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: 811-09687
ALLIANCEBERNSTEIN FOCUSED GROWTH AND INCOME 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
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: November 30, 2006
Date of reporting period: May 31, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
- -------------------------------------------------------------------------------
AllianceBernstein Focused Growth & Income Fund
Semi-Annual Report
May 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
AllianceBernstein(R) 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.
July 11, 2006
Semi-Annual Report
This report provides management's discussion of fund performance for
AllianceBernstein Focused Growth & Income Fund (the "Fund") for the semi-annual
reporting period ended May 31, 2006.
Investment Objective and Policies
This open-end fund seeks long-term growth of capital. The Fund invests
primarily in the equity securities of U.S. companies that AllianceBernstein
believes are undervalued. We believe that, over time, a company's stock price
will come to reflect its intrinsic economic value. We use a disciplined
investment process to evaluate the companies in our extensive research universe
and to identify the stocks of companies that offer the best combination of
value and potential for price appreciation. The Fund may invest in companies of
any size and in any industry.
Investment Results
The table on page 4 provides performance data for the Fund and its benchmark,
the Russell 1000 Value Index, for the six- and 12-month periods ended May 31,
2006. Also included in the table are returns for the Fund's peer group, as
represented by the Lipper Multi-Cap Core Funds Average (the "Lipper Average").
Funds in the Lipper Average have generally similar investment objectives to the
Fund, although some may have different investment policies and sales and
management fees.
The Fund underperformed its primary style benchmark, the Russell 1000 Value
Index, and also underperformed the Lipper Average, during both the six- and
12-month periods ended May 31, 2006. During both the six- and 12-month periods,
the Fund's disappointing relative performance was sourced primarily from weak
stock selection. In particular, security selection in technology and consumer
manufacturing was especially weak. Technology results were negatively impacted
by a large holding in Microsoft. Microsoft saw $40 billion of market value
vaporize after the company's surprising announcement that it would spend an
incremental $2 billion of capital to accelerate success-based growth
initiatives and to better compete with Google over the next couple of years.
The Fund's consumer manufacturing performance was weighed down by exposure to
housing. The Fund's exposure to housing was in housing-related retailers where
the fundamentals have remained intact, but the valuations have suffered as
concern about the housing cycle has dampened investor enthusiasm for these
types of companies.
On the sector front, a near zero exposure to traditional value sectors like
energy and materials continued to hurt Fund performance. The Fund continues to
maintain a lower-than-benchmark and lower-than-peer group profile in winning
"value" sectors like commodities (e.g., energy and basic materials). The Fund's
Relative Value Investment Team (the "team") believes prices have detached from
fundamentals in many of these areas as speculators have become more involved in
the short-term direction of stock prices. In some respects, the momentum
building in these areas is reminiscent of the excesses that defined the prior
investment style cycle top in early 2000. In
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 1
that period, "growth" style investing was all the rage and companies like
Yahoo, Cisco and Intel were the "can't get enough of" stocks. Today, companies
like Burlington Northern and Phelps Dodge, a railroad and a copper mining
company, are now considered "growth" stocks. (These stocks are not held in the
Fund.)
Market Review and Investment Strategy
U.S. stock market returns were moderately better than long-term trend during
the trailing six- and 12-month periods as the economy and corporate profits
remained buoyant despite escalating geopolitical tension, surging commodity
prices and rising interest rates. However, as the end of the reporting period
approached, stock returns weakened as investor concern about the impact of
higher interest rates on growth forecasts began to weigh heavily on security
prices. Until mid-May, as they have since the end of the internet bubble,
smaller companies and deep value stocks had been outperforming.
The team continues to see great investment opportunity in large, high-quality
stocks which have severely underperformed the broad market over the past five
years, despite delivering strong fundamental performance. In an investment
period generally characterized by a low concern for risk, the best performers
have been the riskiest asset classes: emerging markets, small companies and the
stocks of volatile businesses. This phenomenon has been dominant around the
world for a number of years now.
The team's philosophy has always been centered on the notion of buying high
quality businesses that are undervalued. It is the cornerstone of a disciplined
investment process that has served our shareholders well over the long-term.
The team remains fully committed to executing on this strategy and believes
recent underperformance is mostly a function of the market's unusual appetite
for the types of companies the Fund generally doesn't invest in. As the global
economic and corporate profit cycles mature, the team expects investor appetite
for risk taking to approach more historically normal levels. This should
benefit many of the big, high quality holdings that the Fund currently holds.
2 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME 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
website at www.alliancebernstein.com or call your financial advisor or
AllianceBernstein Investments at 800.227.4618. You should read the prospectus
carefully before you invest.
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 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 1000 Value Index does not reflect fees and expenses
associated with the active management of a mutual fund portfolio. The Index
contains those securities in the Russell 1000 Index with a less-than-average
growth orientation. The Russell 1000 Index is composed of 1000 of the largest
capitalized companies that are traded in the United States. For the six- and
12-month periods ended May 31, 2006, the Lipper Multi-Cap Core Funds Average
consisted of 880 and 803 funds, respectively. Funds in the Lipper Average have
generally similar investment objectives to AllianceBernstein Focused Growth &
Income Fund, although some may have different investment policies and sales and
management fees. An investor cannot invest directly in an index or average, and
their 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, which may magnify fluctuations due
to changes in foreign exchange rates and the possibility of substantial
volatility due to political and economic uncertainties in foreign countries.
The Fund can invest in small- to mid-capitalization companies. These
investments may be more volatile than investments in large-capitalization
companies. The Fund may at times be concentrated in a particular sector or
industry group and, therefore, may be subject to greater risk. 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 FOCUSED GROWTH & INCOME FUND o 3
HISTORICAL PERFORMANCE
(continued from previous page)
THE FUND VS. ITS BENCHMARK
PERIODS ENDED MAY 31, 2006
Returns
----------------------------
6 Months 12 Months
- -------------------------------------------------------------------------------
AllianceBernstein Focused Growth & Income Fund
Class A -1.21% 1.83%
Class B -1.54% 1.11%
Class C -1.54% 1.11%
Class R* -1.29% 1.69%
Class K* -1.08% 1.96%
Class I* -1.00% 2.24%
Russell 1000 Value Index 6.51% 12.61%
Lipper Multi-Cap Core Funds Average 3.47% 10.76%
* Please note that these share classes are for investors purchasing shares
through institutional pension plans.
See Historical Performance and Benchmark disclosures on previous page.
(Historical Performance continued on next page)
4 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF MAY 31, 2006
- -------------------------------------------------------------------------------
NAV Returns SEC Returns
Class A Shares
1 Year 1.83% -2.48%
5 Years 1.33% 0.46%
Since Inception* 7.13% 6.42%
Class B Shares
1 Year 1.11% -2.69%
5 Years 0.61% 0.61%
Since Inception* 6.39% 6.39%
Class C Shares
1 Year 1.11% 0.16%
5 Years 0.63% 0.63%
Since Inception* 6.38% 6.38%
Class R Shares+
1 Year 1.69% 1.69%
Since Inception* 6.32% 6.32%
Class K Shares+
1 Year 1.96% 1.96%
Since Inception* -0.03% -0.03%
Class I Shares+
1 Year 2.24% 2.24%
Since Inception* 0.24% 0.24%
* Inception dates: 12/22/99 for Class A, Class B and Class C shares; 11/3/03
for Class R shares; 3/1/05 for 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 these share classes are 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 FOCUSED GROWTH & INCOME 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 (JUNE 30, 2006)
SEC Returns
- -------------------------------------------------------------------------------
Class A Shares
1 Year -2.71%
5 Year 0.95%
Since Inception* 6.24%
Class B Shares
1 Year -2.92%
5 Year 1.09%
Since Inception* 6.20%
Class C Shares
1 Year -0.08%
5 Year 1.11%
Since Inception* 6.19%
Class R Shares+
1 Year 1.39%
Since Inception* 5.86%
Class K Shares+
1 Year 1.66%
Since Inception* -0.50%
Class I Shares+
1 Year 2.01%
Since Inception* -0.20%
* Inception dates: 12/22/99 for Class A, Class B and Class C shares; 11/3/03
for Class R shares; 3/1/05 for Class K and Class I shares.
+ Please note that these share classes are 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 FOCUSED GROWTH & INCOME 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
December 1, 2005 May 31, 2006 During Period*
---------------------- ------------------------ ----------------------
Actual Hypothetical Actual Hypothetical** Actual Hypothetical
-------- ------------ -------- -------------- -------- ------------
Class A $1,000 $1,000 $ 987.88 $1,018.50 $ 6.39 $ 6.49
Class B $1,000 $1,000 $ 984.58 $1,014.91 $ 9.95 $10.10
Class C $1,000 $1,000 $ 984.57 $1,015.01 $ 9.85 $10.00
Class R $1,000 $1,000 $ 987.15 $1,017.60 $ 7.28 $ 7.39
Class K $1,000 $1,000 $ 989.22 $1,019.35 $ 5.55 $ 5.64
Class I $1,000 $1,000 $ 989.98 $1,020.94 $ 3.97 $ 4.03
* Expenses are equal to the classes' annualized expense ratios of 1.29%,
2.01%, 1.99%, 1.47%, 1.12% and 0.80%, respectively, multiplied by the average
account value over the period, multiply by 182/365 (to reflect the one-half
year period).
** Assumes 5% return before expenses.
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 7
PORTFOLIO SUMMARY
May 31, 2006 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $325.4
SECTOR BREAKDOWN
[ ] 25.1% Finance [PIE CHART OMITTED]
[ ] 18.3% Technology
[ ] 16.7% Consumer Services
[ ] 11.9% Consumer Staples
[ ] 7.8% Capital Goods
[ ] 6.2% Health Care
[ ] 4.3% Utilities
[ ] 3.1% Transportation
[ ] 2.9% Basic Industry
[ ] 1.5% Consumer Manufacturing
[ ] 2.2% Short-Term
TEN LARGEST HOLDINGS
May 31, 2006 (unaudited)
Percent of
Company U.S. $ Value Net Assets
- -------------------------------------------------------------------------------
Citigroup, Inc. $ 16,022,500 4.9%
Axis Capital Holdings, Ltd. 14,491,220 4.5
Time Warner, Inc. 14,026,150 4.3
Federal National Mortgage Association 13,681,250 4.2
JPMorgan Chase & Co. 12,792,000 3.9
The Home Depot, Inc. 12,770,200 3.9
American International Group, Inc. 12,160,000 3.8
Loews Corp. 11,711,900 3.6
Microsoft Corp. 11,325,000 3.5
News Corp. Cl. A 10,202,450 3.1
$129,182,670 39.7%
* All data are as of May 31, 2006. The Fund's sector breakdown is expressed
as a percentage of total investments (excluding security lending collateral)
and may vary over time.
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser. These sector classifications
are broadly defined. The "Portfolio of Investments" section of the report
reflects more specific industry information and is consistent with the
investment restrictions discussed in the Fund's prospectus.
8 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS
May 31, 2006 (unaudited)
Company Shares U.S. $ Value
- -------------------------------------------------------------------------------
COMMON STOCKS-99.6%
Finance-25.5%
Banking-0.4%
The Bank of New York, Inc. 40,000 $ 1,329,200
Banking-Money Center-4.0%
JPMorgan Chase & Co. 300,000 12,792,000
Banking-Regional-1.9%
Bank of America Corp. 41,800 2,023,120
Northern Trust Corp. 75,000 4,194,000
------------
6,217,120
Insurance-10.1%
ACE, Ltd. 98,000 5,073,460
American International Group, Inc. 200,000 12,160,000
Axis Capital Holdings, Ltd. 553,100 14,491,220
The Hartford Financial Services Group, Inc. 13,800 1,213,572
------------
32,938,252
Mortgage Banking-4.2%
Federal National Mortgage Association 275,000 13,681,250
Miscellaneous-4.9%
Citigroup, Inc. 325,000 16,022,500
------------
82,980,322
Technology-18.6%
Communication Equipment-2.3%
Cisco Systems, Inc.(a) 300,000 5,904,000
Juniper Networks, Inc.(a) 100,000 1,593,000
------------
7,497,000
Computer Hardware/Storage-8.2%
EMC Corp.(a) 650,000 8,320,000
International Business Machines Corp. 115,000 9,188,500
Sun Microsystems, Inc.(a) 2,000,000 9,320,000
------------
26,828,500
Computer Software-4.1%
BEA Systems, Inc.(a) 140,000 1,898,400
Microsoft Corp. 500,000 11,325,000
------------
13,223,400
Semiconductor Capital Equipment-2.6%
Applied Materials, Inc. 500,000 8,455,000
Semiconductor Components-1.4%
Advanced Micro Devices, Inc.(a) 150,000 4,633,500
------------
60,637,400
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 9
Company Shares U.S. $ Value
- -------------------------------------------------------------------------------
Consumer Services-17.0%
Broadcasting & Cable-9.1%
News Corp. Cl.A 535,000 $ 10,202,450
Time Warner, Inc. 815,000 14,026,150
Viacom, Inc. Cl.B(a) 125,000 4,718,750
Westwood One, Inc. 100,000 802,000
------------
29,749,350
Restaurants & Lodging-2.1%
Hilton Hotels Corp. 140,000 3,844,400
McDonald's Corp. 85,000 2,819,450
------------
6,663,850
Retail-General Merchandise-5.8%
Lowe's Cos., Inc. 100,000 6,228,000
The Home Depot, Inc. 335,000 12,770,200
------------
18,998,200
------------
55,411,400
Consumer Staples-12.1%
Household Products-5.0%
Fortune Brands, Inc.* 135,000 9,990,000
The Procter & Gamble Co. 115,000 6,238,750
------------
16,228,750
Retail-Food & Drug-0.7%
CVS Corp. 83,000 2,315,700
Tobacco-6.4%
Altria Group, Inc. 125,000 9,043,750
Loews Corp.* 85,000 2,888,300
Loews Corp.-Carolina Group 190,000 8,823,600
------------
20,755,650
------------
39,300,100
Capital Goods-8.0%
Electrical Equipment-1.6%
Emerson Electric Co. 63,600 5,248,272
Machinery-0.9%
ITT Industries, Inc. 55,000 2,868,250
Miscellaneous-5.5%
General Electric Co. 263,200 9,017,232
Illinois Tool Works, Inc. 49,200 2,442,780
United Technologies Corp. 100,000 6,252,000
------------
17,712,012
------------
25,828,534
10 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
Shares or
Principal
Amount
Company (000) U.S. $ Value
- -------------------------------------------------------------------------------
Health Care-6.3%
Biotechnology-0.7%
Amgen, Inc.(a) 35,000 $ 2,365,650
Drugs-0.7%
Forest Laboratories, Inc.(a)* 45,000 1,686,600
Wyeth 12,100 553,454
------------
2,240,054
Medical Services-4.9%
UnitedHealth Group, Inc. 143,700 6,317,052
WellPoint, Inc.(a) 135,000 9,663,300
------------
15,980,352
------------
20,586,056
Utilities-4.4%
Telephone Utility-4.4%
AT&T, Inc. 309,400 8,062,964
Verizon Communications, Inc. 201,200 6,279,452
------------
14,342,416
Transportation-3.2%
Air Freight-2.6%
United Parcel Service, Inc. Cl.B 106,500 8,578,575
Railroad-0.6%
Union Pacific Corp. 19,800 1,837,440
------------
10,416,015
Basic Industry-3.0%
Chemicals-3.0%
Air Products & Chemicals, Inc.* 150,000 9,727,500
Consumer Manufacturing-1.5%
Textile Products-1.5%
Building Materials Holding Corp.* 175,000 4,991,000
Total Common Stocks
(cost $293,807,008) 324,220,743
SHORT-TERM INVESTMENT-2.2%
Time Deposit-2.2%
State Street Euro Dollar
4.35%, 6/01/06
(cost $7,163,000) $ 7,163 7,163,000
Total Investments Before Security Lending
Collateral-101.8%
(cost $300,970,008) 331,383,743
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 11
Shares U.S. $ Value
- -------------------------------------------------------------------------------
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED-5.7%
Short-Term Investment
UBS Private Money Market Fund, LLC,
4.90%
(cost $18,415,605) 18,415,605 $ 18,415,605
Total Investments-107.5%
(cost $319,385,613) 349,799,348
Other assets less liabilities-(7.5)% (24,359,668)
-------------
Net Assets-100% $325,439,680
* Represents entire or partial securities out on loan. See Note E for
securities lending information.
(a) Non-income producing security.
See notes to financial statements.
12 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
STATEMENT OF ASSETS & LIABILITIES
May 31, 2006 (unaudited)
Assets
Investments in securities, at value
(cost $319,385,613--including investment of
cash collateral for securities loaned of
$18,415,605) $349,799,348(a)
Cash 206
Receivable for investment securities sold 4,312,815
Receivable for capital stock sold 659,680
Dividends receivable 436,954
Total assets 355,209,003
Liabilities
Payable for collateral on securities loaned 18,415,605
Payable for investment securities purchased 8,925,854
Payable for capital stock redeemed 1,611,895
Distribution fee payable 200,105
Advisory fee payable 159,126
Transfer Agent fee payable 87,338
Accrued expenses 369,400
Total liabilities 29,769,323
Net Assets $325,439,680
Composition of Net Assets
Capital stock, at par $ 23,235
Additional paid-in capital 280,720,358
Undistributed net investment income 24,323
Accumulated net realized gain on investment transactions 14,258,029
Net unrealized appreciation of investments 30,413,735
$325,439,680
Net Asset Value Per Share--18 billion shares of capital stock authorized,
$.001 par value
Shares Net Asset
Class Net Assets Outstanding Value
- -------------------------------------------------------------------------------
A $142,682,286 9,953,778 $14.33*
B $128,711,627 9,355,392 $13.76
C $ 52,760,012 3,836,380 $13.75
R $ 1,128,554 78,975 $14.29
K $ 137,934 9,605 $14.36
I $ 19,267 1,337 $14.41
* The maximum offering price per share for Class A shares was $14.97 which
reflects a sales charge of 4.25%.
(a) Includes securities on loan with a value of $17,994,226 (see Note E).
See notes to financial statements.
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 13
STATEMENT OF OPERATIONS
Six Months Ended May 31, 2006 (unaudited)
Investment Income
Dividends $ 3,062,909
Interest 92,463 $ 3,155,372
Expenses
Advisory fee 1,027,110
Distribution fee--Class A 241,995
Distribution fee--Class B 749,097
Distribution fee--Class C 305,617
Distribution fee--Class R 2,741
Distribution fee--Class K 136
Transfer agency--Class A 208,947
Transfer agency--Class B 208,417
Transfer agency--Class C 81,310
Transfer agency--Class R 1,341
Transfer agency--Class K 58
Transfer agency--Class I 7
Custodian 94,222
Registration 60,020
Legal 49,028
Administrative 42,000
Audit 29,676
Printing 14,659
Directors' fees 14,558
Miscellaneous 13,393
Total expenses 3,144,332
Less: expense offset arrangement
(see Note B) (13,283)
Net expenses 3,131,049
Net investment income 24,323
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized gain on investment
transactions 20,221,160
Net change in unrealized appreciation/
depreciation of investments (23,678,575)
Net loss on investment transactions (3,457,415)
Net Decrease in Net Assets
from Operations $ (3,433,092)
See notes to financial statements.
14 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
Statement of Changes in Net Assets
Six Months Ended Year Ended
May 31, 2006 November 30,
(unaudited) 2005
---------------- ---------------
Increase (Decrease) in Net Assets
from Operations
Net investment income (loss) $ 24,323 $ (218,678)
Net realized gain on investment
transactions 20,221,160 22,464,325
Net change in unrealized
appreciation/depreciation
of investments (23,678,575) 5,926,478
Net increase (decrease) in net assets
from operations (3,433,092) 28,172,125
Dividends and Distributions to
Shareholders from
Net investment income
Class A -0- (1,514,182)
Class R -0- (1,155)
Net realized gain on
investment transactions
Class A (10,387,971) (2,195,466)
Class B (10,014,550) (2,044,514)
Class C (4,131,885) (831,037)
Class R (55,743) (2,393)
Class K (610) -0-
Class I (606) -0-
Capital Stock Transactions
Net decrease (54,585,119) (122,923,053)
Total decrease (82,609,576) (101,339,675)
Net Assets
Beginning of period 408,049,256 509,388,931
End of period (includes undistributed net
investment income of $24,323
and $0, respectively) $325,439,680 $408,049,256
See notes to financial statements.
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 15
NOTES TO FINANCIAL STATEMENTS
May 31, 2006 (unaudited)
NOTE A
Significant Accounting Policies
AllianceBernstein Focused Growth & Income Fund, Inc. (the "Fund"), organized as
a Maryland corporation on July 6, 1999, 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, 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 C shares are subject to a contingent deferred sales charge of
1% on redemptions made within the first year after purchase. Class R and Class
K shares are sold without an initial or contingent deferred sales charge. Class
I shares are sold without any initial or contingent deferred sales charge and
are not subject to ongoing distribution expenses. All six 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")
16 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
are valued in accordance with the NASDAQ Official Closing Price; listed put or
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, AllianceBernstein L.P. (prior to February 24, 2006 known as Alliance
Capital Management L.P.) (the "Adviser") may establish procedures whereby
changes in market yields or spreads are used to adjust, on a daily basis, a
recently obtained quoted price on a security; and OTC and other derivatives are
valued on the basis of a quoted bid price or spread from a major broker/dealer
in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because most foreign markets close well before the Fund values its
securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim and may materially affect the
value of those securities. To account for this, the Fund may frequently value
many of its foreign equity securities using fair value prices based on third
party vendor modeling tools to the extent available.
2. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 17
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 policy of the Fund 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. Class Allocations
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the net assets of such class, except for class
specific expenses which are allocated to the respective class. 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
18 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser
an advisory fee at an annual rate of .55% of the first $2.5 billion, .45% of
the next $2.5 billion and .40% in excess of $5 billion, of the Fund's average
daily net assets. Prior to September 7, 2004, the Fund paid the Adviser an
advisory fee at an annual rate of .75% of the Fund's average daily net assets.
The fee is accrued daily and paid monthly. The Adviser has agreed to waive its
fees and bear certain expenses to the extent necessary to limit total operating
expenses on an annual basis to 2.50%, 3.20%, 3.20%, 2.70%, 2.45% and 2.20% of
the daily average net assets for the Class A, Class B, Class C, Class R, Class
K and Class I shares, respectively. For the six months ended May 31, 2006,
there were no fees waived by the Adviser.
Pursuant to the advisory agreement, the Fund paid $42,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the six months ended May 31, 2006.
The Fund compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.) ("ABIS"), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Fund. ABIS may make payments to intermediaries that provide omnibus account
services, sub-accounting services and/or networking services. Such compensation
retained by ABIS amounted to $207,601 for the six months ended May 31, 2006.
For the six months ended May 31, 2006, the Fund's expenses were reduced by
$13,283 under an expense offset arrangement with ABIS.
AllianceBernstein Investments, Inc. (prior to February 24, 2006 known as
AllianceBernstein Investment Research and Management, Inc.) (the
"Distributor"), a wholly-owned subsidiary of the Adviser, serves as the
distributor of the Fund's shares. The Distributor has advised the Fund that it
has retained front-end sales charges of $4,452 from the sale of Class A shares
and received $3,571, $94,777 and $4,900 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 May 31, 2006.
Brokerage commissions paid on investment transactions for the six months ended
May 31, 2006, amounted to $610,538, of which $81,616 and $0, respectively, was
paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited,
affiliates of the Adviser.
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 19
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 Fund's average daily net assets
attributable to both Class B and Class C shares, .50% of the Fund's average
daily net assets attributable to Class R shares and .25% of the Fund's average
daily net assets attributable to Class K shares. There are no distribution and
servicing fees on Class I shares. The fees are accrued daily and paid monthly.
The Agreement provides that the Distributor will use such payments in their
entirety for distribution assistance and promotional activities. The
Distributor has incurred expenses in excess of the distribution costs
reimbursed by the Fund in the amounts of $602,856, $1,260,768, $19,294 and $58
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 Adviser
may use its own resources to finance the distribution of the Fund's shares.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended May 31, 2006, were as follows:
Purchases Sales
-------------- --------------
Investment securities (excluding
U.S. government securities) $206,623,739 $279,424,680
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 $39,614,825
Gross unrealized depreciation (9,201,090)
Net unrealized appreciation $30,413,735
1. Financial Futures Contracts
The Fund may buy or sell financial futures contracts for the purpose of hedging
its portfolio against adverse effects of anticipated movements in the market.
The Fund bears the market risk that arises from changes in the value of these
financial
20 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
instruments and the imperfect correlation between movements in the price of the
futures contracts and movements in the price of the securities hedged or used
for cover.
At the time the Fund enters into a futures contract, the Fund deposits and
maintains as collateral an initial margin with the broker, as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in the value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized gains or
losses. Risks may arise from the potential inability of a counterparty to meet
the terms of the contract. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the time it was closed.
NOTE E
Securities Lending
The Fund has entered into a securities lending agreement with UBS Warburg LLC
(the"Lending Agent"). Under the terms of the agreement, the Lending Agent, on
behalf of the Fund, administers the lending of portfolio securities to certain
broker-dealers. In return, the Fund receives fee income from the lending
transactions or it retains a portion of interest on the investment of any cash
received as collateral. The Fund also continues to receive dividends or
interest on the securities loaned. Unrealized gain or loss on the value of the
securities loaned that may occur during the term of the loan will be reflected
in the accounts of the Fund. All loans are continuously secured by collateral
exceeding the value of the securities loaned. All collateral consists of either
cash or U.S. government securities. The Lending Agent may invest the cash
collateral received in an eligible money market vehicle in accordance with the
investment restrictions of the Fund. The Lending Agent will indemnify the Fund
for any loss resulting from a borrower's failure to return a loaned security
when due. As of May 31, 2006, the Fund had loaned securities with a value of
$17,994,226 and received cash collateral which was invested in a money market
fund valued at $18,415,605 as included in the accompanying portfolio of
investments. For the six months ended May 31, 2006, the Fund earned fee income
of $854 which is included in interest income in the accompanying statement of
operations.
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 21
NOTE F
Capital Stock
Each class consists of 3,000,000,000 authorized shares. Transactions in capital
shares for each class were as follows:
Shares Amount
--------------------------- ------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
May 31, 2006 November 30, May 31, 2006 November 30,
(unaudited) 2005 (unaudited) 2005
------------ ------------ -------------- --------------
Class A
Shares sold 800,860 3,146,956 $ 11,846,834 $ 47,329,068
Shares issued in
reinvestment of
dividends and
distributions 633,054 226,157 9,261,571 3,412,711
Shares converted
from Class B 170,864 300,476 2,511,593 4,509,940
Shares redeemed (3,017,017) (7,580,567) (44,593,604) (113,693,130)
Net decrease (1,412,239) (3,906,978) $(20,973,606) $(58,441,411)
Class B
Shares sold 281,366 945,079 $ 3,987,308 $ 13,737,539
Shares issued in
reinvestment of
distributions 585,469 114,511 8,249,255 1,679,878
Shares converted
to Class A (177,768) (310,682) (2,511,593) (4,509,940)
Shares redeemed (2,362,176) (3,980,552) (33,641,558) (57,816,219)
Net decrease (1,673,109) (3,231,644) $(23,916,588) $(46,908,742)
Class C
Shares sold 129,432 456,930 $ 1,839,647 $ 6,649,779
Shares issued in
reinvestment of
distributions 233,067 44,538 3,281,581 652,931
Shares redeemed (1,070,040) (1,758,535) (15,231,685) (25,543,365)
Net decrease (707,541) (1,257,067) $(10,110,457) $(18,240,655)
Class R
Shares sold 26,446 49,008 $ 389,293 $ 725,512
Shares issued in
reinvestment of
dividends and
distributions 2,781 26 40,611 385
Shares redeemed (10,561) (5,184) (156,404) (78,278)
Net increase 18,666 43,850 $ 273,500 $ 647,619
22 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
Shares Amount
--------------------------- ------------------------------
Six Months March 1, Six Months March 1,
Ended 2005(a) to Ended 2005(a) to
May 31, 2006 November 30, May 31, 2006 November 30,
(unaudited) 2005 (unaudited) 2005
------------ ------------ -------------- --------------
Class K
Shares sold 11,186 661 $ 164,811 $ 10,100
Shares issued in
reinvestment of
distributions -0-(b) -0- 3 -0-
Shares redeemed (2,242) -0- (32,784) -0-
Net increase 8,944 661 $ 132,030 $ 10,100
Class I
Shares sold 680 657 $ 10,000 $ 10,036
Shares issued in
reinvestment of
distributions -0-(b) -0- 2 -0-
Net increase 680 657 $ 10,002 $ 10,036
(a) Commencement of distribution.
(b) Share amounts less than one full share.
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 the 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 U.S. companies or of the U.S. 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
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $250 million revolving credit facility (the "Facility")
intended to provide short-term financing, if necessary, subject to certain
restrictions in connection with abnormal redemption activity. Commitment fees
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 23
related to the Facility are paid by the participating funds and are included in
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the six months ended May 31, 2006.
NOTE I
Distributions to Shareholders
The tax character of distributions to be paid for the year ending November 30,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal year ended November 30, 2005
was as follows:
2005
-----------
Distributions paid from:
Ordinary income $ 1,515,337
Net long-term capital gains 5,073,410
Total taxable distributions 6,588,747
Total distributions paid $ 6,588,747
As of November 30, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed long term capital gain $11,110,815
Undistributed ordinary income 13,408,064
Unrealized appreciation/(depreciation) 48,201,665(a)
Total accumulated earnings/(deficit) $72,720,544
(a) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
NOTE J
Legal Proceedings
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("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
24 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME 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; 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.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
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, directed and oversaw 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
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 25
Doe defendants. The Hindo Complaint was filed in the United States District
Court for the Southern District of New York by alleged shareholders of two of
the AllianceBernstein Funds. The Hindo Complaint alleges that certain of the
Alliance defendants failed to disclose that they improperly allowed certain
hedge funds and other unidentified parties to engage in "late trading" and
"market timing" of AllianceBernstein Fund securities, violating Sections 11 and
15 of the Securities Act, Sections 10(b) and 20(a) of the Exchange Act and
Sections 206 and 215 of the Advisers Act. Plaintiffs seek an unspecified amount
of compensatory damages and rescission of their contracts with the Adviser,
including recovery of all fees paid to the Adviser pursuant to such contracts.
Since October 2, 2003, 43 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. 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 actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
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.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
26 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
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 Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the Hindo Complaint. On 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 Commissioner 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. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
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 alleged shareholders 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)
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 27
that certain defendants caused such conduct as control persons of other
defendants. The Aucoin Complaint asserts claims for violation of Sections
34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of
the Advisers Act, breach of common law fiduciary duties, and aiding and
abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, 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
plaintiffs' 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. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended 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.
28 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class A
-------------------------------------------------------------------------------
Six Months
Ended
May 31, Year Ended November 30,
2006 ----------------------------------------------------------------
(unaudited) 2005 2004 2003 2002 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $15.42 $14.69 $13.27 $10.85 $13.09 $11.42
Income From Investment Operations
Net investment income (loss)(a) .03 .05 .10(b) (.01) (.01) (.07)(b)
Net realized and unrealized
gain (loss) on investment
transactions (.20) .93 1.32 2.43 (2.23) 1.82
Net increase (decrease) in
net asset value from
operations (.17) .98 1.42 2.42 (2.24) 1.75
Less: Dividends and Distributions
Dividends from net investment
income -0- (.10) -0- -0- -0- -0-
Distributions from net realized
gain on investment
transactions (.92) (.15) -0- -0- -0- -0-
Distributions in excess
of net realized gain on
investment transactions -0- -0- -0- -0- -0- (.08)
Total dividends and distributions (.92) (.25) -0- -0- -0- (.08)
Net asset value,
end of period $14.33 $15.42 $14.69 $13.27 $10.85 $13.09
Total Return
Total investment return based
on net asset value(c) (1.21)% 6.67% 10.70% 22.30% (17.11)% 15.40%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $142,682 $175,285 $224,377 $163,169 $75,413 $76,617
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.29%(d)(e) 1.27% 1.19% 1.51% 1.59% 1.85%
Expenses, before waivers/
reimbursements 1.29%(d)(e) 1.27% 1.34% 1.51% 1.59% 1.88%
Net investment
income (loss) .40%(d)(e) .36% .73%(b) (.12)% (.10)% (.55)%(b)
Portfolio turnover rate 56% 152% 132% 159% 218% 299%
See footnote summary on page 34.
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 29
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class B
---------------------------------------------------------------------------------
Six Months
Ended
May 31, Year Ended November 30,
2006 ------------------------------------------------------------------
(unaudited) 2005 2004 2003 2002 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $14.89 $14.20 $12.92 $10.64 $12.93 $11.36
Income From Investment Operations
Net investment loss(a) (.02) (.05) -0-(b)(f) (.10) (.10) (.16)(b)
Net realized and unrealized
gain (loss) on investment
transactions (.19) .89 1.28 2.38 (2.19) 1.81
Net increase (decrease) in
net asset value from
operations (.21) .84 1.28 2.28 (2.29) 1.65
Less: Distributions
Distributions from net realized
gain on investment
transactions (.92) (.15) -0- -0- -0- -0-
Distributions in excess
of net realized gain on
investment transactions -0- -0- -0- -0- -0- (.08)
Total distributions (.92) (.15) -0- -0- -0- (.08)
Net asset value,
end of period $13.76 $14.89 $14.20 $12.92 $10.64 $12.93
Total Return
Total investment return based
on net asset value(c) (1.54)% 5.90% 9.91% 21.43% (17.71)% 14.60%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $128,712 $164,194 $202,459 $183,098 $110,968 $98,204
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 2.01%(d)(e) 2.00% 1.92% 2.25% 2.32% 2.55%
Expenses, before waivers/
reimbursements 2.01%(d)(e) 2.00% 2.07% 2.25% 2.32% 2.60%
Net investment loss (.32)%(d)(e) (.37)% (.03)%(b) (.87)% (.84)% (1.28)%(b)
Portfolio turnover rate 56% 152% 132% 159% 218% 299%
See footnote summary on page 34.
30 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class C
------------------------------------------------------------------------------
Six Months
Ended
May 31, Year Ended November 30,
2006 -----------------------------------------------------------------
(unaudited) 2005 2004 2003 2002 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $14.88 $14.19 $12.91 $10.63 $12.92 $11.34
Income From Investment Operations
Net investment loss(a) (.02) (.05) -0-(b)(f) (.10) (.10) (.16)(b)
Net realized and unrealized
gain (loss) on investment
transactions (.19) .89 1.28 2.38 (2.19) 1.82
Net increase (decrease) in
net asset value from
operations (.21) .84 1.28 2.28 (2.29) 1.66
Less: Distributions
Distributions from net realized
gain on investment
transactions (.92) (.15) -0- -0- -0- -0-
Distributions in excess
of net realized gain on
investment transactions -0- -0- -0- -0- -0- (.08)
Total distributions (.92) (.15) -0- -0- -0- (.08)
Net asset value,
end of period $13.75 $14.88 $14.19 $12.91 $10.63 $12.92
Total Return
Total investment return based
on net asset value(c) (1.54)% 5.90% 9.91% 21.45% (17.72)% 14.71%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $52,760 $67,622 $82,312 $71,348 $37,810 $35,790
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.99%(d)(e) 1.99% 1.90% 2.22% 2.30% 2.56%
Expenses, before waivers/
reimbursements 1.99%(d)(e) 1.99% 2.05% 2.22% 2.30% 2.60%
Net investment loss (.31)%(d)(e) (.36)% (.01)%(b) (.84)% (.82)% (1.28)%(b)
Portfolio turnover rate 56% 152% 132% 159% 218% 299%
See footnote summary on page 34.
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 31
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class R
----------------------------------------------------
Six Months
Ended Year Ended November 3,
May 31, November 30, 2003(g) to
2006 ------------------------ November 30,
(unaudited) 2005 2004 2003
----------- ----------- ----------- -----------
Net asset value, beginning of period $15.39 $14.66 $13.27 $13.16
Income From Investment Operations
Net investment income (loss)(a) .02 .03 .18(b) -0-(f)
Net realized and unrealized gain (loss) on
investment transactions (.20) .92 1.21 .11
Net increase (decrease) in net asset value
from operations (.18) .95 1.39 .11
Less: Dividends and Distributions
Dividends from net investment income -0- (.07) -0- -0-
Distributions from net realized gain on
investment transactions (.92) (.15) -0- -0-
Total dividends and distributions (.92) (.22) -0- -0-
Net asset value, end of period $14.29 $15.39 $14.66 $13.27
Total Return
Total investment return based on net
asset value(c) (1.29)% 6.47% 10.48% .84%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $1,129 $928 $241 $10
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.47%(d)(e) 1.60% 1.45% 1.83%(d)
Expenses, before waivers/
reimbursements 1.47%(d)(e) 1.60% 1.59% 1.83%(d)
Net investment income (loss) .24%(d)(e) .19% 1.25%(b) (.26)%(d)
Portfolio turnover rate 56% 152% 132% 159%
See footnote summary on page 34.
32 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class K
------------------------
Six Months
Ended March 1,
May 31, 2005(g) to
2006 November 30,
(unaudited) 2005
----------- -----------
Net asset value, beginning of period $15.43 $15.27
Income From Investment Operations
Net investment income(a) .05 .05
Net realized and unrealized gain (loss)
on investment transactions (.20) .11
Net increase (decrease) in net asset
value from operations (.15) .16
Less: Distributions
Distributions from net realized gain on
investment transactions (.92) -0-
Net asset value, end of period $14.36 $15.43
Total Return
Total investment return based on net
asset value(c) (1.08)% 1.05%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $138 $10
Ratio to average net assets of:
Expenses(d) 1.12%(e) 1.23%
Net investment income(d) .68%(e) .48%
Portfolio turnover rate 56% 152%
See footnote summary on page 34.
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 33
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class I
------------------------
Six Months
Ended March 1,
May 31, 2005(g) to
2006 November 30,
(unaudited) 2005
----------- -----------
Net asset value, beginning of period $15.47 $15.27
Income From Investment Operations
Net investment income(a) .08 .09
Net realized and unrealized gain (loss)
on investment transactions (.22) .11
Net increase (decrease) in net asset
value from operations (.14) .20
Less: Distributions
Distributions from net realized gain on
investment transactions (.92) -0-
Net asset value, end of period $14.41 $15.47
Total Return
Total investment return based on net
asset value(c) (1.00)% 1.31%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $19 $10
Ratio to average net assets of:
Expenses(d) .80%(e) .96%
Net investment income(d) 1.02%(e) .77%
Portfolio turnover rate 56% 152%
(a) Based on average shares outstanding.
(b) Net of fees and expenses waived by the Adviser and Transfer Agent.
(c) 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 charge or contingent
defered sales charge is not reflected in the calculation of the 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.
(d) Annualized.
(e) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(f) Amount is less than $0.005.
(g) Commencement of distributions.
34 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
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)
Nancy P. Jacklin(1)
Marshall C. Turner, Jr.(1)
OFFICERS
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer
Frank V. Caruso(2), Senior Vice President
Paul C. Rissman, Senior Vice President
Thomas J. Bardong, Vice President
Stephen Pelensky, 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, TX 78278-6003
Toll-free (800) 221-5672
Independent Registered Public Accounting Firm
Ernst & Young LLP
5 Times Square
New York, NY 10036
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) The management of and investment decisions for the Fund are made by the
Adviser's Relative Value Investment Team. While the members of the team work
jointly to determine the investment strategy, including security selection, for
the Fund, Mr. Frank Caruso, CIO of the Adviser's Relative Value Investment
Team, is primarily responsible for the day-to-day management of the Fund.
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 35
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 website at
www.alliancebernstein.com or call us at 800.227.4618 for a current prospectus.
You should read the prospectus carefully before you invest.
* 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.
36 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the Investment Advisory
Agreement between AllianceBernstein L.P. (the "Adviser") and AllianceBernstein
Focused Growth & Income Fund, Inc. (the "Fund"), prepared by Philip L.
Kirstein, the Senior Officer of the Fund for the Directors of the Fund, as
required by an August 2004 agreement between the Adviser and the New York State
Attorney General (the "NYAG").(2) The Senior Officer's evaluation of the
Investment Advisory Agreement is not meant to diminish the responsibility or
authority of the Board of Directors of the Fund to perform its duties pursuant
to Section 15 of the Investment Company Act of 1940 (the "40 Act") and
applicable state law. The purpose of the summary is to provide shareholders
with a synopsis of the independent evaluation of the reasonableness of the
advisory fees proposed to be paid by the Fund which was provided to the
Directors in connection with their review of the proposed approval of the
continuance of the Investment Advisory Agreement. The Senior Officer's
evaluation considered the following factors:
1. 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 supplying
such services;
5. Possible economies of scale as the Fund grows larger; and
6. Nature and quality of the Adviser's services including the
performance of the Fund.
FUND ADVISORY FEES, EXPENSE CAPS, REIMBURSEMENTS & RATIOS
The Adviser proposed that the Fund pay the advisory fee set forth in the table
below for receiving the services to be provided pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the NYAG in December 2003, is
(1) It should be noted that the information in the fee summary was completed
on June 2, 2006 and presented to the Board of Directors on June 14, 2006 in
accordance with the Assurance of Discontinuance between the NYAG and the
Adviser. 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.
(2) Future references to the Fund do not include "AllianceBernstein."
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 37
based on a master schedule that contemplates eight categories of funds with
almost all funds in each category having the same advisory fee schedule.(3)
Net Assets Advisory Fee Based
02/28/06 on % of Average
Category (million) Daily Net Assets Fund
- -------------------------------------------------------------------------------
Value $373.5 55 bp on 1st $2.5 billion Focused Growth
45 bp on next $2.5 billion & Income Fund, Inc.
40 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount, which the Adviser
received from the Fund in the Fund's most recently completed fiscal year,
expressed in dollars and as a percentage of average daily net assets:
As a % of Average
Fund Amount Daily Net Assets
- -------------------------------------------------------------------------------
Focused Growth & Income Fund, Inc. $89,751 0.02%
The Adviser agreed to waive that portion of its management fees and/or
reimburse the Fund for that portion of its total operating expenses to the
degree necessary to limit the Fund's expense ratios to the amounts set forth
below for the Fund's fiscal year. The waiver is terminable by the Adviser at
the end of the Fund's fiscal year upon at least 60 days written notice prior to
the termination date of the undertaking. It should be noted that the Fund was
operating below its expense cap as of its most recent fiscal year end;
accordingly the expense limitation undertaking of the Fund was of no effect.
Expense Cap
Pursuant to Gross Fiscal
Expense Limitation Expense Year
Fund Undertaking Ratio End
- -------------------------------------------------------------------------------
Focused Growth & Class A 2.50% 1.27% November 30
Income Fund, Inc. Class B 3.20% 2.00%
Class C 3.20% 1.99%
Class R 2.70% 1.60%
Class K 2.45% 1.23%
Class I 2.20% 0.96%
(3) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the NYAG.
38 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. 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, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Fund's third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses is reimbursed by the Fund to the Adviser. Also, retail mutual
funds managed by the Adviser are widely held. Servicing the Fund's investors is
more time consuming and labor intensive compared to institutional clients since
the Adviser needs to communicate with a more extensive network of financial
intermediaries and shareholders. In addition, managing the cash flow of an
investment company may be more difficult than that of a stable pool of assets,
such as an institutional account with little cash movement in either direction,
particularly, if the Fund is in net redemption and the Adviser is frequently
forced to sell securities to raise cash for redemptions. However, managing a
fund with positive cash flow may be easier at times than managing a stable pool
of assets. Finally, in recent years, investment advisers have been sued by
institutional clients and have suffered reputational damage both by the
attendant publicity and outcomes other than complete victories. Accordingly,
the legal and reputational risks associated with institutional accounts are
greater than previously thought, although still not equal to those related to
the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. It should be noted that the Adviser has indicated
that with respect to institutional accounts with assets greater than $300
million, it will negotiate a fee schedule. Discounts that are negotiated vary
based upon each client relationship. In addition to the AllianceBernstein
Institutional fee schedule, set forth below is what would have been the
effective advisory fee of the Fund had the
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 39
AllianceBernstein Institutional fee schedule been applicable to the Fund versus
the Fund's advisory fee:
Net Assets AllianceBernstein ("AB") Effective Fund
02/28/06 Institutional ("Inst.") AB Inst. Advisory
Fund ($MIL) Fee Schedule Adv. Fee Fee(4)
- -------------------------------------------------------------------------------
Focused Growth & $373.5 Relative Value 0.327% 0.550%
Income Fund, Inc. 65 bp on 1st $25 million
50 bp on next $25 million
40 bp on next $50 million
30 bp on next $100 million
25 bp on the balance
Minimum Account Size: $10 m
The AllianceBernstein Variable Products Series Fund, Inc. ("AVPS"), which is
managed by the Adviser and is available through variable annuity and variable
life contracts offered by other financial institutions, offers investors the
option to invest in a portfolio that has a similar investment style as the
Fund. The following table shows the fee schedule of such AVPS portfolio:
Fund AVPS Portfolio Fee Schedule
- -------------------------------------------------------------------------------
Focused Growth & Growth & Income 0.55% on first $2.5 billion
Income Fund, Inc. Portfolio 0.45% on next $2.5 billion
0.40% on the balance
The Adviser also manages and sponsors retail mutual funds, which are organized
in jurisdictions outside the United States, generally Luxembourg and Japan, and
sold to non-United States resident investors. The Adviser charges the following
"all-in" fee(5) for the Luxembourg fund that has a somewhat similar investment
strategy as the Fund:
Fund Fee
- -------------------------------------------------------------------------------
Equity Value 1.50%
(4) Fund advisory fee information was provided by Lipper. See Section II for
additional discussion.
(5) The "all-in" fee shown is for the class A shares of Equity Value. This
includes a fee for investment advisory services and a separate fee for
distribution related services.
40 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
The Adviser provides sub-advisory investment services to certain other
investment companies managed by other fund families. The Adviser charges the
following fees for each of these sub-advisory relationships.
Fund Sub-advised Fund Fee Schedule
- -------------------------------------------------------------------------------
Focused Growth & Client # 1 0.30% on first $1 billion
Income Fund, Inc. 0.25% on next $500 million
0.20% thereafter
Client # 2 0.60% on first $1 billion
0.55% thereafter
Client # 3(6) 0.60% on first $1 billion
0.55% on next $500 million
0.50% on next $500 million
0.45% on next $500 million
0.40% thereafter
Client # 4(6) 0.30%
It is fair to note that the services the Adviser provides pursuant to
sub-advisory agreements are generally confined to the services related to the
investment process; in other words, they are not as comprehensive as the
services provided to the Fund by the Adviser. In addition, to the extent that
certain of these sub-advisory relationships are with affiliates of the Adviser,
the fee schedules may not reflect arms-length bargaining or negotiations.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc. ("Lipper"), an analytical service that is not affiliated with the
Adviser, compared the fees charged to the Fund with fees charged to other
investment companies for similar services by other investment advisers.
Lipper's analysis included the Fund's ranking with respect to the proposed
management fee relative to the Lipper group median at the approximate current
asset level of the Fund.(7)
(6) This is the fee schedule of a fund managed by an affiliate of the Adviser.
(7) The effective management fee is calculated by Lipper using the Fund's
contractual management fee rate at a hypothetical asset level. The hypothetical
asset level is based on the combined net assets of all classes of the Fund,
rounded up to the next $25 million. Lipper's total expense ratio information is
based on the most recent annual report except as otherwise noted. A ranking of
"1" means that the Fund has the lowest effective fee rate in the Lipper peer
group.
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 41
Effective Lipper
Management Group
Fund Fee(8) Median Rank
- -------------------------------------------------------------------------------
Focused Growth & Income Fund, Inc. 0.550 0.750 1/12
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(9) and Lipper Expense Universe.(10) Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objective with a similar load type as the subject
Fund. The result of that analysis is set forth below:
Expense Lipper Lipper Lipper Lipper
Ratio Group Group Universe Universe
Fund (%)(11) Median (%) Rank Median (%) Rank
- -------------------------------------------------------------------------------
Focused Growth & 1.277 1.276 7/12 1.302 37/79
Income Fund, Inc.
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
A consultant was retained by the Senior Officer to work with the Adviser's
personnel to align the Adviser's two profitability reporting systems. The
alignment, which now has been completed, allows the Adviser's management and
the Directors to receive consistent presentations of the financial results and
profitability although the two profitability reporting systems operate
independently. See Section IV for additional discussion.
(8) The effective management fee rate for the Fund does not reflect the
aforementioned payments made by the Fund to the Adviser for certain clerical,
legal, accounting, administrative, and other services.
(9) Lipper uses the following criteria in screening funds to be included in
the 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. A Lipper Expense Group will typically
consist of seven to twenty funds.
(10) Except for asset (size) comparability, Lipper uses the same criteria for
selecting a Lipper Expense Group when selecting a Lipper Expense Universe.
Unlike the Lipper Expense Group, the Lipper Expense Universe allows for the
same adviser to be represented by more than just one fund.
(11) The total expense ratios shown are for the Fund's Class A shares.
42 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. The Adviser's
profitability from providing investment advisory services to the Fund increased
during calendar year 2005 relative to 2004.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent,
distribution, and brokerage related services to the Fund 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.
AllianceBernstein Investments, Inc. ("ABI"), an affiliate of the Adviser, is
the Fund's principal underwriter. ABI and the Adviser have disclosed in the
Fund's prospectus that they may make revenue sharing payments from their own
resources, in addition to resources derived from sales loads and Rule 12b-1
fees, to firms that sell shares of the Fund. In 2005, ABI paid approximately
0.042% of the average monthly assets of the AllianceBernstein Mutual Funds or
approximately $18.0 million for distribution services and educational support
(revenue sharing payments). For 2006, it is anticipated, ABI will pay
approximately 0.04% of the average monthly assets of the AllianceBernstein
Mutual Funds or approximately $17.5 million.(12)
After payments to third party intermediaries, ABI retained the following
amounts for Class A front-end load sales charges from sales of the Fund's Class
A shares during the Fund's most recently completed fiscal year:
Fund Amount Received
- -------------------------------------------------------------------------------
Focused Growth & Income Fund, Inc. $11,148
(12) ABI currently inserts the "Advance" in quarterly account statements and
pays the incremental costs associated with the mailing. The incremental cost is
less than what an "independent mailing" would cost.
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 43
ABI received the amounts set forth below in Rule 12b-1 fees and CDSC for the
Fund during Fund's most recent fiscal year:
12b-1 Fees CDSC
Fund Received Received
- -------------------------------------------------------------------------------
Focused Growth & Income Fund, Inc. $3,265,417 $246,344
Fees and reimbursements for out of pocket expenses charged by AllianceBernstein
Investor Services, Inc. ("ABIS"), the affiliated transfer agent, are based on
the level of the network account and the class of share held by the account.
ABIS also receives a fee per shareholder sub-account for each account
maintained by an intermediary on an omnibus basis. ABIS' after-tax
profitability increased in 2005 in comparison to 2004. ABIS received the
following fee from the Fund in the most recent fiscal year:
Fund ABIS Fee(13)
- -------------------------------------------------------------------------------
Focused Growth & Income Fund, Inc. $492,725
The Fund effected brokerage transactions through the Adviser's affiliate,
Sanford C. Bernstein & Co. LLC ("SCB & Co.") and/or its U.K. affiliate, Sanford
C. Bernstein Limited ("SCB Ltd."), collectively "SCB," and paid commissions for
such transactions during the Fund's most recently completed fiscal year. The
Adviser represented that SCB's profitability from business conducted with the
Fund is comparable to the profitability of SCB's dealings with other similar
third party clients. In the ordinary course of business, SCB receives and pays
liquidity rebates from electronic communications networks ("ECNs") derived from
trading for its clients, including the Fund. These credits and charges are not
being passed on to any SCB client. The Adviser also receives certain soft
dollar benefits from brokers that execute agency trades for the Fund and other
clients. These soft dollar benefits reduce the Adviser's cost of doing business
and increase its profitability.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has 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
(13) The fee disclosed is net of any waivers or any other expense offset
arrangement with ABIS. An expense offset is created by the interest earned on
the positive cash balance that occurs within the transfer agent account as
there is a one day lag with regards to money movement from the shareholder's
account to the transfer agent's account and then from the transfer agent's
account to the Fund's account.
44 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
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 lack of cost data,
researchers had 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 a fund's assets exceeds its
initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $635 billion as of April 30, 2006, the Adviser
has the investment experience to manage and provide non-investment services
(described in Section I) to the Fund.
The information below, which was prepared by Lipper, shows the 1, 3, and 5 year
performance ranking of the Fund(14) relative to its Lipper Performance
Group(15) and Lipper Performance Universe(16) for the periods ended December
31, 2005:
Focused Growth & Income Fund, Inc. Group Universe
- -------------------------------------------------------------------------------
1 year 11/12 162/170
3 year 7/12 54/116
5 year 3/10 18/84
(14) The performance rankings are for the Class A shares of the Fund.
(15) The Lipper Performance Group is identical to the Lipper Expense Group.
(16) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective and load type, regardless
of asset size.
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 45
Set forth below are the 1, 3, and 5 year and since inception performance
returns of the Fund (in bold)(17) versus its benchmark:(18)
Periods Ending December 31, 2005
Annualized Performance
- -------------------------------------------------------------------------------
1 3 5 Since
Fund Year Year Year Inception
- -------------------------------------------------------------------------------
Focused Growth & 1.20 15.41 4.98 7.27
Income Fund, Inc.
Russell 1000 Value Index 7.05 17.49 5.28 5.57
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 17, 2006
(17) The performance returns shown are for the Class A shares of the Fund.
(18) The Adviser provided Fund and benchmark performance return information for
periods through December 31, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
46 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
NOTES
ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND o 47
NOTES
48 o ALLIANCEBERNSTEIN FOCUSED GROWTH & INCOME FUND
ALLIANCEBERNSTEIN FOCUSED GROWTH &INCOME
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
FGI-0152-0506
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 Focused Growth and Income Fund, Inc.
By: /s/ Marc O. Mayer
-------------------
Marc O. Mayer
President
Date: July 28, 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: July 28, 2006
By: /s/ Mark D. Gersten
-------------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: July 28, 2006