $11
Ratio to average net assets of:
Expenses(e) 1.30%(f) 1.14%
Net investment loss(e) (.46)%(f) (.58)%
Portfolio turnover rate 66% 88%
See footnote summary on page 33.
32 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class I
------------------------
Six Months
Ended March 1,
January 31, 2005(g) to
2006 July 31,
(unaudited) 2005
----------- ----------
Net asset value, beginning of period $ 6.46 $ 6.05
Income From Investment Operations
Net investment loss(b) -0-(h) (.01)
Net realized and unrealized gain on
investment transactions 1.16 .42
Net increase in net asset value from
operations 1.16 .41
Less: Distributions
Distributions from net realized gain on
investment transactions (.59) -0-
Net asset value, end of period $ 7.03 $ 6.46
Total Return
Total investment return based on net
asset value(d) 18.66% 6.78%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $11,967 $11
Ratio to average net assets of:
Expenses(e) .91%(f) .92%
Net investment loss(e) .07%(f) (.35)%
Portfolio turnover rate 66% 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) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(g) Commencement of distributions.
(h) Amount is less than $.005.
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 33
RESULTS OF SHAREHOLDERS MEETING
(unaudited)
The Annual Meeting of Stockholders of AllianceBernstein Mid-Cap Growth Fund
(the "Fund") was held on November 15, 2005 and adjourned until December 6,
2005. At the November 15, 2005 Meeting, with respect to the first item of
business, the election of Directors, and the third item of business,
elimination or reclassification as non-fundamental of certain investment
restrictions, the required number of outstanding shares were voted in favor of
the proposals, and the proposals were approved. At the December 6, 2005
Meeting, the required number of outstanding shares voted in favor of the second
item of business, the amendment and restatement of the Fund's charter, and the
fourth item of business, the reclassification of the Fund's investment
objective as non-fundamental with changes to the Fund's investment objectives,
and the proposals were approved. A description of each proposal and number of
shares voted at the Meeting are as follows (the proposal numbers shown below
correspond to the proposal numbers in the Fund's proxy statement):
1. The election of the Directors, each such Director to serve a term of an
indefinite duration and until his or her successor is duly elected and
qualifies.
Voted For Withheld Authority
- -------------------------------------------------------------------------------
Ruth Block 77,989,413 3,346,614
David H. Dievler 78,057,710 3,278,317
John H. Dobkin 78,009,348 3,326,679
Michael J. Downey 78,175,282 3,160,745
William H. Foulk, Jr. 78,114,184 3,221,842
D. James Guzy 77,654,176 3,681,851
Marc O. Mayer 78,171,625 3,164,401
Marshall C. Turner, Jr. 78,014,683 3,321,344
2. The amendment and restatement of the Fund's charter, which repealed in its
entirety all currently existing charter provisions and substituted in lieu
thereof new provisions set forth in the Form of Articles of Amendment and
Restatement Attached to the Fund's Proxy Statement as Appendix D.
Voted Broker
Voted For Against Abstained Non-Votes
- -----------------------------------------------------------------------------------------------------
68,846,696 3,662,939 2,875,065 0
3. The amendment, elimination, or Reclassification as non-fundamental of the
fundamental investment restrictions regarding:
Voted Broker
Voted For Against Abstained Non-Votes
- -----------------------------------------------------------------------------------------------------
3.A. Diversification 64,950,181 3,313,435 1,969,049 11,317,225
3.B. Issuing Senior Securities 64,129,924 4,186,547 1,916,195 11,317,225
and Borrowing Money
3.C. Underwriting Securities 64,207,298 3,966,373 2,058,993 11,317,225
3.D. Concentration of
Investments 64,787,421 3,417,247 2,027,997 11,317,225
34 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
Voted Broker
Voted For Against Abstained Non-Votes
- -----------------------------------------------------------------------------------------------------
3.E. Real Estate and 64,946,475 3,337,131 1,949,059 11,317,225
Companies that Deal
in Real Estate
3.F. Commodities, 63,813,802 4,487,105 1,931,758 11,317,225
Commodity Contracts
and Futures Contracts
3.G. Loans 63,896,205 4,364,278 1,972,182 11,317,225
3.K. Oil, Gas, and Other 64,574,372 3,658,939 1,999,354 11,317,225
Types of Minerals or
Mineral Leases
3.L. Purchases of Securities 63,272,270 5,003,674 1,956,721 11,317,225
on Margin
3.M. Short Sales 63,411,732 4,809,842 2,011,091 11,317,225
3.N. Pledging, 63,521,290 4,771,945 1,939,430 11,317,225
Hypothecating,
Mortgaging, or
Otherwise
Encumbering Assets
3.P. Warrants 63,636,107 4,377,351 2,219,208 11,317,225
3.Q. UnSeasoned 63,784,096 4,533,640 1,914,928 11,317,225
Companies
3.T. Securities of Issuers in 63,503,813 4,751,215 1,977,637 11,317,225
which Officers, Directors,
or Partners Have an
Interest
3.U. Purchasing or Selling 63,616,465 4,761,641 1,854,559 11,317,225
Securities Through
Interested Parties
3.W. Purchasing Voting or 64,469,997 3,678,129 2,084,539 11,317,225
Other Securities of
Issuers
4.B. The reclassification as 62,832,266 4,406,408 2,993,990 11,317,225
non-fundamental and
with changes to the
Fund's investment
objectives.
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 35
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Marc O. Mayer, President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
Michael J. Downey(1)
D. James Guzy(1)
Marshall C. Turner, Jr.(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
Emilie D. Wrapp, Secretary
Mark D. Gersten, Treasurer and Chief Financial Officer
Vincent S. Noto, Controller
Custodian
State Street Bank & Trust Company
One Lincoln Street
Boston, MA 02111
Principal Underwriter
AllianceBernstein Investments, Inc.
1345 Avenue of the Americas
New York, NY 10105
Transfer Agent
AllianceBernstein 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
the Independent Directors Committee.
(2) Ms. Wood is the person primarily responsible for the day-to-day management
of the Fund's investment portfolio.
36 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
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
- ----------------------------------------
Global Government Income Trust*
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Multi-Market Strategy Trust
Intermediate Bond Portfolio*
Short Duration Portfolio
U.S. Government Portfolio
- ----------------------------------------
Municipal Bond Funds
- ----------------------------------------
National Michigan
Insured National Minnesota
Arizona New Jersey
California New York
Insured California Ohio
Florida Pennsylvania
Massachusetts 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
- ----------------------------------------
Retirement Strategies Funds
- ----------------------------------------
2000 Retirement Strategy
2005 Retirement Strategy
2010 Retirement Strategy
2015 Retirement Strategy
2020 Retirement Strategy
2025 Retirement Strategy
2030 Retirement Strategy
2035 Retirement Strategy
2040 Retirement Strategy
2045 Retirement Strategy
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 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. Prior to February 1, 2006,
Global Government Income Trust was named Americas Government Income Trust and
Intermediate Bond Portfolio was named Quality Bond Portfolio.
** 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.
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 37
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.
38 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
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.
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 39
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 0.75% on first $10 million
Cap Growth Fund, Inc. Growth 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
40 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
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.
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 41
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.
42 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
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.
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND o 43
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
44 o ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
ALLIANCEBERNSTEIN MID-CAP GROWTH FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
MCG-0152-0106
ITEM 2. CODE OF ETHICS.
Not applicable when filing a semi-annual report to shareholders.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable when filing a semi-annual report to shareholders.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable when filing a semi-annual report to shareholders.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the registrant.
ITEM 6. SCHEDULE OF INVESTMENTS.
Please see Schedule of Investments contained in the Report to Shareholders
included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Fund's Board of Directors since the Fund last
provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and procedures
(as defined in Rule 30a-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 changes in the registrant's internal controls over financial
reporting that occurred during the second fiscal quarter of the period that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
12 (b) (1) Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
12 (b) (2) Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
12 (c) Certification of Principal Executive Officer and Principal
Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): AllianceBernstein Mid-Cap Growth Fund, Inc.
By: /s/ Marc O. Mayer
-------------------
Marc O. Mayer
President
Date: March 31, 2006
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: March 31, 2006
By: /s/ Mark D. Gersten
-------------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: March 31, 2006