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: 811-08527
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH
GROWTH FUND, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Mark R. Manley
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: July 31, 2006
Date of reporting period: July 31, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
AllianceBernstein International Research Growth Fund
Annual Report
July 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.
September 15, 2006
Annual Report
This report provides management's discussion of fund performance for
AllianceBernstein International Research Growth Fund (the "Fund") for the
annual reporting period ended July 31, 2006.
Investment Objective and Policies
This open-end fund seeks long-term growth of capital by investing primarily in
an international portfolio of equity securities of carefully selected
international companies that are judged likely to achieve superior earnings
growth. The Fund invests, under normal circumstances, in the equity securities
of companies domiciled in at least three countries, and normally substantially
more, other than the United States. The Fund invests in securities of companies
in both developed and emerging market countries. AllianceBernstein expects that
normally the Fund's portfolio will tend to emphasize investments of companies
with market capitalizations of at least $3 billion at the time of investment,
although the Fund may invest in companies with smaller market capitalizations
from time to time.
Investment Results
The table on page 5 shows the Fund's performance compared to its former
benchmark, the Morgan Stanley Capital International (MSCI) Europe, Australasia
and Far East (EAFE) Growth Index, and its new benchmark, the MSCI All Country
(AC) World (ex-U.S.) Index, for the six- and 12-month periods ended July 31,
2006. The Adviser believes that the MSCI AC World (ex-U.S.) Index is the more
appropriate broad-based benchmark for the Fund in light of that Index's
relatively broader international and emerging markets exposure.
The Fund underperformed its new benchmark, the MSCI AC World (ex-U.S.) Index
for the six-month period ended July 31, 2006 and performed approximately in
line with this benchmark for the 12-month period ended July 31, 2006.
After enjoying a somewhat more favorable environment in 2005, so far in 2006
growth stocks have again come under pressure and are notably underperforming
value stocks. The Fund's International Research Growth Team (the "team")
believes that the Fund's underperformance this year has had little to do with
fundamental failures among the companies that it holds, but rather more to do
with the growth style of investing being out of favor. The Fund has continued
to benefit from an overweighted sector position and strong stock selection in
energy which, unfortunately, was more than offset by weaker performance in
other sectors.
Market Review and Investment Strategy
Global equity markets declined sharply midway through the second quarter of
2006 on fears that rising official interest rates-fueled by inflation concerns-
would slow global growth. Taking their cue from Ben Bernanke, the new chairman
of the U.S. Federal Reserve (the "Fed"), central banks around the world
tightened monetary policy as economic growth remained very strong and evidence
of rising prices abounded.
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 1
The Fed's particularly hawkish tone on inflation, however, raised concerns that
policymakers might overtighten, triggering a global recession. During the
second quarter, what had been an inflation scare became a growth scare,
prompting investors to sell riskier assets indiscriminately, with commodities,
emerging markets securities and economically-sensitive equities bearing the
brunt of the selling. The liquidity fed on itself in a downward spiral, causing
volatility to spike higher and pushing emerging markets to their sharpest
25-day decline since the Asian Crisis of 1998. The market did recover toward
quarter-end amid more hopeful comments from the Fed.
In comparison to the benchmark, the Fund's largest active positions were
overweights in health care and financial stocks and an underweight in
utilities, all of which detracted modestly from the Fund's performance during
the reporting period. The Fund's significant regional allocation was overweight
in Europe, modestly contributing to the Fund's performance during the reporting
period. Among sectors, energy stocks had strong performance. The Fund continues
to own fundamentally superior stocks where the team believes earnings growth is
underappreciated by the consensus.
2 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
HISTORICAL PERFORMANCE
An Important Note About the Value of Historical Performance
The performance shown on the following pages represents past performance and
does not guarantee future results. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by visiting www.alliancebernstein.com.
The investment return and principal value of an investment in the Fund will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. You should consider the investment objectives, risks,
charges and expenses of the Fund carefully before investing. For a free copy of
the Fund's prospectus, which contains this and other information, visit our
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 the different share
classes will vary due to different expenses associated with each class.
Performance assumes reinvestment of distributions and does not account for
taxes. During the reporting period, the Adviser waived a portion of its
advisory fee or reimbursed the Fund for a portion of its expenses to the extent
necessary to limit its expenses on an annual basis to 1.65%, 2.35%, 2.35% and
1.35% of the average daily net assets of Class A, Class B, Class C and Advisor
Class shares, respectively. These waivers extend through the Fund's current
fiscal year and may be extended by the Adviser for additional one-year terms.
Without the waivers, the Fund's expenses would have been higher and each Class'
performance would have been lower than that shown.
Benchmark Disclosure
Neither the unmanaged Morgan Stanley Capital International (MSCI) Europe,
Australasia and Far East (EAFE) Growth Index nor the unmanaged MSCI All Country
(AC) World (ex-U.S.) Index reflects fees and expenses associated with the
active management of a mutual fund portfolio. The MSCI EAFE Growth Index is a
free float-adjusted market capitalization index that is designed to measure
developed market growth equity performance in 21 countries, excluding the U.S.
and Canada. The MSCI AC World (ex-U.S.) Index is a free float-adjusted market
capitalization index that is designed to measure equity market performance in
the global developed and emerging markets, excluding the U.S. An investor
cannot invest directly in an index, and its results are not indicative of the
performance for any specific investment, including the Fund.
The MSCI EAFE Growth Index values are calculated using net returns. The MSCI AC
World (ex-U.S.) Index values are calculated using both net and gross returns.
In calculating net returns, the dividend is reinvested after deduction of
withholding tax, applying the rate to non-resident individuals who do not
benefit from double taxation treaties. In calculating gross returns, the amount
of the dividend reinvested is the dividend distributed to individuals resident
in the country of the company, but does not include tax credits.
(Historical Performance continued on next page)
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 3
HISTORICAL PERFORMANCE
(continued from previous page)
A Word About Risk
Substantially all of the Fund's assets will be invested in foreign securities.
Foreign markets can be more volatile than the U.S. market due to increased
risks of adverse issuer, political, regulatory, market or economic
developments. In addition, because the Fund will invest in foreign currency
denominated securities, fluctuations in the value of the Fund's investments may
be magnified by changes in foreign exchange rates. The Fund concentrates its
investments in a limited number of securities and an investment in the Fund is
therefore subject to greater risk and volatility than investments in a more
diversified portfolio. The Fund may invest in securities of emerging market
nations. These investments have additional risks, such as illiquid or thinly
traded markets, company management risk, heightened political instability and
currency volatility. Accounting standards and market regulations in emerging
market nations are not the same as those in the U.S. 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)
4 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE FUND VS. ITS BENCHMARK -------------------------
PERIODS ENDED JULY 31, 2006 6 Months 12 Months
- -------------------------------------------------------------------------------
AllianceBernstein International Research
Growth Fund
Class A 1.02% 25.24%
- -------------------------------------------------------------------------------
Class B 0.67% 24.31%
- -------------------------------------------------------------------------------
Class C 0.67% 24.31%
- -------------------------------------------------------------------------------
Advisor Class* 1.23% 25.60%
- -------------------------------------------------------------------------------
MSCI EAFE Growth Index (net) 3.43% 22.82%
- -------------------------------------------------------------------------------
MSCI AC World (ex-U.S.) Index (net) 3.57% 24.61%
- -------------------------------------------------------------------------------
MSCI AC World (ex-U.S.) Index (gross) 3.87% 25.10%
- -------------------------------------------------------------------------------
Please note that this share class is for investors purchasing shares
through institutional pension plans and investment advisory clients of,
and certain other persons associated with, the Adviser and its affiliates
or the Funds.
GROWTH OF A $10,000 INVESTMENT IN THE FUND
3/3/98* TO 7/31/06
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
MSCI AC World (ex-U.S.) Index (gross): $17,764
MSCI EAFE Growth Index (net): $12,937
AllianceBernstein International Research Growth Fund Class A: $12,726
AllianceBernstein
International Research MSCI MSCI
Growth Fund EAFE Growth AC World (ex-U.S.)
Class A Index (net) Index (gross)
- -------------------------------------------------------------------------------
3/3/98* $ 9,575 $10,000 $10,000
7/31/98 $ 9,901 $10,352 $10,289
7/31/99 $10,513 $11,058 $11,425
7/31/00 $12,593 $12,251 $12,663
7/31/01 $ 8,583 $ 8,506 $ 9,822
7/31/02 $ 7,207 $ 7,051 $ 8,326
7/31/03 $ 7,465 $ 7,355 $ 9,074
7/31/04 $ 8,415 $ 8,806 $11,369
7/31/05 $10,157 $10,534 $14,200
7/31/06 $12,726 $12,937 $17,764
* Since inception of the Fund's Class A shares on 3/3/98.
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein International Research Growth Fund Class A shares (from
3/3/98* to 7/31/06) as compared to the performance of the MSCI EAFE Growth
Index (net) and the MSCI AC World (ex-U.S.) Index (gross). The growth of the
MSCI EAFE Growth Index (net) and the MSCI AC World (ex-U.S.) Index are from
2/28/98, the closest month-end to the Fund's inception date. Net return values
for the MSCI AC World (ex-U.S.) Index are not available for the 3/3/98-12/31/00
time period. The chart reflects the deduction of the maximum 4.25% sales charge
from the initial $10,000 investment in the Fund and assumes the reinvestment of
dividends and capital gains distributions.
See Historical Performance and Benchmark disclosures on pages 3 - 4.
(Historical Performance continued on next page)
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 5
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF JULY 31, 2006
NAV Returns SEC Returns
- --------------------------------------------------------------------------
Class A Shares
1 Year 25.24% 19.87%
5 Years 8.19% 7.26%
Since Inception* 3.44% 2.91%
Class B Shares
1 Year 24.31% 20.31%
5 Years 7.39% 7.39%
Since Inception*(a) 2.71% 2.71%
Class C Shares
1 Year 24.31% 23.31%
5 Years 7.39% 7.39%
Since Inception* 2.67% 2.67%
Advisor Class Shares+
1 Year 25.60% 25.60%
5 Years 8.49% 8.49%
Since Inception* 3.72% 3.72%
(a) Assumes conversion of Class B shares into Class A shares after eight
years.
* Inception Date: 3/3/98 for Class A, Class B, Class C and Advisor Class
shares.
+ This share class is offered at net asset value (NAV) to eligible
investors and its SEC returns are the same as the NAV returns. Please note that
this share class is for investors purchasing shares through institutional
pension plans and investment advisory clients of, and certain other persons
associated with, the Adviser and its affiliates or the Funds. The inception
date for this share class is listed above.
See Historical Performance disclosures on pages 3 - 4.
(Historical Performance continued on next page)
6 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
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 23.95%
5 Years 6.60%
Since Inception* 2.82%
Class B Shares
1 Year 24.57%
5 Years 6.74%
Since Inception*(a) 2.62%
Class C Shares
1 Year 27.57%
5 Years 6.74%
Since Inception* 2.60%
Advisor Class Shares+
1 Year 29.91%
5 Years 7.85%
Since Inception* 3.64%
(a) Assumes conversion of Class B shares into Class A shares after eight
years.
* Inception Date: 3/3/98 for Class A, Class B, Class C and Advisor Class
shares.
+ Please note that this share class is for investors purchasing shares
through institutional pension plans and investment advisory clients of, and
certain other persons associated with, the Adviser and it affiliates of the
Funds. The inception date for this share class is listed above.
See Historical Performance disclosures on pages 3 - 4.
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 7
FUND EXPENSES
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual
expenses. You may use the information, together with the amount you invested,
to estimate the expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value divided by $1,000
= 8.6), then multiply the result by the number under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
Hypothetical Example for Comparison Purposes
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
annual rate of return of 5% before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds by comparing this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the hypothetical example is useful in comparing ongoing costs only,
and will not help you determine the relative total costs of owning different
funds. In addition, if these transactional costs were included, your costs
would have been higher.
Beginning Ending
Account Value Account Value Expenses Paid
February 1, 2006 July 31, 2006 During Period*
- -----------------------------------------------------------------------------------------------
Actual Hypothetical Actual Hypothetical** Actual Hypothetical
- -----------------------------------------------------------------------------------------------
Class A $1,000 $1,000 $1,010.22 $1,016.61 $ 8.22 $ 8.25
- -----------------------------------------------------------------------------------------------
Class B $1,000 $1,000 $1,006.67 $1,013.14 $11.69 $11.73
- -----------------------------------------------------------------------------------------------
Class C $1,000 $1,000 $1,006.67 $1,013.14 $11.69 $11.73
- -----------------------------------------------------------------------------------------------
Advisor
Class $1,000 $1,000 $1,012.31 $1,018.10 $ 6.74 $ 6.76
- -----------------------------------------------------------------------------------------------
* Expenses are equal to the classes' annualized expense ratios of 1.65%,
2.35%, 2.35% and 1.35%, respectively, multiplied by the average account value
over the period, multiplied by 181/365 (to reflect the one-half year period).
** Assumes 5% return before expenses.
8 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
PORTFOLIO SUMMARY
July 31, 2006
PORTFOLIO STATISTICS
Net Assets ($mil): $273.4
SECTOR BREAKDOWN*
[ ] 29.7% Finance
[ ] 11.8% Energy
[ ] 10.1% Health Care
[ ] 9.0% Technology
[ ] 8.6% Consumer Staples [PIE CHART OMITTED.]
[ ] 8.5% Basic Industry
[ ] 7.5% Consumer Services
[ ] 5.6% Consumer Manufacturing
[ ] 5.0% Capital Goods
[ ] 2.0% Utilities
[ ] 1.1% Multi-Industry
[ ] 0.6% Transportation
[ ] 0.5% Aerospace & Defense
COUNTRY BREAKDOWN*
[ ] 18.2% Japan
[ ] 15.3% Switzerland
[ ] 14.8% United Kingdom [PIE CHART OMITTED.]
[ ] 11.4% France
[ ] 4.7% Australia
[ ] 3.9% Brazil
[ ] 3.3% Italy
[ ] 2.7% Ireland
[ ] 2.6% Netherlands
[ ] 2.5% Germany
[ ] 2.4% Spain
[ ] 2.3% Russia
[ ] 2.1% Norway
[ ] 1.8% China
[ ] 12.0% Other
* All data are as of July 31, 2006. The Fund's sector and country
breakdowns are expressed as a percentage of total investments and may vary over
time. "Other" country weightings represent less than 1.8% weightings in the
following countries: Austria, Canada, Cayman Islands, Egypt, Greece, Hong Kong,
Hungary, India, Israel, Mexico, Netherlands Antilles, South Korea, Sweden,
Taiwan and Turkey.
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 this report
reflects more specific industry information and is consistent with the
investment restrictions discussed in the Fund's prospectus.
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 9
TEN LARGEST HOLDINGS
July 31, 2006
Percent of
Company U.S. $ Value Net Assets
- ----------------------------------------------------------------------------
BNP Paribas, SA $ 8,706,236 3.2%
UBS AG 7,972,931 2.9
Credit Suisse Group 6,766,356 2.5
Norsk Hydro ASA 5,698,537 2.1
Roche Holding AG 5,685,181 2.1
Novartis AG 5,572,769 2.0
Nestle, SA 5,140,433 1.9
HSBC Holdings Plc. 5,109,101 1.9
Mitsubishi UFJ Financial Group, Inc. 5,085,458 1.8
Nomura Holdings, Inc. 5,049,364 1.8
- ----------------------------------------------------------------------------
$ 60,786,366 22.2%
10 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
PORTFOLIO OF INVESTMENTS
July 31, 2006
Company Shares U.S. $ Value
- -----------------------------------------------------------------------------
COMMON & PREFERRED STOCKS-97.0%
Finance-28.8%
Banking-Money Center-13.9%
Anglo Irish Bank Corp. Plc. 159,007 $ 2,309,282
Banco Bilbao Vizcaya Argentaria, SA 125,771 2,679,775
BNP Paribas, SA 89,378 8,706,236
Commerzbank AG 52,470 1,844,486
Credit Suisse Group 120,719 6,766,356
HSBC Holdings Plc. 281,310 5,109,101
Mitsubishi UFJ Financial Group, Inc. 363 5,085,458
Standard Chartered Plc. 106,478 2,695,784
Sumitomo Mitsui Financial Group, Inc. 274 2,918,411
------------
38,114,889
Banking-Regional-3.3%
Allied Irish Banks Plc. 48,207 1,166,127
China Construction Bank Class H(a) 4,143,000 1,813,009
Turkiye Is Bankasi Class C 275,541 1,465,854
UniCredito Italiano SpA 581,062 4,474,646
------------
8,919,636
Brokerage & Money Management-3.1%
Man Group Plc. 63,335 2,906,280
Nomura Holdings, Inc. 283,800 5,049,364
Partners Group(b) 9,300 631,437
------------
8,587,081
Insurance-5.1%
ING Groep NV 105,865 4,296,143
Prudential Plc. 300,958 3,165,240
QBE Insurance Group, Ltd. 272,290 4,599,067
Swiss Reinsurance 25,877 1,861,287
------------
13,921,737
Miscellaneous-3.4%
ORIX Corp. 4,610 1,203,309
UBS AG 146,472 7,972,931
------------
9,176,240
------------
78,719,583
Energy-11.4%
International-6.4%
ENI SpA 85,352 2,618,541
LUKOIL (ADR) 57,615 5,012,505
Norsk Hydro ASA 198,970 5,698,537
Petroleo Brasileiro, SA (ADR)(b) 50,200 4,158,568
------------
17,488,151
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 11
Company Shares U.S. $ Value
- -----------------------------------------------------------------------------
Oil Service-5.0%
GlobalSantaFe Corp. 82,400 $ 4,526,232
Saxon Energy Services, Inc.(b) 587,500 2,128,435
Schlumberger, Ltd. 45,000 3,008,250
WorleyParsons, Ltd. 264,600 4,070,041
------------
13,732,958
------------
31,221,109
Health Care-9.8%
Drugs-7.7%
Chugai Pharmaceutical Co., Ltd. 63,100 1,300,034
Gedeon Richter Rt. 5,679 1,205,016
Novartis AG 98,486 5,572,769
Roche Holding AG 31,946 5,685,181
Sanofi-Aventis 40,564 3,852,579
Takeda Pharmaceutical Co., Ltd. 31,000 1,998,057
Teva Pharmaceutical Industries, Ltd. (ADR) 40,400 1,336,432
------------
20,950,068
Medical Products-2.1%
Essilor International, SA 25,137 2,515,642
Nobel Biocare Holding AG 9,521 2,257,947
Synthes, Inc. 9,057 1,046,490
------------
5,820,079
------------
26,770,147
Technology-8.7%
Communication Equipment-0.4%
OAO Vimpel-Communications (ADR)(b) 11,300 544,660
Tim Participacoes, SA (ADR) 20,500 508,400
------------
1,053,060
Communication Services-0.2%
Comstar United Telesystems (GDR)(a) 75,479 437,778
Computer Hardware/Storage-0.6%
NEC Corp. 280,000 1,540,434
Computer Peripherals-0.3%
High Tech Computer Corp. 43,200 960,013
Computer Services-0.9%
CapGemini, SA 47,067 2,529,583
Electronic Components-0.6%
Largan Precision Co., Ltd. 73,000 1,537,755
Internet Infrastructure-0.6%
Fastweb(b) 44,610 1,726,913
Semiconductor Capital Equipment-0.5%
ASML Holding NV(b) 76,026 1,505,020
12 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
Company Shares U.S. $ Value
- -----------------------------------------------------------------------------
Semiconductor Components-0.7%
Hynix Semiconductor, Inc.(a)(b) 4,200 $ 141,750
Hynix Semiconductor, Inc.(b) 51,010 1,734,576
------------
1,876,326
Software-1.3%
Infosys Technologies, Ltd. 32,033 1,141,817
SAP AG 12,772 2,332,346
------------
3,474,163
Miscellaneous-2.6%
Canon, Inc. 68,700 3,279,986
Hoya Corp. 66,900 2,339,999
Keyence Corp. 6,800 1,552,319
------------
7,172,304
------------
23,813,349
Consumer Staples-8.3%
Beverages-2.7%
Companhia de Bebidas das Americas pfd
(ADR) 48,400 1,948,100
Pernod Ricard, SA 11,168 2,326,072
SABMiller Plc. 150,900 3,032,027
------------
7,306,199
Food-1.9%
Nestle, SA 15,681 5,140,433
Retail-Food & Drug-1.3%
Carrefour SA 28,838 1,798,168
Tesco Plc. 282,466 1,897,733
------------
3,695,901
Tobacco-1.4%
Altadis, SA 35,443 1,679,336
British American Tobacco Plc. 85,828 2,312,745
------------
3,992,081
Miscellaneous-1.0%
Punch Taverns Plc. 164,695 2,711,045
------------
22,845,659
Basic Industry-8.3%
Chemicals-1.0%
Bayer AG 11,210 551,854
Hitachi Chemical Co., Ltd. 86,700 2,116,415
------------
2,668,269
Mining & Metals-6.7%
China Shenhua Energy Co., Ltd. Class H 1,681,000 3,026,825
Companhia Vale do Rio Doce (ADR)(b) 185,600 3,693,440
Rio Tinto Plc. 90,114 4,682,046
Xstrata Plc. 80,803 3,473,190
Zinifex, Ltd. 420,723 3,411,250
------------
18,286,751
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 13
Company Shares U.S. $ Value
- -----------------------------------------------------------------------------
Miscellaneous-0.6%
Asahi Glass Co., Ltd. 136,000 $ 1,742,638
------------
22,697,658
Consumer Services-7.3%
Airlines-0.8%
easyJet Plc.(b) 248,273 2,070,101
Broadcasting & Cable-1.4%
Grupo Televisa, SA (ADR) 63,200 1,170,464
Societe Television Francaise 1 81,050 2,587,638
------------
3,758,102
Cellular Communications-1.8%
America Movil SA de CV Series L (ADR) 35,800 1,280,924
Bharti Airtel, Ltd.(b) 84,666 697,414
Orascom Telecom Holding, SAE (GDR)(a) 13,424 641,667
Vodafone Group Plc. 1,049,842 2,279,784
------------
4,899,789
Entertainment & Leisure-1.5%
Greek Organisation of Football Prognostics, SA 61,206 2,225,969
ProSiebenSat. 1 Media AG pfd 71,464 1,820,102
------------
4,046,071
Resturants & Lodging-0.7%
Accor, SA 34,662 2,045,259
Miscellaneous-1.1%
First Choice Holidays Plc. 379,997 1,628,928
Li & Fung, Ltd. 669,400 1,403,636
------------
3,032,564
------------
19,851,886
Consumer Manufacturing-5.4%
Auto & Related-2.5%
Honda Motor Co., Ltd. 72,600 2,390,394
Toyota Motor Corp. 86,500 4,553,124
------------
6,943,518
Building & Related-2.9%
CRH Plc. 116,298 3,749,868
Rinker Group, Ltd. 30,843 308,959
Vinci, SA 37,048 3,766,734
------------
7,825,561
------------
14,769,079
Capital Goods-4.9%
Electrical Equipment-1.6%
Atlas Copco AB Class A 53,604 1,336,883
Delta Electronics, Inc. 684,250 1,843,144
Koninklijke (Royal) Philips Electronics NV 35,200 1,159,665
------------
4,339,692
14 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
Company Shares U.S. $ Value
- -----------------------------------------------------------------------------
Engineering & Construction-1.3%
ABB, Ltd. 278,142 $ 3,598,476
Machinery-1.3%
Komatsu, Ltd. 181,000 3,646,181
Miscellaneous-0.7%
Nitto Denko Corp. 24,600 1,787,393
------------
13,371,742
Utilities-1.9%
Telephone Utility-1.9%
Nippon Telegraph & Telephone Corp. 217 1,127,013
Telefonica, SA 113,024 1,912,098
Telekom Austria AG 69,291 1,565,765
TeliaSonera AB 108,166 606,539
------------
5,211,415
Multi-Industry-1.1%
Multi-Industry-1.1%
Mitsui & Co., Ltd. 193,000 2,909,496
Transportation-0.6%
Railroad-0.6%
Central Japan Railway Co. 151 1,671,193
Aerospace & Defense-0.5%
Aerospace-0.5%
BAE Systems Plc. 207,622 1,386,831
Total Investments-97.0%
(cost $213,919,836) 265,239,147
Other assets less liabilities-3.0% 8,207,417
------------
Net Assets-100% $273,446,564
============
(a) Security is exempt from registration under Rule 144A of the Securities
Act of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At July 31, 2006, the aggregate market value of these securities
amounted to $3,034,204 or 1.1% of net assets.
(b) Non-income producing security.
Glossary of Terms:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
See notes to financial statements.
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 15
STATEMENT OF ASSETS & LIABILITIES
July 31, 2006
Assets
Investments in securities, at value (cost $213,919,836) $ 265,239,147
Cash 2,867,238
Foreign cash, at value (cost $5,494,832) 5,567,779
Receivable for investment securities sold
and foreign currency contracts 3,960,834
Receivable for capital stock sold 2,003,668
Dividends receivable 478,556
Total assets 280,117,222
Liabilities
Payable for investment securities purchased and foreign
currency contracts 3,675,854
Payable for capital stock redeemed 2,266,563
Advisor fee payable 286,510
Distribution fee payable 115,999
Transfer Agent fee payable 83,427
Administrative fee payable 30,139
Accrued expenses and other liabilities 212,166
Total liabilities 6,670,658
Net Assets $ 273,446,564
Composition of Net Assets
Capital stock, at par $ 21,703
Additional paid-in capital 290,506,407
Accumulated net investment loss (20,242)
Accumulated net realized loss on investment
and foreign currency transactions (68,470,013)
Net unrealized appreciation of investments
and foreign currency denominated assets and liabilities 51,408,709
$ 273,446,564
Net Asset Value Per Share--12 billion shares of capital stock authorized,
$.001 par value
Shares Net Asset
Class Net Assets Outstanding Value
- -------------------------------------------------------------------------------
A $114,116,963 8,882,510 $12.85*
B $ 72,758,717 6,026,654 $12.07
C $ 30,840,630 2,554,954 $12.07
Advisor $ 55,730,254 4,238,815 $13.15
* The maximum offering price per share for Class A shares was $13.42 which
reflects a sales charge of 4.25%.
See notes to financial statements.
16 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
STATEMENT OF OPERATIONS
Year Ended July 31, 2006
Investment Income
Dividends (net of foreign taxes withheld of
$609,523) $ 5,093,105
Interest 181,428 $ 5,274,533
Expenses
Advisory fee 1,974,523
Distribution fee--Class A 315,168
Distribution fee--Class B 827,124
Distribution fee--Class C 298,340
Transfer agency--Class A 365,738
Transfer agency--Class B 326,784
Transfer agency--Class C 108,346
Transfer agency--Advisor Class 160,715
Custodian 374,310
Printing 179,019
Administration 90,000
Legal 76,139
Registration 65,012
Audit 58,614
Directors' fees 27,509
Miscellaneous 31,958
Total expenses 5,279,299
Less: expenses waived and reimbursed
by the Adviser (see Note B) (262,986)
Less: expense offset arrangement
(see Note B) (21,539)
Net expenses 4,994,774
Net investment income 279,759
Realized and Unrealized Gain (Loss)
on Investment and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment transactions 38,247,619(a)
Foreign currency transactions (44,808)
Net change in unrealized
appreciation/depreciation of:
Investments 17,599,764
Foreign currency denominated assets
and liabilities 71,152
Net gain on investments 55,873,727
Net Increase in Net Assets from
Operations $ 56,153,486
(a) Net of foreign capital gains taxes of $31,003.
See notes to financial statements.
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 17
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
July 31, July 31,
2006 2005
------------- -------------
Increase (Decrease) in Net Assets
from Operations
Net investment income (loss) $ 279,759 $ (537,297)
Net realized gain on investment and
foreign currency transactions 38,202,811 17,627,980
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities 17,670,916 18,969,421
Net increase in net assets from
operations 56,153,486 36,060,104
Capital Stock Transactions
Net increase (decrease) (18,943,153) 112,921,281
Total increase 37,210,333 148,981,385
Net Assets
Beginning of period 236,236,231 87,254,846
End of period (including accumulated
net investment loss of $(20,242)
and $(960,630), respectively) $ 273,446,564 $ 236,236,231
============= =============
See notes to financial statements.
18 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
July 31, 2006
NOTE A
Significant Accounting Policies
AllianceBernstein International Research Growth Fund, Inc. (the "Fund"), was
incorporated as a Maryland Corporation on November 24, 1997 and is registered
under the Investment Company Act of 1940, as a diversified, open-end management
investment company. The Fund offers Class A, Class B, Class C and Advisor Class
shares. Class A shares are sold with a front-end sales charge of up to 4.25%
for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000
or more, Class A shares redeemed within one year of purchase may be subject to
a contingent deferred sales charge of 1%. Class B shares are currently sold
with a contingent deferred sales charge which declines from 4% to zero
depending on the period of time the shares are held. Class B shares will
automatically convert to Class A shares eight years after the end of the
calendar month of purchase. Class C shares are subject to a contingent deferred
sales charge of 1% on redemptions made within the first year after purchase.
Advisor Class shares are sold without an initial or contingent deferred sales
charge and are not subject to ongoing distribution expenses. All four classes
of shares have identical voting, dividend, liquidation and other rights, except
that the classes bear different distribution and transfer agency expenses. Each
class has exclusive voting rights with respect to its distribution plan. The
financial statements have been prepared in conformity with U.S. generally
accepted accounting principles, 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 (other than securities listed on the NASDAQ Stock Market,
Inc. ("NASDAQ")) or on a foreign securities exchange are valued at the last
sale price at the close of the exchange or foreign securities exchange. If
there has been no sale on such day, the securities are valued at the 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
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 19
listed only on "NASDAQ" 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") 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 currency exchange 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.
20 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent amounts actually received or paid.
Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation and depreciation of investments
and foreign currency denominated assets and liabilities.
3. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required. The Fund may be subject to taxes imposed by countries in which it
invests. Such taxes are generally based on income and/or capital gains earned
or repatriated. Taxes are accrued and applied to net investment income, net
realized gains and net unrealized appreciation/depreciation as such income
and/or gains are earned.
4. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Fund is
informed of the dividend. Interest income is accrued daily. Investment
transactions are accounted for on the 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 and capital gains distributions are determined in
accordance with federal tax regulations and may differ from those determined in
accordance with U.S. generally accepted accounting principles. To the extent
these differences are permanent, such amounts are reclassified within the
capital accounts based on their federal tax basis treatment; temporary
differences do not require such reclassification.
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 21
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser
an advisory fee at an annual rate of .75% of the first $2.5 billion, .65% of
the next $2.5 billion and .60% in excess of $5 billion, of the Fund's average
daily net assets. Prior to September 7, 2004, the Fund paid the Adviser an
advisory fee at an annual rate of 1% of the Fund's average daily net assets.
The fee is accrued daily and paid monthly. Until May 9, 2005, the Adviser
waived its fees and bore certain expenses to the extent necessary to limit
total operating expenses on an annual basis to 2.50%, 3.20%, 3.20%, and 2.20%
of the average daily net assets for Class A, Class B, Class C and Advisor Class
shares, respectively. Effective May 10, 2005, 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 1.65%, 2.35%, 2.35% and 1.35% of the
average daily net assets for Class A, Class B, Class C and Advisor Class
shares, respectively. For the year ended July 31, 2006, such waivers and
reimbursements amounted to $262,986.
Pursuant to the advisory agreement, the Adviser provides certain legal and
accounting services to the Fund. For the year ended July 31, 2006, such fees
amounted to $90,000.
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. The compensation
retained by ABIS amounted to $551,600 for the year ended July 31, 2006.
For the year ended July 31, 2006, the Fund's expenses were reduced by $21,539
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 $1,852 from the sales of Class A shares
and received $2,895, $43,704 and $2,711 in contingent deferred sales charges
imposed upon redemptions by shareholders of Class A, Class B and Class C
shares, respectively, for the year ended July 31, 2006.
Brokerage commissions paid on investment transactions for the year ended July
31, 2006, amounted to $728,442, none of which was paid to Sanford C. Bernstein
& Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
22 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
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 and 1% of the Fund's average daily net assets
attributable to the Class B and Class C shares. There are no distribution and
servicing fees on the Advisor Class shares. The fees are accrued daily and paid
monthly. The Agreement provides that the Distributor will use such payments in
their entirety for distribution assistance and promotional activities. The
Distributor has incurred expenses in excess of the distribution costs
reimbursed by the Fund in the amounts of $4,886,764 and $1,284,351 for Class B
and Class C shares, respectively; such costs may be recovered from the Fund in
future periods so long as the Agreement is in effect. In accordance with the
Agreement, there is no provision for recovery of unreimbursed distribution
costs incurred by the Distributor beyond the current fiscal year for Class A
shares. The Agreement also provides that the 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 year ended July 31, 2006, were as follows:
Purchases Sales
Investment securities (excluding
U.S. government securities) $ 224,322,255 $ 247,700,206
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes, gross unrealized
appreciation and unrealized depreciation (excluding foreign currency
transactions) are as follows:
Cost $ 214,233,872
Gross unrealized appreciation $ 54,044,824
Gross unrealized depreciation (3,039,549)
Net unrealized appreciation $ 51,005,275
Forward Currency Exchange Contracts
The Fund may enter into forward currency exchange contracts in order to hedge
its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings, to hedge certain firm purchase and sale commitments
denominated in foreign currencies and for investment purposes. A forward
currency exchange contract is a commitment to purchase or sell a foreign
currency
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 23
on a future date at a negotiated forward rate. The gain or loss arising from
the difference between the original contract and the closing of such contract
would be included in net realized gain or loss on foreign currency
transactions. Fluctuations in the value of open forward currency exchange
contracts are recorded for financial reporting purposes as unrealized
appreciation and depreciation by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or other liquid assets in a separate account of the Fund having a value at
least equal to the aggregate amount of the Fund's commitments under forward
currency exchange contracts entered into with respect to position hedges.
Risks may arise from the potential inability of the counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount in U.S.
dollars reflects the total exposure the Fund has in that particular currency
contract.
NOTE E
Capital Stock
Each class consists of 3,000,000,000 authorized shares. Transactions in capital
shares for each class were as follows:
Shares Amount
--------------------------- ---------------------------
Year Ended Year Ended Year Ended Year Ended
July 31, July 31, July 31, July 31,
2006 2005 2006 2005
------------- ------------ ------------- ------------
Class A
Shares sold 1,635,288 1,358,600 $ 19,818,874 $ 12,941,873
Shares converted
from Class B 785,298 98,793 9,873,072 976,302
Shares issued in
connection with
the acquisitions of
AllianceBernstein
All-Asia Investment
Fund and
AllianceBernstein
New Europe Fund -0- 7,115,439 -0- 52,005,064
Shares redeemed (2,499,177) (2,200,290) (30,034,379) (21,037,077)
Net increase
(decrease) (78,591) 6,372,542 $ (342,433) $ 44,886,162
24 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
Shares Amount
--------------------------- ---------------------------
Year Ended Year Ended Year Ended Year Ended
July 31, July 31, July 31, July 31,
2006 2005 2006 2005
------------- ------------ ------------- ------------
Class B
Shares sold 436,583 719,691 $ 5,030,345 $ 6,674,220
Shares converted
to Class A (832,440) (105,415) (9,873,072) (976,302)
Shares issued in
connection with
the acquisitions of
AllianceBernstein
All-Asia Investment
Fund and
AllianceBernstein
New Europe Fund -0- 5,257,962 -0- 53,423,241
Shares redeemed (2,087,937) (2,105,960) (23,466,464) (19,136,574)
Net increase
(decrease) (2,483,794) 3,766,278 $(28,309,191) $ 39,984,585
Class C
Shares sold 333,856 335,174 $ 3,885,051 $ 3,101,481
Shares issued in
connection with
the acquisitions of
AllianceBernstein
All-Asia Investment
Fund and
AllianceBernstein
New Europe Fund -0- 1,789,403 -0- 16,860,859
Shares redeemed (653,444) (782,232) (7,247,436) (7,151,721)
Net increase
(decrease) (319,588) 1,342,345 $ (3,362,385) $ 12,810,619
Advisor Class
Shares sold 2,297,949 1,173,637 $ 28,954,456 $ 11,554,197
Shares issued in
connection with
the acquisitions of
AllianceBernstein
All-Asia Investment
Fund and
AllianceBernstein
New Europe Fund -0- 1,030,873 -0- 10,035,460
Shares redeemed (1,282,619) (646,158) (15,883,600) (6,349,742)
Net increase 1,015,330 1,558,352 $ 13,070,856 $ 15,239,915
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 25
NOTE F
Risks Involved in Investing in the Fund
Concentration of Risk--Investing in securities of foreign companies or foreign
governments involves special risks which include changes in foreign currency
exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable 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 G
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 for short-term financing if necessary, subject to certain
restrictions, in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the year ended July 31, 2006.
NOTE H
Components of Accumulated Earnings (Deficit)
As of July 31, 2006, the components of accumulated earnings/(deficit) on a tax
basis were as follows:
Accumulated capital and other losses $ (68,176,215)(a)
Unrealized appreciation/(depreciation) 51,094,673(b)
Total accumulated earnings/(deficit) $ (17,081,542)
(a) On July 31, 2006, the Fund had a net capital loss carryforward of
$68,155,975 (of which approximately $3,983,570 and $33,920,000, respectively,
were attributable to the purchases of net assets of AllianceBernstein All-Asia
Investment Fund, Inc. and AllianceBernstein New Europe Fund, Inc.), of which
$232,411 expires in the year 2008, $6,639,293 expires in the year 2009,
$53,808,061 expires in the year 2010 and $7,476,210 expires in the year 2011.
During the fiscal year, the Fund utilized capital loss carryforwards of
$37,494,879. To the extent future capital gains are offset by capital loss
carryforwards, such gains will not be distributed. As a result of the mergers
with AllianceBernstein All-Asia Investment Fund, Inc. and AllianceBernstein New
Europe Fund, Inc., into the Fund, various limitations and reductions regarding
the future utilization of certain capital loss carryforwards were applied,
based on certain provisions in the Internal Revenue Code. In addition, the Fund
deferred $20,238 in post-October foreign currency losses into the next fiscal
year.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
26 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
During the fiscal year, permanent differences due to foreign currency losses,
net operating loss, India capital gains taxes and merger related reductions in
capital loss carryforwards, resulted in a net decrease in accumulated net
investment loss, a net decrease in accumulated net realized loss on investment
and foreign currency transactions and a corresponding net decrease in
additional paid-in capital. This reclassification had no effect on net assets.
NOTE I
Acquisition of AllianceBernstein All-Asia Investment Fund, Inc. and
AllianceBernstein New Europe Fund, Inc. by AllianceBernstein
International Research Growth Fund, Inc. (the "Fund")
On June 24, 2005, the Fund acquired all of the net assets of the
AllianceBernstein All-Asia Investment Fund, Inc. ("AAF"), pursuant to a plan of
reorganization approved by the shareholders of AAF on May 31, 2005. On June 24,
2005, the acquisition was accomplished by a tax-free exchange of 2,797,744
shares of the Fund for 4,285,673 shares of AAF. The aggregate net assets of the
Fund and AAF immediately before the acquisition were $86,443,444 and
$26,953,145 (including $1,092,861 of net unrealized appreciation of investments
and foreign currency denominated assets and liabilities), respectively.
Immediately after the acquisition, the combined net assets of the Fund amounted
to $113,396,589.
On July 8, 2005, the Fund acquired all of the net assets of the
AllianceBernstein New Europe Fund, Inc. ("ANEF"), pursuant to a plan of
reorganization approved by the shareholders of ANEF on May 31, 2005. On July 8,
2005, the acquisition was accomplished by a tax-free exchange of 12,395,933
shares of the Fund for 7,725,899 shares of ANEF. The aggregate net assets of
the Fund and ANEF immediately before the acquisition were $112,953,031 and
$119,880,506 (including $13,417,068 of net unrealized appreciation of
investments and foreign currency denominated assets and liabilities),
respectively. Immediately after the acquisition, the combined net assets of the
Fund amounted to $232,833,537.
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
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 27
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from some
of the AllianceBernstein long-term, open-end retail funds until December 31,
2008; 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
28 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 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.
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. The derivative claims brought on behalf of Alliance Holding remain
pending.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to pro-
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 29
duce 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 NYAG Order. 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) 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
30 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
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. On July 5,
2006, plaintiffs filed a notice of appeal.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
NOTE K
Change of Independent Registered Public Accounting Firm
On June 14, 2006, KPMG LLP ("KPMG") was selected as the Fund's independent
registered public accounting firm for the 2006 fiscal year. A majority of the
Fund's Board of Directors, including a majority of the Independent Directors,
approved the appointment of KPMG LLP. The predecessor independent registered
public accounting firm's reports on the Fund's financial statements for the
year ended July 31, 2005 and the year ended July 31, 2004 contained no adverse
opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles. During such fiscal periods
there were no disagreements between the Fund and the predecessor independent
registered public accounting firm on any matter of accounting principles or
practices, finan-
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 31
cial statement disclosure, or auditing scope or procedures, which such
disagreements, if not resolved to the satisfaction of the predecessor
independent registered public accounting firm, would have caused them to make
reference to the subject matter of the disagreement in connection with their
reports on the financial statements for such periods.
Note L
Recent Accounting Pronouncement
On July 13, 2006, the Financial Accounting Standards Board ("FASB") released
FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN
48"). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in
the course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded as a tax benefit or expense in the current year. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006 and is to
be applied to all open tax years as of the effective date. At this time,
management is evaluating the implications of FIN 48 and its impact in the
financial statements has not yet been determined.
32 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class A
--------------------------------------------------------------------------------------
December 1, Year Ended
Year Ended July 31, 2002 to November 30,
----------------------------------------- July 31, -----------------------
2006 2005 2004 2003(a) 2002 2001
- -------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $10.26 $ 8.50 $ 7.54 $ 7.31 $ 8.36 $10.50
--------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment income
(loss)(b) .04(c) (.03)(c) (.07)(c)(d) (.03)(c) (.09) (.10)
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions 2.55 1.79 1.03 .26 (.96) (2.04)
--------------------------------------------------------------------------------------
Net increase (decrease) in
net asset value from
operations 2.59 1.76 .96 .23 (1.05) (2.14)
--------------------------------------------------------------------------------------
Net asset value,
end of period $12.85 $10.26 $ 8.50 $ 7.54 $ 7.31 $ 8.36
======================================================================================
Total Return
Total investment return based
on net asset value(e) 25.24% 20.71% 12.73% 3.15% (12.56)% (20.38)%
Ratios/Supplemental
Data
Net assets, end of period
(000's omitted) $114,117 $91,949 $22,001 $23,851 $27,456 $40,555
Ratio to average net
assets of:
Expenses, net of waivers/
reimbursements 1.65%(f) 1.94%(g) 2.23% 2.50%(h) 2.47% 2.17%
Expenses, before waivers/
reimbursements 1.73%(f) 2.09% 2.46% 2.99%(h) 2.47% 2.17%
Net investment income (loss) .36%(c)(f) (.29)%(c) (.81)%(c)(d) (.68)%(c)(h) (1.17)% (1.06)%
Portfolio turnover rate 88% 136% 84% 56% 75% 171%
See footnote summary on page 37.
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 33
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class B
--------------------------------------------------------------------------------------
December 1, Year Ended
Year Ended July 31, 2002 to November 30,
----------------------------------------- July 31, -----------------------
2006 2005 2004 2003(a) 2002 2001
- -------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $ 9.71 $ 8.10 $ 7.25 $ 7.06 $ 8.12 $10.29
--------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment loss(b) (.04)(c) (.09)(c) (.13)(c)(d) (.06)(c) (.14)(c) (.17)
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions 2.40 1.70 .98 .25 (.92) (2.00)
--------------------------------------------------------------------------------------
Net increase (decrease) in
net asset value from
operations 2.36 1.61 .85 .19 (1.06) (2.17)
--------------------------------------------------------------------------------------
Net asset value,
end of period $12.07 $ 9.71 $ 8.10 $ 7.25 $ 7.06 $ 8.12
======================================================================================
Total Return
Total investment return based
on net asset value(e) 24.31% 19.88% 11.72% 2.69% (13.05)% (21.09)%
Ratios/Supplemental
Data
Net assets, end of period
(000's omitted) $72,759 $82,622 $38,430 $45,815 $52,744 $80,353
Ratio to average net
assets of:
Expenses, net of waivers/
reimbursements 2.35%(f) 2.76%(g) 2.99% 3.20%(h) 3.20% 2.92%
Expenses, before waivers/
reimbursements 2.50%(f) 2.92% 3.26% 3.79%(h) 3.25% 2.92%
Net investment loss (.39)%(c)(f) (1.01)%(c) (1.57)%(c)(d) (1.38)%(c)(h) (1.88)%(c) (1.84)%
Portfolio turnover rate 88% 136% 84% 56% 75% 171%
See footnote summary on page 37.
34 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class C
--------------------------------------------------------------------------------------
December 1, Year Ended
Year Ended July 31, 2002 to November 30,
----------------------------------------- July 31, -----------------------
2006 2005 2004 2003(a) 2002 2001
- -------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $ 9.71 $ 8.10 $ 7.25 $ 7.06 $ 8.13 $10.29
--------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment loss(b) (.04)(c) (.08)(c) (.13)(c)(d) (.06)(c) (.14)(c) (.16)
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions 2.40 1.69 .98 .25 (.93) (2.00)
--------------------------------------------------------------------------------------
Net increase (decrease) in
net asset value from
operations 2.36 1.61 .85 .19 (1.07) (2.16)
--------------------------------------------------------------------------------------
Net asset value,
end of period $12.07 $ 9.71 $ 8.10 $ 7.25 $ 7.06 $ 8.13
======================================================================================
Total Return
Total investment return based
on net asset value(e) 24.31% 19.88% 11.72% 2.69% (13.16)% (20.99)%
Ratios/Supplemental
Data
Net assets, end of period
(000's omitted) $30,841 $27,911 $12,417 $15,257 $17,942 $28,990
Ratio to average net
assets of:
Expenses, net of waivers/
reimbursements 2.35%(f) 2.70%(g) 2.97% 3.20%(h) 3.20% 2.88%
Expenses, before waivers/
reimbursements 2.45%(f) 2.86% 3.21% 3.73%(h) 3.20% 2.88%
Net investment loss (.36)%(c)(f) (.96)%(c) (1.54)%(c)(d) (1.37)%(c)(h) (1.90)%(c) (1.80)%
Portfolio turnover rate 88% 136% 84% 56% 75% 171%
See footnote summary on page 37.
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 35
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Advisor Class
--------------------------------------------------------------------------------------
December 1, Year Ended
Year Ended July 31, 2002 to November 30,
----------------------------------------- July 31, -----------------------
2006 2005 2004 2003(a) 2002 2001
- -------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $10.47 $ 8.65 $ 7.66 $ 7.41 $ 8.44 $10.58
--------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment income
(loss)(b) .09(c) .03(c) (.03)(c)(d) (.01)(c) (.07) (.07)
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions 2.59 1.79 1.02 .26 (.96) (2.07)
--------------------------------------------------------------------------------------
Net increase (decrease) in
net asset value from
operations 2.68 1.82 .99 .25 (1.03) (2.14)
--------------------------------------------------------------------------------------
Net asset value,
end of period $13.15 $10.47 $ 8.65 $ 7.66 $ 7.41 $ 8.44
======================================================================================
Total Return
Total investment return based
on net asset value(e) 25.60% 21.04% 12.92% 3.37% (12.20)% (20.23)%
Ratios/Supplemental
Data
Net assets, end of period
(000's omitted) $55,730 $33,754 $14,407 $12,629 $11,437 $14,116
Ratio to average net
assets of:
Expenses, net of waivers/
reimbursements 1.35%(f) 1.67%(g) 1.90% 2.20%(h) 2.18% 1.86%
Expenses, before waivers/
reimbursements 1.40%(f) 1.85% 2.13% 2.70%(h) 2.18% 1.86%
Net investment income (loss) .75%(c)(f) .30%(c) (.37)%(c)(d) (.32)%(c)(h) (.85)% (.78)%
Portfolio turnover rate 88% 136% 84% 56% 75% 171%
See footnote summary on page 37.
36 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
(a) The Fund changed its fiscal year end from November 30 to July 31.
(b) Based on average shares outstanding.
(c) Net of expenses waived/reimbursed by the Adviser.
(d) Net of expenses waived/reimbursed by the Transfer Agent.
(e) 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
deferred sales charges are not reflected in the calculation of total investment
return. Total return does not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares. Total
investment return calculated for a period of less than one year is not
annualized.
(f) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(g) Ratios reflect expenses grossed up for expense offset arrangement with
the Transfer Agent. For the period shown below, the net expense ratios were as
follows:
Year Ended
July 31, 2005
-------------
Class A 1.94%
Class B 2.75%
Class C 2.70%
Advisor Class 1.67%
(h) Annualized.
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 37
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
AllianceBernstein International Research Growth Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of AllianceBernstein International Research
Growth Fund, Inc. as of July 31, 2006, and the related statement of operations,
statement of changes in net assets, and the financial highlights for the year
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended July 31, 2005
and the financial highlights for each of the presented years and periods ended
prior to August 1, 2005 were audited by other independent registered public
accountants whose report thereon, dated September 16, 2005, expressed an
unqualified opinion on that financial statement and those financial highlights.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of July 31, 2006, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
AllianceBernstein International Research Growth Fund, Inc. as of July 31, 2006,
and the results of its operations, changes in its net assets, and its financial
highlights for the year then ended, in conformity with U.S. generally accepted
accounting principles.
/s/ KPMG LLP
New York, New York
September 25, 2006
38 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH 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(2)
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer
Hiromitsu Agata, Vice President
Edward D. Baker III, Vice President
Michael R. Baldwin, Vice President
Thomas J. Bardong, Vice President
Isabel Buccellati, Vice President
William Johnston, Vice President
Siobhan McManus, Vice President
Michele Patri, Vice President
Paul C. Rissman, Vice President
Robert W. Scheetz, Vice President
Thomas A. Schmitt, Vice President
Valli Srikanthapalan, Vice President
Christopher M. Toub, Vice President
Atsushi Yamamoto, Vice President
Emilie D. Wrapp, Secretary
Andrew L. Gangolf, Assistant Secretary
Joseph J. Mantineo, Treasurer and Chief Financial Officer
Vincent S. Noto, Controller
Custodian
Brown Brothers Harriman & Company
40 Water Street
Boston, MA 02109-3661
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 76278-6003
Toll-Free (800) 221-5672
Independent Registered Public Accounting Firm
KPMG LLP
345 Park Avenue
New York, NY 10154
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 day-to-day management of and investment decisions for the Fund's
portfolio are made by the Adviser's International Research Growth research
sector heads, with oversight by the Adviser's International Research Growth
Portfolio Oversight Group. Stock selection within each market sector of the
Fund's portfolio is the responsibility of a research sector head for that
sector. The Adviser's International Research Growth Oversight Group, comprised
of senior investment professionals, in consultation with the International
Research Growth research sector heads, is responsible for determining the
market sectors into which the Fund's assets are invested and the percentage
allocation into each sector. The research sector heads includes: Hiromitsu
Agata, Isabel Buccellati, William Johnston, Michele Patri, Thomas A. Schmitt,
Valli Srikanthapalan and Atsushi Yamamoto.
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 39
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the
Board of Directors. Certain information concerning the Fund's Directors is set
forth below.
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
DATE OF BIRTH AND OCCUPATION(S) OVERSEEN BY HELD BY
(YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- ----------------------------------------------------------------------------------------------
INTERESTED DIRECTOR
Marc O. Mayer, ** Exective Vice President of 111 SCB Partners,
1345 Avenue of the the Adviser since 2001, and Inc.; SCB, Inc.
Americas Executive Managing Director of
New York, NY 10105 AllianceBernstein Investments,
10/2/1957 Inc. ("ABI") since 2003; prior
(2003) thereto, he was head of
AllianceBernstein Institutional
Investments, a unit of the
Adviser, from 2001-2003. Prior
thereto, Chief Executive Officer
of Sanford C. Bernstein & Co.,
LLC (institutional research and
brokerage arm of Bernstein &
Co., LLC) ("SCB & Co.") and its
predecessor since prior to 2001.
DISINTERESTED DIRECTORS
Chairman of the Board
William H. Foulk, Jr., #, + Investment Adviser and an 113 None
P.O. Box 5060 Independent Consultant. He
Greenwich, CT was formerly Senior Manager
06831-0505 of Barrett Associates, Inc., a
9/7/1932 registered investment adviser,
(1998) with which he had been
associated since prior to 2001.
He was formerly Deputy Comptroller
and Chief Investment Officer
of the State of New York and,
prior thereto, Chief Investment
Officer of the New York Bank
for Savings.
Ruth Block, ***, # Formerly Executive Vice President 100 None
500 S.E. Mizner Blvd. and Chief Insurance Officer of The
Boca Raton, FL 33432 Equitable Life Assurance Society
11/7/1930 of the United States; Chairman and
(1998) Chief Executive Officer of Evlico
(insurance); Director of Avon, BP
(oil and gas), Ecolab Incorporated
(specialty chemicals), Tandem
Financial Group and Donaldson,
Lufkin & Jenrette Securities
Corporation; Governor at Large,
National Association of Securities
Dealers, Inc.
40 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
DATE OF BIRTH AND OCCUPATION(S) OVERSEEN BY HELD BY
(YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- ----------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
David H. Dievler, # Independent Consultant. Until 112 None
P.O. Box 167 December 1994 he was Senior Vice
Spring Lake, NJ 07762 President of AllianceBernstein
10/23/1929 Corporation ("AB Corp.") responsible
(1998) for mutual fund administration.
Prior to joining AB Corp. in 1984,
he was Chief Financial Officer of
Eberstadt Asset Management since 1968.
Prior to that, he was a Senior Manager
at Price Waterhouse & Co. Member of
American Institute of Certified
Public Accountants since 1953.
John H. Dobkin, # Consultant. Formerly President 111 None
P.O. Box 12 of Save Venice, Inc. (preservation
Annandale, NY 12504 organization) from 2001-2002,
2/19/1942 Senior Advisor from June 1999-
(1998) June 2000 and President of
Historic Hudson Valley (historic
preservation) from December 1989-
May 1999. Previously, Director of
the National Academy of Design
and during 1988-1992, Director and
Chairman of the Audit Committee
of AB Corp.
Michael J. Downey, # Consultant since January 2004. 111 Asia Pacific
c/o AllianceBernstein L.P. Formerly managing partner Fund, Inc.
Attn: Philip L. Kirstein of Lexington Capital, LLC and The
1345 Avenue of the (investment advisory firm) from Merger Fund
Americas December 1997 until December
New York, NY 10105 2003. Prior thereto, Chairman
1/26/1944 and CEO of Prudential Mutual
(2005) Fund Management from 1987
to 1993.
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 41
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
DATE OF BIRTH AND OCCUPATION(S) OVERSEEN BY HELD BY
(YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- ----------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
D. James Guzy, # Chairman of the Board of PLX 111 Intel Corporation
P.O. Box 128 Technology (semi-conductors) (semi-conductors),
Glenbrook, NV 89413 and of SRC Computers, Inc., Cirrus Logic
3/7/1936 with which he has been Corporation
(2005) associated since prior to 2001. (semi-conductors),
He is also President of the and the Davis
Arbor Company (private family Selected Advisors
investments). Group of Mutual
Funds
Nancy P. Jacklin, # Formerly, U.S. Executive 111 None
4046 Chancery Court, NW Director of the International
Washington, DC 20007 Monetary Fund (December
5/22/1948 2002-May 2006); partner,
(2006) Clifford Chance (1992-2002);
Senior Counsel, International
Banking and Finance, and
Associate General Counsel,
Citicorp (1985-1992); Assistant
General Counsel (International)
Federal Reserve Board of
Governors (1982-1985); and
Attorney Advisor, U.S. Department
of the Treasury (1973-1982).
Member of the Bar of the District
of Columbia and of New York and
member of the Council on Foreign
Relations.
42 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
DATE OF BIRTH AND OCCUPATION(S) OVERSEEN BY HELD BY
(YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- ----------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
Marshall C. Turner, Jr., # Principal of Turner Venture 111 The George
220 Montgomery Street Associates since prior to 2001. Lucas
Penthouse 10 From 2003 until May 31, 2006, Educational
San Francisco, CA he was CEO of Toppan Photomasks, Foundation;
94104-3402 Inc., Austin, Texas (semi-conductor and National
10/10/1941 manufacturing services). Datacast, Inc.
(2005)
* There is no stated term of office for the Fund's Directors.
** Mr. Mayer is an "interested person", as defined in the 1940 Act, due to
his position as an Executive Vice President of the Adviser.
*** Ms. Block was an "interested person", as defined in the 1940 Act, until
October 21, 2004 by reason of her ownership of equity securities of a
controlling person of the Adviser. Such securities were sold for approximately
$2,400 on October 21, 2004. Ms. Block received shares of The Equitable
Companies Incorporated ("Equitable") as part of the demutualization of The
Equitable Life Assurance Society of the United States. Her Equitable shares
were subsequently converted through a corporate action into 116 American
Depositary Shares of AXA.
+ Member of the Fair Value Pricing Committee.
# Member of the Audit Committee, the Governance and Nominating Committee and
the Independent Directors Committee.
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 43
Officer Information
Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS,* POSITION(S) HELD PRINCIPAL OCCUPATION
AND DATE OF BIRTH WITH FUND DURING PAST 5 YEARS
- -------------------------------------------------------------------------------
Marc O. Mayer President and Chief See biography above.
10/2/1957 Executive Officer
Philip L. Kirstein Senior Vice President Senior Vice President and
5/29/1945 and Independent Independent Compliance Officer of
Compliance Officer the AllianceBernstein Funds, with
which he has been associated since
October 2004. Prior thereto, he was
Of Counsel to Kirkpatrick & Lockhart,
LLP from October 2003 to October 2004,
and General Counsel of Merrill Lynch
Investment Managers, L.P. since prior
to 2001 until March 2003.
Hiromitsu Agata, Vice President Senior Vice President of
11/5/1962 AllianceBernstein Japan, Ltd.,**, with
which he has been associated since prior
to 2001.
Edward D. Baker, III, Vice President Senior Vice President and Chief
2/4/1951 Investment Officer - Emerging Markets of
the Adviser,** with which he has been
associated since prior to 2001.
Michael R. Baldwin, Vice President Senior Vice President of the Adviser,**
2/26/1958 with which he has been associated since
prior to 2001.
Thomas J. Bardong, Vice President Senior Vice President of the Adviser,**
4/28/1945 with which he has been associated since
prior to 2001.
Isabel Buccellati, Vice President Vice President of AllianceBernstein
11/6/1968 Limited ("ABL"),** with which she has
been associated since prior to 2001.
William Johnston, Vice President Senior Vice President of ABL,** with
2/24/1961 which he has been associated since
prior to 2001.
Sioban McManus, Vice President Senior Vice President of the Adviser, **
4/20/1962 with which she has been associated since
prior to 2001.
Michele Patri, Vice President Vice President of ABL** and a Non-US
6/10/1963 Developed Analyst since April 2001.
Prior thereto, he was a portfolio manager
at Citigroup Asset Manager in London since
prior to 2001.
44 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
NAME, ADDRESS,* POSITION(S) HELD PRINCIPAL OCCUPATION
AND DATE OF BIRTH WITH FUND DURING PAST 5 YEARS
- -------------------------------------------------------------------------------
Paul C. Rissman, Vice President Executive Vice President of the
11/10/1956 Adviser,** with which he has
been associated since prior to 2001.
Robert W. Scheetz, Vice President Senior Vice President of the Adviser,**
11/22/1965 with which he has been associated since
prior to 2001.
Thomas A. Schmitt, Vice President Senior Vice President of the Adviser,**
7/13/1957 with which he has been associated since
prior to 2001.
Valli Srikanthapalan, Vice President Senior Vice President of ABL,**
4/21/1974 with which she has been associated since
prior to 2001.
Christopher M. Toub, Vice President Executive Vice President of the
6/15/1959 Adviser,** with which he has been
associated since prior to 2001.
Atsushi Yamamoto, Vice President Senior Vice President of
12/24/1966 AllianceBernstein Japan Ltd.,** with
which he has been associated since prior
to 2001.
Joseph J. Mantineo, Treasurer and Chief Senior Vice President of ABIS,** with
3/28/1959 Financial Officer which he has been associated since prior
to 2001.
Vincent S. Noto, Controller Vice President of ABIS,** with which he
12/14/1964 has been associated since prior to 2001.
Emilie D. Wrapp, Secretary Senior Vice President, Assistant
11/13/1955 General Counsel and Assistant Secretary
of ABI,** with which she has been
associated since prior to 2001.
Andrew L. Gangolf, Assistant Secretary Senior Vice President and Assistant
8/15/1954 General Counsel of ABI,** with which he
has been associated since prior to 2001.
* The address for each of the Fund's officers is 1345 Avenue of the
Americas, New York, NY 10105.
** The Adviser, ABI, AllianceBernstein Japan Ltd., ABL, ABIS and SCB & Co.
are affiliates of the Fund.
The Fund's Statement of Additional Information ("SAI") has additional
information about the Fund's Directors and Officers and is available without
charge upon request. Contact your financial representative or AllianceBernstein
at 1-800-227-4618 for a free prospectus or SAI.
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 45
Information Regarding the Review and Approval of the Fund's Advisory Agreement
The Fund's disinterested directors (the "directors") unanimously approved the
continuance of the Advisory Agreement between the Fund and the Adviser at a
meeting held on June 14, 2006.
In preparation for the meeting, the directors had requested from the Adviser
and received and evaluated extensive materials, including performance and
expense information for other investment companies with similar investment
objectives as the Fund derived from data compiled by Lipper Inc. ("Lipper"),
which is not affiliated with the Adviser. The directors also reviewed an
independent evaluation from the Fund's Senior Officer (who is also the Fund's
Independent Compliance Officer) of the reasonableness of the advisory fees in
the Fund's Advisory Agreement (as contemplated by the September 2004 Assurance
of Discontinuance between the Adviser and the New York Attorney General)
wherein the Senior Officer concluded that such fees were reasonable. In
addition, the directors received a presentation from the Adviser and had an
opportunity to ask representatives of the Adviser various questions relevant to
the proposed approval. The directors noted that the Senior Officer's evaluation
considered the following factors: management fees charged to institutional and
other clients of the Adviser for like services; management fees charged by
other mutual fund companies for like services; cost to the Adviser and its
affiliates of supplying services pursuant to the Advisory Agreement, excluding
any intra-corporate profit; profit margins of the Adviser and its affiliates
from supplying such services; possible economies of scale as the Fund grows
larger; and nature and quality of the Adviser's services including the
performance of the Fund.
Prior to voting, the directors reviewed the proposed continuance of the
Advisory Agreement with management and with experienced counsel who are
independent of the Adviser and received a memorandum from such counsel
discussing the legal standards for their consideration of the proposed
continuance. The directors also discussed the proposed continuance in two
private sessions at which only the directors, their independent counsel and the
Fund's Independent Compliance Officer were present. In reaching their
determinations relating to continuance of the Advisory Agreement, the directors
considered all factors they believed relevant, including the following:
1. information comparing the performance of the Fund to other investment
companies with similar investment objectives and to two indices;
2. the nature, extent and quality of investment, compliance,
administrative and other services rendered by the Adviser;
3. payments received by the Adviser from all sources in respect of the
Fund and all investment companies in the AllianceBernstein Funds complex;
46 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
4. the costs borne by, and profitability of, the Adviser and its
affiliates in providing services to the Fund and to all investment companies in
the AllianceBernstein Funds complex;
5. comparative fee and expense data for the Fund and other investment
companies with similar investment objectives;
6. the extent to which economies of scale would be realized to the
extent the Fund grows and whether fee levels reflect any economies of scale for
the benefit of investors;
7. the Adviser's policies and practices regarding allocation of
portfolio transactions of the Fund, including the extent to which the Adviser
benefits from soft dollar arrangements;
8. information about "revenue sharing" arrangements that the Adviser has
entered into in respect of the Fund;
9. portfolio turnover rates for the Fund compared to other investment
companies with similar investment objectives;
10. fall-out benefits that the Adviser and its affiliates receive from
their relationships with the Fund;
11. the Adviser's representation that there are no institutional products
managed by the Adviser which have a substantially similar investment style as
the Fund;
12. the Senior Officer's evaluation of the reasonableness of the fee
payable to the Adviser in the Advisory Agreement;
13. the professional experience and qualifications of the Fund's
portfolio management team and other senior personnel of the Adviser; and
14. the terms of the Advisory Agreement.
The directors also considered their knowledge of the nature and quality of the
services provided by the Adviser to the Fund gained from their experience as
directors or trustees of most of the registered investment companies advised by
the Adviser, their overall confidence in the Adviser's integrity and competence
they have gained from that experience and the Adviser's responsiveness to
concerns raised by them in the past, including the Adviser's willingness to
consider and implement organizational and operational changes designed to
improve investment results and the services provided to the AllianceBernstein
Funds.
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 47
In their deliberations, the directors did not identify any particular
information that was all-important or controlling, and different directors may
have attributed different weights to the various factors.
The directors determined that the overall arrangements between the Fund and the
Adviser, as provided in the Advisory Agreement, were fair and reasonable in
light of the services performed, expenses incurred and such other matters as
the directors considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the directors
reaching their determinations to approve the continuance of the Advisory
Agreement (including their determinations that the Adviser should continue to
be the investment adviser for the Fund, and that the fees payable to the
Adviser pursuant to the Advisory Agreement are appropriate) were separately
discussed by the directors.
Nature, extent and quality of services provided by the Adviser
The directors noted that, under the Advisory Agreement, the Adviser, subject to
the control of the directors, administers the Fund's business and other
affairs. The Adviser manages the investment of the assets of the Fund,
including making purchases and sales of portfolio securities consistent with
the Fund's investment objective and policies. Under the Advisory Agreement, the
Adviser also provides the Fund with such office space, administrative and other
services (exclusive of, and in addition to, any such services provided by any
others retained by the Fund) and executive and other personnel as are necessary
for the Fund's operations. The Adviser pays all of the compensation of
directors of the Fund who are affiliated persons of the Adviser and of the
officers of the Fund.
The directors also considered that the Advisory Agreement provides that the
Fund will reimburse the Adviser for the cost of certain clerical, accounting,
administrative and other services provided at the Fund's request by employees
of the Adviser or its affiliates. Requests for these "at no more than cost"
reimbursements are approved by the directors on a quarterly basis and (to the
extent requested and paid) result in a higher rate of total compensation from
the Fund to the Adviser than the fee rates stated in the Fund's Advisory
Agreement.
The directors considered the scope and quality of services provided by the
Adviser under the Advisory Agreement and noted that the scope of services
provided by advisers of funds had expanded over time as a result of regulatory
and other developments. The directors noted, for example, that the Adviser is
responsible for maintaining and monitoring its own and, to varying degrees, the
Fund's compliance programs, and that these compliance programs have recently
been refined and enhanced in light of new regulatory requirements. The
directors considered the quality of the in-house investment research
capabilities of the
48 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
Adviser and the other resources it has dedicated to performing services for the
Fund. The quality of administrative and other services, including the Adviser's
role in coordinating the activities of the Fund's other service providers, also
were considered. The directors also considered the Adviser's response to recent
regulatory compliance issues affecting a number of the investment companies in
the AllianceBernstein Funds complex. The directors concluded that, overall,
they were satisfied with the nature, extent and quality of services provided to
the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability to the Adviser
The directors reviewed a schedule of the revenues, expenses and related notes
indicating the profitability of the Fund to the Adviser for calendar years 2004
and 2005 that had been prepared with an updated expense allocation methodology.
The directors noted that the updated methodology differed in various respects
from the methodology used in prior years. The directors reviewed the
assumptions and methods of allocation used by the Adviser in preparing
fund-specific profitability data, and noted the Adviser's representation to
them that it believed that the methods of allocation used in preparing the
profitability information were reasonable and appropriate and that the Adviser
had previously discussed with the directors that there is no generally accepted
allocation methodology for information of this type.
The directors recognized that it is difficult to make comparisons of
profitability from fund advisory contracts because comparative information is
not generally publicly available and is affected by numerous factors, including
the structure of the particular adviser, the types of funds it manages, its
business mix, numerous assumptions regarding allocations and the adviser's
capital structure and cost of capital. In considering profitability
information, the directors considered the effect of fall-out benefits on the
Adviser's expenses, as well as the "revenue sharing" arrangements the Adviser
has entered into with certain entities that distribute shares of the Fund. The
directors focused on the profitability of the Adviser's relationship with the
Fund before taxes and distribution expenses. The directors recognized that the
Adviser should generally be entitled to earn a reasonable level of profits for
the services it provides to the Fund and, based on their review, concluded that
they were satisfied that the Adviser's level of profitability from its
relationship with the Fund was not excessive.
Fall-Out Benefits
The directors considered that the Adviser benefits from soft dollar
arrangements whereby it receives brokerage and research services from many of
the brokers and dealers that execute purchases and sales of securities on
behalf of its clients on an agency basis. They noted that the Adviser makes
presentations to the directors regarding its trading practices and brokerage
allocation policies, including its policies with respect to soft dollar
arrangements, from time to time and had made
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 49
a special presentation to the directors in May 2006 on this subject. The
directors noted that the Adviser has represented to them that all of its soft
dollar arrangements are consistent with applicable legal requirements including
the achievement of best execution.
The directors also considered that the Distributor, which is a wholly-owned
subsidiary of the Adviser, receives 12b-1 fees from the Fund in respect of
classes of shares of the Fund that are subject to the Fund's 12b-1 plan and
retains a portion of such 12b-1 fees, and receives all or a portion of the
sales charges on sales or redemptions of certain classes of shares. The
directors also noted that certain affiliates of the Adviser distribute shares
of the Fund and receive compensation in that connection, that a subsidiary of
the Adviser provides transfer agency services to the Fund and receives
compensation from the Fund for such services, and that brokers who are
affiliated with the Adviser are permitted to execute brokerage transactions for
the Fund subject to satisfaction of certain requirements and receive brokerage
commissions from the Fund and liquidity rebates from electronic communication
networks ("ECNs") in connection with certain of such transactions. The
directors noted that the Adviser had made a recent presentation to the
directors detailing liquidity rebates that Sanford C. Bernstein & Co. LLC
receives in respect of transactions effected through ECNs.
The directors recognized that the Adviser's profitability would be somewhat
lower if it did not receive research for soft dollars or if the Adviser's
affiliates did not receive the other benefits described above. The directors
understood that the Adviser also might derive reputational and other benefits
from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the
meeting, the directors receive detailed comparative performance information for
the Fund at each regular Board meeting during the year. At the meeting, the
directors reviewed information from a report prepared by Lipper showing
performance for Class A shares of the Fund as compared to a group of 4 funds in
its Lipper category selected by Lipper (the "Performance Group") and as
compared to a universe of 10 to 9 funds (depending on the year) in its Lipper
category selected by Lipper (the "Performance Universe") for periods ended
December 31, 2005 over the 1-, 3- and 5-year periods. The directors also
reviewed information prepared by the Adviser showing performance of the Class A
Shares of the Fund as compared to the Morgan Stanley Capital International All
Country World (ex-US) Index (Net) (the "MSCI All Country Index"), the Fund's
new benchmark, and the Morgan Stanley Capital Europe, Australasia and Far East
Growth Index (Net) (the "MSCI EAFE Index"), the Fund's former benchmark, for
periods ended December 31, 2005 over the 1-, 3-, 5-year and since inception
periods (March 1998 inception). The directors noted that in the Performance
50 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
Group comparison the Fund was 2 out of 4 in the 1- and 3-year periods and 1 out
of 4 in the 5-year period, and in the Performance Universe comparison the Fund
was in the 1st quintile in the 1-year period, 4th quintile in the 3-year period
and 2nd quintile in the 5-year period. The comparative information showed that
the Fund outperformed the MSCI All Country Index in the 1-year period and
underperformed the MSCI All Country Index in the 3- and 5-year periods
(comparative information for the MSCI All Country Index was not available for
the since inception period), and outperformed the MSCI EAFE Index in the 1-year
and since inception periods and underperformed the MSCI EAFE Index in the 3-
and 5-year periods. Based on their review, the directors concluded that the
Fund's relative performance over time was satisfactory. They also noted that
the Fund's shareholders had recently approved a new investment objective for
the Fund and that a number of changes to investment policies had recently been
approved.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate paid by the Fund to the Adviser
and information prepared by Lipper concerning fee rates paid by other funds in
the same Lipper category as the Fund at a common asset level. The directors
recognized that it is difficult to make comparisons of advisory fees because
there are variations in the services that are included in the fees paid by
other funds.
The directors reviewed information in the Adviser's Form ADV and noted that it
charged institutional clients lower fees for advising comparably sized accounts
using strategies that differ from those of the Fund but which involve
investments in securities of the same type that the Fund invests in (i.e.,
equity securities). They had previously received an oral presentation from the
Adviser that supplemented such information.
The Adviser reviewed with the directors the significant differences in the
scope of services it provides to institutional clients and to the Fund. For
example, the Advisory Agreement requires the Adviser to provide, in addition to
investment advice, office facilities and officers (including officers to
provide required certifications). The Adviser also coordinates the provision of
services to the Fund by non-affiliated service providers and is responsible for
the compensation of the Fund's Independent Compliance Officer and certain
related expenses. The provision of these non-advisory services involves costs
and exposure to liability. The Adviser explained that many of these services
normally are not provided to non-investment company clients, and that fees
charged to the Fund reflect the costs and risks of the additional obligations.
The Adviser also noted that since the Fund is constantly issuing and redeeming
its shares, it is more difficult to manage than an institutional account, where
the assets are relatively stable. In light of these facts, the directors did
not place significant weight on these fee comparisons.
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 51
The directors also considered the total expense ratio of the Class A shares of
the Fund in comparison to the fees and expenses of funds within two comparison
groups created by Lipper: an Expense Group and an Expense Universe. Lipper
described an Expense Group as a representative sample of comparable funds and
an Expense Universe as a broader group, consisting of all funds in the
investment classification/objective with a similar load type as the subject
Fund. The Class A expense ratio of the Fund was based on the Fund's latest
fiscal year expense ratio adjusted to reflect the new expense cap effective May
10, 2005. The directors recognized that the expense ratio information for the
Fund potentially reflected on the Adviser's provision of services, as the
Adviser is responsible for coordinating services provided to the Fund by
others. The directors noted that it was likely that the expense ratios of some
funds in the Fund's Lipper category also were lowered by waivers or
reimbursements by those funds' investment advisers, which in some cases were
voluntary and perhaps temporary.
The directors noted that the Fund's at approximate current size contractual
effective fee rate of 75 basis points was materially lower than the Expense
Group median. The directors noted that the latest fiscal year administrative
expense reimbursement by the Fund pursuant to the Advisory Agreement was 9
basis points, and that as a result the total compensation received by the
Adviser from the Fund pursuant to the Advisory Agreement was only somewhat
lower than the Expense Group median. The directors also noted that the Adviser
advises a portfolio of another AllianceBernstein fund with a substantially
similar investment style as the Fund for the same fee rate schedule as the
Fund. The directors also noted that the Fund's pro forma total expense ratio
(pro forma to reflect the new expense cap effective May 10, 2005) was slightly
lower than the Expense Group median and the same as the Expense Universe
median. The directors concluded that the Fund's expense ratio was satisfactory.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund contains
breakpoints so that, if assets were to increase over the breakpoint levels, the
fee rates would be reduced on the incremental assets. The directors also
considered a presentation by an independent consultant discussing economies of
scale issues in the mutual fund industry. The directors believe that economies
of scale are realized (if at all) by the Adviser across a variety of products
and services, and not only in respect of a single fund. The directors noted
that there is no uniform methodology for establishing breakpoints that give
effect to fund-specific services provided by the Adviser and to the economies
of scale that the Adviser may realize in its overall mutual fund business or
those components of it which directly or indirectly affect the Fund's
operations. The directors observed that in the mutual fund industry as a whole,
as well as among funds similar to the Fund, there is no uniformity or pattern
in the fees and asset levels at which breakpoints (if any) apply. Depending on
the age and size of a particular fund and its adviser's
52 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
cost structure, different conclusions can be drawn as to whether there are
economies of scale to be realized at any particular level of assets,
notwithstanding the intuitive conclusion that such economies exist, or will be
realized at some level of total assets. Moreover, because different advisers
have different cost structures and service models, it is difficult to draw
meaningful conclusions from the comparison of a fund's advisory fee breakpoints
with those of comparable funds. The directors also noted that the advisory
agreements for many funds do not have breakpoints at all. Having taken these
factors into account, the directors concluded that the Fund's breakpoint
arrangements would result in a sharing of economies of scale in the event of a
very significant increase in the Fund's net assets.
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 53
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
International Research Growth 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."
54 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
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
02/28/06 Based on % of Average
Category (million) Daily Net Assets Fund
- ----------------------------------------------------------------------------------------
International $281.7 75 bp on 1st $2.5 billion International Research
65 bp on next $2.5 billion Growth Fund, Inc.
60 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
- --------------------------------------------------------------------------
International Research Growth Fund, Inc. $84,000 0.09%
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.
Expense Cap Pursuant to Gross
Expense Limitation Expense
Fund Undertaking Ratio(4) Fiscal Year End
- ---------------------------------------------------------------------------
International Research Class A 1.65% 1.97% July 31 (ratios
Growth Fund, Inc.(5) Class B 2.35% 2.71% as of January
Class C 2.35% 2.69% 31, 2006)
Adv. Class 1.35% 1.67%
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
(3) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the NYAG.
(4) Annualized.
(5) The stated caps were implemented on May 10, 2005 with respect to Class A,
Class B, Class C and Advisor Class shares. Prior thereto, with respect to Class
A, Class B and Class C, and Advisor Class shares, the caps were 2.50%, 3.20%,
3.20% and 2.20%, respectively.
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 55
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. However, in respect to the Fund, the
Adviser represented that there is no institutional product that has a
substantially similar investment style as the Fund.
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
- ------------------------------------------------------------------------------------------------
International Research International Research 75 bp on first $2.5 billion
Growth Fund, Inc. Growth Portfolio 65 bp on next $2.5 billion
60 bp on the balance
56 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
The Alliance Capital Investment Trust Management mutual funds ("ACITM"), which
are offered to investors in Japan, have an "all-in" fee to compensate the
Adviser for investment advisory as well as fund accounting and administrative
related services. The fee schedule of the ACITM mutual fund with a similar
investment style as the Fund is as follows:
Fund ACITM Mutual Fund Fee
- ----------------------------------------------------------------------
International Research Alliance International Research 0.30%
Growth Fund, Inc. Growth -- International Blend(6)
The Adviser represented that it does not sub-advise any registered investment
company with a substantially similar investment style as the Fund.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc. ("Lipper"), an analytical service that is not affiliated with the
Adviser, compared the fees charged to the Fund with fees charged to other
investment companies for similar services 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)
At the request of the Senior Officer, independent counsel for the Independent
Directors and the Adviser, Lipper provided supplemental information (shown in
bold and italicized), which compared the Fund's management fee against it's
peers within an expanded Lipper Expense Group.(8) The expanded Lipper Expense
Group of the Fund has peers which have a similar size, load type and 12b-1
service/non 12b-1 service fee; the difference between a "normal" and expanded
Lipper Expense Group is that the peers of the expanded group, which invest in
international equity securities, can either be large cap or multi-cap and have
an investment style of growth or core (blend).(9)
(6) This ACITM fund is privately placed or institutional.
(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.
(8) For a "normal" Lipper Expense Group, 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.
(9) The Fund's Lipper investment classification/objective is International
Large-Cap Growth (ILCG). The Fund's expanded Lipper Expense Group, including
the Fund, consists of 2 funds with the investment classification/objective of
ILCG, 6 funds of International Multi-Cap Growth ("IMLG") and 6 funds of
International Large-Cap Core ("ILCC").
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 57
Effective Lipper
Management Group
Fund Fee(10) Median Rank
- -------------------------------------------------------------------------------
International Research 0.750 0.915 1/4
Growth Fund, Inc. 0.750 0.851 1/14
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(11) and Lipper Expense Universe.(12) 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. Supplemental Lipper
information for certain of the Funds is also provided (shown in bold and
italicized).(13)
Expense Lipper Lipper Lipper Lipper
Ratio Group Group Universe Universe
Fund (%)(14) Median (%) Rank Median (%) Rank
- ------------------------------------------------------------------------------
International Research 1.940 1.699 4/4 1.650 8/8
Growth Fund, Inc.(15) 1.940 1.816 11/14 N/A N/A
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.
(10) 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. In addition, the
effective management fee does not reflect any waivers or expense reimbursements
for expense caps that effectively reduce the contractual fee rate.
(11) 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.
(12) 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.
(13) See footnote 9.
(14) The total expense ratios shown are for the Fund's most recent fiscal year
end Class A shares.
(15) The total expense ratio that is shown is for the Fund's Class A shares as
of end of the most recently completed fiscal year (July 31, 2005). Effective
May 10, 2005, the Adviser agreed to waive its fees and bear certain expenses to
the extent necessary to limit the Fund's total operating expenses on an annual
basis. Had the expense cap been in effect for the full fiscal year, the Fund
would have had a pro-forma total expense ratio of 1.650, group expense ratio
ranking of 2/4 and universe expense ranking of 5/8.
58 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
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.
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.(16)
(16) 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 INTERNATIONAL RESEARCH GROWTH FUND o 59
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
- ----------------------------------------------------------------------------
International Research Growth Fund, Inc. $2,311
ABI received the amounts set forth below in Rule 12b-1 fees and CDSC for the
Fund during the Fund's most recent fiscal year:
Fund 12b-1 Fees Received CDSC Received
- ----------------------------------------------------------------------------
International Research Growth Fund, Inc. $600,249 $37,839
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(17)
- ----------------------------------------------------------------------------
International Research Growth Fund, Inc. $273,518
The Fund may effect brokerage transactions through the Adviser's affiliate,
Sanford C. Bernstein & Co. LLC ("SCB") and/or its U.K. affiliate, Sanford C.
Bernstein Limited ("SCB Ltd."), collectively "SCB," and pay commissions for
such transactions during the Fund's fiscal year. The Adviser represented that
SCB's profitability from any business conducted with the Fund would be
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. 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 Adviser's clients. These soft dollar
benefits reduce the Adviser's cost of doing business and increase its
profitability.
(17) 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.
60 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
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 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 rankings of the Fund(18) relative to its Lipper Performance
Group(19) and Lipper Performance Universe(20) for the periods ended December
31, 2005:
International Research
Growth Fund, Inc. Group Universe
- -----------------------------------------------------------
1 year 2/4 2/10
3 year 2/4 7/10
5 year 1/4 3/9
(18) The performance rankings are for the Class A shares of the Fund.
(19) The Lipper Performance Group is identical to the Lipper Expense Group.
(20) 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 INTERNATIONAL RESEARCH GROWTH FUND o 61
Set forth below are the 1, 3, 5 year and since inception performance returns of
the Fund (in bold)(21) versus its benchmark:(22)
Periods Ending December 31, 2005
Annualized Performance
- --------------------------------------------------------------------------
1 3 5 Since
Fund Year Year Year Inception
- --------------------------------------------------------------------------
International Research
Growth Fund, Inc. 17.71 19.02 1.88 2.06
MSCI All Country World
ex US Index (Net) 16.62 25.69 6.27 N/A
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
(21) The performance returns shown are for the Class A shares of the Fund.
(22) 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.
62 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
THIS PAGE IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
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-CapValue 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
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.
* Prior to February 1, 2006, Global Government Income Trust was named
Americas Government Income Trust and Intermediate Bond Portfolio was named
Quality Bond Portfolio.
** An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND o 63
NOTES
64 o ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
ALLIANCEBERNSTEIN INTERNATIONAL RESEARCH GROWTH FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
IRG-0151-0706
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics that applies to its
principal executive officer, principal financial officer and principal
accounting officer. A copy of the registrant's code of ethics is filed
herewith as Exhibit 12(a)(1).
(b) During the period covered by this report, no material amendments
were made to the provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit
waivers to the provisions of the code of ethics adopted in 2(a) above were
granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors has determined that independent directors
David H. Dievler and William H. Foulk, Jr. qualify as audit committee financial
experts.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) - (c) The following table sets forth the aggregate fees billed by the
independent registered public accounting firm PricewaterhouseCoopers LLP for
the Fund's 2005 fiscal year and KPMG LLP for the Fund's 2006 fiscal year for
professional services rendered for: (i) the audit of the Fund's annual
financial statements included in the Fund's annual report to stockholders;
(ii) assurance and related services that are reasonably related to the
performance of the audit of the Fund's financial statements and are not
reported under (i), which include advice and education related to accounting
and auditing issues and quarterly press release review (for those Funds
which issue press releases), and preferred stock maintenance testing (for
those Funds that issue preferred stock); and (iii) tax compliance, tax
advice and tax return preparation.
Audit-Related
Audit Fees Fees Tax Fees
- -------------------------------------------------------------------------------
2005 $44,000 $1,760 $6,100
2006 $37,500 $0 $8,511
(d) Not applicable.
(e) (1) Beginning with audit and non-audit service contracts entered into
on or after May 6, 2003, the Fund's Audit Committee policies and procedures
require the pre-approval of all audit and non-audit services provided to the
Fund by the Fund's independent registered public accounting firm. The Fund's
Audit Committee policies and procedures also require pre-approval of all audit
and non-audit services provided to the Adviser and Service Affiliates to the
extent that these services are directly related to the operations or financial
reporting of the Fund.
(e) (2) All of the amounts for Audit Fees, Audit-Related Fees and Tax
Fees in the table under Item 4 (a) - (c) are for services pre-approved by the
Fund's Audit Committee.
(f) Not applicable.
(g) The following table sets forth the aggregate non-audit services
provided to the Fund, the Fund's Adviser and entities that control, are
controlled by or under common control with the Adviser that provide ongoing
services to the Fund ("Service Affiliates"):
Total Amount of
Foregoing Column Pre-
approved by the Audit
All Fees for Committee
Non-Audit Services (Portion Comprised of
Provided to the Audit Related Fees)
Portfolio, the Adviser (Portion Comprised of
and Service Affiliates Tax Fees)
- ----------------------------------------------------------------------------
2005 $810,635 [$7,860]
($1,760)
($6,100)
2006 * $6,472,214 [$8,511]
($ 0)
($8,511)
* On June 14, 2006, the Fund engaged KPMG LLP as independent accountants
for fiscal year 2006.
(h) The Audit Committee of the Fund has considered whether the
provision of any non-audit services not pre-approved by the Audit Committee
provided by the Fund's independent registered public accounting firm to the
Adviser and Service Affiliates is compatible with maintaining the auditor's
independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the registrant.
ITEM 6. SCHEDULE OF INVESTMENTS.
Please see Schedule of Investments contained in the Report to Shareholders
included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT
COMPANIES.
Not applicable to the registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders
may recommend nominees to the Fund's Board of Directors since the Fund last
provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-2(c) under the Investment Company Act of
1940, as amended) are effective at the reasonable assurance level based on
their evaluation of these controls and procedures as of a date within 90 days
of the filing date of this document.
(b) There were no 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 (a) (1) Code of Ethics that is subject to the disclosure of
Item 2 hereof
12 (b) (1) Certification of Principal Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
12 (b) (2) Certification of Principal Financial Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
12 (c) Certification of Principal Executive Officer and
Principal Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): AllianceBernstein International Research Growth Fund, Inc.
By: /s/ Marc O. Mayer
Marc O. Mayer
President
Date: September 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: September 28, 2006
By: /s/ Joseph J. Mantineo
Joseph J. Mantineo
Treasurer and Chief Financial Officer
Date: September 28, 2006