N-CSR 1 edg10282_ar.txt 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: 811-01716 ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND, INC. (Exact name of registrant as specified in charter) 1345 Avenue of the Americas, New York, New York 10105 (Address of principal executive offices) (Zip code) Mark R. Manley Alliance Capital Management L.P. 1345 Avenue of the Americas New York, New York 10105 (Name and address of agent for service) Registrant's telephone number, including area code: (800) 221-5672 Date of fiscal year end: July 31, 2004 Date of reporting period: July 31, 2004 ITEM 1. REPORTS TO STOCKHOLDERS. [LOGO] AllianceBernstein(SM) Investment Research and Management AllianceBernstein Small Cap Growth Fund Small Cap Growth Annual Report--July 31, 2004 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 Alliance 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 (click on Investors/ Products & Services/ Mutual Funds). 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 Alliance Capital's web site at www.alliancebernstein.com (click on Investors, then the "Proxy voting policies" link or "Proxy voting records" link on the left side of the page), or go to the Securities and Exchange Commission's, (The "Commission") web site at www.sec.gov, or call Alliance Capital 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. Alliance publishes full portfolio holdings for the Fund monthly at www.alliancebernstein.com. AllianceBernstein Investment Research and Management, Inc., is an affiliate of Alliance Capital Management L.P., the manager of the funds, and is a member of the NASD. September 15, 2004 Annual Report This report provides management's discussion of fund performance for AllianceBernstein Small Cap Growth Fund (the "Fund") for the annual reporting period ended July 31, 2004. Investment Objective and Policies This open-end fund seeks growth of capital by pursuing aggressive investment policies. The Fund invests in a diversified portfolio of equity securities that offer the possibility of above-average earnings growth. The Fund emphasizes investment in small-capitalization companies in the United States and may also pursue investment opportunities outside the United States. Investment Results The table on page 4 shows the Fund's performance compared to its benchmark, the Russell 2000 Growth Index, for the six- and 12-month periods ended July 31, 2004. The Fund outperformed the benchmark for both the six-month and 12-month periods ended July 31, 2004. Driven by positive returns in all sectors except the health care sector, the Fund outperformed the Russell 2000 Growth Index during the 12-month period ended July 31, 2004. Relative returns during the 12-month reporting period benefited from strong stock selection, which was driven by significant outperformance in the Fund's technology and consumer holdings. Sector allocations also contributed to the Fund's outperformance during the period due to the Fund's overweighted positions in the energy, consumer and industrials sectors, three relatively strong performing sectors during the 12-month period under review. During the six-month period ended July 31, 2004, the Fund modestly outperformed the benchmark. Although stock selection for the six-month period was modestly negative, favorable contributions from sector allocations and a modest benefit from the Fund's small cash holdings during a period of negative returns enabled the Fund to outperform its benchmark. The negative contribution from stock selection stemmed from disappointing picks in the health care and consumer sectors which more than offset the Fund's outperformance within the technology and industrials sectors. Sector allocations benefited from overweighted positions in the energy and consumer sectors, two of the period's stronger performing sectors. Market Review and Investment Strategy Stubbornly high energy prices, continued geopolitical uncertainty and the prospect of rising interest rates combined to drive U.S. equities lower during the six-month period ended July 31, 2004. Declining during the six-month period, small-cap growth stocks, as represented by the Russell 2000 Growth Index, trailed many of the more widely followed market indices. Technology stocks were by far the period's worst performers, losing over 25% during the six-month period ended July 31, 2004. In sharp contrast, energy stocks, benefiting from the upward move in commodity prices, gained over 25% during the same time frame. In a notable reversal of trends experienced throughout much of 2003, smaller, more speculative stocks -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 1 significantly underperformed the Russell 2000 Growth Index. For the six-month period ended July 31, 2004, slower-growing, more value-oriented stocks proved to be the strongest performers. Despite the declines experienced over the six-month period ended July 31, 2004, strong gains during the second half of 2003 pushed equity markets, including small-cap growth stocks, into solidly positive territory for the 12-month period ended July 31, 2004. The Russell 2000 Growth Index performed roughly in line with the broader equity markets. All sectors, with the exception of the technology sector, participated in the period's gains. The energy sector was once again the standout performer, with a gain of more than 55% during the 12-month period ended July 31, 2004. During the six-month period ended July 31, 2004, we added to the Fund's holdings in commercial services, software, energy and biotechnology stocks, while decreasing its exposure to semiconductors, media, pharmaceuticals and health care services. The net result of these purchases and sales was an increase in the Fund's relative exposure to the technology, health care and financial services sectors, with a corresponding reduction in the consumer/commercial services and industrials sectors. As of July 31, 2004, the Fund held overweighted positions in the technology, consumer/commercial services and energy sectors, and underweighted positions in the health care, industrials and financial services sectors. -------------------------------------------------------------------------------- 2 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND HISTORICAL PERFORMANCE An Important Note About the Value of Historical Performance The performance shown on the following pages represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.alliancebernstein.com (click on Investors/Products & Services/Mutual Funds). The investment return and principal value of an investment in the Fund will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. You should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For a free copy of the Fund's prospectus, which contains this and other information, visit our web site at www.alliancebernstein.com or call your financial advisor or Alliance at (800) 227-4618. You should read the prospectus carefully before you invest. Returns are annualized for periods longer than one year. All fees and expenses related to the operation of the Fund have been deducted. NAV returns do not reflect sales charges; if sales charges were reflected, the Fund's quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares; the applicable contingent deferred sales charge for Class B shares (4% year 1, 3% year 2, 2% year 3, 1% year 4); a 1% 1 year contingent deferred sales charge for Class C shares. Returns for Advisor Class shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. Benchmark Disclosure The unmanaged Russell 2000 Growth Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index contains those securities in the Russell 2000 Index with a greater-than-average growth orientation. The unmanaged Russell 2000 Index is a capitalization-weighted index that includes 2,000 of the smallest stocks representing approximately 10% of the U.S. equity market. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Fund. A Word About Risk The Fund concentrates its investments in the stocks of small-capitalization companies, which tend to be more volatile than large-cap companies. Small-cap stocks may have additional risks because these companies tend to have limited product lines, markets or financial resources. The Fund invests 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 pursues an aggressive investment strategy and an investment in the Fund is risky. 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 prospectus. (Historical Performance continued on next page) -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 3 HISTORICAL PERFORMANCE (continued from previous page) =================================== Returns THE FUND VS. ITS BENCHMARK =================================== PERIODS ENDED JULY 31, 2004 6 Months 12 Months -------------------------------------------------------------------------------- AllianceBernstein Small Cap Growth Fund Class A -8.24% 13.87% -------------------------------------------------------------------------------- Class B -8.58% 12.97% -------------------------------------------------------------------------------- Class C -8.57% 13.02% -------------------------------------------------------------------------------- Advisor Class -8.10% 14.20% -------------------------------------------------------------------------------- Russell 2000 Growth Index -8.61% 11.32% -------------------------------------------------------------------------------- GROWTH OF A $10,000 INVESTMENT IN THE FUND 7/31/94 TO 7/31/04 AllianceBernstein Small Cap Growth Fund Class A: $19,024 Russell 2000 Growth Index: $17,910 [TABLE BELOW REPRESENT MOUNTAIN CHART] AllianceBernstein Small Cap Growth Fund Class A Russell 2000 Growth Index -------------------------------------------------------------------------------- 7/31/94 9,575 10,000 7/31/95 12,584 13,377 7/31/96 16,616 13,781 7/31/97 22,708 17,261 7/31/98 23,031 17,033 7/31/99 22,540 19,504 7/31/00 24,386 23,626 7/31/01 20,694 18,118 7/31/02 13,790 12,572 7/31/03 16,707 16,089 7/31/04 19,024 17,910 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Small Cap Growth Fund Class A shares (from 7/31/94 to 7/31/04) as compared to the performance of an appropriate index. See Historical Performance and Benchmark disclosures on previous page. (Historical Performance continued on next page) -------------------------------------------------------------------------------- 4 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND HISTORICAL PERFORMANCE (continued from previous page) AVERAGE ANNUAL RETURNS AS OF JULY 31, 2004 -------------------------------------------------------------------------------- NAV Returns SEC Returns Class A Shares 1 Year 13.87% 9.02% 5 Years -3.33% -4.17% 10 Years 7.11% 6.64% Class B Shares 1 Year 12.97% 8.97% 5 Years -4.10% -4.10% 10 Years(a) 6.46% 6.46% Class C Shares 1 Year 13.02% 12.02% 5 Years -4.09% -4.09% 10 Years 6.29% 6.29% Advisor Class Shares 1 Year 14.20% 5 Years -3.02% Since Inception* 0.38% SEC AVERAGE ANNUAL RETURNS (WITH SALES CHARGES) AS OF THE MOST RECENT CALENDAR QUARTER-END (JUNE 30, 2004) -------------------------------------------------------------------------------- Class A Shares 1 Year 25.90% 5 Years -3.23% 10 Years 7.55% Class B Shares 1 Year 26.52% 5 Years -3.16% 10 Years(a) 7.36% Class C Shares 1 Year 29.55% 5 Years -3.14% 10 Years 7.20% (a) Assumes conversion of Class B shares into Class A shares after eight years. * Inception date: 10/1/96 for Advisor Class shares. See Historical Performance disclosures on page 3. -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 5 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 first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, 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 in the first line 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 second line of the table below 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 second line of the table 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, 2004 July 31, 2004 During Period* ------------------------------------------------------------------------------------ Class A Actual $1,000 $ 917.57 $ 8.01 Hypothetical (5% return before expenses) $1,000 $1,016.51 $ 8.42 ------------------------------------------------------------------------------------ Class B Actual $1,000 $ 914.17 $ 11.80 Hypothetical (5% return before expenses) $1,000 $1,012.53 $ 12.41 ------------------------------------------------------------------------------------ Class C Actual $1,000 $ 914.30 $ 11.61 Hypothetical (5% return before expenses) $1,000 $1,012.73 $ 12.21 ------------------------------------------------------------------------------------ Advisor Class Actual $1,000 $ 918.99 $ 6.78 Hypothetical (5% return before expenses) $1,000 $1,017.80 $ 7.12 ------------------------------------------------------------------------------------
* Expenses are equal to the classes' annualized expense ratios of 1.68%, 2.48%, 2.44% and 1.42%, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). -------------------------------------------------------------------------------- 6 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND PORTFOLIO SUMMARY July 31, 2004 PORTFOLIO STATISTICS Net Assets ($mil): $381.3 SECTOR BREAKDOWN* 27.9% Technology 23.1% Consumer Services 17.4% Health Care 8.2% Finance 6.9% Energy 6.5% Capital Goods 4.1% Transportation 1.3% Basic Industry 1.2% Consumer Manufacturing 1.2% Utilities 0.8% Consumer Staples 1.4% Short-Term * All data is as of July 31, 2004. The Fund's sector breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 7 TEN LARGEST HOLDINGS July 31, 2004 Percent of Company Value Net Assets -------------------------------------------------------------------------------- Dycom Industries, Inc. $ 6,869,700 1.8% -------------------------------------------------------------------------------- Resources Connection, Inc. 6,759,354 1.8 -------------------------------------------------------------------------------- MICROS Systems, Inc. 6,519,942 1.7 -------------------------------------------------------------------------------- Amphenol Corp. Cl.A 6,383,433 1.7 -------------------------------------------------------------------------------- ScanSource, Inc. 6,273,716 1.6 -------------------------------------------------------------------------------- Alliance Data Systems Corp. 6,151,079 1.6 -------------------------------------------------------------------------------- Hyperion Solutions Corp. 6,013,532 1.6 -------------------------------------------------------------------------------- MGI Pharma, Inc. 5,882,100 1.5 -------------------------------------------------------------------------------- Insight Enterprises, Inc. 5,703,664 1.5 -------------------------------------------------------------------------------- Station Casinos, Inc. 5,594,400 1.5 -------------------------------------------------------------------------------- $ 62,150,920 16.3% -------------------------------------------------------------------------------- 8 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS July 31, 2004 Company Shares Value -------------------------------------------------------------------------------- COMMON STOCKS-98.2% Technology-27.8% Communications Equipment-1.0% Inet Technologies, Inc.(a) ..................... 323,300 $ 3,976,590 ----------- Computer Hardware/Storage-1.3% Avocent Corp.(a) ............................... 162,400 4,862,256 ----------- Computer Services-3.8% Alliance Data Systems Corp.(a) ................. 154,900 6,151,079 Anteon International Corp.(a) .................. 127,100 3,957,894 Cognizant Technology Solutions Corp.(a) ........ 156,000 4,297,800 ----------- 14,406,773 ----------- Computer Software-1.6% Hyperion Solutions Corp.(a)* ................... 146,600 6,013,532 ----------- Internet Infrastructure-2.1% Digitas, Inc.(a) ............................... 522,638 3,496,448 SupportSoft, Inc.(a) ........................... 530,300 4,671,943 ----------- 8,168,391 ----------- Semi-Conductor Capital Equipment-1.0% FormFactor, Inc.(a)* ........................... 190,100 3,817,208 ----------- Semi-Conductor Components-1.9% Microsemi Corp.(a)* ............................ 243,200 2,979,200 ON Semiconductor Corp.(a) ...................... 570,400 2,281,600 SiRF Technology Holdings, Inc.(a)* ............. 174,600 1,953,774 ----------- 7,214,574 ----------- Software-5.2% Aspect Communications Corp.(a) ................. 280,300 2,374,141 MicroStrategy, Inc. Cl A(a) .................... 109,400 4,404,444 PalmSource, Inc.(a)* ........................... 148,500 3,008,610 Quest Software, Inc.(a) ........................ 360,500 4,347,630 SERENA Software, Inc.(a)* ...................... 179,100 2,758,140 SINA Corp. (Hong Kong)(a)* ..................... 105,000 2,976,750 ----------- 19,869,715 ----------- Steel-0.9% Allegheny Technologies, Inc. ................... 172,740 3,463,437 ----------- Miscellaneous-9.0% 02Micro International, Ltd.(a) ................. 216,200 2,782,494 Amphenol Corp. Cl.A(a) ......................... 203,100 6,383,433 Exar Corp.(a) .................................. 270,100 3,638,247 Kronos, Inc.(a) ................................ 116,400 5,112,288 MICROS Systems, Inc.(a) ........................ 134,100 6,519,942 Power-One, Inc.(a)* ............................ 347,900 3,051,083 -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 9 Company Shares Value -------------------------------------------------------------------------------- TNS, Inc.(a) ................................. 103,300 $ 2,293,260 TTM Technologies, Inc.(a) .................... 387,200 4,445,056 ------------ 34,225,803 ------------ 106,018,279 Consumer Services-23.0% Advertising-1.0% StarTek, Inc. ................................ 131,700 4,047,141 ------------ Broadcasting & Cable-2.0% Cumulus Media, Inc. Cl.A(a) .................. 308,418 4,527,576 Entravision Communications Corp. Cl.A(a) ..... 462,200 3,267,754 ------------ 7,795,330 ------------ Entertainment & Leisure-1.0% Activision, Inc.(a) .......................... 250,700 3,672,755 ------------ Gaming-1.5% Station Casinos, Inc.* ....................... 129,500 5,594,400 ------------ Retail-General Merchandise-3.8% Cost Plus, Inc.(a) ........................... 87,200 2,917,712 Dick's Sporting Goods, Inc.(a)* .............. 145,400 4,725,500 Hibbett Sporting Goods, Inc.(a) .............. 136,650 2,604,549 Tuesday Morning Corp.(a) ..................... 132,700 4,267,632 ------------ 14,515,393 ------------ Miscellaneous-13.7% Bright Horizons Family Solutions, Inc.(a) .... 89,100 4,521,825 Charles River Associates, Inc.(a) ............ 123,000 3,940,920 Dycom Industries, Inc.(a) .................... 255,000 6,869,700 Insight Enterprises, Inc.(a) ................. 355,590 5,703,664 Intersections, Inc.(a) ....................... 97,200 1,421,064 Laureate Education, Inc.(a) .................. 124,900 4,408,970 Life Time Fitness, Inc.(a)* .................. 169,200 3,916,980 MSC Industrial Direct Co., Inc. Cl.A ......... 148,100 4,635,530 Resources Connection, Inc.(a) ................ 174,300 6,759,354 ScanSource, Inc.(a)* ......................... 107,060 6,273,716 Strayer Education, Inc. ...................... 38,200 3,721,444 ------------ 52,173,167 ------------ 87,798,186 Health Care-17.4% Biotechnology-7.3% MGI Pharma, Inc.(a)* ......................... 210,000 5,882,100 Nektar Therapeutics(a) ....................... 200,500 3,516,770 NeoPharm, Inc.(a)* ........................... 247,600 1,559,880 Protein Design Labs, Inc.(a) ................. 192,500 3,118,500 Seattle Genetics, Inc.(a) .................... 356,900 2,134,262 Serologicals Corp.(a)* ....................... 209,500 4,106,200 SFBC International, Inc.(a) .................. 19,000 646,760 Techne Corp.(a) .............................. 103,800 4,131,240 Telik, Inc.(a) ............................... 129,300 2,554,968 ------------ 27,650,680 ------------ -------------------------------------------------------------------------------- 10 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND Company Shares Value -------------------------------------------------------------------------------- Drugs-3.6% Connetics Corp.(a) ............................... 59,300 $ 1,632,529 Impax Laboratories, Inc.(a) ...................... 271,600 3,843,140 Indevus Pharmaceuticals, Inc.(a)* ................ 449,600 2,850,464 Martek Biosciences Corp.(a) ...................... 114,700 5,427,604 ----------- 13,753,737 ----------- Medical Products-4.4% Abaxis, Inc.(a) .................................. 307,000 4,608,070 Angiotech Pharmaceuticals, Inc. (Canada)(a) ..... 241,300 4,251,706 Animas Corp.(a) .................................. 121,600 1,850,752 INAMED Corp.(a) .................................. 65,081 3,526,089 OraSure Technologies, Inc.(a) .................... 350,800 2,718,700 ----------- 16,955,317 ----------- Medical Services-2.1% LabOne, Inc.(a)* ................................. 145,900 4,305,509 Stericycle, Inc.(a) .............................. 74,400 3,645,600 ----------- 7,951,109 ----------- 66,310,843 Finance-8.2% Banking-Money Centers-1.9% UCBH Holdings, Inc. .............................. 76,400 2,986,476 Wintrust Financial Corp. ......................... 78,700 4,173,461 ----------- 7,159,937 ----------- Banking-Regional-2.1% Oriental Financial Group, Inc. (Puerto Rico) ..... 138,800 3,532,460 R&G Financial Corp. Cl.B ......................... 126,750 4,446,390 ----------- 7,978,850 ----------- Brokerage & Money Management-2.2% Affiliated Managers Group, Inc.(a)* .............. 59,900 2,750,009 Greenhill & Co., Inc.(a) ......................... 61,600 1,259,720 Southwest Bancorporation of Texas, Inc. .......... 223,600 4,550,260 ----------- 8,559,989 ----------- Financial Services-0.2% Collegiate Funding Services, Inc.(a)* ............ 40,700 571,021 ----------- Insurance-0.8% Triad Guaranty, Inc.(a) .......................... 57,100 3,106,240 ----------- Miscellaneous-1.0% Investors Financial Services Corp.* .............. 82,800 3,782,304 ----------- 31,158,341 ----------- Energy-6.8% Oil Service-6.0% Cimarex Energy Co.(a) ............................ 47,500 1,545,175 Core Laboratories N.V. (Netherlands)(a) .......... 122,800 2,701,600 FMC Technologies, Inc.(a) ........................ 170,400 5,112,000 Helmerich & Payne, Inc. .......................... 146,400 3,706,848 Meridian Resource Corp.(a) ....................... 255,000 2,129,250 -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 11 Company Shares Value -------------------------------------------------------------------------------- Range Resources Corp. ............................ 252,900 $ 4,236,075 W-H Energy Services, Inc.(a) ..................... 165,900 3,334,590 ----------- 22,765,538 ----------- Pipelines-0.8% Hydril Co.(a) .................................... 91,400 3,258,410 ----------- 26,023,948 ----------- Capital Goods-6.5% Electrical Equipment-2.0% EDO Corp. ........................................ 26,400 625,152 Engineered Support Systems, Inc. ................. 66,900 3,751,083 United Defense Industries, Inc.(a) ............... 96,800 3,354,120 ----------- 7,730,355 ----------- Machinery-2.5% Actuant Corp. Cl.A(a) ............................ 147,200 5,366,912 Bucyrus International, Inc. Cl. A(a)* ............ 61,100 1,466,400 Oshkosh Truck Corp. .............................. 52,000 2,754,440 ----------- 9,587,752 ----------- Miscellaneous-2.0% IDEX Corp. ....................................... 131,200 4,210,208 Simpson Manufacturing Co., Inc. .................. 59,100 3,310,191 ----------- 7,520,399 ----------- 24,838,506 Transportation-4.1% Air Freight-1.2% UTI Worldwide, Inc. (British Virgin Islands) ..... 89,400 4,603,206 ----------- Shipping-1.1% Kirby Corp.(a) ................................... 104,500 4,033,700 ----------- Trucking-1.1% Werner Enterprises, Inc. ......................... 208,900 4,163,377 ----------- Miscellaneous-0.7% Pacer International, Inc.(a) ..................... 181,400 2,863,399 ----------- 15,663,682 ----------- Basic Industry-1.3% Chemicals-1.3% Ferro Corp. ...................................... 60,200 1,198,582 Georgia Gulf Corp. ............................... 103,800 3,690,090 ----------- 4,888,672 ----------- Consumer Manufacturing-1.2% Building & Related-1.2% Hughes Supply, Inc.* ............................. 74,200 4,520,264 ----------- Utilities-1.1% Electric & Gas Utility-1.1% GrafTech International Ltd.(a) ................... 399,800 4,409,794 ----------- -------------------------------------------------------------------------------- 12 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND Shares or Principal Amount Company (000) Value -------------------------------------------------------------------------------- Consumer Staples-0.8% Household Products-0.8% Tempur-Pedic International, Inc.(a)* ........ 231,200 $ 2,906,184 ------------- Total Common Stocks (cost $319,815,787) ...................... 374,536,699 ------------- SHORT-TERM INVESTMENT-1.4% Time Deposit-1.4% State Street Euro Dollar 0.65%, 8/02/04 (cost $5,339,000) ........................ $ 5,339 5,339,000 ------------- Total Investments Before Security Lending Collateral-99.6% (cost $325,154,787) ...................... 379,875,699 ------------- INVESTMENT OF CASH COLLATERAL FOR SECURITIES LOANED**-11.1% Short-Term Investment-11.1% UBS Private Money Market Fund, LLC, 1.27% (cost $42,031,859) ....................... 42,031,859 42,031,859 ------------- Total Investments-110.7% (cost $367,186,646) ...................... 421,907,558 Other assets less liabilities-(10.7%) ....... (40,639,156) ------------- Net Assets-100% ............................. $ 381,268,402 ------------- * Represents entire or partial securities out on loan. ** See Note E for securities lending information. (a) Non-income producing security. See notes to financial statements. -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 13 STATEMENT OF ASSETS & LIABILITIES July 31, 2004 Assets Investments in securities, at value (cost $367,186,646--including investment of cash collateral for securities loaned of $42,031,859)......................................... $ 421,907,558(a) Receivable for investment securities sold............... 9,350,060 Receivable for capital stock sold....................... 1,080,362 Dividends and interest receivable....................... 4,735 --------------- Total assets............................................ 432,342,715 --------------- Liabilities Due to custodian........................................ 2,014,574 Payable for collateral on securities loaned............. 42,031,859 Payable for investment securities purchased............. 3,361,018 Payable for capital stock redeemed...................... 2,024,598 Advisory fee payable.................................... 718,316 Distribution fee payable................................ 205,503 Transfer Agent fee payable.............................. 163,160 Accrued expenses........................................ 555,285 --------------- Total liabilities....................................... 51,074,313 --------------- Net Assets.............................................. $ 381,268,402 --------------- Composition of Net Assets Capital stock, at par................................... $ 42,074 Additional paid-in capital.............................. 642,808,506 Accumulated net realized loss on investment transactions.............................. (316,303,090) Net unrealized appreciation of investments.............. 54,720,912 --------------- $ 381,268,402 --------------- Calculation of Maximum Offering Price Class A Shares Net asset value and redemption price per share ($185,906,493 / 9,438,061 shares of capital stock issued and outstanding)................ $19.70 Sales charge--4.25% of public offering price............ .87 ------ Maximum offering price.................................. $20.57 ------ Class B Shares Net asset value and offering price per share ($152,030,879 / 9,092,591 shares of capital stock issued issued and outstanding)....................... $16.72 ------ Class C Shares Net asset value and offering price per share ($35,410,033 / 2,113,876 shares of capital stock issued and outstanding).............................. $16.75 ------ Advisor Class Shares Net asset value, redemption and offering price per share ($7,920,997 / 392,334 shares of capital stock issued and outstanding).............................. $20.19 ------ (a) Includes securities on loan with a value of $41,059,978 (see Note E). See notes to financial statements. -------------------------------------------------------------------------------- 14 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND STATEMENT OF OPERATIONS Year Ended July 31, 2004 Investment Income Dividends.............................. $ 701,163 Interest............................... 64,339 $ 765,502 --------------- Expenses Advisory fee........................... 4,249,099 Distribution fee--Class A.............. 545,948 Distribution fee--Class B.............. 1,779,653 Distribution fee--Class C.............. 415,016 Transfer agency........................ 2,486,216 Printing............................... 307,196 Custodian.............................. 223,195 Audit and legal........................ 146,959 Administrative......................... 106,000 Registration........................... 71,092 Directors' fees........................ 22,388 Miscellaneous.......................... 30,668 --------------- Total expenses......................... 10,383,430 Less: expenses waived by the Adviser and the Transfer Agent (see Note B)........................ (700,133) Less: expense offset arrangement (see Note B)........................ (242) --------------- Net expenses........................... 9,683,055 --------------- Net investment loss.................... (8,917,553) --------------- Realized and Unrealized Gain (Loss) on Investment Transactions Net realized gain on investment transactions............. 85,614,969 Net change in unrealized appreciation/depreciation of investments...................... (20,842,949) --------------- Net gain on investment transactions........................ 64,772,020 --------------- Net Increase in Net Assets from Operations..................... $ 55,854,467 --------------- See notes to financial statements -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 15 STATEMENT OF CHANGES IN NET ASSETS Year Ended October 1, 2002 Year Ended July 31, to September 30, 2004 July 31, 2003* 2002 --------------- --------------- --------------- Increase (Decrease) in Net Assets from Operations Net investment loss.. $ (8,917,553) $ (7,099,630) $ (12,565,930) Net realized gain (loss) on investment transactions...... 85,614,969 (35,585,110) (175,496,028) Net change in unrealized appreciation/ depreciation of investments....... (20,842,949) 135,998,028 119,701,358 --------------- --------------- --------------- Net increase (decrease) in net assets from operations... 55,854,467 93,313,288 (68,360,600) Capital Stock Transactions Net decrease......... (75,968,369) (54,233,829) (188,608,810) --------------- --------------- --------------- Total increase (decrease)........ (20,113,902) 39,079,459 (256,969,410) Net Assets Beginning of period.. 401,382,304 362,302,845 619,272,255 --------------- --------------- --------------- End of period, (including undistributed net investment income (loss) of $0, $0 and $0, respectively)..... $ 381,268,402 $ 401,382,304 $ 362,302,845 --------------- --------------- --------------- * The Fund changed its fiscal year from September 30 to July 31. See notes to financial statements. -------------------------------------------------------------------------------- 16 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS July 31, 2004 NOTE A Significant Accounting Policies AllianceBernstein Small Cap Growth Fund, Inc. (the "Fund"), formerly AllianceBernstein Quasar Fund, Inc., 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. Advisor Class shares are offered to investors participating in fee-based programs and to certain retirement plan accounts. All four classes of shares have identical voting, dividend, liquidation and other rights, except that each class bears different distribution expenses and has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Fund. 1. Security Valuation In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management, L.P. (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is determined as follows: Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. If no bid or asked prices are quoted on such day, then the security is valued in good faith at -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 17 fair value in accordance with the Pricing Policies. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The Nasdaq Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, the Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 2. 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. 3. Investment Income and Investment Transactions Dividend income is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the trade date the securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Fund accretes discounts as adjustments to interest income. -------------------------------------------------------------------------------- 18 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND 4. Income and Expenses All income earned and expenses incurred by the Fund are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Fund represented by the net assets of such class, except that the Fund's Class B and Class C shares bear higher distribution and transfer agent fees than Class A and Advisor Class shares. Advisor Class shares have no distribution fees. 5. Dividends and Distributions Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. 6. Change of Fiscal Year End During 2003, the Fund changed its fiscal year end from September 30 to July 31. Accordingly, the statement of changes in net assets and financial highlights include the period from October 1, 2002 to July 31, 2003. NOTE B Advisory Fee and Other Transactions With Affiliates Under the terms of an investment advisory agreement, the Fund pays the Adviser an advisory fee at a quarterly rate equal to .25% (approximately 1% on an annual basis) of the net assets of the Fund valued on the last business day of the previous quarter. Such fee is accrued daily and paid quarterly. Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Fund at the reduced 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 value of the net assets of the Fund at the close of business on the last business day of the previous quarter. Through July 31, 2004, such waiver amounted to $613,546.The waiver was made in contemplation of the final agreement with the Office of the New York Attorney General ("NYAG") described in "Legal Proceedings" below. Pursuant to the advisory agreement, the Fund paid $106,000 to the Adviser representing the cost of certain legal and accounting services provided to the Fund by the Adviser for the year ended July 31, 2004. The Fund compensates Alliance Global Investor Services, Inc. (AGIS), 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. -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 19 Such compensation amounted to $1,541,930 for the year ended July 31, 2004. During the period, AGIS voluntarily agreed to waive a portion of its fees for such services. Such waiver amounted to $86,587. For the year ended July 31, 2004, the Fund's expenses were reduced by $242 under an expense offset arrangement with AGIS. 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 charge of $11,974 from the sale of Class A shares and received $6,130, $124,024 and $7,726 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, 2004. Brokerage commissions paid on investment transactions for the year ended July 31, 2004 amounted to $1,666,955, of which $2,687 was paid to Sanford C. Bernstein & Co. LLC, an affiliate of the Adviser. NOTE C Distribution Services Agreement The Fund has adopted a Distribution Services Agreement (the "Agreement") pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Fund pays distribution and servicing fees to the Distributor at an annual rate of up to .30% of the Fund's average daily net assets attributable to Class A shares and 1% of the average daily net assets attributable to both 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 advised the Fund that it has incurred expenses in excess of the distribution costs reimbursed by the Fund in the amount of $22,294,564 and $2,221,742 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. -------------------------------------------------------------------------------- 20 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND NOTE D Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the year ended July 31, 2004 were as follows: Purchases Sales --------------- --------------- Investment securities (excluding U.S. government securities)......... $ 396,229,871 $ 483,474,317 U.S. government securities............. -0- -0- The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows: Cost.................................................... $ 372,093,731 --------------- Gross unrealized appreciation........................... $ 71,335,109 Gross unrealized depreciation........................... (21,521,282) --------------- Net unrealized appreciation............................. $ 49,813,827 --------------- NOTE E Securities Lending The Fund has entered into a securities lending agreement with UBS Warburg LLC (the "Lending Agent"). Under the terms of the agreement, the Lending Agent, on behalf of the Fund, administers the lending of portfolio securities to certain broker-dealers. In return, the Fund receives fee income from the lending transactions or it retains a portion of interest on the investment of any cash received as collateral. The Fund also continues to receive dividends or interest on the securities loaned. Unrealized gain or loss on the value of the securities loaned that may occur during the term of the loan will be reflected in the accounts of the Fund. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. government securities. The Lending Agent invests the cash collateral received in an eligible money market vehicle in accordance with the investment restrictions of the Fund. The Lending Agent will indemnify the Fund for any loss resulting from a borrower's failure to return a loaned security when due. As of July 31, 2004, the Fund had loaned securities with a value of $41,059,978 and received cash collateral which was invested in a money market fund valued at $42,031,859 as included in the accompanying portfolio of investments. For the year ended July 31, 2004, the Fund earned fee income of $35,559 which is included in interest income in the accompanying statement of operations. -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 21 NOTE F Capital Stock There are 12,000,000,000 shares of $.002 par value capital stock authorized, divided into four classes, designated Class A, Class B, Class C and Advisor Class shares. Each class consists of 3,000,000,000 authorized shares. Transactions in capital stock were as follows: =================================================== Shares =================================================== Year Ended October 1, 2002 Year Ended July 31, to July 31, September 30, 2004 2003(a) 2002 --------------------------------------------------- Class A Shares sold 3,136,426 21,673,280 4,270,744 ------------------------------------------------------------------------------- Shares converted from Class B 321,183 297,254 211,616 ------------------------------------------------------------------------------- Shares redeemed (4,680,028) (23,031,319) (7,067,128) ------------------------------------------------------------------------------- Net decrease (1,222,419) (1,060,785) (2,584,768) ------------------------------------------------------------------------------- Class B Shares sold 1,015,672 815,483 1,427,398 ------------------------------------------------------------------------------- Shares converted to Class A (377,364) (342,155) (244,199) ------------------------------------------------------------------------------- Shares redeemed (2,937,438) (2,990,411) (5,500,367) ------------------------------------------------------------------------------- Net decrease (2,299,130) (2,517,083) (4,317,168) ------------------------------------------------------------------------------- Class C Shares sold 354,080 376,983 780,705 ------------------------------------------------------------------------------- Shares redeemed (900,954) (954,897) (1,855,191) ------------------------------------------------------------------------------- Net decrease (546,874) (577,914) (1,074,486) ------------------------------------------------------------------------------- Advisor Class Shares sold 64,716 90,677 500,904 ------------------------------------------------------------------------------- Shares redeemed (182,407) (236,241) (4,004,915) ------------------------------------------------------------------------------- Net decrease (117,691) (145,564) (3,504,011) ------------------------------------------------------------------------------- (a) The Fund changed its fiscal year end from September 30 to July 31. -------------------------------------------------------------------------------- 22 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND ================================================== Amount ================================================== Year Ended October 1, 2002 Year Ended July 31, to July 31, September 30, 2004 2003(a) 2002 ------------------------------------------------------------------------------- Class A Shares sold $ 59,613,067 $305,897,763 $76,838,507 ------------------------------------------------------------------------------- Shares converted from Class B 6,556,859 4,327,131 3,754,642 ------------------------------------------------------------------------------- Shares redeemed (90,488,343) (325,096,195) (125,712,831) ------------------------------------------------------------------------------- Net decrease $(24,318,417) $(14,871,301) $(45,119,682) ------------------------------------------------------------------------------- Class B Shares sold $ 17,129,692 $ 10,221,382 $22,381,783 ------------------------------------------------------------------------------- Shares converted to Class A (6,556,859) (4,327,131) (3,754,642) ------------------------------------------------------------------------------- Shares redeemed (50,310,419) (36,292,442) (83,631,416) ------------------------------------------------------------------------------- Net decrease $(39,737,586) $(30,398,191) $(65,004,275) ------------------------------------------------------------------------------- Class C Shares sold $ 5,934,943 $ 4,743,734 $12,441,554 ------------------------------------------------------------------------------- Shares redeemed (15,375,226) (11,627,959) (28,463,454) ------------------------------------------------------------------------------- Net decrease $ (9,440,283) $ (6,884,225) $(16,021,900) ------------------------------------------------------------------------------- Advisor Class Shares sold $ 1,300,455 $ 1,304,540 $ 9,556,707 ------------------------------------------------------------------------------- Shares redeemed (3,772,538) (3,384,652) (72,019,660) ------------------------------------------------------------------------------- Net decrease $ (2,472,083) $ (2,080,112) $(62,462,953) ------------------------------------------------------------------------------- (a) The Fund changed its fiscal year end from September 30 to July 31. -------------------------------------------------------------------------------- NOTE G Risk involved in Investing in the Fund In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE H Joint Credit Facility A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $500 million revolving credit facility (the "Facility") intended to provide short-term financing if necessary, subject to certain restrictions in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the statement of operations. The Fund did not utilize the Facility during the year ended July 31, 2004. -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 23 NOTE I Components of Accumulated Earnings (Deficit) As of July 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Accumulated capital and other losses................... $(311,396,005)(a) Unrealized appreciation/(depreciation)................. 49,813,827 (b) ------------- Total accumulated earnings/(deficit)................... $(261,582,178) ------------- (a) On July 31, 2004, the Fund had a net capital loss carryforward for federal income tax purposes of $311,396,005 of which $47,704,950 expires in the year 2009, $117,231,356 expires in the year 2010 and $146,459,699 expires in the year 2011. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. During the fiscal year, the Fund utilized capital loss carry forward of $60,904,762. (b) The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales. During the current fiscal year, permanent differences, primarily due to a net investment loss resulted in a net decrease in accumulated net investment loss and a corresonding decrease in additional paid-in capital. This reclassification had no effect on net assets. NOTE J Legal Proceedings As has been previously reported in the press, the staff of the U.S. Securities and Exchange Commission ("SEC") and the NYAG have been investigating practices in the mutual fund industry identified as "market timing" and "late trading" of mutual fund shares. Certain other regulatory authorities have also been conducting investigations into these practices within the industry and have requested that the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market -------------------------------------------------------------------------------- 24 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND 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 NYAGOrder 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. For more information on this waiver, 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, is continuing to direct and oversee an internal investigation and a comprehensive review of the facts and circumstances relevant to the SEC's and the NYAG's investigations. In addition, the Independent Directors of the Fund ("the Independent Directors") have initiated an investigation of the above-mentioned matters with the advice of an independent economic consultant and independent counsel. The Independent Directors have formed a special committee to supervise the investigation. On October 2, 2003, a putative class action complaint entitled Hindo et al. v. AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was filed against the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 25 an unspecified amount of compensatory damages and rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. This may require the AllianceBernstein Mutual Funds to sell investments held by those funds to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AllianceBernstein Mutual Funds. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that Morgan Stanley violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein Mutual Funds, including the Fund, as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of the AllianceBernstein Growth & Income 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 AllianceBernstein 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 -------------------------------------------------------------------------------- 26 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all AllianceBernstein Fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on the Fund or its ability to perform advisory services relating to the Fund. -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 27 FINANCIAL HIGHLIGHTS Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
======================================================================= Class A ======================================================================= October 1, Year 2002 Ended to July 31, July 31, Year Ended September 30, ------------------------------------------ 2004 2003(a) 2002 2001 2000 1999 ------------------------------------------------------------------------ Net asset value, beginning of period........ $17.30 $ 13.34 $16.25 $30.76 $23.84 $22.27 ------------------------------------------------------------------------ Income From Investment Operations Net investment loss(b)........ (.33)(c) (.24) (.30) (.35) (.38) (.22) Net realized and unrealized gain (loss) on investment transactions............... 2.73 4.20 (2.61) (11.46) 7.30 2.80 ------------------------------------------------------------------------ Net increase (decrease) in net asset value from operations................. 2.40 3.96 (2.91) (11.81) 6.92 2.58 ------------------------------------------------------------------------ Less: Distributions Distributions from net realized gain on investment transactions............... -0- -0- -0- (.72) -0- (1.01) Distributions in excess of net realized gain on investment transactions............... -0- -0- -0- (1.98) -0- -0- ------------------------------------------------------------------------ Total distributions........... -0- -0- -0- (2.70) -0- (1.01) ------------------------------------------------------------------------ Net asset value, . end of period.............. $19.70 $17.30 $13.34 $16.25 $30.76 $23.84 ======================================================================== Total Return Total investment return based on net asset value(d)......... 13.87% 29.69% (17.91)% (41.42)% 29.03% 11.89% Ratios/Supplemental Data Net assets, end of period (000's omitted)............ $185,906 $184,378 $156,340 $232,456 $458,008 $517,289 Ratio to average net assets of: Expenses, net of waivers/ reimbursements.......... 1.85% 2.32%(e) 1.92% 1.79% 1.68%(f) 1.69%(f) Expenses, before waivers/ reimbursements........... 2.01% 2.32%(e) 1.92% 1.79% 1.68%(f) 1.69%(f) Net investment loss......... (1.67)%(c) (1.95)%(e) (1.71)% (1.58)% (1.39)% (.90)% Portfolio turnover rate....... 94% 94% 98% 109% 160% 91%
See footnote summary on page 32. -------------------------------------------------------------------------------- 28 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
======================================================================= Class B ======================================================================= October 1, Year 2002 Ended to July 31, July 31, Year Ended September 30, ------------------------------------------ 2004 2003(a) 2002 2001 2000 1999 ------------------------------------------------------------------------ Net asset value, beginning of period........ $14.80 $11.49 $14.11 $27.30 $21.32 $20.17 ------------------------------------------------------------------------ Income From Investment Operations Net investment loss(b)........ (.42)(c) (.28) (.39) (.45) (.52) (.37) Net realized and unrealized gain (loss) on investment transactions............... 2.34 3.59 (2.23) (10.04) 6.50 2.53 ------------------------------------------------------------------------ Net increase (decrease) in net asset value from operations ........... 1.92 3.31 (2.62) (10.49) 5.98 2.16 ------------------------------------------------------------------------ Less: Distributions Distributions from net realized gain on investment transactions............... -0- -0- -0- (.72) -0- (1.01) Distributions in excess of net realized gain on investment transactions............... -0- -0- -0- (1.98) -0- -0- ------------------------------------------------------------------------ Total distributions........... -0- -0- -0- (2.70) -0- (1.01) ------------------------------------------------------------------------ Net asset value, end of period ............. $16.72 $14.80 $11.49 $14.11 $27.30 $21.32 ======================================================================== Total Return Total investment return based on net asset value(d)......... 12.97% 28.81% (18.57)% (41.88)% 28.05% 11.01% Ratios/Supplemental Data Net assets, end of period (000's omitted)............ $152,031 $168,554 $159,791 $257,161 $546,302 $587,919 Ratio to average net assets of: Expenses, net of waivers/ reimbursements........... 2.65% 3.14%(e) 2.72% 2.57% 2.44%(f) 2.46%(f) Expenses, before waivers/ reimbursements........... 2.81% 3.14%(e) 2.72% 2.57% 2.44%(f) 2.46%(f) Net investment loss......... (2.47)%(c) (2.78)%(e) (2.50)% (2.36)% (2.16)% (1.68)% Portfolio turnover rate....... 94% 94% 98% 109% 160% 91% See footnote summary on page 32 -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 29
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
======================================================================= Class C ======================================================================= October 1, Year 2002 Ended to July 31, July 31, Year Ended September 30, ------------------------------------------ 2004 2003(a) 2002 2001 2000 1999 ------------------------------------------------------------------------ Net asset value, beginning of period........ $14.82 $11.50 $14.13 $27.32 $21.34 $20.18 ------------------------------------------------------------------------ Income From Investment Operations Net investment loss(b)........ (.42)(c) (.28) (.39) (.45) (.52) (.36) Net realized and unrealized gain (loss) on investment transactions............... 2.35 3.60 (2.24) (10.04) 6.50 2.53 ------------------------------------------------------------------------ Net increase (decrease) in net asset value from operations............ 1.93 3.32 (2.63) (10.49) 5.98 2.17 ------------------------------------------------------------------------ Less: Distributions Distributions from net realized gain on investment transactions............... -0- -0- -0- (.72) -0- (1.01) Distributions in excess of net realized gain on investment transactions............... -0- -0- -0- (1.98) -0- -0- ------------------------------------------------------------------------ Total distributions........... -0- -0- -0- (2.70) -0- (1.01) ------------------------------------------------------------------------ Net asset value, end of period.............. $16.75 $14.82 $11.50 $14.13 $27.32 $21.34 ======================================================================== Total Return Total investment return based on net asset value(d)......... 13.02% 28.87% (18.61)% (41.85)% 28.02% 11.05% Ratios/Supplemental Data Net assets, end of period (000's omitted)............ $35,410 $39,434 $37,256 $60,925 $137,242 $168,120 Ratio to average net assets of: Expenses, net of waivers/ reimbursements........... 2.61% 3.10%(e) 2.71% 2.56% 2.43%(f) 2.45%(f) Expenses, before waivers/ reimbursements........... 2.77% 3.10%(e) 2.71% 2.56% 2.43%(f) 2.45%(f) Net investment loss......... (2.43)%(c) (2.73)%(e) (2.49)% (2.35)% (2.12)% (1.66)% Portfolio turnover rate....... 94% 94% 98% 109% 160% 91% See footnote summary on page 32. -------------------------------------------------------------------------------- 30 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
======================================================================= Advisor Class ======================================================================= October 1, Year 2002 Ended to July 31, July 31, Year Ended September 30, ------------------------------------------ 2004 2003(a) 2002 2001 2000 1999 ------------------------------------------------------------------------ Net asset value, beginning of period........ $17.68 $13.60 $16.52 $31.07 $24.01 $22.37 ------------------------------------------------------------------------ Income From Investment Operations Net investment loss(b)........ (.29)(c) (.21) (.28) (.29) (.30) (.15) Net realized and unrealized gain (loss) on investment transactions............... 2.80 4.29 (2.64) (11.56) 7.36 2.80 ------------------------------------------------------------------------ Net increase (decrease) in net asset value from operations............ 2.51 4.08 (2.92) (11.85) 7.06 2.65 ------------------------------------------------------------------------ Less: Distributions Distributions from net realized gain on investment transactions............... -0- -0- -0- (.72) -0- (1.01) Distributions in excess of net realized gain on investment transactions.... -0- -0- -0- (1.98) -0- -0- ------------------------------------------------------------------------ Total distributions........... -0- -0- -0- (2.70) -0- (1.01) ------------------------------------------------------------------------ Net asset value, end of period ............. $20.19 $17.68 $13.60 $16.52 $31.07 $24.01 ======================================================================== Total Return Total investment return based on net asset value(d)......... 14.20% 30.00% (17.68)% (41.11)% 29.40% 12.16% Ratios/Supplemental Data Net assets, end of period (000's omitted)............ $7,921 $9,016 $8,916 $68,730 $135,414 $164,671 Ratio to average net assets of: Expenses, net of waivers/ reimbursements........... 1.59% 2.05%(e) 1.60% 1.52% 1.39%(f) 1.42%(f) Expenses, before waivers/ reimbursements........... 1.74% 2.05%(e) 1.60% 1.52% 1.39%(f) 1.42%(f) Net investment loss......... (1.41)%(c) (1.69)%(e) (1.41)% (1.31)% (1.08)% (.62)% Portfolio turnover rate....... 94% 94% 98% 109% 160% 91%
See footnote summary on page 32. -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 31 (a) The Fund changed its fiscal year end from September 30 to July 31. (b) Based on average shares outstanding. (c) Net of fees reimbursed by the Adviser and Transfer Agent. (d) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales charges or contingent deferred sales charges are not reflected in the calculation of total investment return. Total return does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Total investment return calculated for a period of less than one year is not annualized. (e) Annualized. (f) Ratios reflect expenses grossed up for expense offset arrangement with the Transfer Agent. For the periods shown below, the net expense ratios were as follows: Year Ended September 30, ----------------------------- 2000 1999 ----------------------------- Class A............... 1.67% 1.68% Class B............... 2.42% 2.45% Class C............... 2.42% 2.44% Advisor Class......... 1.38% 1.41% ------------------------------------------------------------------------------- 32 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of AllianceBernstein Small Cap Growth Fund, Inc. We have audited the accompanying statement of assets and liabilities of AllianceBernstein Small Cap Growth Fund, Inc. (the "Fund"), including the portfolio of investments, as of July 31, 2004, and the related statement of operations for the year then ended, the statement of changes in net assets and the financial highlights for each of the periods indicated therein. 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 audits. We conducted our audits 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 and financial highlights. Our procedures included confirmation of securities owned as of July 31, 2004, by correspondence with the custodian and others. 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 audits provide 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 Small Cap Growth Fund, Inc. at July 31, 2004, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for each of the periods indicated therein, in conformity with the U.S. generally accepted accounting principles. Ernst & Young LLP New York, New York September 10, 2004 -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 33 BOARD OF DIRECTORS William H. Foulk, Jr..(1), Chairman Marc O. Mayer, President Ruth Block(1) David H. Dievler(1) John H. Dobkin(1) Clifford L. Michel(1) Donald J. Robinson(1) OFFICERS Bruce K. Aronow(2), Senior Vice President Thomas J. Bardong, Vice President Mark R. Manley, Secretary Mark D. Gersten, Treasurer & Chief Financial Officer Vincent S. Noto, Controller Custodian State Street Bank & Trust Company 225 Franklin Street Boston, MA 02110 Distributor AllianceBernstein Investment Research and Management, Inc. 1345 Avenue of the Americas New York, NY 10105 Legal Counsel Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 Transfer Agent Alliance Global Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-free (800) 221-5672 Independent Registered Public Accounting Firm Ernst & Young LLP 5 Times Square New York, NY 10036 (1) Member of the Audit Committee. (2) Mr. Aronow is the person primarily responsible for the day-to-day management of the Fund's investment portfolio. -------------------------------------------------------------------------------- 34 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND MANAGEMENT OF THE FUND Board of Directors Information The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below. PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIPS ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR -------------------------------------------------------------------------------- INTERESTED DIRECTOR Marc O. Mayer, +, 46 Executive Vice President 68 None 1345 Avenue of the of ACMC since 2001; prior Americas thereto, Chief Executive New York, NY 10105 Officer of Sanford C. (Elected November Bernstein & Co., LLC and 18, 2003) its predecessor since prior to 1999. DISINTERESTED DIRECTORS William H. Foulk, Jr.,# 72 Investment adviser and an 116 None 2 Sound View Drive independent consultant. Suite 100 He was formerly Senior Greenwich, CT 06830 Manager of Barrett (12) Associates, Inc., a Chairman of the Board registered investment adviser, with which he had been associated since prior to 1999. 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,#, 73 Formerly Executive Vice 96 None 500 SE Mizner Blvd., President and Chief Boca Raton, FL 33432 Insurance Officer of The (12) Equitable Life Assurance Society of the United States; Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Association of Securities Dealers, Inc. David H. Dievler,#, 74 Independent consultant. 100 None P.O. Box 167 Until December 1994 he was Spring Lake, NJ 07762 Senior Vice President of (17) Alliance Capital Management Corporation ("ACMC") responsible for mutual fund administration. Prior to joining ACMC in 1984 he was Chief Financial Officer of Eberstadt Asset Management since 1968. Prior to that he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 35 PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIPS ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR -------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (continued) John H. Dobkin,#, 62 Consultant. Formerly 98 None P.O. Box 12 President of Save Venice, Annandale, NY 12504 Inc. (preservation (10) organization)from 2001-2002, a Senior Advisor from June 1999- June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design and during 1988-1992, he was Director and Chairman of the Audit Committee of ACMC. Clifford L.Michel,#, 64 Senior Counsel to the law 97 Placer 15 St. Bernard's Road firm of Cahill Gordon & Dome, Inc. Gladstone, NJ 07934 Reindel since February 2001 (18) and a partner of that firm for more than twenty-five years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson,#, 69 Senior Counsel to the law 96 None 98 Hell's Peak Road firm of Orrick, Herrington & Weston, VT 05161 Sutcliffe LLP since prior to (8) 1999. Formerly a senior partner and a member of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and Trustee of the Museum of the City of New York. * There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Nominating Committee. + Mr. Mayer is an "interested Person", as defined in the 1940 Act, due to his position as Executive Vice President of ACMC. -------------------------------------------------------------------------------- 36 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND Officer Information Certain information concerning the Fund's Officers is listed below. NAME, POSITION(S) PRINCIPAL OCCUPATION ADDRESS* AND AGE HELD WITH FUND DURING PAST 5 YEARS -------------------------------------------------------------------------------- Marc O. Mayer, 46 President See biography above. Bruce K. Aronow, 38 Senior Vice President Senior Vice President of ACMC, with which he has been associated since 1999. Thomas J. Bardong, 59 Vice President Senior Vice President of ACMC,** with which he has been associated since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Chief Compliance Officer of ACMC,** with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of AGIS,** and Vice President of ABIRM,** with which he has been associated since prior to 1999. Vincent S. Noto, 39 Controller Vice President of AGIS,** with which he has been associated since prior to 1999. -------------------------------------------------------------------------------- * The address for each of the Fund's officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, ABIRM and AGIS are affiliates of the Fund. The Fund's Statement of Additional Information ("SAI") has additional information about the Fund's Directors and officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800) 227-4618 for a free prospectus or SAI. -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 37 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 Health Care Fund Mid-Cap Growth Fund Premier Growth Fund Small Cap Growth Fund Technology Fund Global & International All-Asia Investment Fund Global Research Growth Fund Global Small Cap Fund Greater China '97 Fund International Premier Growth Fund New Europe Fund Worldwide Privatization Fund Select Investor Series Biotechnology Portfolio Premier Portfolio Technology Portfolio ================================================================================ Value Funds Domestic Balanced Shares Disciplined Value Fund Growth & Income Fund Real Estate Investment Fund Small Cap Value Fund Utility Income Fund Value Fund Global & International Global Value Fund International Value Fund ================================================================================ Taxable Bond Funds Americas Government Income Trust Corporate Bond Portfolio Emerging Market Debt Fund Global Strategic Income Trust High Yield Fund Multi-Market Strategy Trust Quality Bond Portfolio Short Duration Portfolio U.S. Government Portfolio ================================================================================ Municipal Bond Funds National Insured National Arizona California Insured California Florida Massachusetts Michigan Minnesota New Jersey New York Ohio Pennsylvania Virginia ================================================================================ Intermediate Municipal Bond Funds Intermediate California Intermediate Diversified Intermediate New York ================================================================================ Closed-End Funds All-Market Advantage Fund ACM Income Fund ACM Government Opportunity Fund ACM Managed Dollar Income Fund ACM Managed Income Fund ACM Municipal Securities Income Fund California Municipal Income Fund National Municipal Income Fund New York Municipal Income Fund The Spain Fund World Dollar Government Fund World Dollar Government Fund II We also offer Exchange Reserves,+ which serves as the money market fund exchange vehicle for the AllianceBernstein mutual funds. For more complete information on any AllianceBernstein mutual fund, including investment objectives and policies, sales charges, expenses, risks and other matters of importance to prospective investors, visit our web site at www.alliancebernstein.com or call us at (800) 227-4618 for a current prospectus. Please read the prospectus carefully before you invest or send money. * Formerly Growth Investors Fund. ** Formerly Conservative Investors Fund. + An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. -------------------------------------------------------------------------------- 38 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND NOTES -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND o 39 NOTES -------------------------------------------------------------------------------- 40 o ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN SMALL CAP GROWTH FUND 1345 Avenue of the Americas New York, NY 10105 (800) 221-5672 [LOGO] AllianceBernstein(SM) Investment Research and Management (SM) This service mark used under license from the owner, Alliance Capital Management L.P. QSRAR0704 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 11(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. The following table sets forth the aggregate fees billed by the independent auditor, Ernst & Young LLP, for the Fund's last two fiscal years for professional services rendered for: (i) the audit of the Fund's annual financial statements included in the Fund's annual report to stockholders; (ii) assurance and related services that are reasonably related to the performance of the audit of the Fund's financial statements and are not reported under (i), which include multi-class distribution testing, advice and education on accounting and auditing issues, and consent letters; (iii) tax compliance, tax advice and tax return preparation; and (iv) 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"), which include conducting an annual internal control report pursuant to Statement on Auditing Standards No. 70. No other services were provided to the Fund during this period. All Fees for Non-Audit Services Provided to the Portfolio, the Adviser Audit-Related and Service Audit Fees Fees Tax Fees Affiliates ------------------------------------------------------------------------------- 2003:* $36,125 $6,000 $12,753 $672,268 2004: $38,000 $6,038 $13,635 $857,274 * Fiscal year 2003 was comprised of only ten calendar months due to a change in fiscal year end from September 30 to July 31. 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 auditors. 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. Accordingly, all of the amounts in the table for Audit Fees, Audit-Related Fees and Tax Fees for the entire period ended 2003 and 2004 are for services pre-approved by the Fund's Audit Committee. The amounts of the Fees for Non-Audit Services provided to the Fund, the Adviser and Service Affiliates in the table for the Fund, that were subject to pre-approval by the Audit Committee for the entire period ended 2003 and 2004 were as follows: Non-Audit Services Pre-Approved by the Audit Committee -------------------------------------------- Audit Related Tax Fees(a) Fees Total ------------- ------ ------- 2003 $289,900 $12,753 $302,653 2004 $252,785 $13,635 $266,420 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 auditor 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. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable to the registrant. ITEM 9. 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 10. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as amended) are effective at the reasonable assurance level based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document. (b) There were no significant changes in the registrant's internal controls that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 11. EXHIBITS. The following exhibits are attached to this Form N-CSR: Exhibit No. DESCRIPTION OF EXHIBIT ----------- ---------------------- 11 (a) (1) Code of ethics that is subject to the disclosure of Item 2 hereof 11 (b) (1) Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 11 (b) (2) Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 11 (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 Small Cap Growth Fund, Inc. By: /s/ Marc O. Mayer --------------------- Marc O. Mayer President Date: September 29, 2004 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 29, 2004 By: /s/ Mark D. Gersten --------------------- Mark D. Gersten Treasurer and Chief Financial Officer Date: September 29, 2004