<PAGE>
Registration No. 33-21844
811-5555
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No.
Post-Effective Amendment No. 15
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 17 /X/
Sanford C. Bernstein Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
767 Fifth Avenue, New York, New York 10153
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 486-5800
Jean Margo Reid, Esq.
767 Fifth Avenue
New York, New York 10153
(Name and Address of Agent for Service)
---------------------------------------------
Copies to:
Joel H. Goldberg, Esq.
Shereff, Friedman, Hoffman & Goodman LLP
919 Third Avenue
New York, New York 10022
--------------------------------------------
Approximate Date of Proposed Public Offering: Continuous.
--------------------------------------------
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b), or
X on January 31, 1997 pursuant to paragraph (b), or
___ 75 days after filing pursuant to paragraph (a), or
___ on (date) pursuant to paragraph (a), of Rule 485.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
registered an indefinite number of shares of its Common Stock $.001 par value
under the Securities Act of 1933, and has filed a Rule 24f-2 Notice for the most
recent fiscal year on November 19, 1996.
<PAGE>
This filing contains two (2) Prospectuses, a regular Prospectus covering all
eleven series of shares of the Sanford C. Bernstein Fund, Inc. (see
Cross-Reference Sheet Part A-1) and an Institutional Services Prospectus
covering three of the eleven series of shares of the Sanford C. Bernstein Fund,
Inc. (see Cross-Reference Sheet Part A-2) and one Statement of Additional
Information ("SAI") which is common to both Prospectuses.
2
<PAGE>
SANFORD C. BERNSTEIN FUND, INC.
CROSS-REFERENCE SHEET
(as required by Rule 481(a))
N-1A Item No.
- -------------
Location in Regular
-------------------
Part A-1 Prospectus
- -------- ----------
Item 1. Cover Page Cover Page
Item 2. Synopsis Fee Table
Item 3. Condensed Financial
Information Financial Highlights
Item 4. General Description of
Registrant The Fund; Investment
Objectives and
Policies of the
Portfolios;
Investments; Special
Investment
Techniques
Item 5. Management of the Fund Management of the
Portfolios
Item 5A. Management's Discussion
of Fund Performance Not Applicable
Item 6. Capital Stock and Other
Securities The Fund; Dividends,
Distributions and
Taxes; Description
of Shares
Item 7. Purchase of Securities
Being Offered Purchase of Shares;
Exchanges of Shares
Item 8. Redemption or Repurchase Redemption of Shares
Item 9. Pending Legal Proceedings Not Applicable
3
<PAGE>
SANFORD C. BERNSTEIN FUND, INC.
CROSS-REFERENCE SHEET
(as required by Rule 481(a))
N-1A Item No.
- -------------
Location in Institutional
-------------------------
Part A-2 Services Prospectus
- -------- -------------------
Item 1. Cover Page Cover Page
Item 2. Synopsis Fee Table
Item 3. Condensed Financial
Information Financial Highlights
Item 4. General Description of
Registrant The Fund; Investment
Objectives and
Policies of the
Portfolios;
Investments; Special
Investment
Techniques
Item 5. Management of the Fund Management of the
Portfolios
Item 5A. Management's Discussion
of Fund Performance Not Applicable
Item 6. Capital Stock and Other
Securities The Fund; Dividends,
Distributions and
Taxes; Description
of Shares
Item 7. Purchase of Securities
Being Offered Participating in
Your Plan
Item 8. Redemption or Repurchase Participating in
Your Plan
Item 9. Pending Legal Proceedings Not Applicable
4
<PAGE>
Location in Statement of
------------------------
of Additional Information
-------------------------
Part B
- ------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information
and History Not Applicable
Item 13. Investment Objectives
and Policies Investment Objectives
and Policies;
Investment
Restrictions
Item 14. Management of the Fund Manager and
Distributor
Item 15. Control Persons and
Principal Holders of
Securities Directors and
Officers and
Principal Holders
of Securities
Item 16. Investment Advisory and
Other Services Directors and
Officers and
Principal Holders
of Securities and
Manager and
Distributor
Item 17. Brokerage Allocation and
Other Practices Portfolio
Transactions
and Brokerage
Item 18. Capital Stock and Other
Securities Not Applicable
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered Net Asset Value;
Purchase and
Redemption of Shares
Item 20. Tax Status Taxes
5
<PAGE>
Location in Statement of
------------------------
of Additional Information
-------------------------
Part B
- ------
Item 21. Underwriters Manager and Distributor
Item 22. Calculation of
Performance Data Performance
Item 23. Financial Statements Custodian, Transfer
Agent, Independent
Accountants and
Financial Statements
6
<PAGE>
Part C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
7
<PAGE>
January 31, 1997
PROSPECTUS
Sanford C. Bernstein Fund, Inc.
767 Fifth Avenue
New York, NY 10153
212-756-4097
Sanford C. Bernstein Fund, Inc. (the "Fund") is an open-end management
investment company. This type of company is commonly referred to as a mutual
fund. This Prospectus relates to 11 of the Fund's series of shares, each
representing a separate portfolio of securities and each having its own
investment objectives. Sanford C. Bernstein & Co., Inc. ("Bernstein," or the
"Manager") serves as Investment Manager to each series.
The Bernstein Fixed-Income Portfolios aim to generate the highest total
return consistent with safety of principal and the financial objectives of the
Portfolios.
The Bernstein International Value Portfolio and the Bernstein Emerging
Markets Value Portfolio seek long-term capital growth on a total-return basis
(capital appreciation or depreciation plus dividends and interest) principally,
in the case of the Bernstein International Value Portfolio, through investment
in equity securities of established non-U.S. companies, and, in the case of the
Bernstein Emerging Markets Value Portfolio, through investment in equity
securities of companies in emerging-market countries. Investments in either
Portfolio may be made solely for capital appreciation, solely for income or any
combination of the two for the purpose of achieving a higher overall return.
Investments in emerging-market countries are more volatile and less liquid than
investments in developed countries and involve exposure to a greater degree of
risk due to increased social, political and economic instability. This
Prospectus discusses in more detail these as well as other risks of investing in
emerging-market countries.
This Prospectus sets forth information you ought to know before investing
in the Fund. You should read it carefully and retain it for future reference.
You can find more information about the Fund in the Statement of Additional
Information (the "SAI") dated January 31, 1997, which has been filed with the
Securities and Exchange Commission (the "Commission") and is incorporated herein
by reference. You may obtain a copy of the SAI without charge by calling or
writing the Fund at the above telephone number or address.
The minimum initial investment in any Portfolio is generally $25,000,
except that the minimum initial investment in the Bernstein Emerging Markets
Value Portfolio is $10,000 for discretionary investment management clients of
Bernstein whose investment in the Bernstein Emerging Markets Value Portfolio
constitutes a portion of a balanced account. Different minimums are applicable
with respect to subsequent investments. The Fund may change the provisions
concerning minimum investments at any time.
Bernstein Fixed-Income Portfolio Objectives/Policies
Short-Duration Portfolios
Bernstein Government Short Duration 23
o Limit state and local taxation; and
o Invest largely in U.S. government and agency securities.
Bernstein Short Duration Plus 23
o Choose primarily from a broad universe of high-grade
fixed-income instruments.
Bernstein Short Duration New York Municipal 24
o Provide income while limiting federal, state and local
taxation for New York residents.
Bernstein Short Duration California Municipal 26
o Provide income while limiting federal and California personal
income taxation for state residents.
Bernstein Short Duration Diversified Municipal 27
o Provide income while limiting federal taxation.
Intermediate-Duration Portfolios
Bernstein New York Municipal. 24
o Maximize total after-tax return for New York State residents,
taking into account the taxable nature of interest on taxable
bonds and capital gains.
Bernstein California Municipal. 26
o Maximize total after-tax return for California residents,
taking into account the taxable nature of interest on taxable
bonds and capital gains.
Bernstein Diversified Municipal 27
o Maximize total after-tax return, taking into account the
taxable nature of interest on taxable bonds and capital gains.
Bernstein Intermediate Duration 24
o Choose primarily from a broad universe of high-grade
fixed-income instruments.
Bernstein International Equity Portfolio Objectives
Bernstein International Value 28
o Invest primarily in equity securities of established foreign
companies in the countries comprising the EAFE index,
plus Canada.
Bernstein Emerging Markets Value Portfolio Objectives
Bernstein Emerging Markets Value 28
o Invest primarily in equity securities of companies in
emerging-market countries.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
FEE TABLE
<TABLE>
<CAPTION>
Bernstein Bernstein Bernstein
Short Duration Short Duration Short Duration Bernstein
California Diversified New York Government
Municipal Municipal Municipal Short Duration
Portfolio Portfolio Portfolio Portfolio
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases
(as a percentage of offering price) None None None None
Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None None None None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds) None None None None
Redemption Fees
(as a percentage of amount redeemed) None None None None
Exchange Fees None None None None
ANNUAL PORTFOLIO OPERATION EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.50% 0.50% 0.50% 0.50%
12b-1 Fees None None None None
Other Expenses
Shareholder Servicing & Administrative Fees 0.10% 0.10% 0.10% 0.10%
All Other Expenses After Expense Reimbursement 0.12% 0.11% 0.14% 0.09%
Total Portfolio Operating Expenses 0.72% 0.71% 0.74% 0.69%
EXAMPLE
A Portfolio would pay the following expenses on a
$1,000 investment, assuming 5% annual return:
1 Yr. $7 $7 $8 $7
3 Yrs. (cum.) $23 $23 $24 $22
5 Yrs. (cum.) $40 $40 $41 $38
10 Yrs. (cum.) $89 $88 $92 $86
</TABLE>
The purpose of the fee table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The Fund is no-load, and, except in the case of the Bernstein
Emerging Markets Value Portfolio, there are no redemption fees, and there are no
charges for shareholders on monthly payment plans.
The Bernstein Emerging Markets Value Portfolio assesses a portfolio
transaction fee on purchases of Portfolio shares equal to 2% of the dollar
amount invested in the Portfolio (including purchases made by exchanging shares
of other Fund Portfolios for shares of the Bernstein Emerging Markets Value
Portfolio). The portfolio transaction fee on purchases applies to an initial
investment in the Bernstein Emerging Markets Value Portfolio and to all
subsequent purchases, but not to reinvested dividends or capital gains
distributions. The portfolio transaction fee on purchases is deducted
automatically from the amount invested; it cannot be paid separately. The
Bernstein Emerging Markets Value Portfolio
- -------------------------------------------------------------------------------
2 Sanford C. Bernstein Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
Bernstein Bernstein Bernstein Bernstein Bernstein Bernstein
Short Duration New York California Diversified Intermediate International
Plus Municipal Municipal Municipal Duration Value
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- ---------- ----------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases
(as a percentage of offering price) None None None None None None
Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None None None None None None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds) None None None None None None
Redemption Fees
(as a percentage of amount redeemed) None None None None None None
Exchange Fees None None None None None None
ANNUAL PORTFOLIO OPERATION EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.50% 0.50% 0.50% 0.50% 0.49% 0.97%
12b-1 Fees None None None None None None
Other Expenses
Shareholder Servicing & Administrative Fees 0.10% 0.10% 0.10% 0.10% 0.10% 0.25%
All Other Expenses After Expense Reimbursement 0.05% 0.06% 0.08% 0.06% 0.04% 0.09%
Total Portfolio Operating Expenses 0.65% 0.66% 0.68% 0.66% 0.63% 1.31%
EXAMPLE
A Portfolio would pay the following expenses on a
$1,000 investment, assuming 5% annual return:
1 Yr. $7 $7 $7 $7 $6 $13
3 Yrs. (cum.) $21 $21 $22 $21 $20 $42
5 Yrs. (cum.) $36 $37 $38 $37 $35 $72
10 Yrs. (cum.) $81 $82 $85 $82 $79 $158
</TABLE>
- -------------------------------------------------------------------------------
also assesses a portfolio transaction fee on redemptions of Portfolio shares
equal to 2% of the dollar amount redeemed from the Portfolio (including
redemptions made by exchanging shares of the Bernstein Emerging Markets Value
Portfolio for shares of other Fund Portfolios). The portfolio transaction fee on
redemptions is deducted from redemption or exchange proceeds. The portfolio
transaction fees on purchases and redemptions are received by the Bernstein
Emerging Markets Value Portfolio, not by Bernstein, and are neither sales loads
nor contingent deferred sales loads.
The purpose of the portfolio transaction fees is to allocate transaction
costs associated with purchases and redemptions to the investors making those
purchases and redemptions, not to other shareholders. The Bernstein Emerging
Markets Value Portfolio, unlike the other Portfolios of the Fund, imposes
transaction fees because transaction costs incurred when purchasing or selling
stocks of companies in emerging-market countries are considerably higher than
those incurred in either the United States or other developed countries. The
portfolio
- -------------------------------------------------------------------------------
Prospectus--January 31, 1997 3
<PAGE>
FEE TABLE
Bernstein
Emerging Markets
Value Portfolio
----------------
SHAREHOLDER TRANSACTION EXPENSES
PAID TO MANAGER
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as applicable) None
SHAREHOLDER TRANSACTION EXPENSES
PAID TO PORTFOLIO
Portfolio Transaction Fee upon Purchase of Shares
(as a percentage of amount invested)* 2.00%
Portfolio Transaction Fee upon Redemption of Shares
(as a percentage of amount redeemed)** 2.00%
Portfolio Transaction Fee upon Exchange of Shares ***
Annual Portfolio Operating Expenses
(as a percentage of average net assets)
Management Fees 1.25%
12b-1 Fees None
Other Expenses
Shareholder Servicing & Administrative Fees 0.25%
All Other Expenses After Expense Reimbursement 0.42%
Total Portfolio Operating Expenses 1.92%
EXAMPLE
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period+ $59 $102 $147 $271
You would pay the following expenses on the same investment, assuming
no redemption++ $40 $80 $124 $244
</TABLE>
* The portfolio transaction fee on purchases is deducted automatically from
the amount invested.
** The portfolio transaction fee upon redemption is withheld from redemption
proceeds by the Portfolio.
*** Exchanges will be treated as purchases or redemptions for purposes of
imposing the portfolio transaction fee on purchases or redemptions.
+ The expenses include the portfolio transaction fee on purchases and
redemptions.
++ The expenses include the portfolio transaction fee on purchases.
- --------------------------------------------------------------------------------
transaction fees reflect Bernstein's estimate of the brokerage and other
transaction costs that the Bernstein Emerging Markets Value Portfolio incurs as
a result of purchases or redemptions. Without the fees, the Bernstein Emerging
Markets Value Portfolio would not be reimbursed for these transaction costs,
resulting in reduced investment performance for all shareholders of the
Portfolio. With the fees, the transaction costs occasioned by purchases or sales
of shares of the Bernstein Emerging Markets Value Portfolio are borne not by
existing shareholders, but by the investors making the purchases and
redemptions.
"Other Expenses" for all Portfolios are based on amounts for the fiscal
year ended September 30, 1996. The example should not be considered a
representation of future expenses; actual expenses may be greater or less than
those shown. For the period commencing October 3, 1994 through and including
October 2, 1996, Bernstein agreed to assume the
- -------------------------------------------------------------------------------
4 Sanford C. Bernstein Fund, Inc.
<PAGE>
expenses of the Bernstein Short Duration California Municipal Portfolio, the
Bernstein Short Duration Diversified Municipal Portfolio and the Bernstein Short
Duration New York Municipal Portfolio (collectively, the "Short Duration
Municipal Portfolios"), to the extent that aggregate operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary expenses)
exceed 0.79% per annum of the Portfolios' average daily net assets. If Bernstein
had not assumed these expenses during the fiscal year ended September 30, 1996,
the shareholders of the Bernstein Short Duration California Municipal Portfolio
would have incurred total annual operating expenses of .75%, the shareholders of
the Bernstein Short Duration Diversified Municipal Portfolio would have incurred
total annual operating expenses of .77% and the shareholders of the Bernstein
Short Duration New York Municipal Portfolio would have incurred total annual
operating expenses of .77%. For the period through and including December 31,
1997, Bernstein has agreed to assume the Bernstein Emerging Markets Value
Portfolio's expenses to the extent that aggregate operating expenses (excluding
interest, taxes, brokerage and other transaction costs and extraordinary
expenses) exceed 2% per annum of the Portfolio's average daily net assets.
Portfolio transaction fees on purchases and redemptions are not operating
expenses; no portion of the portfolio transaction fees will be assumed by
Bernstein. If Bernstein were not to assume any of the Bernstein Emerging Markets
Value Portfolio's aggregate operating expenses, it is estimated that the
Bernstein Emerging Markets Value Portfolio would incur Other Expenses of .42%
and total annual operating expenses of 1.92% of average daily net assets for the
current fiscal year. A more complete description of the various costs and
expenses will be found under "Management of the Portfolios" on page 38.
Shareholders of the Fund do not need to open a brokerage account with Bernstein;
shareholders may elect to take delivery of the shares or to make alternate
arrangements for custodying them. If a shareholder holds Fund shares in a
Bernstein brokerage account, Bernstein (not the Fund) will charge an annual
maintenance fee of $100 for accounts with assets of less than $400,000 under the
management of Bernstein's Equity and/or Fixed-Income Investment Policy Groups.
This fee is deducted from cash held in the brokerage account or, if insufficient
cash is maintained in the brokerage account, by selling securities. Bernstein
does not charge this fee on accounts that are included in a group of related
accounts as defined by Bernstein with combined assets of $400,000 or more.
Shares of the Fund purchased or redeemed through broker-dealers, banks and other
financial institutions may be subject to fees imposed by those institutions.
- -------------------------------------------------------------------------------
Prospectus--January 31, 1997 5
<PAGE>
Financial Highlights
Set forth below is a table containing information as to the income and
operating performance of a share of each Portfolio of the Fund for the periods
ended September 30, 1996; September 30, 1995; September 30, 1994; September 30,
1993; September 30, 1992; September 30, 1991; September 30, 1990; and September
30, 1989, or as applicable. The financial statements, which contain this
information for the periods ended September 30, 1996; September 30, 1995;
September 30, 1994; September 30, 1993; and September 30, 1992, have been
audited by Price Waterhouse LLP. The related financial statements and the
reports of independent accountants for the period ended September 30, 1996 are
included by reference in the Fund's SAI. Additional performance information with
respect to all Portfolios is contained in the Fund's annual report to
shareholders dated September 30, 1996, which is available upon request and
without charge. These financial highlights should be read in conjunction with
the financial statements contained in the Fund's SAI.
<TABLE>
<CAPTION>
Bernstein International Value Portfolio
-------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92 (a)
---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.08 $16.57 $15.39 $11.98 $12.50
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Investment income, net 0.23 0.18 0.19 0.05 0.02
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies 2.26 0.07 1.13 3.54 (0.54)
------ ------ ------ ------ ------
Total from investment operations 2.49 0.25 1.32 3.59 (0.52)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from taxable net investment income (0.10) (0.11) (0.02) (0.05) 0
Dividends from tax-exempt net investment income 0 0 0 0 0
Distributions from net realized gains (0.33) (0.63) (0.12) (0.13) 0
Distributions in excess of net investment
income due to timing differences 0 0 0 0 0
Distributions in excess of net realized gains
due to timing differences 0 0 0 0 0
------ ------ ------ ------ ------
Total distributions (0.43) (0.74) (0.14) (0.18) 0
------ ------ ------ ------ ------
Net asset value, end of period $18.14 $16.08 $16.57 $15.39 $11.98
====== ====== ====== ====== ======
Total return 15.83% 1.84% 8.55% 30.45% (4.16)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $3,131,258 $1,996,112 $1,343,266 $539,936 $75,255
Average net assets (000 omitted) $2,569,586 $1,591,703 $948,563 $235,839 $41,234
Ratio of expenses to average net assets 1.31% 1.35% 1.39% 1.53% 2.00%*
Ratio of net investment income to
average net assets 1.37% 1.17% 1.13% 1.27% 0.59%*
Portfolio turnover rate 21.89% 29.53% 23.78% 21.22% 1.12%
Average commission rate per share 0.0234 N/A N/A N/A N/A
</TABLE>
* Annualized
(a) Commenced operations June 22, 1992
- -------------------------------------------------------------------------------
6 Sanford C. Bernstein Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
Bernstein
Emerging
Markets
Value
Portfolio Bernstein Intermediate Duration Portfolio
------------ -------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/96 (b) 9/30/96 9/30/95 9/30/94 9/30/93 9/30/92
------------ ------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $20.00 $13.30 $12.54 $13.92 $13.82 $13.19
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Investment income, net 0.18 0.80 0.78 0.68 0.76 0.90
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies 1.64(c) (0.14) 0.77 (1.15) 0.68 0.79
------ ------ ------ ------ ------ ------
Total from investment operations 1.82 0.66 1.55 (0.47) 1.44 1.69
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from taxable net investment income 0 (0.80) (0.76) (0.70) (0.76) (0.90)
Dividends from tax-exempt net investment inco 0 0 0 0 0 0
Distributions from net realized gains 0 (0.08) 0 (0.08) (0.58) (0.16)
Distributions in excess of net investment
income due to timing differences 0 0 (0.03) 0 0 0
Distributions in excess of net realized gains
due to timing differences 0 0 0 (0.13) 0 0
------ ------ ------ ------ ------ ------
Total distributions 0 (0.88) (0.79) (0.91) (1.34) (1.06)
------ ------ ------ ------ ------ ------
Net asset value, end of period $21.82 $13.08 $13.30 $12.54 $13.92 $13.82
====== ====== ====== ====== ====== ======
Total return 4.80%* 5.05% 12.82% (3.54)% 11.30% 13.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $273,924 $1,451,776 $1,142,768 $848,529 $693,772 $524,301
Average net assets (000 omitted) $165,362 $1,310,208 $957,247 $764,519 $595,273 $444,750
Ratio of expenses to average net assets 1.92%+ 0.63% 0.64% 0.65% 0.66% 0.67%
Ratio of net investment income to
average net assets 1.01%+ 5.99% 6.11% 5.14% 5.59% 6.64%
Portfolio turnover rate 9.81% 141.04% 212.40% 203.73% 60.77% 149.71%
Average commission rate per share 0.0027 N/A N/A N/A N/A N/A
<CAPTION>
Year Ended Year Ended Year Ended
9/30/91 9/30/90 9/30/89 (d)
------------ ------------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period $12.36 $12.82 $12.50
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Investment income, net 1.00 0.98 0.69
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies 0.85 (0.25) 0.32
------ ------ ------
Total from investment operations 1.85 0.73 1.01
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from taxable net investment income (1.00) (0.98) (0.69)
Dividends from tax-exempt net investment income 0 0 0
Distributions from net realized gains (0.02) (0.21) 0
Distributions in excess of net investment
income due to timing differences 0 0 0
Distributions in excess of net realized gains
due to timing differences 0 0 0
Total distributions (1.02) (1.19) (0.69)
------ ------ ------
Net asset value, end of period $13.19 $12.36 $12.82
====== ====== ======
Total return 15.54% 5.90% 8.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $375,345 $240,779 $183,480
Average net assets (000 omitted) $304,034 $218,760 $135,549
Ratio of expenses to average net assets 0.68% 0.71% 0.83%+
Ratio of net investment income to
average net assets 7.80% 7.77% 7.74%+
Portfolio turnover rate 81.04% 119.09% 121.11%
Average commission rate per share N/A N/A N/A
</TABLE>
* This reflects the return to a shareholder who purchased shares of the
Portfolio at the beginning of the year and redeemed them at the end of
the year, paying, in each case, the 2.00% transaction fee. Total return
to a shareholder without taking account of these transaction fees would
be 9.1%.
+ Annualized
(b) Commenced operations December 15, 1995
(c) Includes effect of portfolio transaction fee
(d) Commenced operations January 17, 1989
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 7
<PAGE>
Financial Highlights
Set forth below is a table containing information as to the income and
operating performance of a share of each Portfolio of the Fund for the periods
ended September 30, 1996; September 30, 1995; September 30, 1994; September 30,
1993; September 30, 1992; September 30, 1991; September 30, 1990; and September
30, 1989, or as applicable. The financial statements, which contain this
information for the periods ended September 30, 1996; September 30, 1995;
September 30, 1994; September 30, 1993; and September 30, 1992, have been
audited by Price Waterhouse LLP. The related financial statements and the
reports of independent accountants for the period ended September 30, 1996 are
included by reference in the Fund's SAI. Additional performance information with
respect to all Portfolios is contained in the Fund's annual report to
shareholders dated September 30, 1996, which is available upon request and
without charge. These financial highlights should be read in conjunction with
the financial statements contained in the Fund's SAI.
<TABLE>
<CAPTION>
Bernstein Government Short Duration Plus Portfolio
----------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92 9/30/91 9/30/90 9/30/89(f)
--------- ---------- ----------- ---------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.49 $12.32 $12.89 $13.14 $12.84 $12.50 $12.62 $12.50
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Investment income, net 0.69 0.70 0.55 0.59 0.75 0.94 0.97 0.78
Net realized and unrealized
gain (loss) on investments,
futures and foreign currencies (0.01) 0.18 (0.40) 0.10 0.44 0.41 (0.01) 0.12
------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.68 0.88 0.15 0.69 1.19 1.35 0.96 0.90
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from taxable net
investment income (0.69) (0.69) (0.56) (0.59) (0.75) (0.94) (0.97) (0.78)
Dividends from tax-exempt net
investment income 0 0 0 0 0 0 0 0
Distributions from
net realized gains 0 0 0 (0.35) (0.14) (0.07) (0.11) 0
Distributions in excess of net
investment income due to
timing differences 0 (0.02) 0 0 0 0 0 0
Distributions in excess of
net realized gains
due to timing differences 0 0 (0.16) 0 0 0 0 0
------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.69) (0.71) (0.72) (0.94) (0.89) (1.01) (1.08) (0.78)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period $12.48 $12.49 $12.32 $12.89 $13.14 $12.84 $12.50 $12.62
====== ====== ====== ====== ====== ====== ====== ======
Total return 5.54% 7.36% 1.14% 5.49% 9.60% 11.26% 7.88% 7.41%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $538,248 $534,462 $550,415 $508,959 $535,980 $435,334 $391,131 $335,310
Average net assets
(000 omitted) $532,094 $536,042 $529,892 $535,889 $482,467 $405,457 $374,101 $263,899
Ratio of expenses to
average net assets 0.65% 0.65% 0.65% 0.66% 0.66% 0.67% 0.68% 0.75%*
Ratio of net investment income
to average net assets 5.47% 5.69% 4.30% 4.52% 5.75% 7.42% 7.67% 7.91%*
Portfolio turnover rate 169.96% 61.03% 285.80% 112.87% 169.60% 140.03% 155.21% 132.82%
Average commission rate per share N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- -------------------------------------------------------------------------------
8 Sanford C. Bernstein Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
Bernstein Government Short Duration Portfolio
----------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92 9/30/91 9/30/90 9/30/89(f)
--------- ---------- ----------- ---------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.55 $12.34 $12.87 $13.14 $12.93 $12.58 $12.61 $12.50
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Investment income, net 0.65 0.69 0.49 0.44 0.66 0.86 0.95 0.72
Net realized and unrealized
gain (loss) on investments,
futures and foreign currencies (0.07) 0.21 (0.38) 0.20 0.41 0.41 0.05 0.11
------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.58 0.90 0.11 0.64 1.07 1.27 1.00 0.83
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from taxable net
investment income (0.65) (0.69) (0.49) (0.44) (0.66) (0.86) (0.95) (0.72)
Dividends from tax-exempt net
investment income 0 0 0 0 0 0 0 0
Distributions from
net realized gains 0 0 0 (0.47) (0.20) (0.06) (0.08) 0
Distributions in excess of net
investment income due to
timing differences 0 0 0 0 0 0 0 0
Distributions in excess of
net realized gains due to
timing differences 0 0 (0.15) 0 0 0 0 0
------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.65) (0.69) (0.64) (0.91) (0.86) (0.92) (1.03) (0.72)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period $12.48 $12.55 $12.34 $12.87 $13.14 $12.93 $12.58 $12.61
====== ====== ====== ====== ====== ====== ====== ======
Total return 4.76% 7.55% 0.85% 5.11% 8.57% 10.47% 8.29% 6.77%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $139,802 $143,723 $185,028 $212,531 $254,950 $211,566 $159,490 $138,052
Average net assets
(000 omitted) $145,268 $145,710 $188,013 $239,462 $238,381 $184,175 $159,170 $107,512
Ratio of expenses to
average net assets 0.69% 0.69% 0.68% 0.68% 0.68% 0.70% 0.72% 0.85%
Ratio of net investment income
to average net assets 5.21% 5.58% 3.85% 3.40% 5.02% 6.67% 7.52% 7.82%
Portfolio turnover rate 155.29% 49.34% 213.02% 130.40% 220.86% 175.87% 171.41% 141.20%
Average commission rate per share N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
* Annualized
(e) Commenced operations December 12, 1988
(f) Commenced operations January 3, 1989
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 9
<PAGE>
Financial Highlights
Set forth below is a table containing information as to the income and
operating performance of a share of each Portfolio of the Fund for the periods
ended September 30, 1996; September 30, 1995; September 30, 1994; September 30,
1993; September 30, 1992; September 30, 1991; September 30, 1990; and September
30, 1989, or as applicable. The financial statements, which contain this
information for the periods ended September 30, 1996; September 30, 1995;
September 30, 1994; September 30, 1993; and September 30, 1992, have been
audited by Price Waterhouse LLP. The related financial statements and the
reports of independent accountants for the period ended September 30, 1996 are
included by reference in the Fund's SAI. Additional performance information with
respect to all Portfolios is contained in the Fund's annual report to
shareholders dated September 30, 1996, which is available upon request and
without charge. These financial highlights should be read in conjunction with
the financial statements contained in the Fund's SAI.
<TABLE>
<CAPTION>
Bernstein Diversified Municipal Portfolio
----------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92 9/30/91 9/30/90 9/30/89(g)
---------- ----------- ---------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.50 $12.99 $13.78 $13.40 $13.01 $12.51 $12.52 $12.50
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Investment income, net 0.63 0.65 0.61 0.63 0.71 0.73 0.74 0.52
Net realized and unrealized
gain (loss) on investments,
futures and foreign currencies (0.04) 0.51 (0.72) 0.49 0.42 0.51 0.04 0.02
------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.59 1.16 (0.11) 1.12 1.13 1.24 0.78 0.54
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from taxable net
investment income (0.01) (0.02) (0.01) (0.01) (0.11) (0.06) (0.03) (0.03)
Dividends from tax-exempt net
investment income (0.62) (0.63) (0.60) (0.62) (0.60) (0.67) (0.71) (0.49)
Distributions from
net realized gains (0.02) 0 (0.03) (0.11) (0.03) (0.01) (0.05) 0
Distributions in excess of net
investment income due to
timing differences 0 0 0 0 0 0 0 0
Distributions in excess of net
realized gains due to timing
differences 0 0 (0.04) 0 0 0 0 0
------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.65) (0.65) (0.68) (0.74) (0.74) (0.74) (0.79) (0.52)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period $13.44 $13.50 $12.99 $13.78 $13.40 $13.01 $12.51 $12.52
====== ====== ====== ====== ====== ====== ====== ======
Total return 4.38% 9.16% (0.80)% 8.61% 8.91% 10.21% 6.35% 4.41%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $820,395 $660,814 $552,134 $449,668 $301,746 $210,417 $157,730 $108,653
Average net assets
(000 omitted) $744,452 $572,769 $509,380 $375,576 $256,850 $179,375 $142,712 $87,945
Ratio of expenses to
average net assets 0.66% 0.66% 0.67% 0.69% 0.69% 0.71% 0.75% 0.91%*
Ratio of net investment income
to average net assets 4.61% 4.89% 4.57% 4.64% 5.33% 5.69% 5.83% 5.75%
Portfolio turnover rate 25.22% 42.55% 34.45% 34.74% 48.22% 33.91 47.25% 19.52%
Average commission rate per share N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- -------------------------------------------------------------------------------
10 Sanford C. Bernstein Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
Bernstein California Municipal Portfolio
-------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92 9/30/91 9/30/90(h)
--------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.58 $13.06 $13.83 $13.38 $12.94 $12.42 $12.50
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Investment income, net 0.61 0.64 0.61 0.60 0.66 0.70 0.13
Net realized and unrealized
gain (loss) on investments,
futures and foreign currencies 0 0.52 (0.74) 0.52 0.45 0.52 (0.08)
------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.61 1.16 (0.13) 1.12 1.11 1.22 0.05
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from taxable net
investment income (0.03) (0.05) (0.02) (0.02) (0.07) (0.11) (0.09)
Dividends from tax-exempt net
investment income (0.58) (0.59) (0.59) (0.58) (0.59) (0.59) (0.04)
Distributions from
net realized gains 0 0 0 (0.07) (0.01) 0 0
Distributions in excess of net
investment income due to
timing differences 0 0 0 0 0 0 0
Distributions in excess of
net realized gains
due to timing differences 0 0 (0.03) 0 0 0 0
------ ------ ------ ------ ------ ------ ------
Total distributions (0.61) (0.64) (0.64) (0.67) (0.67) (0.70) (0.13)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of period $13.58 $13.58 $13.06 $13.83 $13.38 $12.94 $12.42
====== ====== ====== ====== ====== ====== ======
Total return 4.60% 9.11% (0.98)% 8.60% 8.76% 10.06% 0.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $285,758 $213,951 $192,993 $150,115 $83,043 $50,356 $22,828
Average net assets
(000 omitted) $246,410 $185,990 $168,797 $116,301 $65,492 $35,005 $21,481
Ratio of expenses to
average net assets 0.68% 0.69% 0.70% 0.73% 0.77% 0.79% 0.79%*
Ratio of net investment income
to average net assets 4.48% 4.78% 4.51% 4.36% 4.96% 5.40% 6.73%*
Portfolio turnover rate 23.87% 63.89% 24.55% 23.79% 53.08% 48.91% 113.25%
Average commission rate
per share N/A N/A N/A N/A N/A N/A N/A
</TABLE>
* Annualized
(g) Commenced operations January 9, 1989
(h) Commenced operations August 6, 1990
- -------------------------------------------------------------------------------
Prospectus -- January 31, 1997 11
<PAGE>
Financial Highlights
Set forth below is a table containing information as to the income and
operating performance of a share of each Portfolio of the Fund for the periods
ended September 30, 1996; September 30, 1995; September 30, 1994; September 30,
1993; September 30, 1992; September 30, 1991; September 30, 1990; and September
30, 1989, or as applicable. The financial statements, which contain this
information for the periods ended September 30, 1996; September 30, 1995;
September 30, 1994; September 30, 1993; and September 30, 1992, have been
audited by Price Waterhouse LLP. The related financial statements and the
reports of independent accountants for the period ended September 30, 1996 are
included by reference in the Fund's SAI. Additional performance information with
respect to all Portfolios is contained in the Fund's annual report to
shareholders dated September 30, 1996, which is available upon request and
without charge. These financial highlights should be read in conjunction with
the financial statements contained in the Fund's SAI.
<TABLE>
<CAPTION>
Bernstein New York Municipal Portfolio
----------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92 9/30/91 9/30/90 9/30/89(i)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.48 $12.98 $13.80 $13.47 $13.05 $12.54 $12.59 $12.50
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Investment income, net 0.64 0.65 0.64 0.67 0.74 0.74 0.76 0.53
Net realized and unrealized
gain (loss) on investments,
futures and foreign
currencies (0.07) 0.50 (0.75) 0.46 0.44 0.52 0 0.09
------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 0.57 1.15 (0.11) 1.13 1.18 1.26 0.76 0.62
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from taxable net
investment income (0.02) (0.02) (0.02) (0.01) (0.11) (0.09) (0.08) (0.07)
Dividends from tax-exempt
net investment income (0.62) (0.63) (0.62) (0.66) (0.63) (0.65) (0.68) (0.46)
Distributions from
net realized gains (0.06) 0 (0.03) (0.13) (0.02) (0.01) (0.05) 0
Distributions in excess of
net investment income due
to timing differences 0 0 0 0 0 0 0 0
Distributions in excess of
net realized gains
due to timing differences 0 0 (0.04) 0 0 0 0 0
------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.70) (0.65) (0.71) (0.80) (0.76) (0.75) (0.81) (0.53)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period $13.35 $13.48 $12.98 $13.80 $13.47 $13.05 $12.54 $12.59
====== ====== ====== ====== ====== ====== ====== ======
Total return 4.31% 9.14% (0.81)% 8.68% 9.31% 10.34% 6.12% 5.04%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $539,217 $458,543 $408,021 $336,101 $238,871 $190,776 $158,292 $98,299
Average net assets
(000 omitted) $497,391 $413,892 $381,144 $277,930 $210,474 $172,347 $129,347 $83,529
Ratio of expenses to
average net assets 0.66% 0.66% 0.67% 0.69% 0.69% 0.70% 0.74% 0.89%*
Ratio of net investment income
to average net assets 4.73% 4.95% 4.78% 4.91% 5.55% 5.79% 5.94% 5.84%*
Portfolio turnover rate 26.19% 44.84% 22.45% 34.58% 42.53% 29.79% 36.10% 10.12%
Average commission rate
per share N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- --------------------------------------------------------------------------------
12 Sanford C. Bernstein Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
Bernstein Short Bernstein Short Bernstein Short
Duration Diversified Duration California Duration New York
Municipal Portfolio Municipal Portfolio Municipal Portfolio
------------------------ ------------------------ ------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/96 9/30/95(j) 9/30/96 9/30/95(j) 9/30/96 9/30/95(j)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.63 $12.50 $12.65 $12.50 $12.60 $12.50
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Investment income, net 0.52 0.55 0.50 0.53 0.51 0.54
Net realized and unrealized
gain (loss) on investments,
futures and foreign
currencies (0.06) 0.13 (0.07) 0.15 (0.07) 0.10
------ ------ ------ ------ ------ ------
Total from investment
operations 0.46 0.68 0.43 0.68 0.44 0.64
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from taxable net
investment income (0.02) (0.04) (0.05) (0.06) (0.02) (0.05)
Dividends from tax-exempt
net investment income (0.50) (0.51) (0.45) (0.47) (0.49) (0.49)
Distributions from
net realized gains (0.05) 0 (0.05) 0 (0.01) 0
Distributions in excess of
net investment income due
to timing differences 0 0 0 0 0 0
Distributions in excess of
net realized gains
due to timing differences 0 0 0 0 0 0
------ ------ ------ ------ ------ ------
Total distributions (0.57) (0.55) (0.55) (0.53) (0.52) (0.54)
------ ------ ------ ------ ------ ------
Net asset value, end of period $12.52 $12.63 $12.53 $12.65 $12.52 $12.60
====== ====== ====== ====== ====== ======
Total return 3.68% 5.55% 3.50% 5.58% 3.53% 5.24%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $119,096 $101,325 $72,925 $63,530 $58,750 $55,221
Average net assets
(000 omitted) $105,467 $85,893 $68,060 $49,944 $54,087 $50,642
Ratio of expenses to
average net assets 0.71% 0.72%* 0.72% 0.73%* 0.74% 0.73%*
Ratio of net investment income
to average net assets 4.07% 4.32%* 3.96% 4.12%* 4.02% 4.23%*
Portfolio turnover rate 63.40% 73.50% 60.76% 89.33% 55.81% 112.15%*
Average commission rate
per share N/A N/A N/A N/A N/A N/A
</TABLE>
* Annualized
(i) Commenced operations January 9, 1989
(j) Commenced operations October 3, 1994
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 13
<PAGE>
THE FUND
The Fund was incorporated on May 4, 1988 under the laws of Maryland as an
open-end management investment company. This Prospectus relates to the Fund's 11
series of shares (the "Portfolios"). Shares of each series represent an interest
in a separate portfolio of securities. At September 30, 1996, the Portfolios of
the Fund had net assets totaling $7.431 billion. Bernstein, with offices at 767
Fifth Avenue, New York, New York 10153; 1999 Avenue of the Stars, Los Angeles,
California 90067; 777 South Flagler Drive, West Palm Beach, Florida 33401; 227
West Monroe Street, Chicago, Illinois 60606; 300 Crescent Court, Suite 950,
Dallas, Texas 75201; and 555 California Street, Suite 4300, San Francisco,
California 94104, serves as Investment Manager to each Portfolio. Each Portfolio
has its own investment objectives.
Why Bernstein?
Research Strength
Bernstein's business is investment research and management. For more than a
quarter-century we have been developing proprietary and innovative means of
improving investment decision-making. In the increasingly complex financial
markets, we believe Bernstein's analytic strength is a significant advantage.
Disciplined, Consistent Decision-Making
Bernstein research is applied within a value-oriented framework backed by
extensive research capability. Investment decision-making is disciplined,
centralized and highly systematic.
Bernstein Philosophy
We believe opportunity in the fixed-income and international markets is
primarily the result of complexity and emotion. To solve the complex problems of
bond and stock valuation, we devote considerable resources to research. To
minimize the emotional aspects of decision-making under uncertainty, we strive
to apply our valuation tools in a consistent and disciplined fashion.
BERNSTEIN FIXED-INCOME PROCESS
The management of Bernstein Fixed-Income Portfolios reflects three principal
elements:
1. Security and sector evaluation to identify the most attractive
securities in the market at a given time-- those offering the highest
expected return in relation to their risks;
2. Interest-rate forecasting to determine the best level of interest-rate
risk at a given time, within specified limits for each Portfolio; and
3. Yield-curve analysis to determine the optimum combination of maturities
for given degrees of interest-rate risk.
To identify attractive bonds, we use proprietary valuation techniques that
seek to quantify the incremental return we should demand to compensate for the
various risks that bonds entail. We perform these analyses on all Treasury
securities; virtually all federal agency securities; representative samples of
municipal, mortgage-related, corporate and foreign bonds; and virtually all
financial futures and options.
We use our forecast of interest rates to set the target level of
interest-rate risk for each of the Fixed-Income Portfolios. When we expect
interest rates to rise, we modestly shorten average maturities; when we expect
rates to fall, we modestly lengthen.
Finally, given our interest-rate risk target, we analyze the yield curve to
determine the best combination of maturities. In some environments it is best to
concentrate a Portfolio's maturities near the interest-rate risk target, while
at other times a higher expected return may be achieved by using a mix of short-
and long-term bonds that have, on average, the same risk as the target.
The Advantage of Short and Intermediate Bonds
Over the short run, fixed-income returns tend to be dominated by cyclical swings
in interest rates. The longer the maturity, the more the individual security
benefits from a decline, or is hurt by a rise, in interest rates. Inasmuch as it
is difficult to forecast consistently the direction of interest rates
accurately, it is important for an investor to weigh the risks and returns
offered by any specific maturity strategy.
- --------------------------------------------------------------------------------
14 Sanford C. Bernstein Fund, Inc.
<PAGE>
The Normal Yield Curve
[GRAPH]
Maturity Yield
(years) %
-------- -----
0.2400 4.9800
0.9600 5.4500
1.8600 5.8300
2.7100 6.0200
3.5000 6.1700
4.2400 6.2800
4.9400 6.3800
5.5900 6.4600
7.1900 6.5500
10.8700 6.7700
11.9800 6.7600
Source: Street Software Technology and Bernstein estimates.
- --------------------------------------------------------------------------------
As the chart above suggests, the yield on bonds normally increases with
maturity.
But notice that the path is not a straight line: nearly 50% of the rise
typically occurs within the first two years; 80% occurs within six years. In our
view, the reason the yield curve is generally so steep at the short maturities
is that investors are willing to forgo considerable return in exchange for the
knowledge that their investments will mature within the next few months. This
preference for liquidity is most striking between three months and two years.
The yield curve is dependent upon the period of time analyzed, and there may
be periods of time during which longer-term maturities provide substantially
higher yields and other times when shorter-term securities offer higher yields.
Because of the characteristic shape of the yield curve, a disproportionate
share of the extra return that normally stems from lengthening the maturity of
fixed-income investments is expected to be earned in the first few years of the
lengthening process.
The relevance of this yield chart for the Bernstein Fixed-Income
Portfolios--both taxable and municipal--is that the Portfolios are relatively
short or intermediate in average duration. We believe the risk/reward tradeoff
at those average durations is more advantageous than at the two extremes--i.e.,
money-market instruments or long-term bonds.*
The table below shows the rates of return of Treasuries of varying
maturities over two time periods: a nearly 27-year period that included both
rising and falling interest-rate cycles, and the most recent 13 3/4 years, which
was a period of generally declining interest rates. Note that in both the
broader and the narrower time periods (1) short-term bonds (i.e., with two-year
maturities) outperformed Treasury bills, and (2) intermediate bonds provided
rates of return competitive with 30-year bonds, despite having a maturity only
one-fifth as long.
The other side of the investment equation is risk. As our earlier remarks
suggested, the principal source of risk in bond investing is interest-rate
change. The market value of a bond falls when interest rates rise and vice
versa. While maturity is somewhat indicative of interest-rate risk, duration is
a more accurate measure. The duration of a bond is defined to be the effect on
price of a rise (or fall) of 1% in interest rates. The Bernstein short duration
Portfolios generally have durations around 2.0 years and thus will lose about 2%
in principal should interest rates rise 1%. The Bernstein intermediate duration
Portfolios (the municipal Portfolios as well as Intermediate Duration) generally
have durations of
- --------------------------------------------------------------------------------
Treasury Total Returns (Annualized)
Treasury Bills Short-Term Intermediate-Term Long-Term
(3 mos.) Bonds (2 yrs.) Bonds (6 yrs.) Bonds (30 yrs.)
Jan 1970-Sep 1996 7.3% 8.3% 9.0% 8.8%
Jan 1983-Sep 1996 6.6 8.2 10.1 10.6
Note: The returns in this table were calculated by adding monthly income to the
month-end price and dividing this sum by the previous month-end price.
Source: Center for Research in Security Prices, Federal Reserve Board, The Wall
Street Journal, Salomon Brothers, Street Pricing Service and Bernstein.
- --------------------------------------------------------------------------------
* In the examples that follow on this and the following page Treasury bills are
90-day bills, short-term bonds are two-year bonds, intermediate-term bonds are
six-year bonds and long-term bonds are 30-year bonds. The 90-day maturity has
been chosen for Treasury bills because it is representative of the interest-rate
risk offered by money-market instruments. The two-year and six-year maturities
have been chosen for short- and intermediate-term bonds because their
interest-rate risk resembles that of the Bernstein short-duration and
intermediate-duration Portfolios. The 30-year maturity was selected because it
is widely used by market participants to represent the long end of the bond
market.
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 15
<PAGE>
about 5.0 years and would lose about 5% should interest rates rise 1%. In
contrast, long-term bonds typically have durations of greater than 10 years and
would thus lose more than 10% if interest rates were to rise 1%. As the table
below illustrates, the longer the bond's duration, whether it is a Treasury,
corporate or municipal bond, the greater its vulnerability to these
fluctuations.
Treasury securities always produce a positive return if held to maturity.
However, when interest rates rise sufficiently, the market value of a bond can
drop in a given year by more than the annual interest received. When this
happens, the total return is negative.
As the table below indicates, Treasury bills and short-term bonds have not
experienced a single negative total return over any 12-month period since 1970.
Intermediate-term bonds have been profitable more than 90% of the time, over
both the 1970-96 and 1983-96 periods. But long bonds declined in value by more
than their interest payments 21.4% of the time during the 1983-96 period and
23.9% of the time during the 1970-96 period. During those periods when the
return on these securities was negative, the average loss on intermediate bonds
was 2.7% and the average loss on long-term bonds was 4.8%.
Our goal is to optimize the tradeoff between risk and return. For the
reasons detailed above, we believe that short duration bonds will provide
superior returns to money-market instruments with only a slight increase in
risk. We also believe that intermediate bonds will produce virtually the same
returns as long bonds with less than half the risk. Bernstein's Fixed-Income
Portfolios are, accordingly, targeted to the short and intermediate durations
that maximize reward in relation to risk.
- --------------------------------------------------------------------------------
Bond Risk: Change in Value Due to Interest-Rate Fluctuations
Value of $100 Bond Value of $100 Bond
If Rates Rise 1% If Rates Fall 1%
Short-term bond (duration 1.8 yrs.) $98.16 $101.88
Intermediate-term bond (duration 5.0 yrs.) 95.17 105.13
Long-term bond (duration 13.8 yrs.) 87.53 115.45
Note: Assumes initial yield and coupon of 6%
- --------------------------------------------------------------------------------
Frequency of Loss:
Percent of 12-Month Periods When Treasuries Had Negative Total Return
(Jan 1970-Sep 1996)
Treasury Bills Short-Term Intermediate-Term Long-Term
(3 mos.) Bonds (2 yrs.) Bonds (6 yrs.) Bonds (30 yrs.)
Jan 1970-Sep 1996* 0.0% 0.0% 8.4% 23.9%
Jan 1983-Sep 1996** 0.0 0.0 9.1 21.4
* Based on 310 overlapping 12-month periods.
** Based on 154 overlapping 12-month periods.
Source: Center for Research in Security Prices, Federal Reserve Board, The Wall
Street Journal, Salomon Brothers, Street Pricing Service and Bernstein
- --------------------------------------------------------------------------------
16 Sanford C. Bernstein Fund, Inc.
<PAGE>
Bernstein Fixed-Income Portfolios
<TABLE>
<CAPTION>
Frequency of
Negative Annual
Portfolio Principal Holdings* Total Return Rate of Income
- --------- ------------------- --------------- --------------
<S> <C> <C> <C>
Bernstein High-grade, short-term, Extremely low Moderate,
Short Duration tax-exempt, depending on
California Municipal California municipals tax bracket
Bernstein High-grade, short-term, Extremely low Moderate,
Short Duration tax-exempt, geographically depending on
Diversified Municipal diversified municipals tax bracket
Bernstein High-grade, short-term, Extremely low Moderate,
Short Duration tax-exempt, depending on
New York Municipal New York municipals tax bracket
Bernstein Short-term Extremely low Moderate
Government U.S. Treasury and
Short Duration agency securities
Bernstein High-grade, Extremely low Moderate
Short Duration Plus short-term securities
Bernstein High-grade, intermediate, Low Moderate to high,
New York Municipal tax-exempt depending on
New York municipals tax bracket
Bernstein High-grade, intermediate, Low Moderate to high,
California Municipal tax-exempt depending on
California municipals tax bracket
Bernstein High-grade, intermediate, Low Moderate to high,
Diversified Municipal geographically diversified, depending on
tax-exempt municipals tax bracket
Bernstein High-grade, Low Moderate/high
Intermediate Duration intermediate bonds
</TABLE>
* "Short-term" and "intermediate" refer to effective duration of the
Portfolios as described on pages 23-28.
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 17
<PAGE>
BERNSTEIN INTERNATIONAL VALUE AND
EMERGING MARKETS VALUE PROCESS
Why Invest in Foreign Stocks?
Americans' recognition of the opportunities available in developed and emerging
foreign stock markets has increased dramatically in recent years for obvious
reasons. Whereas 15 years ago U.S. stocks represented 55% of the value of common
stocks around the world, today that percentage is less than 40%. Thus, foreign
markets now account for over 60% of the world's stock market value with the
developed foreign markets making up almost 51% and the emerging markets making
up a little over 10% (Display 1). Moreover, the large public companies with
which we're most familiar are no longer American only. Toyota and Honda loom as
large in our consciousness today as Ford or Chrysler; Nestle is as familiar as
Hershey. And important global companies such as DeBeers, Samsung and Posco are
domiciled in emerging nations. Investing in the companies we know best--and
whose products fill our lives--now entails a certain commitment to non-U.S.
stocks.
But the most important reason to expand one's stock investment horizon, in
Bernstein's judgment, is the opportunity to broaden portfolio diversification.
The stock markets of many developed and emerging foreign countries have
outperformed the S&P 500 over the last 10 years, while others have
underperformed (Display 2). Yet--and this is the key point--different countries'
stock markets don't necessarily follow the same rhythm. Developed foreign
markets don't move in the same direction at the same time, nor do developed
foreign stocks as a group mirror U.S.-market movements. Likewise, emerging
foreign markets have followed different performance rhythms from one another,
and as a group, a different performance rhythm from the stock markets of the
industrialized world. This is not to overlook the extraordinary volatility of
emerging markets over the historical record available to us--or the brevity of
that record. Nonetheless, because the correlations among returns in the various
markets are modest, adding an international component to a domestic stock
portfolio has provided the risk-reduction benefits of diversification.
- --------------------------------------------------------------------------------
Display 1
World Stock Capitalization
1982
U.S. 55.7%
Developed Foreign Markets 41.6%
Emerging Markets 2.6%
1995
Developed Foreign Markets 50.9%
U.S. 38.9%
Emerging Markets 10.2%
Source: International Finance Corporation
- --------------------------------------------------------------------------------
Display 2
Compound Annual Rates of Returns: 1985-95
(in U.S. dollars)
Argentina 30.5%
Mexico 29.5%
Thailand 28.7%
Hong Kong 26.1%
Switzerland 22.4%
Taiwan 20.9%
Korea 19.3%
U.K. 18.1%
Germany 17.9%
S&P 500* 16.3%
Singapore 15.6%
Japan 15.1%
Australia 14.2%
Brazil 14.2%
Malaysia 12.7%
India 12.0%
Canada 8.3%
* The Standard & Poor's 500 is a widely recognized index of large-cap stock
traded on U.S. exchanges.
Source: Datastream, International Finance Corporation, Morgan Stanley Capital
International, Standard & Poor's and Bernstein
- --------------------------------------------------------------------------------
18 Sanford C. Bernstein Fund, Inc.
<PAGE>
Display 3 illustrates just how unrelated the returns of the world's
developed and emerging foreign stock markets have been in recent years. With
respect to developed foreign markets, notice that since 1985, Japan came in
first three times--and last four times. German stocks scored highest twice and
lowest twice; the United Kingdom, first once, worst once. With respect to
emerging foreign markets, performance in 1994 ranged from 70% in Brazil to minus
41% in Mexico--and that was not extreme. The 1991 gap extended from the 397%
gain in Argentina to the 42% loss in Turkey. And in 1989, there were almost 500
percentage points of return between the return of the Turkish market and that of
the Indian market.
- --------------------------------------------------------------------------------
Display 3
Total Annual Returns (in U.S. dollars)
x.xx Best Performing Country for Each Year
====
xx.x Worst Performing Country for Each Year
- ----
<TABLE>
<CAPTION>
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INDICES
S&P 500* 32.2% 18.5% 5.2% 16.8% 31.5% (3.2)% 30.6% 7.7% 10.0% 1.3% 37.5%
EAFE Index+ 54.8 50.2 (0.2) 30.8 24.2 (21.9) 8.3 (9.1) 29.9 2.3 11.5
IFCG Index++ 27.7 12.8 13.6 58.2 54.7 (29.9) 17.6 0.3 67.5 (0.5) (12.3)
DEVELOPED MARKETS
Australia 19.6 42.3 9.3 36.4 9.3 (17.5) 33.6 (10.8) 35.2 5.4 11.2
====
Canada 15.1 9.9 13.9 17.1 24.3 (13.0) 11.1 (12.2) 17.6 (3.1) 18.3
--- ----
Germany 135.2 35.3 (24.8) 20.6 46.3 (9.4) 8.2 (10.3) 35.6 4.7 16.4
===== ------ ==== ---
Hong Kong 51.7 56.1 (4.1) 28.1 8.4 9.2 49.5 32.3 116.7 (28.9) 22.6
==== ==== ===== ------
Japan 43.0 99.4 43.0 35.4 1.7 (36.1) 8.9 (21.5) 25.5 21.4 0.7
==== ==== --- ------ ------ ==== ---
Singapore (22.2) 45.2 2.3 33.4 42.3 (11.7) 25.0 6.3 67.9 6.7 6.5
Switzerland 105.8 33.4 (9.5) 6.2 26.2 (6.2) 15.8 17.2 45.8 3.6 44.1
====
United Kingdom 53.0 27.0 35.1 5.9 21.9 10.3 16.0 (3.7) 24.5 (1.6) 21.3
--- ====
EMERGING MARKETS
Argentina 74.9 (26.5) 9.8 38.8 175.9 (36.6) 396.9 (26.5) 72.7 (23.3) 12.7
------ ===== ====
Brazil 94.2 (24.6) (63.1) 125.6 39.9 (65.7) 170.4 0.3 99.4 69.8 (20.2)
------ ===== ------ ====
India 105.1 (2.9) (15.6) 37.3 4.3 18.8 18.4 22.9 18.8 7.4 (34.2)
===== --- ---- ------
Korea 38.1 85.9 36.5 112.8 7.0 (25.4) (15.9) 3.6 20.9 19.1 (6.9)
Malaysia (14.3) 11.9 0.9 27.7 44.0 (11.2) 12.1 27.9 102.9 (21.5) 3.6
-----
Mexico 18.4 97.2 (4.8) 108.3 73.4 29.7 106.8 21.2 49.9 (40.6) (26.0)
==== ==== ------
Taiwan 10.4 49.3 120.8 93.3 100.0 (50.9) (0.6) (26.6) 89.0 22.5 (30.7)
Thailand 0.1 74.8 37.5 40.7 100.8 (20.7) 19.2 40.3 103.0 (11.3) (1.4)
====
Turkey -- -- 262.2 (61.1) 502.4 (2.8) (41.8) (52.8) 234.3 (40.2) (11.4)
===== ------ ===== ------ ------ =====
</TABLE>
Note: All countries and indices are net dividend returns except for the
International Finance Corporation Global (IFCG) Index which is gross dividend
returns.
* The Standard & Poor's 500 is a widely recognized index of large-cap
stocks traded on U.S. exchanges.
+ EAFE index, half-hedged, GDP-weighted, includes developed stock markets in
Europe, Australia and the Far East. This is calculated by Bernstein using
data from Datastream, International Financial Statistics (IFS), Morgan
Stanley Capital International (MSCI), Organization for Economic Cooperation
and Development (OECD) and Bernstein estimates. Calculation followed MSCI
methodology based on available data.
++ The IFCG Index is an unhedged index of emerging stock markets.
Source: International Finance Corporation, IFS, MSCI, Standard & Poor's and
Bernstein
- --------------------------------------------------------------------------------
Yet observe in Display 4, on the following page, what happened when the
stocks of the major developed markets of the world were combined into one
portfolio. The horizontal axis here measures volatility of returns for the
period; the vertical axis here measures return. The better the investment, the
higher and farther to the left it appears on the chart. Clearly, most developed
foreign markets by themselves were extremely volatile during this period. If you
invested 20% in a mixed basket of developed foreign market stocks (as the
Bernstein International Value Portfolio will do) and the remaining 80% in
domestic stocks (through other investments)--the spot marked "80% U.S./20% EAFE"
on the chart in Display 4--your risk/reward profile was superior to that of any
of these countries by themselves, the U.S. included.
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 19
<PAGE>
Display 4
Risk/Reward Positions: Jun 1976-Dec 1995
Based on Monthly Returns
[GRAPH]
Return(%) Risk(%)
--------- -------
S&P 500* 14.03% 14.55%
80% U.S./20% EAFE 14.08% 13.45%
EAFE** 13.53% 13.88%
Australia 11.20% 26.83%
Canada 8.85% 19.12%
Germany 12.24% 20.82%
Japan 15.76% 23.25%
Singapore 14.68% 26.08%
Switzerland 14.59% 18.13%
U.K. 16.41% 21.30%
* The Standard & Poor's 500 is a widely recognized index of large-cap stocks
traded on U.S. exchanges.
** EAFE index, half-hedged, GDP-weighted, includes developed stock markets in
Europe, Australia and the Far East. This is calculated by Bernstein using
data from Datastream, International Financial Statistics (IFS), Morgan
Stanley Capital International (MSCI), Organization for Economic Cooperation
and Development (OECD) and Bernstein estimates. Calculation followed MSCI
methodology based on available data.
Source: International Finance Corporation, IFS, MSCI, Standard & Poor's and
Bernstein
- --------------------------------------------------------------------------------
Likewise Display 5 depicts the result of combining the stocks of the various
emerging markets in a single portfolio. If you had invested just 5% of your
equity portfolio in the emerging-market stocks represented in the International
Finance Corporation Global Index (the "IFCG Index")--a widely recognized index
of emerging-market performance--and the rest in the stocks of the U.S. and other
major developed nations, you'd have further diversified your portfolio and
modestly reduced its risk.
- --------------------------------------------------------------------------------
Display 5
Risk/Reward Position: 1985-95
Based on Monthly Returns
[GRAPH]
Return(%) Risk(%)
--------- -------
95% Developed Markets/5% Emerging Markets 16.05% 14.06%
80% U.S./20% EAFE 16.05% 13.68%
IFCG Index 15.42% 22.87%
Mexico 29.50% 50.98%
Korea 19.28% 27.72%
Taiwan 20.93% 48.46%
India 12.04% 32.72%
Thailand 28.65% 30.44%
Malaysia 12.74% 27.26%
Note: EAFE index, half-hedged, GDP-weighted, includes developed stock markets in
Europe, Australia and the Far East. This is calculated by Bernstein using data
from Datastream, International Financial Statistics (IFS), Morgan Stanley
Capital International (MSCI), Organization for Economic Cooperation and
Development (OECD) and Bernstein estimates. Calculation followed MSCI
methodology based on available data. All countries and indicies are net dividend
returns except for the IFCG Index which is gross dividend returns.
Source: Datastream, IFS, NMSCI, OECD and Bernstein
- --------------------------------------------------------------------------------
Whether correlations among these markets will remain low is impossible to
predict based on so short a history, particularly given the variability of the
market correlations. Furthermore, the effect on smaller stock markets of a
severe downturn in U.S. stocks or a market dislocation elsewhere in the
developed world has not yet been tested. It's also important to understand that
the risk-reducing property of broad diversification is most manifest in the long
run; in any single year, global diversification may result in higher volatility
than a U.S.-only portfolio, and possibly lower return as well. But, over time,
there has clearly been advantage in spreading one's eggs among many baskets, and
in accessing a broad universe of opportunity.
The above displays on U.S., developed foreign and emerging stock market
returns should not be viewed as representations of future returns from these
stock markets, the Bernstein International Value Portfolio or the Bernstein
Emerging Markets Value Portfolio. The illustrated returns represent historical
investment performance and relative volatilities, which may not be
representative of future returns and volatilities. Moreover, stock market
indexes are based on unmanaged portfolios of securities before transaction costs
and other expenses; managed portfolios will incur these costs. Finally, each of
the Bernstein International Value Portfolio and the Bernstein Emerging Markets
Value Portfolio is likely to differ in composition from broad stock market
indexes, and so each Portfolio's performance should not be expected to mirror
the returns provided by any specific index.
The Bernstein Process
The return of an international portfolio to a U.S. investor depends on three
factors: (1) how the various foreign markets perform in a given period, (2) what
happens to foreign currencies in relation to the dollar during the period and
(3) what strategies the investment manager may employ in an attempt to control
risk and increase return. We at Bernstein employ active management in all three
areas, following a value-oriented investment approach backed by extensive
research capability.
- --------------------------------------------------------------------------------
20 Sanford C. Bernstein Fund, Inc.
<PAGE>
Value-Based Stock Selection
The bulk of our efforts is directed to stock selection. Our value-oriented
approach in foreign markets rests on our understanding that:
o Stock markets around the world are inefficient. Stocks often sell for
more or less than their intrinsic value because of emotional
overreactions among investors.
o Investment value depends on price. It's not just what you get when you
invest, but what you pay for it, that determines your return.
o High-quality research is required. It takes rigorous research to
capitalize on market inefficiencies--research focused on estimating
intrinsic value for a broad universe of companies, using the same
tools, techniques and economic assumptions in forecasting for each
company so that comparisons within and across markets will be sound.
o Value investing is a long-term pursuit. Around the world, as in the
U.S., stock prices are unpredictable in the short term; the benefits of
stock investing are captured more reliably over longer periods. As
master investor Benjamin Graham put it, the stock market is a voting
machine in the short run, a weighing machine in the long run.
Research-Backed Decision-Making
The research analyses supporting buy and sell decisions are fundamental and
bottom-up, based largely on specific company and industry findings rather than
on broad economic forecasts. Bernstein studies and experience suggest that
underpriced stocks as a class--those with low price/earnings ratios, low
price/book-value ratios and high dividend yields--have outperformed their peers
in the U.S., the developed foreign market countries and the emerging-market
countries. On reflection, this seems logical: American investors have no
monopoly on emotional overreaction to short-term difficulties in companies and
industries--the overreactions that depress and elevate particular stocks and
create investment value.
In addition to specific stock selection, we employ country-allocation and
currency-management techniques:
Country allocation: In order to attempt to capture the return potential and
diversification benefits of foreign markets, Bernstein's International Value
Portfolio concentrates in the most established companies of the major European
and Far Eastern nations plus Australia--the countries of the Morgan Stanley
Capital International "EAFE" index--and Canada, although this Portfolio may also
invest in less developed countries or emerging equity markets. Investment
decision-making for the Portfolio is systematic and centralized, pursued by an
investment policy group working in concert, and guided by the findings of our
global equity research staff.
Under most conditions, the Bernstein Emerging Markets Value Portfolio
intends to have its assets diversified among emerging-market countries. In
allocating the Portfolio's assets among emerging-market countries, Bernstein
will consider such factors as the geographical distribution of the Portfolio,
the sizes of the stock markets represented and the proportion of the oil
importing and exporting countries--factors which, in Bernstein's opinion, have
the most impact on portfolio risk. However, the Portfolio may not necessarily be
diversified on a geographical basis. Bernstein will also consider the
transaction costs and volatility of each individual market.
We monitor the levels of stock prices in relation to local market conditions
in the major foreign markets, seeking out instances when relationships deviate
from normal. When and where stock prices are abnormally low in our view in
relation to local conditions, we may overweight a country's stocks in our
Portfolios relative to our usual system of apportioning investment. When
opportunities appear smaller than usual--when stock prices are abnormally
high--we may underweight a country's stocks.
Currency management: In the case of the Bernstein International Value
Portfolio, we seek to control risk through currency-management techniques. We
monitor factors including the balance of trade flows and interest-rate
differentials in all the nations in which the Bernstein International Value
Portfolio invests to determine the fair values of the various currencies and
identify under- and overvaluations as they occur. The findings are accounted for
in our investment decisions. In the case of the Bernstein Emerging Markets Value
Portfolio, although we will hedge opportunistically when we believe there is
potential to enhance risk-adjusted returns, the exposures of this Portfolio will
generally be unhedged because, even when currency hedging is possible, it is
often prohibitively expensive.
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 21
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
OF THE PORTFOLIOS
Investment Objectives and Policies
Of the Fixed-Income Portfolios
General Investment Policies
Each Fixed-Income Portfolio evaluates a wide variety of instruments and issuers,
utilizing a variety of internally developed, quantitatively based valuation
techniques. Each of the Fixed-Income Portfolios may invest in any of the
securities detailed on pages 31-35. In addition, each of the Fixed-Income
Portfolios may use any of the special investment techniques, some of which are
commonly called derivatives, described on pages 35-37 to hedge various market
risks (such as interest rates, currency exchange rates and broad or
security-specific changes in the prices of fixed-income securities), to manage
the effective maturity or duration of fixed-income securities, to exploit
mispricings in the securities markets or as an alternative to activities in the
underlying cash markets. Except for those policies and objectives of each
Portfolio that are described in the Prospectus or SAI as fundamental, the
investment policies and objectives of each Portfolio may be changed by the
Fund's Board of Directors without shareholder approval. If there is a change in
investment policy or objective, shareholders should consider whether the
Portfolio remains an appropriate investment in light of their then-current
financial position and needs. There is no assurance that any Portfolio will
achieve its investment objective.
None of the Fixed-Income Portfolios will purchase any security if
immediately after that purchase less than 80% of the Portfolio's total assets
would consist of securities or commercial paper rated A or higher by Standard &
Poor's Corporation ("Standard & Poor's"), Fitch Investors Service, Inc.
("Fitch") or Moody's Investors Service, Inc. ("Moody's"); SP-1 by Standard &
Poor's, F-1 by Fitch, or MIG 1 or VMIG 1 by Moody's; A-1 by Standard & Poor's,
or P-1 by Moody's; or of securities and commercial paper that are not rated but
that are determined by the Manager to be of comparable quality. In addition,
none of the Fixed-Income Portfolios will purchase a security or commercial paper
rated less than B by Standard & Poor's, Fitch or Moody's; less than A-2 or SP-2
by Standard & Poor's, less than F-2 by Fitch, or less than P-2, MIG 2 or VMIG 2
by Moody's; or securities and commercial paper that are not rated but that are
determined by the Manager to be of comparably poor quality. In the event of
differing ratings, the higher rating shall apply. The impact of changing
economic conditions, investment risk and changing interest rates is increased by
investing in securities rated below A by Standard & Poor's, Fitch or Moody's;
below SP-1 or A-1 by Standard & Poor's, below F-1 by Fitch, or below MIG 1, VMIG
1 or P-1 by Moody's. In addition, the secondary trading market for lower-rated
bonds may be less liquid than the market for higher-grade bonds. Accordingly,
lower-rated bonds may be difficult to value accurately. Securities rated BBB by
Standard & Poor's and Fitch or Baa by Moody's are investment grade. Securities
that are rated BB or B by Standard & Poor's and Fitch, or Ba or B by Moody's are
considered to be speculative with regard to the payment of interest and
principal. Each Fixed-Income Portfolio, at the time of purchase, may invest as
much as 20% of its total assets in securities of foreign issuers, including
Eurobonds, Yankees (other than Yankees included in the Lehman Brothers Aggregate
Bond Index which are considered to be issued by domestic issuers for this
purpose) and obligations of foreign banks that are securities of foreign
issuers, including foreign governments.
No Fixed-Income Portfolio (other than the Short Duration Municipal
Portfolios) will invest in an illiquid security if, at the time of purchase, the
value of such illiquid security together with other securities that are not
readily marketable would exceed 10% of the net assets of the Portfolio. No Short
Duration Municipal Portfolio will invest in an illiquid security if, at the time
of purchase, the value of such illiquid security together with other securities
that are not readily marketable would exceed 15% of the net assets of the
Portfolio.
In addition to these policies, which govern all Fixed- Income Portfolios,
individual Portfolios have individual policies, discussed hereafter, pertaining
to the minimum ratings and types of investments permitted, as well as the
effective duration and average maturity of the Portfolio. Effective duration, a
statistic that is expressed in time periods, is a measure of the exposure of the
Portfolio to changes in interest rates. Unlike maturity, which is the latest
possible date for the final payment to be received from a bond, effective
duration is a measure of the timing of all the expected interest and principal
payments. The actual duration of each of the Fixed-Income Portfolios may vary,
depending on the Manager's interest-rate forecast. When interest rates are
expected to rise, the duration is shortened. When interest rates are expected to
fall, the duration is lengthened.
The maturity composition of each of the Fixed-Income Portfolios may also
vary, depending upon the shape of the yield curve and opportunities in the bond
market, at times
- --------------------------------------------------------------------------------
22 Sanford C. Bernstein Fund, Inc.
<PAGE>
being concentrated in the middle part of the targeted range, while at other
times consisting of a greater amount of securities with maturities that are
shorter and others that are longer than the targeted range.
Generally, the value of debt securities changes as the general level of
interest rates fluctuates. During periods of rising interest rates, the values
of fixed-income securities generally decline. Conversely, during periods of
falling interest rates, the values of these securities nearly always increase.
Generally, the longer the maturity or effective duration, the greater the
sensitivity of the price of a fixed-income security to any given change in
interest rates. The value of each Portfolio's shares fluctuates with the value
of its investments.
Individual Portfolios' Policies
The Short Duration Taxable Portfolios
The Bernstein Government Short Duration Portfolio invests in a diversified
portfolio of securities that it believes offer the highest expected returns to
investors consistent with a prudent level of credit risk. This Portfolio intends
to invest, under normal market conditions, at least 65% of its total assets in
U.S. government and agency securities. In addition, the Portfolio intends to
invest, under normal market conditions, at least 90% of its total assets in U.S.
government and agency securities and high-quality money-market securities--i.e.,
securities with remaining maturities of one year or less that have been rated AA
or better by Standard & Poor's or Aa by Moody's, or that are not rated but that
are determined by the Manager to be of comparable quality. Shareholders'
investments in this Portfolio are not insured by the U.S. government. To the
extent that this Portfolio is invested in government securities, its income is
generally not subject to state and local income taxation. Certain states allow a
pass-through to the individual shareholders of the tax-exempt character of this
income for purposes of those states' taxes.
The Bernstein Government Short Duration Portfolio will purchase only
securities rated A or better by Standard & Poor's, Fitch or Moody's; commercial
paper rated A-1 by Standard & Poor's, F-2 by Fitch or P-1 by Moody's; or
securities and commercial paper that are not rated but that are determined by
the Manager to be of comparable quality.
Since this Portfolio is invested in securities with longer maturities than
the assets of the type of mutual fund known as a money-market mutual fund, its
expected return is somewhat higher. However, since its effective duration is
longer, and the quality of the portfolio securities may be lower, the risk of a
decline in the market value of the Portfolio is also greater than for a
money-market fund that seeks to maintain a stable net asset value.
Although the actual maturities of the securities in the Portfolio may vary
widely, the Portfolio intends to maintain an effective duration of one to three
years under normal market conditions. The average dollar-weighted maturity of
the Portfolio may range from one to 20 years while maintaining the required
duration. The relatively short-term nature of the Portfolio makes it appropriate
for consideration as a temporary investment.
The pretax returns on the Bernstein Government Short Duration Portfolio are
likely to be lower than those on the Bernstein Short Duration Plus Portfolio.
Since the income earned by the Bernstein Government Short Duration Portfolio is
generally exempt from state and local taxes, it may not be appropriate for
investors, such as pension plans and IRAs, that are not subject to current state
or local income taxation. Shareholders may wish to consult a tax advisor about
the status of distributions from the Portfolios in their individual states or
localities.
The Bernstein Short Duration Plus Portfolio invests in a diversified
portfolio of securities that it believes offer the highest expected returns to
investors consistent with a prudent level of credit risk. The Bernstein Short
Duration Plus Portfolio should produce higher returns than the Bernstein
Government Short Duration Portfolio because it will normally own a much higher
percentage of securities that are not U.S. government securities. Because the
Bernstein Short Duration Plus Portfolio is managed without regard to potential
tax consequences, it may be particularly appropriate for investors, such as
pension plans and IRAs, that are not subject to current income taxation, as well
as individuals who reside in states with low or no state taxes or who reside in
high-tax states that do not permit a pass- through to the individual shareholder
of the tax-exempt character of this income.
Like the Government Short Duration Portfolio, the Short Duration Plus
Portfolio is invested in securities with longer maturities than the assets of
the type of mutual fund known as a money-market mutual fund, and its expected
return is somewhat higher. Although the actual maturities of the securities in
the Portfolio may vary widely, the effective duration of this Portfolio--which
is expected to be one to three years under normal market conditions--is longer
than the effective duration of money markets. The average dollar-weighted
maturity of the Portfolio may range from one to 25 years while maintaining the
required duration. Since the effective duration of this Portfolio is longer, and
the quality of the portfolio securities may be lower, the risk of a decline in
the market value of the Portfolio is greater than for a money-market fund that
seeks to maintain a stable net asset
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Prospectus--January 31, 1997 23
<PAGE>
value. The relatively short-term nature of the Portfolio makes it appropriate
for consideration as a temporary investment.
The Intermediate Duration Taxable Portfolio
The Bernstein Intermediate Duration Portfolio invests in a diversified portfolio
of securities that it believes offer the highest expected return consistent with
a prudent level of risk. While the actual maturities of the securities in the
Portfolio may vary widely, the Portfolio intends to maintain an effective
duration of three to six years under normal market conditions. The average
dollar-weighted maturity of the Portfolio may range from two to 25 years while
maintaining the required duration. The Portfolio will not purchase any security
if immediately after that purchase less than 65% of the Portfolio's total assets
would consist of securities rated AA or higher by Standard & Poor's or Aa or
higher by Moody's or of securities that are not rated but that are determined by
the Manager to be of comparable quality.
Because the Bernstein Intermediate Duration Portfolio is managed without
regard to potential tax consequences to the shareholder, it may be particularly
appropriate for investors, such as pension plans and IRAs, not subject to
current federal income taxation.
The Municipal Portfolios
As a fundamental policy, each of the six municipal Portfolios will invest, under
normal market conditions, at least 80% of its net assets in Municipal
Securities. "Municipal Securities" are securities issued by states and their
various political subdivisions along with agencies and instrumentalities of
states and their various political subdivisions and by possessions and
territories of the United States, such as Puerto Rico, the Virgin Islands and
Guam and their various political subdivisions. The income from these securities
is exempt from federal taxation or, in certain instances, may be includable in
income subject to the alternative minimum tax.
In addition to Municipal Securities, each municipal Portfolio may invest in
non-municipal securities when, in the opinion of the Manager, the inclusion of
the non-municipal security will enhance the expected after-tax return of the
Portfolio in accordance with the Portfolio's objectives.
The Short Duration Municipal Portfolios. Since the Short Duration Municipal
Portfolios are invested in securities with longer maturities than the assets of
the type of mutual fund known as a municipal money-market mutual fund, their
expected return is somewhat higher. However, since their effective duration is
longer, and the quality of the Portfolio securities may be lower, the risk of a
decline in the market value of the Portfolio is also greater than for a
municipal money-market fund that seeks to maintain a stable net asset value.
While the maturities of the securities in each Short Duration Municipal
Portfolio may vary widely, each Portfolio is designed generally to maintain an
effective duration of one-half year to two and one-half years under normal
market conditions. The average dollar-weighted maturity of each Short Duration
Municipal Portfolio may range from six months to 20 years while maintaining the
required duration. The relatively short-term nature of the Portfolios makes them
appropriate for consideration as a temporary investment.
The Intermediate Duration Municipal Portfolios. While the maturities of the
securities in each of the Bernstein New York Municipal Portfolio, the Bernstein
California Municipal Portfolio and the Bernstein Diversified Municipal Portfolio
(the "Intermediate Duration Municipal Portfolios") may vary widely, each
Intermediate Duration Municipal Portfolio is designed generally to maintain a
level of risk comparable to that of an intermediate portfolio of securities with
an average effective duration of four to seven years. The average
dollar-weighted maturity of each municipal Portfolio may range from two to 25
years while maintaining the required duration.
The New York Municipal Portfolios
The Bernstein Short Duration New York Municipal Portfolio and the Bernstein New
York Municipal Portfolio. Each of the Bernstein Short Duration New York
Municipal Portfolio and the Bernstein New York Municipal Portfolio (the "New
York Municipal Portfolios") invest in those securities which it believes offer
the highest after-tax returns for New York residents (without regard to any
alternative minimum tax) consistent with a prudent level of credit risk. Each
New York Municipal Portfolio will invest, under normal market conditions, at
least 65% of its total assets in securities issued by New York State and its
various political subdivisions along with agencies and instrumentalities of New
York State and its various political subdivisions ("New York Municipal
Securities"). The income from these securities is exempt from federal, New York
State and local taxes or, in certain instances, may be includable in income
subject to the alternative minimum tax.
Each New York Municipal Portfolio is a non-diversified portfolio under the
Investment Company Act of 1940 (the "1940 Act"). Nonetheless, the Fund intends
to qualify each New York Municipal Portfolio, like each of the other Portfolios,
as a "regulated investment company" for purposes of the Internal Revenue Code of
1986, as amended. This will require, at the close of each quarter of each fiscal
year, that at least 50% of the market value of each New York Municipal
Portfolio's total assets be represented by cash, cash items, U.S. government
securities and other securities limited, in
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24 Sanford C. Bernstein Fund, Inc.
<PAGE>
respect to any one issuer, to an amount no greater than 5% of such Portfolio's
total assets, and that each New York Municipal Portfolio invest no more than 25%
of the value of its total assets in the securities of any one issuer (other than
the U.S. government). If either New York Municipal Portfolio's assets consist of
the securities of a small number of issuers, any change in the market's
assessment, or in the financial condition, of any one of those issuers could
have a significant impact on the performance of such Portfolio.
Because each New York Municipal Portfolio invests primarily in New York
Municipal Securities, each Portfolio's performance is closely tied to economic
conditions within the State of New York and the financial condition of the State
and its agencies and municipalities. The following information concerning the
State's economic background is contained in the Annual Information Statement of
the State of New York dated July 26, 1996 which is part of an Official Statement
dated July 31, 1996 relating to the sale of $75,630,000 of State of New York
General Obligation Bonds and the update to the Annual Information Statement
dated October 29, 1996 issued by the State of New York.
New York is the third most populous state in the nation and has a relatively
high level of personal wealth. During the 1982-83 recession, overall economic
activity in the State declined less than that of the nation as a whole. However,
in the calendar years 1987 through 1995, the State's rate of economic growth was
somewhat slower than the rest of the nation. In particular, during the 1990-91
recession and post-recession period, the economy of the State and that of the
rest of the Northeast was more heavily damaged than that of the nation as a
whole and has been slower to recover. The total employment growth rate in the
State has been below the national average since 1987. The unemployment rate in
the State dipped below the national rate in the second half of 1981 and remained
lower until 1991.
In recent years, State actions affecting the level of receipts and
disbursements, the relative strength of the State and regional economy, actions
of the federal government and other factors have created structural budget gaps
for the State. These gaps resulted from a significant disparity between
recurring revenues and the costs of maintaining or increasing the level of
support for State programs. To address a potential imbalance in any given fiscal
year, the State would be required to take actions to increase receipts and/or
reduce disbursements as it enacts the budget for that year, and under the State
Constitution, the Governor is required to propose a balanced budget each year.
There can be no assurance, however, that the Legislature will enact the
Governor's proposals or that the State's actions will be sufficient to preserve
budgetary balance in a given fiscal year or to align recurring receipts and
disbursements in future fiscal years.
The 1996-97 State Financial Plan was projected to be balanced on a cash
basis. The State issued its first update to the cash-basis 1996-97 State
Financial Plan (the "Mid-Year Update") on October 25, 1996. Although revisions
to the 1996-97 State Financial Plan contained in the Mid-Year Update are
favorable, the State faces certain risks which could potentially cost the State
up to one-half billion dollars. One major uncertainty to the 1996-97 State
Financial Plan continues to be risks related to the economy and tax collections,
which could produce either favorable or unfavorable variances during the balance
of the year. While adjustments to the forecast have been made to reflect recent
economic events, it is possible that an increase in interest rates or the impact
of cost-cutting measures in the health care industry could produce slower
economic growth and a deterioration in State receipts. An additional risk to the
1996-97 State Financial Plan arises from the potential impact of certain
litigation now pending against the State, which could produce adverse effects on
the State's projections of receipts and disbursements. Similarly, certain
litigation which by itself did not produce a material judgment against the State
could have an adverse impact on the State Financial Plan because of the
precedential nature of the court's decision.
On August 13, 1996, the State Comptroller released a report entitled "The
1996-97 Budget: Fiscal Review and Analysis" in which he identified several risks
to the State Financial Plan and estimated that the State faces a potential
imbalance in receipts and disbursements of approximately $3 billion for the
State's 1997-98 fiscal year and approximately $3.2 billion for the State's
1998-99 fiscal year.
The economic and financial condition of the State may be affected by various
financial, social, economic and political factors. These factors can be very
complex, may vary from fiscal year to fiscal year and are frequently the result
of actions taken not only by the State and its agencies and instrumentalities,
but also by entities, such as the federal government, that are not under the
control of the State. For example, various proposals relating to federal tax and
spending policies that are currently being publicly discussed and debated could,
if enacted, have a significant impact on the State's financial condition in the
current and future fiscal years. Because of the uncertainty and unpredictability
of the changes, their impact cannot, as a practical matter, be included in the
assumptions underlying the State's projections at this time.
The fiscal health of the State may also be impacted by the fiscal health of
New York City (the "City"), which continues
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Prospectus--January 31, 1997 25
<PAGE>
to require significant financial assistance from the State. The City's Financial
Plan includes its capital, revenue and expense projections and outlines proposed
gap-closing programs for years with projected budget gaps. The City's
projections set forth in the Financial Plan are based on various assumptions and
contingencies, some of which are uncertain and may not materialize. Unforeseen
developments and changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and to meet its
annual cash flow and financing requirements. Implementation of the Financial
Plan is also dependent upon the ability of the City and certain Covered
Organizations (i.e., those which receive or may receive moneys from the City
directly, indirectly or contingently) to market their securities successfully.
The City issues securities to finance, refinance and rehabilitate infrastructure
and other capital needs, as well as for seasonal financing needs. The City
currently projects that if no action is taken, it will exceed its State
Constitutional general debt limit beginning in City fiscal year 1998. The
current Financial Plan includes certain alternative methods of financing a
portion of the City's capital program which require State or other outside
approval. Future developments concerning the City or certain of the Covered
Organizations, and public discussion of such developments, as well as prevailing
market conditions and securities credit ratings, may affect the ability or cost
to sell securities issued by the City or such Covered Organizations and may also
affect the market for their outstanding securities.
Further discussion of the risks associated with the purchase of New York
issues is contained in the SAI.
The New York Municipal Portfolios are not appropriate for tax-exempt
investors. Moreover, because the New York Municipal Portfolios seek income
exempt from New York State and local taxes as well as federal income tax, such
Portfolios may not be appropriate for taxable investors, such as non-New York
State residents, who are not subject to New York State income taxes.
Shareholders may wish to consult a tax advisor about the status of distributions
from the Portfolios in their individual states or localities.
The California Municipal Portfolios
The Bernstein Short Duration California Municipal Portfolio and the Bernstein
California Municipal Portfolio. Each of the Bernstein Short Duration California
Municipal Portfolio and the Bernstein California Municipal Portfolio (the
"California Municipal Portfolios") invests in those securities which it believes
offer the highest after-tax returns for California residents (without regard to
any alternative minimum tax) consistent with a prudent level of credit risk.
Each California Municipal Portfolio will invest, under normal market conditions,
at least 65% of its total assets in securities issued by the State of California
and its various political subdivisions, along with agencies and
instrumentalities of the State of California and its various political
subdivisions ("California Municipal Securities"). The income from these
securities is exempt from federal and California personal income taxes but, in
certain instances, may be includable in income subject to the alternative
minimum tax.
Each California Municipal Portfolio is a non-diversified portfolio under the
1940 Act. Nonetheless, the Fund intends to qualify each California Municipal
Portfolio as a "regulated investment company" for purposes of the Internal
Revenue Code of 1986, as amended. This will require, at the close of each
quarter of each fiscal year, that at least 50% of the market value of each
California Municipal Portfolio's total assets be represented by cash, cash
items, U.S. government securities and other securities limited, in respect to
any one issuer, to an amount no greater than 5% of such Portfolio's total
assets, and that each California Municipal Portfolio invest no more than 25% of
the value of its total assets in the securities of any one issuer (other than
the U.S. government). If either California Municipal Portfolio's assets consist
of the securities of a small number of issuers, any change in the market's
assessment, or in the financial condition, of any one of those issuers could
have a significant impact on the performance of such Portfolio.
Because each California Municipal Portfolio invests primarily in California
Municipal Securities, each such Portfolio's performance is closely tied to
economic conditions within the State of California and the financial condition
of the State and its agencies and municipalities. The following information
regarding the State is contained in an Official Statement dated November 1,
1996, issued in connection with the sale of $500 million of California Various
Purpose General Obligation Bonds.
California's economy is the largest among the 50 states and one of the
largest in the world. A recession began in mid-1990 which severely affected the
State General Fund revenues, and increased expenditures above initial budget
appropriations due to greater health and welfare costs. The State's budget
problems in recent years have also been caused by a structural imbalance in that
the largest General Fund Programs--K-14, education, health, welfare and
corrections--were increasing faster than the revenue base, driven by the State's
rapid population growth. These pressures are expected to continue as population
trends maintain strong demand for health and welfare services, as the school age
population continues to grow and as the correction program responds to the
State's "Three Strikes" law, enacted in 1994, which requires mandatory life
prison
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26 Sanford C. Bernstein Fund, Inc.
<PAGE>
terms for certain third-time felony offenders. As a result of these factors and
others, from the late 1980s until 1992-93, the State had a period of budget
imbalance. During this period, expenditures exceeded revenues in four out of the
six years, and the State accumulated and sustained a budget deficit in the
Special Fund for Economic Uncertainties approaching $2.8 billion at its peak at
June 30, 1993.
The State entered the 1995-96 Fiscal Year budget negotiations with the
smallest nominal "budget gap" to be closed in many years. Nonetheless, serious
policy differences between the Governor and the Legislature prevented timely
enactment of the budget. The 1995-96 Budget Act was signed by the Governor on
August 3, 1995, 34 days after the start of the fiscal year. The Department of
Finance's May Revision to the 1996-97 Governor's Budget updated the projections
for the 1995-96 Fiscal Year so that revenues and transfers were estimated to be
$46.1 billion. Expenditures also increased, to an estimated $45.6 billion, as a
result of the requirement to expend revenues for schools under Proposition 98,
and, among other things, failure of the federal government to enact welfare
reform and to budget new aid for illegal immigrant costs, both of which the
Administration had counted on to allow reductions in State costs.
The 1996-97 Budget Act was signed by the Governor on July 15, 1996. The
Budget Act assumed savings of approximately $660 million in health and welfare
costs which required changes in federal law, including federal welfare reform.
The Budget Act further assumed federal law changes in August 1996 which would
allow welfare cash grant levels to be reduced by October 1, 1996. These cuts
totaled approximately $163 million of the anticipated $660 million savings. The
Budget Act assumed the federal government will provide approximately $700
million in new aid for incarceration and health care costs of illegal
immigrants. These funds reduce appropriations in these categories that would
otherwise have to be paid from the General Fund.
Following the enactment of the 1996-97 Budget Act, Congress passed and the
President signed the Personal Responsibility and Work Opportunity Act of 1996
(the "Law") making a fundamental reform of the current welfare system. The Law
includes conversion of Aid to Families with Dependent Children from an
entitlement program to a block grant titled Temporary Assistance for Needy
Families (TANF). The Law requires states to implement the new TANF program not
later than July 1, 1997. The California State Plan is to be submitted in time to
allow grant reductions to be implemented effective January 1, 1997 (allowing $92
million of the $163 million referred to above to be saved). None of the other
federal changes needed to achieve the balance of the $660 million cost savings
were enacted. Thus, in lieu of the $660 million savings initially assumed to be
saved, it is now projected that savings will total approximately $360 million. A
preliminary analysis of the Law by the Legislative Analyst's Office indicates
that an overall assessment of how these changes will affect the State's General
Fund will not be known for some time, and will depend on how the State
implements the Law.
The following information is contained in a Preliminary Official Statement
dated December 6, 1996 in connection with the sale of $306,815,000 County of
Alameda 1996 Taxable Pension Obligation Bonds, Series B. On November 5, 1996,
California voters approved the Right to Vote on Taxes Act ("Proposition 218")
which requires voter approval for the imposition, extension or increase of taxes
by a local government. Proposition 218 also provides that any general tax
imposed without voter approval by any local government on or after January 1,
1995 will continue to be imposed only if approved by a majority vote.
Proposition 218 also extends to reducing or repealing local property-related
taxes regardless of the date such taxes were imposed. This extension of the
initiative power is not limited by the terms of Proposition 218 to impositions
after November 6, 1996 and could result in retroactive reduction in any existing
taxes, assessments, fees and charges. Proposition 218 could substantially
restrict the ability of California localities to raise future revenues, and
could subject their existing sources of revenue to reduction or repeal, and
increase their costs to hold elections, calculate fees and assessments, notify
the public and defend fees and assessments in court.
Further discussion of the risks associated with the purchase of California
Municipal Securities is contained in the SAI.
The California Municipal Portfolios are not appropriate for tax-exempt
investors. Moreover, because the California Municipal Portfolios seek income
exempt from California personal income taxes as well as federal income tax, the
California Municipal Portfolios may not be appropriate for taxable investors,
such as non-California residents, who are not subject to California personal
income taxes. Shareholders may wish to consult a tax advisor about the status of
distributions from the Portfolio in their individual states or localities.
The Diversified Municipal Portfolios
The Bernstein Short Duration Diversified Municipal Portfolio and the Bernstein
Diversified Municipal Portfolio. Each of the Bernstein Short Duration
Diversified Municipal Portfolio and the Bernstein Diversified Municipal
Portfolio (the "Diversified Municipal Portfolios") invests in a diversified
portfolio of securities which it believes offers the
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Prospectus--January 31, 1997 27
<PAGE>
highest after-tax returns (without regard to any alternative minimum tax) to
investors consistent with a prudent level of credit risk. No Diversified
Municipal Portfolio will purchase a security if such purchase would result in
the Portfolio, at the time of such purchase, having more than 25% of its total
assets in Municipal Securities of issuers located in any one state. Neither
Diversified Municipal Portfolio is appropriate for tax-exempt investors under
normal market conditions.
Investment Objectives and Policies of
The International Value Portfolio
And the Emerging Markets Value Portfolio
The Bernstein International Value Portfolio and the Emerging Markets Value
Portfolio seek long-term capital growth on a total-return basis (capital
appreciation or depreciation plus dividends and interest). The International
Value Portfolio will invest primarily in equity securities of established
foreign companies, as described on page 35, and the Emerging Markets Value
Portfolio will invest primarily in equity securities of both large and small
companies domiciled, or with primary operations in, emerging-market countries.
The International Value Portfolio will invest in a diversified portfolio of
securities that the Manager considers most undervalued. The Portfolio intends to
diversify investments among many foreign countries; it will generally be
invested in countries that comprise the EAFE index (Europe, Australia and the
Far East) and Canada. EAFE countries currently include Australia, Austria,
Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan,
Malaysia, the Netherlands, New Zealand, Norway, Singapore, Spain, Sweden,
Switzerland and the United Kingdom. The Portfolio may also make investments in
less developed or emerging equity markets.
The Emerging Markets Value Portfolio will invest in a diversified portfolio
of securities that the Manager considers most undervalued. As used in this
prospectus, emerging-market countries are those countries that, in the opinion
of Bernstein, are considered to be developing countries by the international
financial community, and will include those countries considered by the
International Finance Corporation, a subsidiary of the World Bank ("IFC"), to
have an "emerging stock market." Examples of emerging-market countries are
Argentina, Brazil, Chile, Greece, India, Indonesia, Israel, Malaysia, Mexico,
the People's Republic of China, the Philippines, Portugal, South Africa, South
Korea, Taiwan, Thailand and Turkey.
Shareholders of the Bernstein International Value Portfolio and the
Bernstein Emerging Markets Value Portfolio should be aware that investments in
foreign securities entail significant risks in addition to those customarily
associated with investing in U.S. equities; moreover, certain of the risks
associated with international investing are heightened with respect to
investments in emerging-market countries. Investing in less developed or
emerging-market countries involves exposure to economic structures that are
generally less diverse and mature, and to political systems that can be expected
to have less stability than those of developed countries. The Bernstein Emerging
Markets Value Portfolio is intended for long-term investors who can accept the
risks associated with the Portfolio's investments and is not appropriate for
individuals with limited investment resources or who are unable to tolerate
fluctuations in the value of their investment. The Portfolio should be
considered as a vehicle for diversification and not as a balanced investment
program. See "Investment Risks of the Bernstein International Value Portfolio
and the Bernstein Emerging Markets Value Portfolio" on page 29.
Under normal market conditions, at least 65% of the Bernstein International
Value Portfolio's total assets will be invested in at least three foreign
countries and at least 65% of the Bernstein Emerging Markets Value Portfolio's
total assets will be invested in at least three emerging-market countries. Under
exceptional conditions abroad or when the Manager believes that economic or
market conditions warrant, either Portfolio may temporarily, for defensive
purposes, invest part or all of its portfolio in U.S. government obligations or
investment grade debt or equity securities of U.S. issuers. Either Portfolio may
invest in fixed-income securities and enter into foreign currency exchange
contracts and options on foreign currencies and it may utilize options on
securities and securities indexes and futures contracts and options on futures.
See the sections on "Investments" and "Special Investment Techniques" on pages
31-37. Neither Portfolio will invest more than 5% of its total assets in
restricted securities (other than securities eligible for resale under Rule 144A
of the Securities Act of 1933). In addition, neither Portfolio will invest in an
illiquid security if, at the time of purchase, the value of such illiquid
security together with other securities that are not readily marketable would
exceed 15% of the net assets of the Portfolio.
The above policies and objectives are not fundamental and may be changed by
the Fund's Board of Directors without shareholder approval. If there is a change
in investment policy or objective, shareholders should consider whether the
Portfolio remains an appropriate investment in light of their then-current
financial position and needs.
Both the Bernstein International Value Portfolio and the Bernstein Emerging
Markets Value Portfolio have adopted
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28 Sanford C. Bernstein Fund, Inc.
<PAGE>
certain fundamental investment limitations. As a fundamental policy, neither
Portfolio will:
(a) with respect to 75% of its total assets, invest more than 5% of its
total assets in the securities of any one issuer if, as a result of the
purchase, less than 75% of the Portfolio's assets consists of cash and
cash items, Government securities, securities of other investment
companies and other securities, limited, in respect of any one issuer,
to an amount not greater in value than 5% of the value of the
Portfolio's total assets and to not more than 10% of the outstanding
voting securities of such issuer;
(b) invest more than 25% of its total assets in any one industry; or
(c) borrow money except that either Portfolio may borrow money for
temporary or emergency purposes in an amount not exceeding 33 1/3% of
its total assets. As an operating (not a fundamental) policy, neither
Portfolio will borrow except from a bank for temporary or emergency
purposes in amounts in excess of 5% of its total assets.
The SAI contains certain investment restrictions pertaining to the Bernstein
International Value Portfolio, the Bernstein Emerging Markets Value Portfolio
and the Bernstein Fixed-Income Portfolios.
The Bernstein International Value Portfolio and the Bernstein Emerging
Markets Value Portfolio may invest uncommitted cash balances in fixed-income
securities. Fixed-income securities may also be held to maintain liquidity to
meet shareholder redemptions, and, although the situation occurs infrequently,
these securities may be held in place of equities when the Manager believes that
fixed-income securities will provide total returns comparable to or better than
those of equity securities.
With respect to the Bernstein International Value Portfolio, fixed-income
securities include obligations of the U.S. or foreign governments and their
political subdivisions; obligations of agencies and instrumentalities of the
U.S. government; and bonds, debentures, notes, commercial paper, bank
certificates of deposit, repurchase agreements and other similar corporate debt
instruments of U.S. or foreign issuers that at the time of purchase are rated
BBB, A-2, SP-2 or higher by S&P, or Baa, P-2 or higher by Moody's; or, if
unrated, are in the Manager's opinion comparable in quality. Securities that are
rated BBB, A-2 or SP-2 by S&P or Baa or P-2 by Moody's are investment grade (for
a description of these rating categories, see the Appendix to the SAI). These
securities may have speculative characteristics, and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher-rated
securities. Bonds with investment grade ratings at time of purchase may be
retained, in the Manager's discretion, in the event of a rating reduction. Under
exceptional conditions abroad, or when it is believed that economic or market
conditions warrant, the Portfolio may temporarily, for defensive purposes,
invest all of its portfolio in fixed-income obligations of the U.S. government
or fixed-income or equity securities of U.S. issuers.
With respect to the Bernstein Emerging Markets Value Portfolio, fixed-income
securities include obligations of the U.S. or foreign governments and their
political subdivisions; obligations of agencies and instrumentalities of the
U.S. government; bonds, debentures, notes, commercial paper, bank certificates
of deposit, repurchase agreements and other similar corporate debt instruments
of U.S. or foreign issuers. Most fixed-income instruments of emerging-market
companies and countries are rated below investment grade or are unrated but
equivalent to those rated below investment grade by internationally recognized
rating agencies such as Standard & Poor's and Moody's. Securities that are rated
BBB, A-2, or SP-2 by S&P or Baa or P-2 by Moody's are investment grade (for a
description of these ratings categories, see the Appendix to the SAI). The
Portfolio will generally invest less than 35% of its total assets in
fixed-income securities. Securities rated in the medium- to lower-rating
categories of nationally recognized statistical rating organizations and unrated
securities of comparable quality are predominately speculative with respect to
the capacity to pay interest and repay principal in accordance with the terms of
the security and generally involve a greater volatility of price than securities
in higher rating categories. The Portfolio does not intend to purchase debt
securities that are in default.
Investment Risks of the Bernstein International
Value Portfolio and the Bernstein Emerging
Markets Value Portfolio
Market risk: Since each of the Bernstein International Portfolio and the
Bernstein Emerging Markets Value Portfolio invests primarily in equity
securities, each Portfolio, like any equity portfolio, is vulnerable to market
risk--the possibility that stock prices in general will decline over short or
even extended periods. Moreover, each Portfolio's composition is likely to
differ from that of broad market indexes, and its performance should not be
expected to mirror the returns provided by a specific index. Stock prices are
volatile from year to year; accordingly, these Portfolios are suited to
investors who are willing to hold their investment over a long horizon.
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Prospectus--January 31, 1997 29
<PAGE>
The securities markets in many emerging-market countries are substantially
smaller, less developed, less liquid and more volatile than the securities
markets of developed countries. In addition, to take advantage of potential
value opportunities, the Bernstein Emerging Markets Value Portfolio may invest
in relatively small companies. Securities of smaller companies may be subject to
more abrupt or erratic market movements than the securities of larger, more
established companies, both because the securities are typically traded in lower
volume and because the companies are subject to greater business risk.
In certain emerging-market countries, volatility may be heightened by
actions of a few major investors. For example, substantial increases or
decreases in cash flows of mutual funds investing in these markets could
significantly affect local stock prices and, therefore, share prices of the
Bernstein Emerging Markets Value Portfolio. Moreover, some emerging-market
securities may be listed on foreign exchanges that are open on days (such as
Saturdays) when the Portfolio does not calculate a net asset value. As a result,
the Bernstein Emerging Markets Value Portfolio's net asset value may be
significantly affected by trading on days when shareholders cannot make
transactions. In addition, trading in emerging markets can be more difficult;
thus, there is a risk that an investor in the Bernstein Emerging Markets Value
Portfolio may not be able to readily redeem his or her shares in the Portfolio.
Foreign currency risk: Returns on foreign securities are influenced by
currency risk as well as equity risk. Foreign securities are denominated in
foreign currencies, which may change in value in relation to the U.S. dollar,
possibly for protracted periods of time. When a foreign currency rises against
the U.S. dollar, the returns on foreign stocks for a U.S. investor will also
rise; when a foreign currency declines in value in relation to the U.S. dollar,
the returns on foreign stocks for a U.S. investor will also fall. Many emerging-
market countries have experienced substantial, and in some cases extremely high,
rates of inflation for many years. Inflation and rapid fluctuations in inflation
rates have had, and may continue to have, negative effects on the economies and
securities markets of certain emerging-market countries. In addition, it is
possible that foreign governments will impose currency exchange control
regulations or other restrictions that would prevent cash from being brought
back to the U.S. Emerging-market governments may also intervene in currency
markets or interpose registration/approval processes, which could adversely
affect the Portfolio.
Other risks: Other risks and considerations of international investing
include the availability of less public information with respect to issuers of
securities; less governmental supervision of brokers and issuers of securities;
lack of uniform accounting, auditing and financial reporting standards; a
generally lower degree of market volume and liquidity than that available in
U.S. markets, which may result in greater price volatility; settlement practices
that may include delays and otherwise differ from those in U.S. markets; the
possibility of expropriation or confiscatory taxation; the imposition of foreign
taxes; and possible political instability in some countries, which could affect
U.S. investment in these countries. Investments in foreign securities will also
result in generally higher expenses due to the costs of currency exchange;
payment of fixed brokerage commissions in certain foreign markets, which
generally are higher than commissions on U.S. exchanges; and the expense of
maintaining securities with foreign custodians.
In addition to the foregoing, other risks and considerations of investing in
companies in emerging markets include:
Social, political and economic instability: Investments in emerging-market
countries involve exposure to a greater degree of risk due to increased
political and economic instability. Instability may result from, among other
factors: (i) authoritarian governments or military involvement in political and
economic decision-making, including changes in government through
extra-constitutional means; (ii) popular unrest associated with demands for
improved political, economic and social conditions; (iii) internal insurgencies;
(iv) hostile relations with neighboring countries; (v) ethnic, religious and
racial disaffection; and (vi) changes in trading status.
Certain emerging-market countries have histories of instability and upheaval
with respect to their internal politics that could cause their governments to
act in a detrimental or hostile manner toward private enterprise or foreign
investment. Such actions--for example, nationalizing a company or industry,
expropriating assets or imposing punitive taxes--could have a severe effect on
security prices and impair the Bernstein Emerging Markets Value Portfolio's
ability to repatriate capital or income. The possibility exists that recent
favorable economic developments in certain emerging-market countries may be
suddenly slowed or reversed by unanticipated political or social events in those
countries, and that economic, political and social instability could disrupt the
principal financial markets in which the Portfolio invests and adversely affect
the value of the Portfolio's assets.
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30 Sanford C. Bernstein Fund, Inc.
<PAGE>
Additional risks: Additional risks and considerations of investing in
emerging-market countries include overburdened infrastructure, obsolete
financial systems and security settlement and clearance procedures that may
result in delays and which may not fully protect the Portfolio against loss or
theft of its assets; national policies which may restrict the Portfolio's
investment opportunities, including restrictions on investment in issuers or
industries deemed sensitive to national interests; and less developed legal
structures governing private or foreign investment or allowing for judicial
redress for injury to private property.
Further discussion of the risks relating to the Bernstein International
Value Portfolio and the Bernstein Emerging Markets Value Portfolio is contained
in the SAI.
INVESTMENTS
The Fixed-Income Portfolios will primarily be invested in debt securities,
including, subject to each Portfolio's general investment policies described on
pages 22-31, but not limited to: (i) obligations issued or guaranteed as to
principal and interest by the U.S. government or the agencies or
instrumentalities thereof; (ii) obligations of Supranational Agencies; (iii)
straight and convertible corporate bonds and notes, including securities of
foreign and U.S. issuers payable in U.S. dollars and issued outside the U.S.
("Eurobonds") or securities of foreign issuers payable in U.S. dollars issued
inside the U.S. ("Yankees"); (iv) loan participations; (v) commercial paper;
(vi) obligations (including certificates of deposit, time deposits and bankers'
acceptances) of U.S. thrift institutions, U.S. commercial banks (including
foreign branches of such banks) and foreign banks (including U.S. branches of
such banks); (vii) mortgage-related securities; (viii) asset-backed securities;
(ix) Municipal Securities, or other securities issued by state and local
government agencies, the income on which may or may not be tax-exempt; (x)
guaranteed investment contracts and bank investment contracts; (xi) variable and
floating rate securities; (xii) private placements; (xiii) preferred stock; and
(xiv) foreign securities. From time to time, additional fixed-income securities
are developed. They will be considered for purchase by the Portfolios. The
Bernstein International Value Portfolio and the Bernstein Emerging Markets Value
Portfolio will invest primarily in foreign equity securities, but may, under the
circumstances described in "Investment Objectives and Policies" (pages 28-29),
invest in fixed-income securities. Of course, the extent to which each of the
Portfolios emphasizes each of the categories of investment described depends
upon the investment objectives and restrictions of that Portfolio.
Obligations Of the U.S. Government and
Its Agencies and Instrumentalities
The types of U.S. government and agency securities in which the Portfolios may
invest include bills, notes and bonds issued by the U.S. Treasury, as well as
securities issued by other U.S. government agencies and instrumentalities,
including bills, notes, bonds, mortgage-backed securities and other fixed-income
securities. However, certain types of mortgage-backed securities, known as
"Interest Only" (or "IO") and "Principal Only" (or "PO") securities, which are
based on government securities but "stripped" by third parties, are not
government securities.
The Portfolios may purchase securities issued or guaranteed by the
Government National Mortgage Association and other agencies and
instrumentalities, the securities or guarantees of which are backed by the full
faith and credit of the United States. The Portfolios may also purchase
securities issued by the United States Postal Service and other agencies and
instrumentalities that have the right to borrow from the United States Treasury
to meet their obligations. The Portfolios may also purchase securities issued or
guaranteed by U.S. government agencies and instrumentalities, including the
Federal Farm Credit Banks, the Federal Home Loan Bank, the Financing Corporation
("FICO"), the Tennessee Valley Authority, the Federal National Mortgage
Association ("FNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC") and
the Resolution Funding Corporation ("Refcorp"), the obligations of which are
backed only by the credit of the issuing agency.
Obligations of Supranational Agencies
The Portfolios may invest in the obligations of supranational agencies.
Supranational agencies rely for funds on participating countries, often
including the United States. Some supranationals, such as the International Bank
for Reconstruction and Development (the "World Bank"), have the right to borrow
from participating countries, including the United States. Other supranationals
must request funds from participating countries; such requests may not always be
honored. Moreover, the securities of supranational agencies, depending on where
and how they are issued, may be subject to some of the risks discussed on page
34 with respect to foreign securities.
Corporate Bonds, Notes and Commercial Paper
The Portfolios may invest in straight and convertible corporate bonds, notes and
commercial paper. The value of the Portfolios' investment in corporate bonds
and notes will change in response to changes in interest rates and the
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Prospectus--January 31, 1997 31
<PAGE>
relative financial strength of each issuer. In general, lower-rated bonds, notes
and commercial paper tend to have higher yields but are subject to greater
market fluctuations and risk of loss than higher-rated bonds, notes and
commercial paper of similar maturity.
Loan Participations
The Portfolios may also invest in participating interests ("participations") in
obligations, including variable-rate tax-exempt obligations, mortgages and other
loans, held by financial institutions. A participation provides the Portfolio
with a specified-percentage undivided interest in the underlying obligation. The
Portfolio may have the right to demand payment of the unpaid principal balance
plus accrued interest upon a specified number of days' notice. The obligation
may also be backed by a letter of credit or guarantee of the institution. The
Portfolio participates on the same basis as the institution in the obligation,
except that the institution may retain a service fee out of the interest paid on
the obligation. Loan participations are considered illiquid securities.
Mortgage-Related Securities
Mortgage loans made on residential or commercial property by banks, savings and
loan institutions and other lenders are often assembled into pools, and
interests in the pools are sold to investors. Interests in such pools are
referred to in this Prospectus as "mortgage-related securities." Payments of
mortgage-related securities are backed by the property mortgaged. In addition,
some mortgage-related securities are guaranteed as to payment of principal and
interest by an agency or instrumentality of the U.S. government. In the case of
mortgage-related and asset-backed securities that are not backed by the United
States government or one of its agencies, a loss could be incurred if the
collateral backing these securities is insufficient. This may occur even though
the collateral is government-backed.
One type of mortgage-related security is a Government National Mortgage
Association ("GNMA") Certificate. GNMA Certificates are backed as to principal
and interest by the full faith and credit of the U.S. government. Another type
is a FNMA Certificate. Principal and interest payments of FNMA Certificates are
guaranteed only by FNMA itself, not by the full faith and credit of the U.S.
government. A third type of mortgage-related security in which one or more of
the Portfolios might invest is a FHLMC Participation Certificate. This type of
security is backed by FHLMC as to payment of principal and interest but, like a
FNMA security, it is not backed by the full faith and credit of the U.S.
government.
The Portfolios may also invest in both residential and commercial mortgage
pools originated by investment banking firms and builders. Rather than being
guaranteed by an agency or instrumentality of the U.S. government, these pools
are usually backed by subordinated interests or mortgage insurance. The Manager
of the Portfolios will take such insurance into account in determining whether
to invest in such pools.
The Portfolios may invest in Real Estate Mortgage Investment Conduits
("REMICs") and collateralized mortgage obligations ("CMOs"). REMICs include
governmental and/or private entities that issue a fixed pool of mortgages
secured by an interest in real property and CMOs are debt obligations
collateralized by mortgage loans or mortgage pass-through securities.
Since the borrower is typically obligated to make monthly payments of
principal and interest, most mortgage-related securities pass these payments
through to the holder after deduction of a servicing fee. However, other payment
arrangements are possible. Payments may be made to the holder on a different
schedule than that on which payments are received from the borrower, including,
but not limited to, weekly, biweekly and semiannually.
Furthermore, the monthly principal and interest payments are not always
passed through to the holder on a pro rata basis. In the case of REMICs and
CMOs, the pool is divided into two or more tranches, and special rules for the
disbursement of principal and interest payments are established. The
Fixed-Income Portfolios may invest in debt obligations that are REMICs or CMOs;
provided that in the case of the Fixed-Income Portfolios other than the Short
Duration Municipal Portfolios, the entity issuing the REMIC or CMO is not a
registered investment company.
In another version of mortgage-related securities, all interest payments go
to one class of holders--"Interest Only" or "IO"--and all of the principal goes
to a second class of holders--"Principal Only" or "PO." The market values of
both IOs and POs are sensitive to prepayment rates; the value of POs varies
directly with prepayment rates, while the value of IOs varies inversely with
prepayment rates. If prepayment rates are high, investors may actually receive
less cash from the IO than was initially invested. IOs and POs issued by the
U.S. government or its agencies and instrumentalities that are backed by
fixed-rate mortgages may be considered liquid securities under guidelines
established by the Fund's Board of Directors; all other IOs and POs will be
considered illiquid.
Payments to the Portfolios from mortgage-related securities generally
represent both principal and interest. Although the underlying mortgage loans
are for specified periods of time, such as 15 or 30 years, borrowers can, and
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32 Sanford C. Bernstein Fund, Inc.
<PAGE>
often do, pay them off sooner. Thus, the Portfolios generally receive
prepayments of principal in addition to the principal that is part of the
regular monthly payments.
A borrower is more likely to prepay a mortgage that bears a relatively high
rate of interest. Thus, the value of the securities may not increase as much as
other debt securities when interest rates fall. However, when interest rates
rise, the rate of prepayments may slow and the value of the mortgage-related and
asset-backed securities may decrease like other debt securities. The Portfolios
normally do not distribute principal payments (whether regular or prepaid) to
their shareholders. Rather, they invest such payments in additional securities,
which may not be mortgage-related. Interest received by the Portfolios is,
however, reflected in dividends to shareholders.
A Portfolio's investments in mortgage derivative securities also subjects
the Portfolio to extension risk. Extension risk is the possibility that rising
interest rates may cause prepayments to occur at a slower-than-expected rate.
This particular risk may effectively change a security which was considered
short- or intermediate-term at the time of purchase into a long-term security.
Long-term securities generally fluctuate more widely in response to changes in
interest rates than short- or intermediate-term securities.
Asset-Backed Securities
Asset-backed securities are debt instruments that are backed by pools of loans,
leases, accounts receivable or other debt obligations of consumers or commercial
entities. Examples of collateral include consumer loans to purchase automobiles,
credit card balances due and loans to purchase manufactured housing. The cash
flow that is generated by payments on these instruments is used to pay interest
and principal to the asset-backed noteholders, as well as any fees for the
servicing and administration of the assets, and in some circumstances may be
used to purchase additional collateral. Asset-backed securities may also be
credit enhanced by one or more methods. These include overcollateralization,
subordination, reserve accounts, issuer guarantees and insurance provided by
third-party bond insurance companies. Issuer guarantees and bond insurance may
cover part or all of the principal and/or interest owed to noteholders.
In the case of securities backed by automobile receivables, the issuers of
such securities typically file financing statements, and the servicers of such
obligations take custody of such obligations. Therefore, if the servicers, in
contravention of their duty, were to sell such obligations, the third-party
purchasers would possibly acquire an interest superior to the holder of the
securitized assets. Also, most states require that a security interest in a
vehicle be noted on the certificate of title, and the certificate of title may
not be amended to reflect the assignment of the seller's security interest.
Therefore, the recovery of the collateral in some cases may not be available to
support payments on the securities. In the case of credit-card receivables, both
federal and state consumer protection laws may allow setoffs against certain
amounts owed against balances of the credit cards.
Municipal Securities
Municipal Securities are debt obligations issued by or on behalf of states,
territories or possessions of the United States or their political subdivisions,
agencies or instrumentalities, the District of Columbia or Puerto Rico, where
the interest from such securities is, according to information reasonably
available to the Manager, in the opinion of bond counsel at the time of
issuance, exempt from federal income tax. Although the Fund may invest, from
time to time, in securities issued by or on behalf of states, territories or
possessions of the United States or their political subdivisions, agencies or
instrumentalities, the District of Columbia or Puerto Rico, where the interest
from such securities is not exempt from federal income tax, these securities
will not be considered Municipal Securities for the purpose of determining the
portions of the municipal Portfolios' assets that are invested in Municipal
Securities.
Municipal Securities include "private activity bonds," such as industrial
revenue bonds, the interest income from which is subject to the alternative
minimum tax. See "Dividends, Distributions and Taxes" on pages 43-45.
The two principal classifications of Municipal Securities are general
obligation and revenue or special obligation securities. General obligation
securities are secured by the issuer's pledge of its faith, credit and taxing
power for the payment of principal and interest. The term "issuer" means the
agency, authority, instrumentality or other political subdivision, the assets
and revenues of which are available for the payment of the principal of and
interest on the securities. Revenue or special obligation securities are payable
only from the revenue derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special tax or other specific revenue
source and generally are not payable from the unrestricted revenues of the
issuer. Some Municipal Securities are municipal lease obligations. Lease
obligations usually do not constitute general obligations of the municipality
for which the municipality's taxing power is pledged, although the lease
obligation is ordinarily backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain non-appropriation clauses that provide that
the municipality has no obligation to make lease
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Prospectus--January 31, 1997 33
<PAGE>
payments in future years unless money is appropriated for such purpose on a
yearly basis. The Fund Board will be responsible for determining the credit
quality of unrated municipal lease obligations on an ongoing basis, including an
assessment of the likelihood that the lease will not be canceled. Some municipal
lease obligations may be illiquid. Municipal Securities include certain
asset-backed certificates representing interests in trusts that include pools of
installment payment agreements, leases or other debt obligations of state or
local governmental entities. Some Municipal Securities are covered by insurance
or other credit enhancements procured by the issuer or underwriter guaranteeing
timely payment of principal and interest.
Guaranteed Investment Contracts and
Bank Investment Contracts
The Portfolios may purchase guaranteed investment contracts ("GICs") and bank
investment contracts ("BICs"). A GIC is a contract issued by an insurance
company that guarantees payment of interest and repayment of principal and a BIC
is a contract issued by a bank that guarantees payment of interest and repayment
of principal. GICs and BICs are considered illiquid securities.
Variable and Floating Rate Securities
Each Portfolio may purchase variable and floating rate securities. The terms of
variable and floating rate instruments provide for the interest rate to be
adjusted according to a formula on certain predetermined dates.
Variable and floating rate instruments that are repayable on demand at a
future date are deemed to have a maturity equal to the time remaining until the
principal will be received on the assumption that the demand feature is
exercised on the earliest possible date. For the purposes of evaluating the
interest-rate sensitivity of the Portfolio, variable and floating rate
instruments are deemed to have a maturity equal to the period remaining until
the next interest-rate readjustment. For the purposes of evaluating the credit
risks of variable and floating rate instruments, these instruments are deemed to
have a maturity equal to the time remaining until the earliest date the
Portfolio is entitled to demand repayment of principal.
Private Placements
The Portfolios may invest in privately placed securities that, in the absence of
an exemption, would be required to be registered under the Securities Act of
1933 so as to permit their sale to the public ("restricted securities").
Restricted securities may be sold only in privately negotiated transactions.
These securities, excluding restricted securities eligible for resale pursuant
to Rule 144A under the Securities Act of 1933 that have been determined to be
liquid in the trading market for the security under procedures adopted by the
Board of Directors of the Fund, are considered to be illiquid. The Board is
responsible for monitoring the implementation of the procedures on the liquidity
of Rule 144A securities in the Portfolio.
Illiquid Securities
Within the limits set forth in "Investment Objectives and Policies" (pages
22-31), the Portfolios may invest in illiquid securities--securities that are
not readily marketable. The Board of Directors of the Fund has determined that
any or all of the following factors may be relevant to determining the liquidity
of a security: the amount of the issue outstanding; the complexity of the issue;
the bid/ask spread; the number and identity of market makers or dealers in or
other buyers of the security; the existence of put features and other rights;
the term of the security; the visibility of the issuer in the marketplace; the
method of soliciting offers and the mechanics of completing transfers; the
average trading volume for the issue; and, with respect to foreign securities,
the amount of such securities that can be owned by investors who are not
residents of the country where such securities were issued and the amount of
such securities owned by the controlling interests. The factors to be considered
in the case of the analysis of unrated municipal lease obligations will include
an analysis of credit factors. Purchased dealer options, private placements
(excluding securities eligible for resale under Rule 144A that have been
determined to be liquid as set forth in the preceding section), guaranteed
investment contracts, bank investment contracts, repurchase agreements for
periods longer than seven days, time deposits maturing in more than seven days
and loan participations are considered to be illiquid securities for the
purposes of this restriction. In addition, the staff of the Securities and
Exchange Commission currently takes the position that all options traded in the
over-the-counter market are illiquid; if the staff amends its position, the Fund
may, in accordance with the amended position, consider such options to be
liquid.
Preferred Stock
The Portfolios may invest in preferred stock. Preferred stock is subordinated to
any debt the issuer has outstanding. Accordingly, preferred stock dividends are
not paid until all debt obligations are first met. Preferred stock may be more
subject to fluctuations in market value, due to changes in market participants'
perceptions of the issuer's ability to continue to pay dividends, than debt of
the same issuer.
Foreign Securities
While the Fixed-Income Portfolios generally invest in domestic securities, each
may also invest up to 20% of its total assets in foreign securities of the same
types and quality as the domestic securities in which it invests when the
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34 Sanford C. Bernstein Fund, Inc.
<PAGE>
anticipated performance of the foreign securities is believed by the advisor to
offer more potential than domestic alternatives in keeping with the investment
objectives of the Portfolios. The Portfolios may invest in foreign fixed-income
securities that may involve risks in addition to those normally associated with
domestic securities. These risks include currency risks and other risks
described on pages 29-31.
Warrants
The Portfolios may have investments in warrants. Warrants are securities that
give the Portfolio the right to purchase securities from the issuer at a
specific price (the strike price) for a limited period of time. The strike price
of warrants sometimes is much lower than the current market price of the
underlying securities, yet they are subject to similar price fluctuations. As a
result, warrants may be more volatile investments than the underlying securities
and may offer greater potential for capital appreciation as well as capital
loss. Warrants do not entitle a holder to dividends, interest payments or voting
rights with respect to the underlying securities and do not represent any rights
in the assets of the issuing company. Also, the value of the warrant does not
necessarily change with the value of the underlying securities, and a warrant
ceases to have value if it is not exercised prior to the expiration date. These
factors can make warrants more speculative than other types of investments.
Equity Securities
The equity securities in which the Bernstein International Value Portfolio and
the Bernstein Emerging Markets Value Portfolio may invest include common and
preferred stocks, warrants and convertible securities. These Portfolios may
invest in foreign securities directly or in the form of sponsored or unsponsored
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) or
other similar securities convertible into securities of foreign issuers without
limitation. ADRs are receipts typically issued by a U.S. bank or trust company
that evidence ownership of the underlying securities. EDRs are European receipts
evidencing a similar arrangement. The issuers of unsponsored ADRs are not
obligated to disclose material information in the United States and, therefore,
there may not be a correlation between such information and the market value of
the ADR. In some circumstances--e.g., when a direct investment in securities in
a particular country cannot be made--the Bernstein International Value Portfolio
and the Bernstein Emerging Markets Value Portfolio, in compliance with
provisions of the Investment Company Act of 1940, as amended (the "1940 Act"),
may invest in the securities of investment companies that invest in foreign
securities. As a shareholder in any mutual fund, each of these Portfolios will
bear its ratable share of the mutual fund's management fees and other expenses,
and will remain subject to payment of the Portfolio's management and other fees
with respect to assets so invested.
Special Investment Techniques
In seeking to achieve its investment objectives, each of the Portfolios may
employ the following special investment techniques, among others. These
techniques may be used to hedge various market risks (such as interest rates,
currency exchange rates and broad or security-specific changes in the prices of
equity or fixed-income securities), to manage the effective maturity or duration
of fixed-income securities, to exploit mispricings in the securities markets or
as an alternative to activities in the underlying cash markets. They may include
the use of exchange-traded derivatives such as futures and options--financial
products which are standardized by size, maturity and delivery, and are sold on
organized exchanges. Furthermore, over-the-counter derivatives such as swaps or
other hybrid instruments, which are individually tailored to meet the needs of a
specific client, may also be used.
Foreign Currency Transactions
A Portfolio may enter into foreign currency exchange contracts on a spot (i.e.,
cash) basis at the rate then prevailing in the currency exchange market or
through entering into forward contracts, which obligate the contracting parties
to purchase or sell a specific currency at a specified future date at a
specified price. The Portfolios will generally not enter into a forward contract
with a term greater than one year.
The Portfolios will generally enter into forward contracts under two
circumstances. First, a Portfolio may enter into a forward contract when it
enters into a contract for the purchase or sale of a security denominated in a
foreign currency in order to lock in the price in dollars of the security.
Second, when the Manager believes that the currency of a particular foreign
country may experience an adverse movement against another currency, a Portfolio
may enter into a forward contract to sell an amount of the foreign currency (or
another currency that acts as a proxy for that currency) approximating the value
of some or all of a Portfolio's securities denominated in such foreign currency.
Under certain circumstances, the Bernstein International Value Portfolio and the
Bernstein Emerging Markets Value Portfolio may commit a substantial portion or
the entire value of their portfolios to the consummation of these contracts. The
Manager will consider the effect that a substantial commitment of assets to
forward contracts would have on the investment program of these Portfolios and
the flexibility of these Portfolios to purchase additional securities. Although
forward contracts will be used primarily to protect the Portfolios from adverse
currency movements, they involve the risk that anticipated currency movements
will not be
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Prospectus--January 31, 1997 35
<PAGE>
accurately predicted and the Portfolios' total return could be adversely
affected as a result.
Futures Contracts and Options
The Portfolios may enter into financial futures contracts, including bond, bond
index, Eurodeposit, stock index or currency futures contracts and options
thereon. In addition, the Portfolios may each purchase and write (i.e., sell)
put and call options on securities, on securities indexes based on securities in
which the Portfolio may invest, on foreign currencies traded on U.S. or foreign
exchanges or over-the-counter and on futures contracts. The securities for
which a Portfolio writes put or call options will be Portfolio securities, and
the Portfolios will write only covered options.
The Portfolios may also enter into options on the yield "spread" or yield
differential between two securities. In contrast to other types of options, this
option is based on the difference between the yields of designated securities,
currencies, futures or other instruments. In addition, the Portfolios may write
covered straddles. A straddle is a combination of a call and a put written on
the same underlying security.
In accordance with the current rules and regulations of the Commodity
Futures Trading Commission (the "CFTC"), the aggregate initial margins and
premiums required from the Portfolio in connection with commodity futures and
options positions used for purposes other than "bona fide hedging" will not
exceed 5% of the liquidation value of the Portfolio; provided, however, in the
case of an option that is in the money at the time of the purchase, that the
in-the-money portion of the premium is excluded in calculating the 5%
limitation. No Portfolio will write any option if, immediately thereafter, the
aggregate value of the Portfolio's securities subject to outstanding options
would exceed 25% of its net assets.
Futures contracts and options can be highly volatile and could reduce a
Portfolio's total returns, and attempts to use such investments for hedging
purposes may not be successful. Successful futures and options strategies
require the ability to predict future movements in securities prices, interest
rates and other economic factors. Each Portfolio's potential losses from the use
of futures extend beyond its initial investment in such contracts and are
potentially unlimited. Also, losses from futures and options could be
significant if a Portfolio is unable to close out its position due to
disruptions in the market or lack of liquidity.
Swaps and Hybrid Investments
As part of its investment program and to maintain greater flexibility, each
Portfolio may invest in hybrid instruments (a type of potentially high-risk
derivative) that have the characteristics of futures, options, currencies and
securities. Such instruments may take a variety of forms, such as a security
with the principal amount, redemption or conversion terms related to the market
price of some commodity, currency or securities index; or debt instruments with
interest or principal payments determined by reference to the value of
commodities, currencies, fixed-income instruments, financial indexes or other
financial or economic indicators, data or events; or the differences between the
value of commodities, currencies, fixed-income instruments, financial indexes or
other financial or economic indicators, data or events; or the rate of change of
the value of commodities, currencies, fixed-income instruments, financial
indexes or other financial or economic indicators, data or events. Hybrids can
have volatile prices and limited liquidity and their use by the Portfolio may
not be successful. The risk of these investments can be substantial; possibly
all of the principal is at risk. No Portfolio will invest more than 20% of its
total assets in these investments.
Swap agreements are contracts between parties in which one party agrees to
make payments to the other party based on the change in the market value of a
specified index or asset. In return, the other party agrees to make payments to
the first party based on the return of a different specified index or asset.
Swap agreements entail the risk that a party will default on its payment
obligations thereunder. Swap agreements also bear the risk that the Portfolio
will not be able to meet its obligation to the counterparty.
A Portfolio may enter into interest-rate or foreign currency swaps and
purchase and sell interest-rate caps and floors. No Portfolio will use swaps to
leverage the Portfolio. A Portfolio will maintain in a segregated account with
the Fund's custodian an amount having an aggregate net asset value at least
equal to the net amount of the excess, if any, of the Portfolio's obligations
over its entitlements with respect to each swap. The Portfolios expect to enter
into these transactions to exploit mispricings in the bond or currency markets
or to preserve a return or spread on a particular investment or portion of its
portfolio, as a duration management technique or to protect against any increase
in the price of securities that the Portfolios anticipate purchasing at a later
date.
Interest-rate swaps involve the exchange by a Portfolio with another party
of their respective commitments to pay or receive interest, e.g., an exchange of
fixed-rate payments for floating-rate payments. Such an exchange would allow the
Portfolio to alter its exposure to interest-rate market risk without changing
the composition of the Portfolio. The purchase of an interest-rate floor or cap
entitles the purchaser to receive payments of interest on a notional principal
amount from the seller, to the extent that the specified index
- --------------------------------------------------------------------------------
36 Sanford C. Bernstein Fund, Inc.
<PAGE>
falls below (floor) or exceeds (cap) a predetermined interest rate. Currency
swaps are similar to interest-rate swaps, except that they involve currencies
instead of interest rates. The Portfolios will enter interest-rate swaps only on
a net basis (i.e., the two payment streams are netted out) with the Portfolios
receiving or paying, as the case may be, only the net amount of the two
payments.
Repurchase Agreements
In a repurchase transaction, a Portfolio purchases a security from a bank or a
securities dealer and simultaneously agrees to resell that security to the bank
or broker-dealer at an agreed-upon price on an agreed-upon date. The resale
price reflects the purchase price and an agreed-upon rate of interest. In
effect, the obligation of the seller to repay the agreed-upon price is secured
by the value of the underlying security, which must at least equal the
repurchase price. Repurchase agreements could involve certain risks in the event
of default or insolvency of the other party, including possible delays or
restrictions on the Portfolio's ability to dispose of the underlying securities.
The Board of Directors has established guidelines to be used by the Manager in
repurchase transactions and regularly monitors the Portfolios' use of repurchase
agreements.
Reverse Repurchase Agreements
The Portfolios may enter into reverse repurchase agreements with banks and
broker-dealers from time to time. In a reverse repurchase transaction, it is the
Portfolio, rather than the other party to the transaction, that sells the
securities and simultaneously agrees to repurchase them at a price reflecting an
agreed-upon rate of interest. A Portfolio's obligations under reverse repurchase
agreements will not exceed one-third of the Portfolio's total assets, less
liabilities other than obligations under such reverse repurchase agreements.
During the time a reverse repurchase agreement is outstanding, each Portfolio
that has entered into such an agreement maintains a segregated account with its
Custodian containing cash, U.S. government or other liquid high-grade debt
securities having a value at least equal to the repurchase price under the
reverse repurchase agreement. The use of reverse repurchase agreements is
included in the Portfolios' borrowing policy and is subject to the limit of
Section 18(f)(1) of the 1940 Act. Reverse repurchase agreements may create
leverage, increasing a Portfolio's opportunity for gain and risk of loss for a
given fluctuation in the value of the Portfolio's assets. There may also be
risks of delay in recovery and, in some cases, even loss of rights in the
underlying securities, should the opposite party fail financially.
Lending Portfolio Securities
Each Portfolio may, from time to time, lend portfolio securities having, in the
case of the Fixed-Income Portfolios (other than the Short Duration Municipal
Portfolios), a market value of no more than 30% of its total assets and, in the
case of the Bernstein International Value Portfolio, Bernstein Emerging Markets
Value Portfolio and the Short Duration Municipal Portfolios, having a market
value of no more than one-third of its total assets, to qualified
broker-dealers, banks or other financial institutions. By lending its portfolio
securities, a Portfolio attempts to increase its income through the receipt of
interest on the loan. Any such loan of portfolio securities will be marked to
the market daily and secured by collateral consisting of cash or U.S. government
securities in an amount at least equal to the value of the securities loaned.
The Manager believes that the risk of loss on such a transaction is slight
because, if the borrower were to default, the collateral would be available to
satisfy the obligation. However, as with other extensions of secured credit,
loans of portfolio securities involve some risk of loss of rights in the
collateral should the borrower fail financially. The Manager carefully evaluates
the creditworthiness of any potential borrower of securities. A Portfolio may
not have the right to vote securities on loan, but it will call a loaned
security in anticipation of an important vote.
When-Issued and Delayed-Delivery Transactions
The Portfolios may purchase securities on a "when-issued" or "delayed-delivery"
basis. In a when-issued or delayed- delivery transaction, a Portfolio purchases
a security with delivery to take place at a later date, usually within three
months from the date the transaction is entered into. The market value of the
security at delivery may be more or less than the purchase price. The Fund's
Custodian is to maintain, in segregated accounts, cash, U.S. government
securities or other liquid high-grade debt obligations having a value equal to
or greater than each Portfolio's purchase commitments; likewise, the Custodian
is to segregate securities sold by each Portfolio on a delayed-delivery basis.
Further information about the Portfolios' use of Special Investment
Techniques and their associated risks is contained in the SAI.
Future Developments
The Portfolios expect to discover additional opportunities in the areas of
options, futures contracts, options on futures contracts and other derivative
instruments. These opportunities will become available as the Manager develops
new strategies, as regulatory authorities broaden the range of transactions that
are permitted and as new options and futures are developed. To the extent such
opportunities are both consistent with the Portfolio's investment objectives and
legally permissible for that Portfolio, the Manager may utilize the strategies
that do not conflict with the Portfolio's investment restrictions. These
opportunities may involve risks that differ from those described above.
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 37
<PAGE>
MANAGEMENT OF THE PORTFOLIOS
Directors and Officers
The Board of Directors of the Fund is responsible for the overall supervision of
the management of the Fund. The directors also perform various duties imposed on
directors of investment companies by the 1940 Act and by the State of Maryland.
Officers of the Fund conduct and supervise the daily operations of the
Portfolios.
The following table lists the directors and executive officers of the Fund,
their business addresses and their principal occupations during the past five
years.
<TABLE>
<CAPTION>
Position with Principal Occupation
Name and Address The Fund During Past Five Years
- ---------------- ------------- ----------------------
<S> <C> <C>
Roger Hertog* President, 1993-Present: President, Chief Operating Officer
767 Fifth Avenue Treasurer, and Director--Bernstein
New York, NY 10153 Director Previously: Executive Vice President and Director--Bernstein
Andrew S. Adelson* Senior Vice President, Senior Vice President, Chief Investment Officer--International
767 Fifth Avenue Director and Director--Bernstein
New York, NY 10153
Arthur Aeder Director 1987-Present: Consultant; Formerly Senior Partner of
20 West 55th Street Oppenheim, Appel, Dixon & Co. (subsequently Spicer
New York, NY 10019 & Oppenheim) Certified Public Accountants, and Chairman
of Spicer & Oppenheim International
Peter L. Bernstein** Director President & Chief Executive Officer of Peter L. Bernstein,
575 Madison Avenue Inc., Economic Consultants
Suite 1006
New York, NY 10022
William Kristol Director 6/95-Present: Editor and Publisher, The Weekly Standard
1150 17th Street, N.W. 11/93-5/95: Chairman, Project for the Republican Future
5th Floor 1/93-11/93: Director, The Bradley Project on the 90's
Washington, D.C. 20036 5/89-1/93: Chief of Staff to the Vice President, The White House
Theodore Levitt Director Professor Emeritus of Business Administration,
Harvard Business School Harvard University
Cumnock 300 1985-89: Editor, Harvard Business Review
Boston, MA 02163
Francis H. Trainer, Jr. Senior Vice President Senior Vice President, Director--Fixed Income Investments
767 Fifth Avenue and Director--Bernstein
New York, NY 10153
Jean Margo Reid Secretary 1997: Vice President and General Counsel--Bernstein
767 Fifth Avenue Previously: Vice President and Associate General
New York, NY 10153 Counsel--Bernstein
</TABLE>
* An "interested person" of the Fund, as defined in the 1940 Act.
** Not related to Zalman C. Bernstein, Chairman of the Executive
Committee--Bernstein.
- --------------------------------------------------------------------------------
38 Sanford C. Bernstein Fund, Inc.
<PAGE>
The Manager
Bernstein is a closely held corporation, organized under the laws of the State
of New York on January 20, 1969, which succeeded to the business of Sanford C.
Bernstein & Co., a partnership, on February 1, 1969. Bernstein is a registered
investment advisor that manages some $46.8 billion, as of September 30, 1996,
for individuals, endowments, trusts and estates, charitable foundations,
partnerships, corporations, the Portfolios of the Fund and tax-exempt funds such
as pension and profit-sharing plans. Of that amount, some $16.2 billion was
invested in fixed-income securities and $30.6 billion in equities as of
September 30, 1996. Pursuant to contracts with the Fund, Bernstein provides the
following types of services: Investment Management, Shareholder Servicing and
Administration and Distribution.
Investment Management
Bernstein has entered into Investment Management Agreements (the "Management
Agreements") with the Fund, on behalf of the Portfolios, under which the
Manager, subject to the supervision of the Board of Directors and in conformity
with the stated policies of the Portfolios, manages each Portfolio's assets.
Investment Policy Groups created by the Manager and comprised of the Manager's
employees make all investment decisions for the Portfolios, and no one person is
primarily responsible for making recommendations to these groups.
Each Portfolio pays the Manager for the services performed on behalf of that
Portfolio, as well as for the services performed on behalf of the Fund as a
whole. The fee paid by each Fixed-Income Portfolio (other than the Short
Duration Municipal Portfolios) is at an annual rate of 0.50% of each such
Portfolio's average daily net assets up to and including $1 billion and at an
annual rate of 0.45% of each such Portfolio's average daily net assets in excess
of $1 billion. The fee paid by each of the Short Duration Municipal Portfolios
is at an annual rate of 0.50% of each such Portfolio's average daily net assets.
The fee paid by the International Value Portfolio is at an annual rate of
1.00% of that Portfolio's average daily net assets up to but not exceeding $2
billion and at an annual rate of 0.90 of 1% of that Portfolio's average daily
net assets that exceed $2 billion. Because the investment programs of
international asset management are costly to implement and maintain, this fee is
higher than that paid by most investment companies that invest in U.S. equity
securities. The fee is computed daily and payable monthly.
The fee paid by the Emerging Markets Value Portfolio is at an annual rate of
1.25% of the Portfolio's average daily net assets, except that during the first
two years of operation, the Portfolio will not pay any portion of the fee that,
together with the other operating expenses of the Portfolio (excluding interest,
taxes, brokerage and other transaction costs and extraordinary expenses, but
including fees payable to Bernstein under the Shareholder Servicing and
Administrative Agreement described below) exceeds the rate of 2% per annum of
the Portfolio's average daily net assets. The term "the first two years of
operation" means the period commencing January 1, 1996 and ending December 31,
1997. Portfolio transaction fees on purchases and redemptions are not operating
expenses; no portion of these portfolio transaction fees will be assumed by
Bernstein. Because the investment programs of emerging-market asset management
are costly to implement and maintain, this fee is higher than that paid by most
U.S. investment companies. The fee is computed daily and payable monthly.
Shareholder Servicing and Administration
Bernstein has also entered into Shareholder Servicing and Administrative
Agreements with the Fund on behalf of the Portfolios. Pursuant to these
Agreements, Bernstein pays all expenses incurred by it in connection with
administering the ordinary course of the Fund's and each Portfolio's business.
Bernstein also pays the costs of office facilities and of clerical and
administrative services not provided by State Street Bank and Trust Company, the
Fund's Custodian and Transfer Agent. Bernstein serves as Shareholder Servicing
Agent and in such capacity may enter into agreements with other organizations
whereby some or all of Bernstein's duties in this regard may be delegated. The
shareholder servicing that will be provided by Bernstein or other organizations
might include, among other things, proxy solicitations and providing information
to shareholders concerning their mutual fund investments, systematic withdrawal
plans, dividend payments, reinvestments and other matters. The fee paid by each
Fixed-Income Portfolio for these services is at an annual rate of 0.10% of that
Portfolio's average daily net assets, and the fees paid by the International
Value Portfolio and the Emerging Markets Value Portfolio are at an annual rate
of 0.25% of each Portfolio's average daily net assets.
Each Portfolio is responsible for the payment of all of its expenses other
than those expressly stated to be payable by Bernstein under the Management
Agreements and the Shareholder Servicing and Administrative Agreements.
Distribution
Bernstein acts as Distributor of each Portfolio's shares pursuant to
Distribution Agreements with the Fund.
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 39
<PAGE>
Purchase of Shares
Shares of the Portfolios are sold at a price based on the net asset value next
calculated after receipt of a purchase order in good form. If an order is placed
at or prior to the close of regular trading of the New York Stock Exchange (the
"Exchange") (normally 4:00 p.m., New York time) on any business day, the
purchase of shares is executed at the offering price determined as of the
closing time that day. If the order is placed after that time, it will be
effected on the next business day. The Emerging Markets Value Portfolio assesses
a portfolio transaction fee of 2% of the amount invested. See "Fee Table" on
page 4 for additional information.
The Fund, on behalf of any Fixed-Income Portfolio, may, at its own option,
accept securities in payment for shares. The securities delivered in are valued
by the method described herein under "Net Asset Value" (page 43) as of the day
the Portfolio receives the securities, including such certificates and any other
documentation necessary for the Custodian to transfer the securities to the
Portfolio's account. This is a taxable transaction to the shareholder.
Securities may be accepted in payment for a Portfolio's shares only if they are,
in the judgment of the Manager, appropriate investments for that Portfolio. The
Fund reserves the right to accept or reject at its own option any and all
securities offered in payment for the shares of any Portfolio.
If shares of the Fund are purchased through broker-dealers, banks and other
financial institutions, these entities may impose service fees and conditions on
the shareholders that may be different from those described in this Prospectus.
The Fund has arrangements with certain broker-dealers, banks and other financial
institutions such that orders through these entities are considered received
when the entity receives the order in good form together with the purchase price
of the shares ordered. The entity is responsible for transmitting the order to
the Fund.
In order to purchase shares, an investor must fill out an application form.
All purchases are confirmed to the investor in writing. If no indication is made
on the application form, dividends and distributions payable by each Portfolio
are automatically reinvested in additional shares of that Portfolio at the net
asset value on the reinvestment date.
Shareholders are sent a confirmation of all purchases. The Fund reserves the
right to reject any purchase order. The Fund may at any time stop selling shares
of any of the Portfolios. Except as otherwise provided, the minimum initial
investment in any Portfolio is $25,000 and the minimum subsequent investment in
the same Portfolio is $5,000. The minimum initial investment in any Portfolio
for Uniform Gifts to Minors Act/Uniform Transfers to Minors Act accounts is
$20,000 and the minimum subsequent investment in the same Portfolio is $5,000.
For shareholders who have met the initial minimum investment requirement in a
Fixed-Income Portfolio, the minimum subsequent investment in any other
Fixed-Income Portfolio is also $5,000.
There is no minimum amount for reinvestment of dividends and distributions
declared by a Portfolio in the shares of that Portfolio. Share certificates are
issued only upon written request, but no certificates are issued for fractional
shares. The minimum initial investment in any Portfolio for employees of
Bernstein and their immediate families is $5,000; Bernstein does not charge an
account maintenance fee on these accounts.
Bernstein effects a purchase order on behalf of a client who has an
investment advisory account with Bernstein upon confirmation of a verified
credit balance at least equal to the amount of the purchase order (subject to
the minimum investment requirements set forth above).
Bernstein may advise some of the clients of its asset-management services
to invest a certain percentage of their assets in one or more of the Portfolios.
If such a client wishes to invest such assets in one or more of the Portfolios
of the Fund, the client may, on receiving this Prospectus, instruct Bernstein to
maintain a percentage of the client's account assets invested in one or more of
the Portfolios or to vary the percentage based on Bernstein's opinion of the
relative allocation of fixed-income investments versus international investments
or domestic stock. As the asset values of the client's various investments
fluctuate, in order to maintain approximately the same percentage(s) or to vary
the percentage(s) of the account assets invested in the Portfolio(s) or for tax
considerations, Bernstein may, from time to time, without additional
instructions from the client, purchase or redeem shares of any Portfolio in
which such a client had elected to invest. With respect to purchases or sales of
shares effected by Bernstein pursuant to the foregoing: (i) initial purchases of
shares of the Portfolios (other than the Bernstein Emerging Markets Value
Portfolio) will be subject to the initial minimum investment requirements, but
the subsequent minimum investment requirements may be waived; (ii) initial
purchases of shares of the Bernstein Emerging Markets Value Portfolio will be
subject to a minimum investment requirement of $10,000, but subsequent minimum
investment requirements may be waived; and (iii) any purchases and sales of
shares of the Bernstein Emerging Markets Value Portfolio will incur the
portfolio transaction fees on purchases and redemptions described in the Fee
Table on page 4. The Manager may, in its discretion, waive initial and
subsequent minimum investment requirements for any participant-directed defined
- --------------------------------------------------------------------------------
40 Sanford C. Bernstein Fund, Inc.
<PAGE>
contribution plan. In January and June of each year, Bernstein will
automatically, without regard to the minimum investment requirement, invest the
cash balances held in any Bernstein account that is otherwise invested solely in
a single Fund Portfolio in that Portfolio.
Purchase orders must be submitted to Bernstein together with payment for the
purchase price of the shares ordered and, in the case of a new account, a
completed application form. Payment may be made by check or wire transfer.
Checks should be made payable to the particular Portfolio. Checks from persons
who are not advisory clients of Bernstein must be bank or certified checks.
Bernstein, at its option, may accept a check that is not a bank or certified
check. There are restrictions on the redemption of shares purchased by check for
which the funds are being collected. See "Redemption of Shares" on this page.
Shares of the Fund will not be offered in any state where the Fund or a
Portfolio of the Fund is not registered.
Bernstein is registered as a Non-Canadian Advisor, Investment Counsel &
Portfolio Manager in Ontario, Canada. Since Bernstein does not have a place of
business in Ontario, the Ontario Securities Commission requires Bernstein to
provide notice of its agent for service of process, which is as follows:
Samantha Horn, 152928 Canada Inc., Suite 5300, Commerce Court West, P.O. Box 85,
Toronto, Canada M5L 1B9.
Bernstein is registered as a Portfolio Manager & Investment Counsel
(Foreign) in Alberta, Canada. Since Bernstein does not have a place of business
in Alberta, the Alberta Securities Commission requires Bernstein to provide
notice of the agent for service of process for Bernstein and the officers of
Bernstein required to register in Alberta, which is as follows: Sandra Redmond,
1500 Bankers Hall, 855-2nd Street S.W., Calgary, Alberta T2P 4J7. Alberta
shareholders may find it difficult to enforce their legal rights against
Bernstein, its directors or officers because (i) Bernstein and its directors and
officers are not resident in Canada and their assets are not situated in Canada
and (ii) the laws of a jurisdiction other than Alberta may apply to legal
proceedings brought by Alberta shareholders.
Exchanges of Shares
Shares of each Portfolio may be exchanged for shares of each of the other
Portfolios of the Fund. After proper receipt of the exchange request in good
order, exchanges of shares are made at the next determined respective net asset
values of the shares of each Portfolio. On any exchanges of other Fund shares
for shares of the Bernstein Emerging Markets Value Portfolio, shareholders will
be charged the portfolio transaction fee of 2% of the dollar amount exchanged;
on any exchanges of shares of the Bernstein Emerging Markets Value Portfolio for
other Fund shares, shareholders will be charged the 2% redemption fee. See "Fee
Table" on page 4 for additional information. Shares purchased through
broker-dealers, banks or other financial institutions may be exchanged through
such broker-dealers, banks and other financial institutions. Exchanges are
subject to the minimum investment requirements of the Portfolio into which the
exchange is being made, and the Fund, on behalf of such Portfolio, at its sole
discretion, may reject any exchange for its shares. The exchange privilege is
available only in states where the exchange may legally be made. The Fund plans
to maintain this exchange privilege. However, in the event of a change in this
policy, the Fund will provide 90-day notice to shareholders. For federal income
tax purposes, any such exchange constitutes a taxable transaction for
shareholders subject to taxation upon which a gain or loss may be realized. See
"Dividends, Distributions and Taxes" on pages 43-45.
Redemption of Shares
General
Redemption orders received by Bernstein are effected at the net asset value next
determined after receipt of the order in proper form. If a redemption order is
placed at or prior to the close of regular trading of the Exchange (normally
4:00 p.m., New York time) on any business day, the redemption of shares is
executed at the offering price determined as of the close of trading that day.
If the redemption order is placed after the close of regular trading, it will be
effected on the next business day. Any capital gain or loss realized by a
shareholder upon any redemption of Portfolio shares must be recognized for
federal income tax purposes by shareholders subject to such taxes. See
"Dividends, Distributions and Taxes" on pages 43-45. There is a redemption fee
of 2% of the amount redeemed for the Emerging Markets Value Portfolio. See "Fee
Table" on page 4 for additional information.
Shareholders may redeem their shares by sending to Bernstein a written
request, accompanied by duly endorsed share certificates, if issued. Orders for
redemption through certain banks, broker-dealers or financial institutions with
whom the Fund has arrangements are considered received when the bank,
broker-dealer or other financial institution receives a written request,
accompanied by duly endorsed share certificates, if issued. The bank,
broker-dealer or other financial institution is responsible for transmitting the
order to the Fund. In this case, all share certificates and all written requests
for redemption must be endorsed by the shareholder(s) with signature(s)
guaranteed by an eligible
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 41
<PAGE>
guarantor institution that meets the Fund's standards for the acceptance of
guarantees (such an institution may be a commercial bank that is a member of the
Federal Deposit Insurance Corporation, a trust company, a member firm of a
domestic securities exchange or other institution). Guarantees must be signed by
an authorized signatory of the eligible guarantor institution, and "Signature
Guaranteed" should appear with the signature. Signature guarantees by notaries
or institutions that do not provide reimbursement in the case of fraud are not
accepted. Signature guarantees may be waived by the Fund in certain instances.
The Fund may waive the requirement that a redemption request must be in writing.
Bernstein may request further documentation from corporations, executors,
administrators, trustees or guardians. Where the shareholder is an advisory
client of Bernstein, proceeds are retained in the client's account with
Bernstein unless other prior instructions are on file. With respect to
redemption orders received through other dealers, proceeds are sent to the
customer's account with the dealer unless prior instructions are on file.
Proceeds of all other redemptions are sent to the shareholder's address by check
unless prior instructions are on file. The cost of wire transfers will be borne
by the shareholder.
Systematic Withdrawal Plan
A shareholder may set up a plan for redemptions to be made automatically at
regular monthly intervals and payments sent directly to the shareholder or to
persons designated by the shareholder. The use of this service will be at the
Fund's discretion and, in general, a shareholder must own shares worth $25,000
or more, and he or she must own them as book-entry shares. For further
information, call Bernstein at (212) 756-4097.
Additional Redemption Information
Payment is made by check within seven days after receipt by the
shareholder-servicing agent of share certificates (if issued) and a redemption
request in proper form. Under the 1940 Act, the Fund, on behalf of any
Portfolio, may suspend the right of redemption or postpone the day of payment
for more than seven days (i) for any periods during which the Exchange is closed
(other than for customary weekend or holiday closings); (ii) for any periods
when trading in the markets that the Portfolio normally uses is closed or
restricted or an emergency exists as determined by the Commission so that
disposal of the Portfolio's investments or determination of its net asset value
is not reasonably practicable; or (iii) during any other period when the
Commission, by order, so permits, provided that applicable rules and regulations
of the Commission shall govern as to whether the condition described in (ii)
exists.
In addition, if the shares being redeemed were purchased by check, payment
may be delayed for up to 15 days in order to verify that the purchase check has
been honored. Any such delay may be avoided if the shares were originally
purchased by certified or bank check or by wire transfer.
Because of the high cost of maintaining smaller shareholder accounts, the
Fund may redeem without shareholder consent, on at least 60 days' written
notice, the account of any shareholder of any Portfolio whose account has a net
asset value of less than $1,000 due to redemptions determined as of the close of
business on the day preceding such notice, unless such shareholder increases the
account balance to $1,000 during such 60-day period.
Portfolio Transactions
And Brokerage
The Manager is responsible for decisions to buy and sell securities for each of
the Portfolios and for broker-dealer selection. In general, the securities in
which the Fixed-Income Portfolios invest are traded on a "net" rather than a
transaction-charge basis (as securities in which the Bernstein International
Value Portfolio and the Bernstein Emerging Markets Value Portfolio invest are
generally traded), with dealers acting as principal for their own accounts
without a stated transaction charge. Accordingly, the price of the security may
reflect an increase or decrease from the price paid by the dealer together with
a spread between the bid and asked price, which provides the opportunity for a
profit or loss to the dealer. Portfolio transactions that are effected on a
transaction-charge basis may be effected through Bernstein, acting as agent and
not as principal, provided, among other things, that any transaction charges,
fees or other remuneration received by Bernstein are reasonable and fair
compared to the transaction charges, fees or other remuneration paid to other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time. In some cases, a Portfolio might engage in
purchase or sale transactions with another Portfolio of the Fund, subject to
conditions specified under the 1940 Act. There might also be occasions when a
Portfolio engages in purchase or sale transactions with another mutual fund.
Although the objectives of the other accounts to which the Manager provides
investment advice may differ from those of each of the Portfolios, it is
possible that, at times, identical securities are acceptable for one or more of
the Portfolios and one or more of such accounts. If the purchase or sale of
securities is consistent with the investment policies of one or more of the
Portfolios and one or more of the accounts of the Manager is considered at or
about the same time, transactions in such securities will be allocated among the
- --------------------------------------------------------------------------------
42 Sanford C. Bernstein Fund, Inc.
<PAGE>
accounts and the Portfolios in a manner deemed equitable by the Manager. Where
securities are allocated among Fund Portfolios and private accounts, the Manager
may use the average price at which the securities were purchased or sold.
None of the Fixed-Income Portfolios anticipates a portfolio turnover rate in
excess of 300%. Each of the International Value Portfolio and the Bernstein
Emerging Markets Value Portfolio anticipates a portfolio turnover rate of less
than 100%. A turnover rate of 100% would occur, for example, if all the
securities held by a Portfolio were replaced in a period of one year. A
portfolio's turnover rate is the percentage computed by dividing the lesser of
portfolio purchases or sales (excluding all securities whose maturities at
acquisition were one year or less) by the average value of the portfolio. High
portfolio turnover involves correspondingly greater transaction costs, which are
borne directly by the Portfolio, and may also result in the realization of
substantial net short-term capital gains, taxable at ordinary income tax rates
to non-tax-exempt investors.
Net Asset Value
The net asset value of each Portfolio is computed as of the close of regular
trading of the Exchange (normally 4:00 p.m., New York time). Purchase and
redemption orders are accepted by the Fund on each business day, with the
exception of Exchange and national bank holidays, as determined from time to
time. Currently, these holidays are: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day. The net asset
value per share of each Portfolio is the net worth of the Portfolio (assets,
including securities at market value, minus liabilities) divided by the number
of shares outstanding. The value of each security for which readily available
market quotations exist is based on the most recent sale, the most recent
available bid price or the mean between the most recent available bid and asked
prices in the broadest and most representative market for that security as
determined by the Manager. Debt instruments with remaining maturities of 60 days
or less may be valued at amortized cost. Securities and other assets for which
market quotations are not readily available are valued by appraisal at their
fair value as determined in good faith under procedures established by and under
the general supervision of the Board of Directors. The Fund may use an
independent pricing service to value the Portfolios' assets at such times and to
such extent as the Manager deems appropriate. All assets and liabilities
initially expressed in foreign currencies will be translated into U.S. dollars.
Dividends on foreign securities are accrued and reflected in net asset value
either on the date the security goes ex-dividend or the date the Manager becomes
aware of them, whichever is later; corporate actions of foreign issuers are
reflected in net asset value on the date on which they become effective, or the
date the Manager becomes aware of them, whichever is later.
Dividends, Distributions and Taxes
The Fund intends each Portfolio to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986 (the "Code"). While so
qualified, the Portfolios are not subject to federal income taxes on net income
and capital gains, if any, realized during any fiscal year and distributed to
shareholders. All taxable dividends out of net investment income, together with
distributions of net short-term capital gains and certain foreign currency
gains, are taxable as ordinary income to shareholders who are subject to federal
income taxes, whether or not reinvested. Dividends derived from the interest
earned on municipal securities constitute "tax-exempt interest dividends" and
are not subject to federal income taxes, provided that the relevant Portfolio
meets the requirements of Section 852(b)(5) of the Code. In general, the
dividends of the Bernstein International Value Portfolio and the Bernstein
Emerging Markets Value Portfolio will not qualify for the dividends-received
deduction for corporations since they are not derived from dividends paid by
U.S. corporations. Any net long-term capital gains distributed to shareholders
are taxable as such to the shareholders who are subject to federal income taxes,
whether or not reinvested, and regardless of the length of time shareholders
have owned their shares. Share purchases made shortly before a dividend of the
Bernstein International Value Portfolio or the Bernstein Emerging Markets Value
Portfolio or a capital gains distribution of any of the Portfolios include in
the purchase price the amount of the distribution; on the record date for the
distribution, the Portfolio's share value drops by the amount of the
distribution.
The Fixed-Income Portfolios intend to declare dividends daily and to pay
them monthly. Each of the Bernstein International Value Portfolio and the
Bernstein Emerging Markets Value Portfolio intends to declare and pay dividends
at least annually, generally in December. Capital-gains distributions are made
at least annually, generally in December. Dividends and distributions are
generally taxable to shareholders in the year in which received, except that
dividends declared in October, November and December and paid prior to February
1 of the following year are taxable to shareholders in the year in which
declared. Each Portfolio's distributions and dividends are paid in additional
shares of that Portfolio based on the Portfolio's net asset value at the close
of business on the record date, unless the shareholder elects in
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 43
<PAGE>
writing not less than five business days prior to the record date to receive
such distributions in cash.
A shareholder's gain or loss upon the redemption, repurchase or exchange of
his or her shares in a portfolio is generally capital gain or loss and is
long-term capital gain or loss if the shares were held for more than one year.
Any loss realized on a redemption, repurchase or exchange is disallowed to the
extent that the shares disposed of are replaced within a period of 61 days
beginning 30 days before and ending 30 days after the shares are disposed of.
However, any loss incurred by shareholders who held their shares for six months
or less is treated as long-term capital loss to the extent of any dividends that
are treated as long-term capital gains by such shareholders. In addition, such a
loss is disallowed to the extent of any tax-exempt interest dividends received
by the shareholders.
It is anticipated that the dividends of the New York Municipal Portfolios,
the California Municipal Portfolios and the Diversified Municipal Portfolios
will be generally exempt from federal income taxes. It should be noted, however,
that under the Code, interest on certain "private activity bonds" issued after
August 7, 1986 is an item of tax preference for purposes of the alternative
minimum tax. The Portfolios anticipate that a portion of their investments may
be made in "private activity bonds," with the result that a portion of the
exempt-interest dividends paid by the Portfolios would be an item of tax
preference to shareholders subject to the alternative minimum tax. In addition,
tax-exempt income constitutes "adjusted current earnings" ("ACE") for purposes
of calculating the ACE adjustment for the corporate alternative minimum tax. It
is intended that within 60 days after the end of each year, each Portfolio will
mail information to shareholders on the tax status of dividends and
distributions, except that such mailing will be made within 45 days for the
Bernstein Government Short Duration Portfolio. If any dividends are not exempt
from federal income taxes, the annual tax information will indicate the
percentages of tax-exempt and taxable income.
It is anticipated that each of the New York Municipal Portfolios will
provide income that is generally tax-free for federal and New York State and
local individual income tax purposes to the extent that the income is derived
from New York State Municipal Securities or securities issued by possessions of
the United States, and that each of the California Municipal Portfolios will
provide income that is generally tax-free for federal and California personal
income taxes to the extent that the income is derived from California Municipal
Securities or securities issued by possessions of the United States. A portion
of the income of the other Portfolios may be exempt from state and local income
taxes in certain states to the extent of the Portfolio's income derived from
securities on which the interest is exempt from income taxes in that state.
Dividends and interest received by the Bernstein International Value
Portfolio or the Bernstein Emerging Markets Value Portfolio may be subject to
foreign tax and withholding. In addition, some emerging markets countries may
impose taxes on capital gains earned by the Bernstein Emerging Markets Value
Portfolio in that country. However, tax conventions between certain countries
and the United States may reduce or eliminate such taxes. Shareholders may be
entitled to claim foreign tax credits or deductions on their own federal income
tax returns with respect to such taxes paid by the Portfolio.
With respect to the Bernstein International Value Portfolio and the
Bernstein Emerging Markets Value Portfolio, if any such Portfolio qualifies as a
regulated investment company, if certain asset and distribution requirements are
satisfied and if more than 50% of the Portfolio's total assets at the close of
its fiscal year consist of stocks or securities of foreign corporations, the
Portfolio may elect for United States income tax purposes to treat foreign
income taxes paid by it as paid by its shareholders. Such Portfolio will make
such an election only if it deems it to be in the best interests of its
shareholders. If the election is made, shareholders of such Portfolio would be
required to include their pro rata portions of such foreign taxes in computing
their taxable incomes and then treat an amount equal to those foreign taxes as a
United States federal income tax deduction or as foreign tax credits against
their U.S. federal income taxes. Shortly after any year for which it makes such
an election, the Fund will report to the Portfolio's shareholders the amount per
share of such foreign tax that must be included in each shareholder's gross
income and the amount that will be available for the deduction or credit. No
deduction for foreign taxes may be claimed by a shareholder who does not itemize
deductions. Certain limitations will be imposed on the extent to which the
credit and the deduction for foreign taxes may be claimed.
Capital gains on the securities of certain foreign corporations that are
considered to be passive foreign investment companies under the Internal Revenue
Code will be deemed to be ordinary income regardless of how long the Bernstein
International Value Portfolio or the Bernstein Emerging Markets Value Portfolio
holds such investments. In addition, such Portfolios may be subject to corporate
income taxes and interest charges on certain dividends and capital gains earned
from these investments, regardless of whether such income and gains are
distributed to shareholders.
- --------------------------------------------------------------------------------
44 Sanford C. Bernstein Fund, Inc.
<PAGE>
Statements as to the tax status of dividends and distributions to
shareholders of each Portfolio are mailed annually. Shareholders are urged to
consult their own tax advisors regarding specific questions as to federal,
state, local or foreign taxes. See "Taxes" in the SAI.
Description of Shares
The shares of each Portfolio have no preemptive or conversion rights. Shares are
fully paid and nonassessable and redeemable at the option of the shareholder and
have a par value of $0.001. Shares are also redeemable at the option of the
Fund, if the net asset value of a shareholder's account is less than $1,000, as
previously discussed in "Redemption of Shares."
Pursuant to the Articles of Incorporation, the Board of Directors may also
authorize the creation of additional series of shares (the proceeds of which may
be invested in separate, independently managed portfolios) with such
preferences, privileges, limitations and voting and dividend rights as the Board
may determine.
Shareholders have certain rights, including the right to call a meeting of
shareholders for the purpose of voting on the removal of one or more Directors.
Such removal can be effected upon the action of two-thirds of the outstanding
shares of all of the Portfolios of the Fund, voting as a single class. The
shareholders of each Portfolio are entitled to a full vote for each full share
held and to the appropriate fractional vote for each fractional share. A matter
that affects a Portfolio of the Fund will not be deemed to have been effectively
acted upon unless approved by the holders of a majority of the outstanding
voting securities of that Portfolio. The voting rights of the shareholders are
not cumulative. The Directors have been elected at the initial meeting of the
public shareholders of the Fund, except for Mr. Kristol and Mr. Adelson, who
were elected by the other Directors. In order to avoid unnecessary expenses, the
Fund does not intend to hold annual meetings of shareholders.
Performance
Each of the Portfolios may, from time to time, advertise yield, average annual
total return and unannualized average total return. In addition, the Bernstein
New York Municipal Portfolio, the Bernstein California Municipal Portfolio, the
Bernstein Diversified Municipal Portfolio, the Bernstein Government Short
Duration Portfolio and the Short Duration Municipal Portfolios may advertise
tax-equivalent yield. Yield is a measure of a Portfolio's income; it does not
measure changes in the net asset value of the Portfolio's shares. Average annual
total return reflects all elements of return, including income, expenses and
changes in the value of the principal. Yield and average annual total return do
not reflect any tax consequences to an investor. Tax-equivalent yield is the
taxable yield that would be necessary to produce an equivalent yield after taxes
to a hypothetical investor in the highest applicable tax bracket. Yield,
tax-equivalent yield and average annual total return are based on historical
results and are not intended to indicate future performance.
The yield of a Portfolio is calculated by dividing the Portfolio's net
investment income per share during a specified month by the maximum offering
price per share on the last day of the month and annualizing it. Yield is
calculated in accordance with accounting methods prescribed by the Commission.
Because the yield accounting methods differ from the methods used for tax and
financial accounting purposes, a Portfolio's yield may not be comparable to the
dividends paid to a shareholder or the net investment income reported in the
Portfolio's financial statements. The calculation of yield takes into account
all fees and expenses. The calculation of tax-equivalent yield is based on yield
and, for the New York Municipal Portfolios and the California Municipal
Portfolios, assumes that the hypothetical investor is subject, respectively, to
the highest bracket of New York State and City or California, as well as
federal, taxes. The calculation of tax-equivalent yield for the Diversified
Municipal Portfolios assumes that the hypothetical investor is subject to the
highest bracket of only federal taxes. The calculation of tax-equivalent yield
for the Bernstein Government Short Duration Portfolio assumes the hypothetical
investor is subject to a stated bracket of state and/or state and local taxes.
The average annual total return of a Portfolio is computed by finding the
average annual compounded rate of return since the commencement of the
Portfolio's operations based on an initial investment of $1,000 as compared to
the ending redeemable value, assuming that all dividends and distributions were
reinvested. The calculation of average annual total return takes into account
all fees and expenses. The unannualized average total return of a Portfolio for
a period is calculated by dividing the value of an investment at the end of the
period, assuming all dividends and distributions were reinvested, by the value
of the investment at the beginning of the period. The Fund may use an
independent service to calculate yield and/or performance data of any or all
Portfolios at such times and to such extent as the Manager deems appropriate.
For further information and a description of the method by which yield,
tax-equivalent yield, average annual total return and unannualized average total
return are calculated, see "Performance" in the SAI.
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 45
<PAGE>
Reports to Shareholders
The Fund sends the shareholders of each Portfolio annual and semiannual reports.
The financial statements appearing in annual reports are audited by independent
accountants, whose report is included thereon. In addition, each shareholder
having an account directly with the Fund is sent a statement confirming each
transaction in the account.
Custodian and Transfer Agent
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, serves as Custodian for the Fund and in that capacity holds the cash and
other assets for each Portfolio in the Fund and maintains certain financial and
accounting books and records pursuant to an agreement with the Fund. Foreign
securities and foreign currency owned by the Fund may be held by foreign
subcustodians of State Street Bank and Trust Company retained for such purpose
in accordance with the 1940 Act. State Street Bank and Trust Company also serves
as Transfer Agent for the Portfolios and in that capacity maintains certain
records pursuant to an agreement with the Fund.
Shareholder Inquiries
All inquiries regarding each Portfolio should be directed to the Fund at the
telephone number or address on the cover page of this Prospectus. Questions
concerning dividends or share ownership, transfer or redemption should be
directed to Bernstein at the same address; at 1999 Avenue of the Stars, Los
Angeles, California 90067; at 777 South Flagler Drive, West Palm Beach, Florida
33401; at 227 West Monroe Street, Chicago, Illinois 60606; at 300 Crescent
Court, Suite 950, Dallas, Texas 75201; or at 555 California Street, San
Francisco, California 94104.
Independent Accountants And Legal Counsel
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036, has
been selected as the independent accountants to audit the annual financial
statements of each Portfolio of the Fund. Price Waterhouse LLP also has been the
independent accountants of the investment performance statistics of certain of
Bernstein's separately managed accounts since 1978.
Shereff, Friedman, Hoffman & Goodman LLP, 919 Third Avenue, New York, New
York 10022, has been selected as legal counsel to the Fund. Shereff, Friedman,
Hoffman & Goodman LLP and partners of that firm have been legal counsel to
Bernstein since 1967, when Bernstein was organized.
- --------------------------------------------------------------------------------
46 Sanford C. Bernstein Fund, Inc.
<PAGE>
This page intentionally left blank.
<PAGE>
January 31, 1997
Bernstein Government
Short Duration
Bernstein Short Duration Plus
Bernstein Intermediate Duration
Bernstein Short Duration
New York Municipal
Bernstein New York Municipal
Bernstein Short Duration
California Municipal
Bernstein California Municipal
Bernstein Short Duration
Diversified Municipal
Bernstein Diversified Municipal
Bernstein International Value
Bernstein Emerging Markets Value
PROSPECTUS
Sanford C. Bernstein Fund, Inc.
767 Fifth Avenue
New York, NY 10153
(212) 756-4097
Table OF Contents
Fee Table 2
Financial Highlights 6
The Fund 14
Bernstein Fixed-Income Process 14
Bernstein Fixed-Income Portfolios 17
Bernstein International Value and
Emerging Markets Value Process 18
Investment Objectives and Policies
Of the Portfolios 22
Investment Objectives and Policies Of the
Fixed-Income Portfolios 22
The Short Duration Taxable Portfolios
o Bernstein Government Short Duration Portfolio 23
o Bernstein Short Duration Plus Portfolio 23
The Intermediate Duration Taxable Portfolio
o Bernstein Intermediate Duration Portfolio 24
The Municipal Portfolios
o The Short Duration Municipal Portfolios 24
o The Intermediate Duration Municipal Portfolios 24
o The New York Municipal Portfolios:
o Bernstein Short Duration New York Municipal Portfolio 24
o Bernstein New York Municipal Portfolio 24
o The California Municipal Portfolios:
o Bernstein Short Duration California Municipal Portfolio 26
o Bernstein California Municipal Portfolio 26
o The Diversified Municipal Portfolios:
o Bernstein Short Duration Diversified Municipal Portfolio 27
o Bernstein Diversified Municipal Portfolio 27
Investment Objectives and Policies Of the Bernstein
International Value Portfolio and Emerging Markets Value Portfolio 28
Investments 31
Special Investment Techniques 35
Management Of the Portfolios 38
Directors and Officers 38
The Manager 39
Purchase of Shares 40
Exchanges of Shares 41
Redemption of Shares 41
Portfolio Transactions and Brokerage 42
Net Asset Value 43
Dividends, Distributions and Taxes 43
Description of Shares 45
Performance 45
Reports to Shareholders 46
Custodian and Transfer Agent 46
Shareholder Inquiries 46
Independent Accountants and Legal Counsel 46
<PAGE>
January 31, 1997
PROSPECTUS
Sanford C. Bernstein Fund, Inc.
767 Fifth Avenue
New York, NY 10153
212-756-4097
Sanford C. Bernstein Fund, Inc. (the "Fund") is an open-end management
investment company. This type of company is commonly referred to as a mutual
fund. The Fund is currently comprised of 11 series of shares, each representing
a separate portfolio of securities and each having its own investment
objectives. Sanford C. Bernstein & Co., Inc. ("Bernstein," or the "Manager")
serves as Investment Manager to each series.
IMPORTANT NOTE: This prospectus is intended exclusively for participants in
employer-sponsored retirement or savings plans, such as tax-qualified pension
and profit-sharing plans and 401(k) thrift plans, and offers shares of only
three of the Fund's Portfolios--the Bernstein Short Duration Plus Portfolio, the
Bernstein Intermediate Duration Portfolio and the Bernstein International Value
Portfolio. Prospectuses containing information on the 11 Fund Portfolios and on
how to open a personal account are available for individual investors, and may
be obtained by writing to the address or calling the telephone number listed
above.
The Bernstein Short Duration Plus Portfolio and the Bernstein Intermediate
Duration Portfolio (each a "Fixed-Income Portfolio") aim to generate the highest
total return consistent with safety of principal and the financial objectives of
the Portfolios.
The Bernstein International Value Portfolio seeks long-term capital growth
on a total-return basis (capital appreciation or depreciation plus dividends and
interest) principally through investment in equity securities of established
non-U.S. companies. Investments may be made solely for capital appreciation,
solely for income or any combination of the two for the purpose of achieving a
higher overall return.
This Prospectus sets forth information you ought to know before investing in
the Bernstein Short Duration Plus Portfolio, the Bernstein Intermediate Duration
Portfolio or the Bernstein International Value Portfolio. You should read it
carefully and retain it for future reference. You can find more information
about the Fund in the Statement of Additional Information (the "SAI") dated
January 31, 1997, which has been filed with the Securities and Exchange
Commission (the "Commission") and is incorporated herein by reference. You may
obtain a copy of the SAI without charge by calling or writing the Fund at the
above telephone number or address.
Bernstein Portfolio Objectives
Short-Duration Portfolio
Bernstein Short Duration Plus 7
o Choose primarily from a broad universe of high-grade fixed-income
instruments.
Intermediate-Duration Portfolio
Bernstein Intermediate Duration 7
o Choose primarily from a broad universe of high-grade fixed-income
instruments.
International Equity Portfolio
Bernstein International Value. 8
o Invest primarily in equity securities of established foreign
companies in the countries comprising the EAFE index, plus Canada.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
FEE TABLE
<TABLE>
<CAPTION>
Bernstein Bernstein Bernstein
Short Intermediate International
Duration Plus Duration Value
Portfolio Portfolio Portfolio
------------- ------------ -------------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Sales Load Imposed on Purchases
(as a percentage of offering price) None None None
Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None None None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds) None None None
Redemption Fees
(as a percentage of amount redeemed) None None None
Exchange Fees None None None
Annual Portfolio Operation Expenses
(as a percentage of average net assets)
Management Fees 0.50% 0.49% 0.97%
12b-1 Fees None None None
Other Expenses
Shareholder Servicing &
Administrative Fees 0.10% 0.10% 0.25%
All Other Expenses After
Expense Reimbursement 0.05% 0.04% 0.09%
Total Portfolio Operating Expenses 0.65% 0.63% 1.31%
EXAMPLE
A Portfolio would pay the following expenses on
a $1,000 investment, assuming 5% annual return:
1 Yr. $7 $6 $13
3 Yrs. (cum.) $21 $20 $42
5 Yrs. (cum.) $36 $35 $72
10 Yrs. (cum.) $81 $79 $158
</TABLE>
The purpose of the fee table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The Portfolios of the Fund covered by this Prospectus are no-load,
have no redemption fees and have no charges for shareholders on monthly payment
plans. "Other Expenses" for all Portfolios are based on amounts for the fiscal
year ended September 30, 1996. The example should not be considered a
representation of future expenses; actual expenses may be greater or less than
those shown. A more complete description of the various costs and expenses will
be found under "Management of the Portfolios" on page 17. Shareholders of the
Fund do not need to open a brokerage account with Bernstein; shareholders may
elect to take delivery of the shares or to make alternate arrangements for
custodying them. If a shareholder holds Fund shares in a Bernstein brokerage
account, Bernstein (not the Fund) will charge an annual maintenance fee of $100
for accounts with assets of less than $400,000 under the management of
Bernstein's Equity and/or Fixed-Income Investment Policy Groups. This fee is
deducted from cash held in the brokerage account or, if insufficient cash is
maintained in the brokerage account, by selling securities. Bernstein does not
charge this fee on accounts that are included in a group of related accounts as
defined by Bernstein with combined assets of $400,000 or more. Shares of the
Fund purchased or redeemed through broker-dealers, banks and other financial
institutions may be subject to fees imposed by those institutions.
- --------------------------------------------------------------------------------
2 Sanford C. Bernstein Fund, Inc.
<PAGE>
Financial Highlights
Set forth below is a table containing information as to the income and operating
performance of a share of each of the Bernstein Short Duration Plus Portfolio,
the Bernstein Intermediate Duration Portfolio and the Bernstein International
Value Portfolio, for the periods ended September 30, 1996; September 30, 1995;
September 30, 1994; September 30, 1993; September 30, 1992; September 30, 1991;
September 30, 1990; and September 30, 1989, or as applicable. The financial
statements, which contain this information for the periods ended September 30,
1996; September 30, 1995; September 30, 1994; September 30, 1993; and September
30, 1992, have been audited by Price Waterhouse LLP. The related financial
statements and the reports of independent accountants for the period ended
September 30, 1996 are included by reference in the Fund's SAI. Additional
performance information is contained in the Fund's annual report to shareholders
dated September 30, 1996, which is available upon request and without charge.
These financial highlights should be read in conjunction with the financial
statements contained in the Fund's SAI.
<TABLE>
<CAPTION>
Bernstein International Value Portfolio
-----------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92(a)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.08 $ 16.57 $ 15.39 $ 11.98 $ 12.50
---------- ---------- ---------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Investment income, net 0.23 0.18 0.19 0.05 0.02
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies 2.26 0.07 1.13 3.54 (0.54)
---------- ---------- ---------- -------- -------
Total from investment operations 2.49 0.25 1.32 3.59 (0.52)
---------- ---------- ---------- -------- -------
LESS DISTRIBUTIONS:
Dividends from taxable net investment income (0.10) (0.11) (0.02) (0.05) 0
Dividends from tax-exempt net investment income 0 0 0 0 0
Distributions from net realized gains (0.33) (0.63) (0.12) (0.13) 0
Distributions in excess of net investment income
due to timing differences 0 0 0 0 0
Distributions in excess of net realized gains
due to timing differences 0 0 0 0 0
---------- ---------- ---------- -------- -------
Total distributions (0.43) (0.74) (0.14) (0.18) 0
---------- ---------- ---------- -------- -------
Net asset value, end of period $ 18.14 $ 16.08 $ 16.57 $ 15.39 $ 11.98
========== ========== ========== ======== =======
Total return 15.83% 1.84% 8.55% 30.45% (4.16)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $3,131,258 $1,996,112 $1,343,266 $539,936 $75,255
Average net assets (000 omitted) $2,569,586 $1,591,703 $ 948,563 $235,839 $41,234
Ratio of expenses to average net assets 1.31% 1.35% 1.39% 1.53% 2.00%*
Ratio of net investment income to average net assets 1.37% 1.17% 1.13% 1.27% 0.59%*
Portfolio turnover rate 21.89% 29.53% 23.78% 21.22% 1.12%
Average commission rate per share 0.0234 N/A N/A N/A N/A
</TABLE>
* Annualized
(a) Commenced operations June 22, 1992
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 3
<PAGE>
Financial Highlights
Set forth below is a table containing information as to the income and
operating performance of a share of each Portfolio of the Fund for the periods
ended September 30, 1996; September 30, 1995; September 30, 1994; September 30,
1993; September 30, 1992; September 30, 1991; September 30, 1990; and September
30, 1989, or as applicable. The financial statements, which contain this
information for the periods ended September 30, 1996; September 30, 1995;
September 30, 1994; September 30, 1993; and September 30, 1992, have been
audited by Price Waterhouse LLP. The related financial statements and the
reports of independent accountants for the period ended September 30, 1996 are
included by reference in the Fund's SAI. Additional performance information with
respect to all Portfolios is contained in the Fund's annual report to
shareholders dated September 30, 1996, which is available upon request and
without charge. These financial highlights should be read in conjunction with
the financial statements contained in the Fund's SAI.
<TABLE>
<CAPTION>
Bernstein Short Duration Plus Portfolio
----------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92 9/30/91 9/30/90 9/30/89(b)
---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.49 $12.32 $12.89 $13.14 $12.84 $12.50 $12.62 $12.50
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Investment income, net 0.69 0.70 0.55 0.59 0.75 0.94 0.97 0.78
Net realized and unrealized
gain (loss) on investments,
futures and foreign currencies (0.01) 0.18 (0.40) 0.10 0.44 0.41 (0.01) 0.12
------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.68 0.88 0.15 0.69 1.19 1.35 0.96 0.90
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from taxable net
investment income (0.69) (0.69) (0.56) (0.59) (0.75) (0.94) (0.97) (0.78)
Dividends from tax-exempt net
investment income 0 0 0 0 0 0 0 0
Distributions from
net realized gains 0 0 0 (0.35) (0.14) (0.07) (0.11) 0
Distributions in excess of net
investment income due to
timing differences 0 (0.02) 0 0 0 0 0 0
Distributions in excess of
net realized gains
due to timing differences 0 0 (0.16) 0 0 0 0 0
------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.69) (0.71) (0.72) (0.94) (0.89) (1.01) (1.08) (0.78)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period $12.48 $12.49 $12.32 $12.89 $13.14 $12.84 $12.50 $12.62
====== ====== ====== ====== ====== ====== ====== ======
Total return 5.54% 7.36% 1.14% 5.49% 9.60% 11.26% 7.88% 7.41%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $538,248 $534,462 $550,415 $508,959 $535,980 $435,334 $391,131 $335,310
Average net assets
(000 omitted) $532,094 $536,042 $529,892 $535,889 $482,467 $405,457 $374,101 $263,899
Ratio of expenses to
average net assets 0.65% 0.65% 0.65% 0.66% 0.66% 0.67% 0.68% 0.75%*
Ratio of net investment income
to average net assets 5.47% 5.69% 4.30% 4.52% 5.75% 7.42% 7.67% 7.91%*
Portfolio turnover rate 169.96% 61.03% 285.80% 112.87% 169.60% 140.03% 155.21% 132.82%
Average commission rate per share N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- --------------------------------------------------------------------------------
4 Sanford C. Bernstein Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
Bernstein Intermediate Duration Portfolio
---------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92 9/30/91 9/30/90 9/30/89(c)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.30 $12.54 $13.92 $13.82 $13.19 $12.36 $12.82 $12.50
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Investment income, net 0.80 0.78 0.68 0.76 0.90 1.00 0.98 0.69
Net realized and unrealized
gain (loss) on investments,
futures and foreign currencies (0.14) 0.77 (1.15) 0.68 0.79 0.85 (0.25) 0.32
------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.66 1.55 (0.47) 1.44 1.69 1.85 0.73 1.01
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from taxable net
investment income (0.80) (0.76) (0.70) (0.76) (0.90) (1.00) (0.98) (0.69)
Dividends from tax-exempt
net investment income 0 0 0 0 0 0 0 0
Distributions from
net realized gains (0.08) 0 (0.08) (0.58) (0.16) (0.02) (0.21) 0
Distributions in excess
of net investment income
due to timing differences 0 (0.03) 0 0 0 0 0 0
Distributions in excess
of net realized gains
due to timing differences 0 0 (0.13) 0 0 0 0 0
------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.88) (0.79) (0.91) (1.34) (1.06) (1.02) (1.19) (0.69)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period $13.08 $13.30 $12.54 $13.92 $13.82 $13.19 $12.36 $12.82
====== ====== ====== ====== ====== ====== ====== ======
Total return 5.05% 12.82% (3.54)% 11.30% 13.32% 15.54% 5.90% 8.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $1,451,776 $1,142,768 $848,529 $693,772 $524,301 $375,345 $240,779 $183,480
Average net assets
(000 omitted) $1,310,208 $ 957,247 $764,519 $595,273 $444,750 $304,034 $218,760 $135,549
Ratio of expenses to
average net assets 0.63% 0.64% 0.65% 0.66% 0.67% 0.68% 0.71% 0.83%*
Ratio of net investment
income to average net
assets 5.99% 6.11% 5.14% 5.59% 6.64% 7.80% 7.77% 7.74%*
Portfolio turnover rate 141.04% 212.40% 203.73% 60.77% 149.71% 81.04% 119.09% 121.11%
Average commission rate
per share N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
* Annualized
(b) Commenced operations December 12, 1988
(c) Commenced operations December 12, 1988
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 5
<PAGE>
The Fund
The Fund was incorporated on May 4, 1988, under the laws of Maryland as an
open-end management investment company. This Prospectus relates to three of the
Fund's series of shares (the "Portfolios"). Shares of each series represent an
interest in a separate portfolio of securities. At September 30, 1996, the 11
Portfolios of the Fund (including the Bernstein Short Duration Plus Portfolio,
the Bernstein Intermediate Duration Portfolio and the Bernstein International
Value Portfolio) had net assets totaling $7.431 billion. Bernstein, with offices
at 767 Fifth Avenue, New York, New York 10153; 1999 Avenue of the Stars, Los
Angeles, California 90067; 777 South Flagler Drive, West Palm Beach, Florida
33401; 227 West Monroe Street, Chicago, Illinois 60606; 300 Crescent Court,
Suite 950, Dallas, Texas 75201; and 555 California Street, Suite 4300, San
Francisco, California 94104, serves as Investment Manager to each Portfolio.
Each Portfolio has its own investment objectives.
Investment Objectives and Policies
Of the Portfolios
Investment Objectives and Policies
Of the Fixed-Income Portfolios
General Investment Policies
Each Fixed-Income Portfolio evaluates a wide variety of instruments and issuers,
utilizing a variety of internally developed, quantitatively based valuation
techniques. Each of the Fixed-Income Portfolios may invest in any of the
securities detailed on pages 9-13. In addition, each of the Fixed-Income
Portfolios may use any of the special investment techniques, some of which are
commonly called derivatives, described on pages 13-16 to hedge various market
risks (such as interest rates, currency exchange rates and broad or
security-specific changes in the prices of fixed-income securities), to manage
the effective maturity or duration of fixed-income securities, to exploit
mispricings in the securities markets or as an alternative to activities in the
underlying cash markets. Except for those policies and objectives of each
Portfolio that are described in the Prospectus or SAI as fundamental, the
investment policies and objectives of each Portfolio may be changed by the
Fund's Board of Directors without shareholder approval. If there is a change in
investment policy or objective, shareholders should consider whether the
Portfolio remains an appropriate investment in light of their then-current
financial position and needs. There is no assurance that any Portfolio will
achieve its investment objective.
Neither of the Fixed-Income Portfolios will purchase any security if
immediately after that purchase less than 80% of the Portfolio's total assets
would consist of securities or commercial paper rated A or higher by Standard &
Poor's Corporation ("Standard & Poor's"), Fitch Investors Service, Inc.
("Fitch") or Moody's Investors Service, Inc. ("Moody's"); SP-1 by Standard &
Poor's, F-1 by Fitch, or MIG 1 or VMIG 1 by Moody's; A-1 by Standard & Poor's,
or P-1 by Moody's; or of securities and commercial paper that are not rated but
that are determined by the Manager to be of comparable quality. In addition,
neither of the Fixed-Income Portfolios will purchase a security or commercial
paper rated less than B by Standard & Poor's, Fitch or Moody's; less than A-2 or
SP-2 by Standard & Poor's, less than F-2 by Fitch, or less than P-2, MIG 2 or
VMIG 2 by Moody's; or securities and commercial paper that are not rated but
that are determined by the Manager to be of comparably poor quality. In the
event of differing ratings, the higher rating shall apply. The impact of
changing economic conditions, investment risk and changing interest rates is
increased by investing in securities rated below A by Standard & Poor's, Fitch
or Moody's; below SP-1 or A-1 by Standard & Poor's, below F-1 by Fitch, or below
MIG 1, VMIG 1 or P-1 by Moody's. In addition, the secondary trading market for
lower-rated bonds may be less liquid than the market for higher-grade bonds.
Accordingly, lower-rated bonds may be difficult to value accurately. Securities
rated BBB by Standard & Poor's and Fitch or Baa by Moody's are investment grade.
Securities that are rated BB or B by Standard & Poor's and Fitch, or Ba or B by
Moody's are considered to be speculative with regard to the payment of interest
and principal. Each Fixed-Income Portfolio, at the time of purchase, may invest
as much as 20% of its total assets in securities of foreign issuers, including
Eurobonds, Yankees (other than Yankees included in the Lehman Brothers Aggregate
Bond Index which are considered to be issued by domestic issuers for this
purpose) and obligations of foreign banks that are securities of foreign
issuers, including foreign governments.
- --------------------------------------------------------------------------------
6 Sanford C. Bernstein Fund, Inc.
<PAGE>
Neither Fixed-Income Portfolio will invest in an illiquid security if, at
the time of purchase, the value of such illiquid security together with other
securities that are not readily marketable would exceed 10% of the net assets of
the Portfolio.
In addition to these policies, which govern both Fixed-Income Portfolios,
each individual Portfolio has individual policies, discussed hereafter,
pertaining to the minimum ratings and types of investments permitted, as well as
the effective duration and average maturity of the Portfolio. Effective
duration, a statistic that is expressed in time periods, is a measure of the
exposure of the Portfolio to changes in interest rates. Unlike maturity, which
is the latest possible date for the final payment to be received from a bond,
effective duration is a measure of the timing of all the expected interest and
principal payments. While maturity is somewhat indicative of interest-rate risk,
duration is a more accurate measure. The duration of a bond is defined to be the
effect on price of a rise (or fall) of 1% in interest rates. The Bernstein Short
Duration Plus Portfolio generally has a duration around 2.0 years and thus will
lose about 2% in principal should interest rates rise 1%. The Bernstein
Intermediate Duration Portfolio generally has a duration of about 5.0 years and
would lose about 5% should interest rates rise 1%. In contrast, long-term bonds
typically have durations of greater than 10 years and would thus lose more than
10% if interest rates were to rise 1%. The longer the bond's duration, whether
it is a Treasury, corporate or municipal bond, the greater its vulnerability to
these fluctuations.
The actual duration of each of the Fixed-Income Portfolios may vary,
depending on the Manager's interest-rate forecast. When interest rates are
expected to rise, the duration is shortened. When interest rates are expected to
fall, the duration is lengthened.
The maturity composition of each of the Fixed-Income Portfolios may also
vary, depending upon the shape of the yield curve and opportunities in the bond
market, at times being concentrated in the middle part of the targeted range,
while at other times consisting of a greater amount of securities with
maturities that are shorter and others that are longer than the targeted range.
Generally, the value of debt securities changes as the general level of
interest rates fluctuates. During periods of rising interest rates, the values
of fixed-income securities generally decline. Conversely, during periods of
falling interest rates, the values of these securities nearly always increase.
Generally, the longer the maturity or effective duration, the greater the
sensitivity of the price of a fixed-income security to any given change in
interest rates. The value of each Portfolio's shares fluctuates with the value
of its investments.
Individual Portfolios' Policies
The Bernstein Short Duration Plus Portfolio invests in a diversified
portfolio of securities that it believes offer the highest expected returns to
investors consistent with a prudent level of credit risk. Because the Bernstein
Short Duration Plus Portfolio is managed without regard to potential tax
consequences, it may be particularly appropriate for investors, such as pension
plans and IRAs, that are not subject to current income taxation, as well as
individuals who reside in states with low or no state taxes or who reside in
high-tax states that do not permit a pass-through to the individual shareholder
of the tax-exempt character of this income.
The Short Duration Plus Portfolio is invested in securities with longer
maturities than the assets of the type of mutual fund known as a money-market
mutual fund, and its expected return is somewhat higher. Although the actual
maturities of the securities in the Portfolio may vary widely, the effective
duration of this Portfolio--which is expected to be one to three years under
normal market conditions--is longer than the effective duration of money
markets. The average dollar-weighted maturity of the Portfolio may range from
one to 25 years while maintaining the required duration. Since the effective
duration of this Portfolio is longer, and the quality of the portfolio
securities may be lower, the risk of a decline in the market value of the
Portfolio is greater than for a money-market fund that seeks to maintain a
stable net asset value. The relatively short-term nature of the Portfolio makes
it appropriate for consideration as a temporary investment.
The Bernstein Intermediate Duration Portfolio invests in a diversified
portfolio of securities that it believes offer the highest expected return
consistent with a prudent level of risk. While the actual maturities of the
securities in the Portfolio may vary widely, the Portfolio intends to maintain
an effective duration of three to six years under normal market conditions. The
average dollar-weighted maturity of the Portfolio may range from two to 25 years
while maintaining the required duration. The Portfolio will not purchase any
security if immediately after that purchase less than 65% of the Portfolio's
total assets would consist of securities rated AA or higher by Standard & Poor's
or Aa or higher by Moody's or of securities that are not rated but that are
determined by the Manager to be of comparable quality.
Because the Bernstein Intermediate Duration Portfolio is managed without
regard to potential tax consequences to the shareholder, it may be particularly
appropriate for investors, such as pension plans and IRAs, not subject to
current federal income taxation.
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 7
<PAGE>
Investment Objectives and Policies
Of the International Value Portfolio
The Bernstein International Value Portfolio seeks long-term capital growth on a
total-return basis (capital appreciation or depreciation plus dividends and
interest). The Portfolio will invest primarily in equity securities of
established foreign companies, as described on page 13.
The Portfolio will invest in a diversified portfolio of securities that the
Manager considers most undervalued. The Portfolio intends to diversify
investments among many foreign countries; it will generally be invested in
countries that comprise the EAFE Index (Europe, Australia and the Far East) and
Canada. EAFE countries currently include Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia, the
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland and the
United Kingdom. The Portfolio may also make investments in less-developed or
emerging equity markets. Shareholders should be aware that investing in
less-developed or emerging-market countries involves exposure to economic
structures that are generally less diverse and mature, and to political systems
that can be expected to have less stability than those of developed countries.
Under normal market conditions, at least 65% of the Portfolio's total assets
will be invested in at least three foreign countries. Under exceptional
conditions abroad or when the Manager believes that economic or market
conditions warrant, the Portfolio may temporarily, for defensive purposes,
invest part or all of its portfolio in U.S. government obligations or investment
grade debt or equity securities of U.S. issuers. The Portfolio may invest in
fixed-income securities and enter into foreign currency exchange contracts and
options on foreign currencies and it may utilize options on securities and
securities indexes and futures contracts and options on futures. See the
sections on "Investments" and "Special Investment Techniques" on pages 9-16. The
International Value Portfolio will not invest more than 5% of its total assets
in restricted securities (other than securities eligible for resale under Rule
144A of the Securities Act of 1933). In addition, the International Value
Portfolio will not invest in an illiquid security if, at the time of purchase,
the value of such illiquid security together with other securities that are not
readily marketable would exceed 15% of the net assets of the Portfolio.
The above policies and objectives are not fundamental and may be changed by
the Fund's Board of Directors without shareholder approval. If there is a change
in investment policy or objective, shareholders should consider whether the
Portfolio remains an appropriate investment in light of their then-current
financial position and needs.
The International Value Portfolio has adopted certain fundamental investment
limitations. As a fundamental policy, the International Value Portfolio will
not:
(a) with respect to 75% of its total assets, invest more than 5% of its
total assets in the securities of any one issuer if, as a result of the
purchase, less than 75% of the International Value Portfolio's assets
consists of cash and cash items, Government securities, securities of
other investment companies and other securities, limited, in respect of
any one issuer, to an amount not greater in value than 5% of the value
of the International Value Portfolio's total assets and to not more than
10% of the outstanding voting securities of such issuer;
(b) invest more than 25% of its total assets in any one industry; or
(c) borrow money except that the International Value Portfolio may borrow
money for temporary or emergency purposes in an amount not exceeding
33 1/3% of its total assets. As an operating (not a fundamental) policy,
the Portfolio will not borrow except from a bank for temporary or
emergency purposes in amounts in excess of 5% of its total assets.
The SAI contains certain investment restrictions pertaining to the
International Value Portfolio and the Fixed-Income Portfolios.
The International Value Portfolio may invest uncommitted cash balances in
fixed-income securities. Fixed-income securities may also be held to maintain
liquidity to meet shareholder redemptions, and, although the situation occurs
infrequently, these securities may be held in place of equities when the Manager
believes that fixed-income securities will provide total returns comparable to
or better than those of equity securities. Fixed-income securities include
obligations of the U.S. or foreign governments and their political subdivisions;
obligations of agencies and instrumentalities of the U.S. government; and bonds,
debentures, notes, commercial paper, bank certificates of deposit, repurchase
agreements and other similar corporate debt instruments of U.S. or foreign
issuers that at the time of purchase are rated BBB, A-2, SP-2 or higher by S&P,
or Baa, P-2 or higher by Moody's; or, if unrated, are in the Manager's opinion
comparable in quality. Securities that are rated BBB, A-2 or SP-2 by S&P or Baa
or P-2 by Moody's are investment grade (for a description of these rating
categories, see the Appendix to the SAI). These securities may have speculative
characteristics, and changes in economic conditions or other
- --------------------------------------------------------------------------------
8 Sanford C. Bernstein Fund, Inc.
<PAGE>
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher-rated securities. Bonds with
investment grade ratings at time of purchase may be retained, in the Manager's
discretion, in the event of a rating reduction. Under exceptional conditions
abroad, or when it is believed that economic or market conditions warrant, the
Portfolio may temporarily, for defensive purposes, invest all of its portfolio
in fixed-income obligations of the U.S. government or fixed-income or equity
securities of U.S. issuers.
Investment Risks Of the Bernstein
International Value Portfolio
Market risk: Since it invests primarily in equity securities, the Portfolio,
like any equity portfolio, is vulnerable to market risk--the possibility that
stock prices in general will decline over short or even extended periods.
Moreover, the Portfolio's composition is likely to differ from that of broad
market indexes, and its performance should not be expected to mirror the returns
provided by a specific index. Stock prices are volatile from year to year;
accordingly, the Portfolio is suited to investors who are willing to hold their
investment over a long horizon.
Foreign currency risk: Returns on foreign securities are influenced by
currency risk as well as equity risk. Foreign securities are denominated in
foreign currencies, which may change in value in relation to the U.S. dollar,
possibly for protracted periods of time. When a foreign currency rises against
the U.S. dollar, the returns on foreign stocks for a U.S. investor will also
rise; when a foreign currency declines in value in relation to the U.S. dollar,
the returns on foreign stocks for a U.S. investor will also fall. In addition,
it is possible that foreign governments will impose currency exchange control
regulations or other restrictions that would prevent cash from being brought
back to the U.S.
Other risks: Other risks and considerations of international investing
include the availability of less public information with respect to issuers of
securities; less governmental supervision of foreign brokers and issuers of
securities; lack of uniform accounting, auditing and financial reporting
standards; a generally lower degree of market volume and liquidity than that
available in U.S. markets, which may result in greater price volatility;
settlement practices that may include delays and otherwise differ from those in
U.S. markets; the possibility of expropriation or confiscatory taxation; the
imposition of foreign taxes; and possible political instability in some
countries, which could affect U.S. investment in these countries. Investments in
foreign securities will also result in generally higher expenses due to the
costs of currency exchange; payment of fixed brokerage commissions in certain
foreign markets, which generally are higher than commissions on U.S. exchanges;
and the expense of maintaining securities with foreign custodians.
Investments
Both Fixed-Income Portfolios will primarily be invested in debt securities,
including, subject to each Portfolio's general investment policies described on
pages 6-7, but not limited to: (i) obligations issued or guaranteed as to
principal and interest by the U.S. government or the agencies or
instrumentalities thereof; (ii) obligations of Supranational Agencies; (iii)
straight and convertible corporate bonds and notes, including securities of
foreign and U.S. issuers payable in U.S. dollars and issued outside the U.S.
("Eurobonds") or securities of foreign issuers payable in U.S. dollars issued
inside the U.S. ("Yankees"); (iv) loan participations; (v) commercial paper;
(vi) obligations (including certificates of deposit, time deposits and bankers'
acceptances) of U.S. thrift institutions, U.S. commercial banks (including
foreign branches of such banks) and foreign banks (including U.S. branches of
such banks); (vii) mortgage-related securities; (viii) asset-backed securities;
(ix) Municipal Securities, or other securities issued by state and local
government agencies, the income on which may or may not be tax-exempt; (x)
guaranteed investment contracts and bank investment contracts; (xi) variable and
floating rate securities; (xii) private placements; (xiii) preferred stock; and
(xiv) foreign securities. From time to time, additional fixed-income securities
are developed. They will be considered for purchase by the Portfolios. The
International Value Portfolio will invest primarily in foreign equity
securities, but may, under the circumstances described in the "Investment
Objectives and Policies" section (pages 8-9), invest in fixed-income securities.
Of course, the extent to which each of the Portfolios emphasizes each of the
categories of investment described depends upon the investment objectives and
restrictions of that Portfolio.
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 9
<PAGE>
Obligations Of the U.S. Government and
Its Agencies and Instrumentalities
The types of U.S. government and agency securities in which the Portfolios may
invest include bills, notes and bonds issued by the U.S. Treasury, as well as
securities issued by other U.S. government agencies and instrumentalities,
including bills, notes, bonds, mortgage-backed securities and other fixed-income
securities. However, certain types of mortgage-backed securities, known as
"Interest Only" (or "IO") and "Principal Only" (or "PO") securities, which are
based on government securities but "stripped" by third parties, are not
government securities.
The Portfolios may purchase securities issued or guaranteed by the
Government National Mortgage Association and other agencies and
instrumentalities, the securities or guarantees of which are backed by the full
faith and credit of the United States. The Portfolios may also purchase
securities issued by the United States Postal Service and other agencies and
instrumentalities that have the right to borrow from the United States Treasury
to meet their obligations. The Portfolios may also purchase securities issued or
guaranteed by U.S. government agencies and instrumentalities, including the
Federal Farm Credit Banks, the Federal Home Loan Bank, the Financing Corporation
("FICO"), the Tennessee Valley Authority, the Federal National Mortgage
Association ("FNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC") and
the Resolution Funding Corporation ("Refcorp"), the obligations of which are
backed only by the credit of the issuing agency.
Obligations of Supranational Agencies
The Portfolios may invest in the obligations of supranational agencies.
Supranational agencies rely for funds on participating countries, often
including the United States. Some supranationals, such as the International Bank
for Reconstruction and Development (the "World Bank"), have the right to borrow
from participating countries, including the United States. Other supranationals
must request funds from participating countries; such requests may not always be
honored. Moreover, the securities of supranational agencies, depending on where
and how they are issued, may be subject to some of the risks discussed on page
13 with respect to foreign securities.
Corporate Bonds, Notes and Commercial Paper
The Portfolios may invest in straight and convertible corporate bonds, notes and
commercial paper. The value of the Portfolios' investment in corporate bonds and
notes will change in response to changes in interest rates and the relative
financial strength of each issuer. In general, lower-rated bonds, notes and
commercial paper tend to have higher yields but are subject to greater market
fluctuations and risk of loss than higher-rated bonds, notes and commercial
paper of similar maturity.
Loan Participations
The Portfolios may also invest in participating interests ("participations") in
obligations, including variable-rate tax-exempt obligations, mortgages and other
loans, held by financial institutions. A participation provides the Portfolio
with a specified-percentage undivided interest in the underlying obligation. The
Portfolio may have the right to demand payment of the unpaid principal balance
plus accrued interest upon a specified number of days' notice. The obligation
may also be backed by a letter of credit or guarantee of the institution. The
Portfolio participates on the same basis as the institution in the obligation,
except that the institution may retain a service fee out of the interest paid on
the obligation. Loan participations are considered illiquid securities.
Mortgage-Related Securities
Mortgage loans made on residential or commercial property by banks, savings and
loan institutions and other lenders are often assembled into pools, and
interests in the pools are sold to investors. Interests in such pools are
referred to in this Prospectus as "mortgage-related securities." Payments of
mortgage-related securities are backed by the property mortgaged. In addition,
some mortgage-related securities are guaranteed as to payment of principal and
interest by an agency or instrumentality of the U.S. government. In the case of
mortgage-related and asset-backed securities that are not backed by the United
States government or one of its agencies, a loss could be incurred if the
collateral backing these securities is insufficient. This may occur even though
the collateral is government-backed.
One type of mortgage-related security is a Government National Mortgage
Association ("GNMA") Certificate. GNMA Certificates are backed as to principal
and interest by the full faith and credit of the U.S. government. Another type
is a FNMA Certificate. Principal and interest payments of FNMA Certificates are
guaranteed only by FNMA itself, not by the full faith and credit of the U.S.
government. A third type of mortgage-related security in which one or more of
the Portfolios might invest is a FHLMC Participation Certificate. This type of
security is backed by FHLMC as to payment of principal and interest but, like a
FNMA security, it is not backed by the full faith and credit of the U.S.
government.
The Portfolios may also invest in both residential and commercial mortgage
pools originated by investment banking firms and builders. Rather than being
guaranteed by an agency or instrumentality of the U.S. government, these
- --------------------------------------------------------------------------------
10 Sanford C. Bernstein Fund, Inc.
<PAGE>
pools are usually backed by subordinated interests or mortgage insurance. The
Manager of the Portfolios will take such insurance into account in determining
whether to invest in such pools.
The Portfolios may invest in Real Estate Mortgage Investment Conduits
("REMICs") and collateralized mortgage obligations ("CMOs"). REMICs include
governmental and/or private entities that issue a fixed pool of mortgages
secured by an interest in real property and CMOs are debt obligations
collateralized by mortgage loans or mortgage pass-through securities.
Since the borrower is typically obligated to make monthly payments of
principal and interest, most mortgage-related securities pass these payments
through to the holder after deduction of a servicing fee. However, other payment
arrangements are possible. Payments may be made to the holder on a different
schedule than that on which payments are received from the borrower, including,
but not limited to, weekly, biweekly and semiannually.
Furthermore, the monthly principal and interest payments are not always
passed through to the holder on a pro rata basis. In the case of REMICs and
CMOs, the pool is divided into two or more tranches, and special rules for the
disbursement of principal and interest payments are established. The
Fixed-Income Portfolios may invest in debt obligations that are REMICs or CMOs;
provided that the entity issuing the REMIC or CMO is not a registered investment
company.
In another version of mortgage-related securities, all interest payments go
to one class of holders--"Interest Only" or "IO"--and all of the principal goes
to a second class of holders--"Principal Only" or "PO." The market values of
both IOs and POs are sensitive to prepayment rates; the value of POs varies
directly with prepayment rates, while the value of IOs varies inversely with
prepayment rates. If prepayment rates are high, investors may actually receive
less cash from the IO than was initially invested. IOs and POs issued by the
U.S. government or its agencies and instrumentalities that are backed by
fixed-rate mortgages may be considered liquid securities under guidelines
established by the Fund's Board of Directors; all other IOs and POs will be
considered illiquid.
Payments to the Portfolios from mortgage-related securities generally
represent both principal and interest. Although the underlying mortgage loans
are for specified periods of time, such as 15 or 30 years, borrowers can, and
often do, pay them off sooner. Thus, the Portfolios generally receive
prepayments of principal in addition to the principal that is part of the
regular monthly payments.
A borrower is more likely to prepay a mortgage that bears a relatively high
rate of interest. Thus, the value of the securities may not increase as much as
other debt securities when interest rates fall. However, when interest rates
rise, the rate of prepayments may slow and the value of the mortgage-related and
asset-backed securities may decrease like other debt securities. The Portfolios
normally do not distribute principal payments (whether regular or prepaid) to
their shareholders. Rather, they invest such payments in additional securities,
which may not be mortgage-related. Interest received by the Portfolios is,
however, reflected in dividends to shareholders.
A Portfolio's investments in mortgage derivative securities also subjects
the Portfolio to extension risk. Extension risk is the possibility that rising
interest rates may cause prepayments to occur at a slower-than-expected rate.
This particular risk may effectively change a security which was considered
short- or intermediate-term at the time of purchase into a long-term security.
Long-term securities generally fluctuate more widely in response to changes in
interest rates than short- or intermediate-term securities.
Asset-Backed Securities
Asset-backed securities are debt instruments that are backed by pools of loans,
leases, accounts receivable or other debt obligations of consumers or commercial
entities. Examples of collateral include consumer loans to purchase
automobiles, credit card balances due and loans to purchase manufactured
housing. The cash flow that is generated by payments on these instruments is
used to pay interest and principal to the asset-backed noteholders, as well as
any fees for the servicing and administration of the assets, and in some
circumstances may be used to purchase additional collateral. Asset-backed
securities may also be credit enhanced by one or more methods. These include
overcollateralization, subordination, reserve accounts, issuer guarantees and
insurance provided by third-party bond insurance companies. Issuer guarantees
and bond insurance may cover part or all of the principal and/or interest owed
to noteholders.
In the case of securities backed by automobile receivables, the issuers of
such securities typically file financing statements, and the servicers of such
obligations take custody of such obligations. Therefore, if the servicers, in
contravention of their duty, were to sell such obligations, the third-party
purchasers would possibly acquire an interest superior to the holder of the
securitized assets. Also, most states require that a security interest in a
vehicle be noted on the certificate of title, and the certificate of title may
not be amended to reflect the assignment of the seller's security interest.
Therefore, the recovery of the collateral in some
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 11
<PAGE>
cases may not be available to support payments on the securities. In the case of
credit-card receivables, both federal and state consumer protection laws may
allow setoffs against certain amounts owed against balances of the credit cards.
Municipal Securities
Municipal Securities are debt obligations issued by or on behalf of states,
territories or possessions of the United States or their political subdivisions,
agencies or instrumentalities, the District of Columbia or Puerto Rico, where
the interest from such securities is, according to information reasonably
available to the Manager, in the opinion of bond counsel at the time of
issuance, exempt from federal income tax. The Fund may also invest, from time to
time, in securities issued by or on behalf of states, territories or possessions
of the United States or their political subdivisions, agencies or
instrumentalities, the District of Columbia or Puerto Rico, where the interest
from such securities is not exempt from federal income tax. Municipal Securities
include "private activity bonds," such as industrial revenue bonds.
The two principal classifications of Municipal Securities are general
obligation and revenue or special obligation securities. General obligation
securities are secured by the issuer's pledge of its faith, credit and taxing
power for the payment of principal and interest. The term "issuer" means the
agency, authority, instrumentality or other political subdivision, the assets
and revenues of which are available for the payment of the principal of and
interest on the securities. Revenue or special obligation securities are payable
only from the revenue derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special tax or other specific revenue
source and generally are not payable from the unrestricted revenues of the
issuer. Some Municipal Securities are municipal lease obligations. Lease
obligations usually do not constitute general obligations of the municipality
for which the municipality's taxing power is pledged, although the lease
obligation is ordinarily backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain non-appropriation clauses that provide that
the municipality has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis. The Fund Board will be
responsible for determining the credit quality of unrated municipal lease
obligations on an ongoing basis, including an assessment of the likelihood that
the lease will not be canceled. Some municipal lease obligations may be
illiquid. Municipal Securities include certain asset-backed certificates
representing interests in trusts that include pools of installment payment
agreements, leases or other debt obligations of state or local governmental
entities. Some Municipal Securities are covered by insurance or other credit
enhancements procured by the issuer or underwriter guaranteeing timely payment
of principal and interest.
Guaranteed Investment Contracts
And Bank Investment Contracts
The Portfolios may purchase guaranteed investment contracts ("GICs") and bank
investment contracts ("BICs"). A GIC is a contract issued by an insurance
company that guarantees payment of interest and repayment of principal and a BIC
is a contract issued by a bank that guarantees payment of interest and repayment
of principal. GICs and BICs are considered illiquid securities.
Variable and Floating Rate Securities
Each Portfolio may purchase variable and floating rate securities. The terms of
variable and floating rate instruments provide for the interest rate to be
adjusted according to a formula on certain predetermined dates.
Variable and floating rate instruments that are repayable on demand at a
future date are deemed to have a maturity equal to the time remaining until the
principal will be received on the assumption that the demand feature is
exercised on the earliest possible date. For the purposes of evaluating the
interest-rate sensitivity of the Portfolio, variable and floating rate
instruments are deemed to have a maturity equal to the period remaining until
the next interest-rate readjustment. For the purposes of evaluating the credit
risks of variable and floating rate instruments, these instruments are deemed
to have a maturity equal to the time remaining until the earliest date the
Portfolio is entitled to demand repayment of principal.
Private Placements
The Portfolios may invest in privately placed securities that, in the absence of
an exemption, would be required to be registered under the Securities Act of
1933 so as to permit their sale to the public ("restricted securities").
Restricted securities may be sold only in privately negotiated transactions.
These securities, excluding restricted securities eligible for resale pursuant
to Rule 144A under the Securities Act of 1933 that have been determined to be
liquid in the trading market for the security under procedures adopted by the
Board of Directors of the Fund, are considered to be illiquid. The Board is
responsible for monitoring the implementation of the procedures on the liquidity
of Rule 144A securities in the Portfolio.
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12 Sanford C. Bernstein Fund, Inc.
<PAGE>
Illiquid Securities
Within the limits set forth in the "Investment Objectives and Policies" section
(pages 6-9), the Portfolios may invest in illiquid securities--securities that
are not readily marketable. The Board of Directors of the Fund has determined
that any or all of the following factors may be relevant to determining the
liquidity of a security: the amount of the issue outstanding; the complexity of
the issue; the bid/ask spread; the number and identity of market makers or
dealers in or other buyers of the security; the existence of put features and
other rights; the term of the security; the visibility of the issuer in the
marketplace; the method of soliciting offers and the mechanics of completing
transfers; the average trading volume for the issue; and with respect to foreign
securities, the amount of such securities that can be owned by investors who are
not residents of the country where such securities were issued and the amount of
such securities owned by the controlling interests. The factors to be considered
in the case of the analysis of unrated municipal lease obligations will include
an analysis of credit factors. Purchased dealer options, private placements
(excluding securities eligible for resale under Rule 144A that have been
determined to be liquid as set forth in the preceding section), guaranteed
investment contracts, bank investment contracts, repurchase agreements for
periods longer than seven days, time deposits maturing in more than seven days
and loan participations are considered to be illiquid securities for the
purposes of this restriction. In addition, the staff of the Securities and
Exchange Commission currently takes the position that all options traded in the
over-the-counter market are illiquid; if the staff amends its position, the Fund
may, in accordance with the amended position, consider such options to be
liquid.
Preferred Stock
The Portfolios may invest in preferred stock. Preferred stock is subordinated to
any debt the issuer has outstanding. Accordingly, preferred stock dividends are
not paid until all debt obligations are first met. Preferred stock may be more
subject to fluctuations in market value, due to changes in market participants'
perceptions of the issuer's ability to continue to pay dividends, than debt of
the same issuer.
Foreign Securities
While the Fixed-Income Portfolios generally invest in domestic securities, each
may also invest up to 20% of its total assets in foreign securities of the same
types and quality as the domestic securities in which it invests when the
anticipated performance of the foreign securities is believed by the advisor to
offer more potential than domestic alternatives in keeping with the investment
objectives of the Portfolios. The Portfolios may invest in foreign fixed-income
securities that may involve risks in addition to those normally associated with
domestic securities. These risks include currency risks and other risks
described on page 9.
Warrants
The Portfolios may have investments in warrants. Warrants are securities that
give the Portfolio the right to purchase securities from the issuer at a
specific price (the strike price) for a limited period of time. The strike price
of warrants sometimes is much lower than the current market price of the
underlying securities, yet they are subject to similar price fluctuations. As a
result, warrants may be more volatile investments than the underlying securities
and may offer greater potential for capital appreciation as well as capital
loss. Warrants do not entitle a holder to dividends, interest payments or voting
rights with respect to the underlying securities and do not represent any rights
in the assets of the issuing company. Also, the value of the warrant does not
necessarily change with the value of the underlying securities, and a warrant
ceases to have value if it is not exercised prior to the expiration date. These
factors can make warrants more speculative than other types of investments.
Equity Securities
The equity securities in which the Bernstein International Value Portfolio may
invest include common and preferred stocks, warrants and convertible securities.
The Portfolio may invest in foreign securities directly or in the form of
sponsored or unsponsored American Depositary Receipts (ADRs), European
Depositary Receipts (EDRs) or other similar securities convertible into
securities of foreign issuers without limitation. ADRs are receipts typically
issued by a U.S. bank or trust company that evidence ownership of the underlying
securities. EDRs are European receipts evidencing a similar arrangement. The
issuers of unsponsored ADRs are not obligated to disclose material information
in the United States and, therefore, there may not be a correlation between such
information and the market value of the ADR. In some circumstances--e.g., when a
direct investment in securities in a particular country cannot be made--the
Portfolio, in compliance with provisions of the Investment Company Act of 1940,
as amended (the "1940 Act"), may invest in the securities of investment
companies that invest in foreign securities. As a shareholder in any mutual
fund, the Portfolio will bear its ratable share of the mutual fund's management
fees and other expenses, and will remain subject to payment of the Portfolio's
management and other fees with respect to assets so invested.
Special Investment Techniques
In seeking to achieve its investment objectives, each of the Portfolios may
employ the following special investment techniques, among others. These
techniques may be used to
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 13
<PAGE>
hedge various market risks (such as interest rates, currency exchange rates and
broad or security-specific changes in the prices of equity or fixed-income
securities), to manage the effective maturity or duration of fixed-income
securities, to exploit mispricings in the securities markets or as an
alternative to activities in the underlying cash markets. They may include the
use of exchange-traded derivatives such as futures and options--financial
products which are standardized by size, maturity and delivery, and are sold on
organized exchanges. Furthermore, over-the-counter derivatives such as swaps or
other hybrid instruments, which are individually tailored to meet the needs of a
specific client, may also be used.
Foreign Currency Transactions
A Portfolio may enter into foreign currency exchange contracts on a spot (i.e.,
cash) basis at the rate then prevailing in the currency exchange market or
through entering into forward contracts, which obligate the contracting parties
to purchase or sell a specific currency at a specified future date at a
specified price. The Portfolios will generally not enter into a forward contract
with a term greater than one year.
The Portfolios will generally enter into forward contracts under two
circumstances. First, a Portfolio may enter into a forward contract when it
enters into a contract for the purchase or sale of a security denominated in a
foreign currency in order to lock in the price in dollars of the security.
Second, when the Manager believes that the currency of a particular foreign
country may experience an adverse movement against another currency, a Portfolio
may enter into a forward contract to sell an amount of the foreign currency (or
another currency that acts as a proxy for that currency) approximating the value
of some or all of a Portfolio's securities denominated in such foreign currency.
Under certain circumstances, the International Value Portfolio may commit a
substantial portion or the entire value of its portfolio to the consummation of
these contracts. The Manager will consider the effect that a substantial
commitment of assets to forward contracts would have on the investment program
of the International Value Portfolio and the flexibility of the Portfolio to
purchase additional securities. Although forward contracts will be used
primarily to protect the Portfolios from adverse currency movements, they
involve the risk that anticipated currency movements will not be accurately
predicted and the Portfolios' total return could be adversely affected as a
result.
Futures Contracts and Options
The Portfolios may enter into financial futures contracts, including bond, bond
index, Eurodeposit, stock index or currency futures contracts and options
thereon. In addition, the Portfolios may each purchase and write (i.e., sell)
put and call options on securities, on securities indexes based on securities in
which the Portfolio may invest, on foreign currencies traded on U.S. or foreign
exchanges or over-the-counter and on futures contracts. The securities for
which a Portfolio writes put or call options will be Portfolio securities, and
the Portfolios will write only covered options.
The Portfolios may also enter into options on the yield "spread" or yield
differential between two securities. In contrast to other types of options, this
option is based on the difference between the yields of designated securities,
currencies, futures or other instruments. In addition, the Portfolios may write
covered straddles. A straddle is a combination of a call and a put written on
the same underlying security.
In accordance with the current rules and regulations of the Commodity
Futures Trading Commission (the "CFTC"), the aggregate initial margins and
premiums required from the Portfolio in connection with commodity futures and
options positions used for purposes other than "bona fide hedging" will not
exceed 5% of the liquidation value of the Portfolio; provided, however, in the
case of an option that is in the money at the time of the purchase, that the
in-the-money portion of the premium is excluded in calculating the 5%
limitation. No Portfolio will write any option if, immediately thereafter, the
aggregate value of the Portfolio's securities subject to outstanding options
would exceed 25% of its net assets.
Futures contracts and options can be highly volatile and could reduce a
Portfolio's total returns, and attempts to use such investments for hedging
purposes may not be successful. Successful futures and options strategies
require the ability to predict future movements in securities prices, interest
rates and other economic factors. Each Portfolio's potential losses from the use
of futures extend beyond its initial investment in such contracts and are
potentially unlimited. Also, losses from futures and options could be
significant if a Portfolio is unable to close out its position due to
disruptions in the market or lack of liquidity.
Swaps and Hybrid Investments
As part of its investment program and to maintain greater flexibility, each
Portfolio may invest in hybrid instruments (a type of potentially high-risk
derivative) that have the characteristics of futures, options, currencies and
securities. Such instruments may take a variety of forms, such as a security
with the principal amount, redemption or conversion terms related to the market
price of some commodity, currency or securities index; or debt instruments with
interest or principal payments determined by reference to the value of
commodities, currencies, fixed-income instruments, financial indexes or other
financial or economic indicators, data or
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14 Sanford C. Bernstein Fund, Inc.
<PAGE>
events; or the differences between the value of commodities, currencies,
fixed-income instruments, financial indexes or other financial or economic
indicators, data or events; or the rate of change of the value of commodities,
currencies, fixed-income instruments, financial indexes or other financial or
economic indicators, data or events. Hybrids can have volatile prices and
limited liquidity and their use by the Portfolio may not be successful. The risk
of these investments can be substantial; possibly all of the principal is at
risk. No Portfolio will invest more than 20% of its total assets in these
investments.
Swap agreements are contracts between parties in which one party agrees to
make payments to the other party based on the change in the market value of a
specified index or asset. In return, the other party agrees to make payments to
the first party based on the return of a different specified index or asset.
Swap agreements entail the risk that a party will default on its payment
obligations thereunder. Swap agreements also bear the risk that the Portfolio
will not be able to meet its obligation to the counterparty.
A Portfolio may enter into interest-rate or foreign currency swaps and
purchase and sell interest-rate caps and floors. No Portfolio will use swaps to
leverage the Portfolio. A Portfolio will maintain in a segregated account with
the Fund's custodian an amount having an aggregate net asset value at least
equal to the net amount of the excess, if any, of the Portfolio's obligations
over its entitlements with respect to each swap. The Portfolios expect to enter
into these transactions to exploit mispricings in the bond or currency markets
or to preserve a return or spread on a particular investment or portion of its
portfolio, as a duration management technique or to protect against any increase
in the price of securities that the Portfolios anticipate purchasing at a later
date.
Interest-rate swaps involve the exchange by a Portfolio with another party
of their respective commitments to pay or receive interest, e.g., an exchange of
fixed-rate payments for floating-rate payments. Such an exchange would allow the
Portfolio to alter its exposure to interest-rate market risk without changing
the composition of the Portfolio. The purchase of an interest-rate floor or cap
entitles the purchaser to receive payments of interest on a notional principal
amount from the seller, to the extent that the specified index falls below
(floor) or exceeds (cap) a predetermined interest rate. Currency swaps are
similar to interest-rate swaps, except that they involve currencies instead of
interest rates. The Portfolios will enter interest-rate swaps only on a net
basis (i.e., the two payment streams are netted out) with the Portfolios
receiving or paying, as the case may be, only the net amount of the two
payments.
Repurchase Agreements
In a repurchase transaction, a Portfolio purchases a security from a bank or a
securities dealer and simultaneously agrees to resell that security to the bank
or broker-dealer at an agreed-upon price on an agreed-upon date. The resale
price reflects the purchase price and an agreed-upon rate of interest. In
effect, the obligation of the seller to repay the agreed-upon price is secured
by the value of the underlying security, which must at least equal the
repurchase price. Repurchase agreements could involve certain risks in the event
of default or insolvency of the other party, including possible delays or
restrictions on the Portfolio's ability to dispose of the underlying securities.
The Board of Directors has established guidelines to be used by the Manager in
repurchase transactions and regularly monitors the Portfolios' use of repurchase
agreements.
Reverse Repurchase Agreements
The Portfolios may enter into reverse repurchase agreements with banks and
broker-dealers from time to time. In a reverse repurchase transaction, it is the
Portfolio, rather than the other party to the transaction, that sells the
securities and simultaneously agrees to repurchase them at a price reflecting an
agreed-upon rate of interest. A Portfolio's obligations under reverse repurchase
agreements will not exceed one-third of the Portfolio's total assets, less
liabilities other than obligations under such reverse repurchase agreements.
During the time a reverse repurchase agreement is outstanding, each Portfolio
that has entered into such an agreement maintains a segregated account with its
Custodian containing cash, U.S. government or other liquid high-grade debt
securities having a value at least equal to the repurchase price under the
reverse repurchase agreement. The use of reverse repurchase agreements is
included in the Portfolios' borrowing policy and is subject to the limit of
Section 18(f)(1) of the 1940 Act. Reverse repurchase agreements may create
leverage, increasing a Portfolio's opportunity for gain and risk of loss for a
given fluctuation in the value of the Portfolio's assets. There may also be
risks of delay in recovery and, in some cases, even loss of rights in the
underlying securities, should the opposite party fail financially.
Lending Portfolio Securities
Each Portfolio may, from time to time, lend portfolio securities having, in the
case of the Fixed-Income Portfolios, a market value of no more than 30% of its
total assets and, in the case of the International Value Portfolio, having a
market value of no more than one-third of its total assets, to qualified
broker-dealers, banks or other financial institutions. By lending its portfolio
securities, a Portfolio attempts to increase its income through the receipt of
interest on the
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 15
<PAGE>
loan. Any such loan of portfolio securities will be marked to the market daily
and secured by collateral consisting of cash or U.S. government securities in
an amount at least equal to the value of the securities loaned. The Manager
believes that the risk of loss on such a transaction is slight because, if the
borrower were to default, the collateral would be available to satisfy the
obligation. However, as with other extensions of secured credit, loans of
portfolio securities involve some risk of loss of rights in the collateral
should the borrower fail financially. The Manager carefully evaluates the
creditworthiness of any potential borrower of securities. A Portfolio may not
have the right to vote securities on loan, but it will call a loaned security in
anticipation of an important vote.
When-Issued and Delayed-Delivery Transactions
The Portfolios may purchase securities on a "when-issued" or "delayed-delivery"
basis. In a when-issued or delayed-delivery transaction, a Portfolio purchases a
security with delivery to take place at a later date, usually within three
months from the date the transaction is entered into. The market value of the
security at delivery may be more or less than the purchase price. The Fund's
Custodian is to maintain, in segregated accounts, cash, U.S. government
securities or other liquid high-grade debt obligations having a value equal to
or greater than each Portfolio's purchase commitments; likewise, the Custodian
is to segregate securities sold by each Portfolio on a delayed-delivery basis.
Further information about the Portfolios' use of Special Investment
Techniques and their associated risks is contained in the SAI.
Future Developments
The Portfolios expect to discover additional opportunities in the areas of
options, futures contracts, options on futures contracts and other derivative
instruments. These opportunities will become available as the Manager develops
new strategies, as regulatory authorities broaden the range of transactions that
are permitted and as new options and futures are developed. To the extent such
opportunities are both consistent with the Portfolio's investment objectives and
legally permissible for that Portfolio, the Manager may utilize the strategies
that do not conflict with the Portfolio's investment restrictions. These
opportunities may involve risks that differ from those described above.
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16 Sanford C. Bernstein Fund, Inc.
<PAGE>
MANAGEMENT OF THE PORTFOLIOS
Directors and Officers
The Board of Directors of the Fund is responsible for the overall supervision of
the management of the Fund. The directors also perform various duties imposed on
directors of investment companies by the 1940 Act and by the State of Maryland.
Officers of the Fund conduct and supervise the daily operations of the
Portfolios.
The following table lists the directors and executive officers of the Fund,
their business addresses and their principal occupations during the past five
years.
<TABLE>
<CAPTION>
Position with Principal Occupation
Name and Address The Fund During Past Five Years
- ---------------- ------------- ----------------------
<S> <C> <C>
Roger Hertog* President, 1993-Present: President, Chief Operating Officer
767 Fifth Avenue Treasurer, and Director--Bernstein
New York, NY 10153 Director Previously: Executive Vice President and Director--Bernstein
Andrew S. Adelson* Senior Vice President, Senior Vice President, Chief Investment Officer--International
767 Fifth Avenue Director and Director--Bernstein
New York, NY 10153
Arthur Aeder Director 1987-Present: Consultant; Formerly Senior Partner of
20 West 55th Street Oppenheim, Appel, Dixon & Co. (subsequently Spicer
New York, NY 10019 & Oppenheim) Certified Public Accountants, and Chairman of
Spicer & Oppenheim International
Peter L. Bernstein** Director President & Chief Executive Officer of Peter L. Bernstein,
575 Madison Avenue Inc., Economic Consultants
Suite 1006
New York, NY 10022
William Kristol Director 6/95-Present: Editor and Publisher, The Weekly Standard
1150 17th Street, N.W. 11/93-5/95: Chairman, Project for the Republican Future
5th Floor 1/93-11/93: Director, The Bradley Project on the 90's
Washington, D.C. 20036 5/89-1/93: Chief of Staff to the Vice President, The White House
Theodore Levitt Director Professor Emeritus of Business Administration,
Harvard Business School Harvard University
Cumnock 300 1985-89: Editor, Harvard Business Review
Boston, MA 02163
Francis H. Trainer, Jr. Senior Vice President Senior Vice President, Director--Fixed Income Investments
767 Fifth Avenue and Director--Bernstein
New York, NY 10153
Jean Margo Reid Secretary 1997: Vice President and General Counsel--Bernstein
767 Fifth Avenue Previously: Vice President and Associate General
New York, NY 10153 Counsel--Bernstein
</TABLE>
* An "interested person" of the Fund, as defined in the 1940 Act.
** Not related to Zalman C. Bernstein, Chairman of the Executive
Committee--Bernstein.
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 17
<PAGE>
The Manager
Bernstein is a closely held corporation, organized under the laws of the State
of New York on January 20, 1969, which succeeded to the business of Sanford C.
Bernstein & Co., a partnership, on February 1, 1969. Bernstein is a registered
investment advisor that manages some $46.8 billion, as of September 30, 1996,
for individuals, endowments, trusts and estates, charitable foundations,
partnerships, corporations, the Portfolios of the Fund and tax-exempt funds such
as pension and profit-sharing plans. Of that amount, some $16.2 billion was
invested in fixed-income securities and $30.6 billion in equities as of
September 30, 1996. Pursuant to contracts with the Fund, Bernstein provides the
following types of services: Investment Management, Shareholder Servicing and
Administration and Distribution.
Investment Management
Bernstein has entered into Investment Management Agreements (the "Management
Agreements") with the Fund, on behalf of the Portfolios, under which the
Manager, subject to the supervision of the Board of Directors and in conformity
with the stated policies of the Portfolios, manages each Portfolio's assets.
Investment Policy Groups created by the Manager and comprised of the Manager's
employees make all investment decisions for the Portfolios, and no one person is
primarily responsible for making recommendations to these groups.
Each Portfolio pays the Manager for the services performed on behalf of that
Portfolio, as well as for the services performed on behalf of the Fund as a
whole. The fee paid by each Fixed-Income Portfolio is at an annual rate of 0.50%
of each such Portfolio's average daily net assets up to and including $1 billion
and at an annual rate of 0.45% of each such Portfolio's average daily net assets
in excess of $1 billion. The fee paid by the International Value Portfolio is at
an annual rate of 1.00% of that Portfolio's average daily net assets up to but
not exceeding $2 billion and at an annual rate of .90 of 1% of that Portfolio's
average daily net assets that exceed $2 billion. Because the investment programs
of international asset management are costly to implement and maintain, this fee
is higher than that paid by most investment companies that invest in U.S. equity
securities. The fee is computed daily and payable monthly.
Shareholder Servicing and Administration
Bernstein has also entered into Shareholder Servicing and Administrative
Agreements with the Fund on behalf of the Portfolios. Pursuant to these
Agreements, Bernstein pays all expenses incurred by it in connection with
administering the ordinary course of the Fund's and each Portfolio's business.
Bernstein also pays the costs of office facilities and of clerical and
administrative services not provided by State Street Bank and Trust Company, the
Fund's Custodian and Transfer Agent. Bernstein serves as Shareholder Servicing
Agent and in such capacity may enter into agreements with other organizations
whereby some or all of Bernstein's duties in this regard may be delegated. The
shareholder servicing that will be provided by Bernstein or other organizations
might include, among other things, proxy solicitations and providing information
to shareholders concerning their mutual fund investments, systematic withdrawal
plans, dividend payments, reinvestments and other matters. The fee paid by each
Fixed-Income Portfolio for these services is at an annual rate of 0.10% of that
Portfolio's average daily net assets, and the fee paid by the International
Value Portfolio is at an annual rate of 0.25% of the Portfolio's average daily
net assets.
Each Portfolio is responsible for the payment of all of its expenses other
than those expressly stated to be payable by Bernstein under the Management
Agreements and the Shareholder Servicing and Administrative Agreements.
Distribution
Bernstein acts as Distributor of each Portfolio's shares pursuant to
Distribution Agreements with the Fund.
Participating in Your Plan
The Fund is available as an investment option in your retirement or savings
plan. The administrator of your plan or your employee benefits office can
provide you with detailed information on how to participate in your plan and how
to elect the Fund as an investment option.
You may be permitted to elect different investment options, alter the
amounts contributed to your plan or change how contributions are allocated among
your investment options in accordance with your plan's specific provisions. See
your plan administrator or employee benefits office for more details.
Contributions, exchanges or distributions of the Fund's shares are effective
when received in "good order" by Bernstein or its agents. "Good order" means
that complete information on the purchase, exchange or redemption and the
appropriate monies have been received by Bernstein or its agents.
Your plan may allow you to exchange monies from one investment option to
another. Check with your plan administrator for details on the rules governing
exchanges in your plan. Certain investment options may be subject to unique
restrictions.
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18 Sanford C. Bernstein Fund, Inc.
<PAGE>
Before making an exchange, you should consider the following:
o If you are making an exchange to another Bernstein Fund option, please
read the Fund's prospectus. Write to the address or call the number
which appears on the cover of this Prospectus for a copy.
o Exchanges are accepted by Bernstein only as permitted by your plan. Your
plan administrator can explain how frequently exchanges are allowed.
If you have questions about your account, contact your plan administrator or the
organization that provides record-keeping services for your plan.
Portfolio Transactions
And Brokerage
The Manager is responsible for decisions to buy and sell securities for each of
the Portfolios and for broker-dealer selection. In general, the securities in
which the Fixed-Income Portfolios invest are traded on a "net" rather than a
transaction-charge basis (as securities in which the International Value
Portfolio invest are generally traded), with dealers acting as principal for
their own accounts without a stated transaction charge. Accordingly, the price
of the security may reflect an increase or decrease from the price paid by the
dealer together with a spread between the bid and asked price, which provides
the opportunity for a profit or loss to the dealer. Portfolio transactions that
are effected on a transaction-charge basis may be effected through Bernstein,
acting as agent and not as principal, provided, among other things, that any
transaction charges, fees or other remuneration received by Bernstein are
reasonable and fair compared to the transaction charges, fees or other
remuneration paid to other brokers in connection with comparable transactions
involving similar securities during a comparable period of time. In some cases,
a Portfolio might engage in purchase or sale transactions with another Portfolio
of the Fund, subject to conditions specified under the 1940 Act. There might
also be occasions when a Portfolio engages in purchase or sale transactions with
another mutual fund.
Although the objectives of the other accounts to which the Manager provides
investment advice may differ from those of each of the Portfolios, it is
possible that, at times, identical securities are acceptable for one or more of
the Portfolios and one or more of such accounts. If the purchase or sale of
securities is consistent with the investment policies of one or more of the
Portfolios and one or more of the accounts of the Manager is considered at or
about the same time, transactions in such securities will be allocated among
the accounts and the Portfolios in a manner deemed equitable by the Manager.
Where securities are allocated among Fund Portfolios and private accounts, the
Manager may use the average price at which the securities were purchased or
sold.
Neither of the Fixed-Income Portfolios anticipates a portfolio turnover
rate in excess of 300%. The International Value Portfolio anticipates a
portfolio turnover rate of less than 100%. A turnover rate of 100% would occur,
for example, if all the securities held by a Portfolio were replaced in a
period of one year. A portfolio's turnover rate is the percentage computed by
dividing the lesser of portfolio purchases or sales (excluding all securities
whose maturities at acquisition were one year or less) by the average value of
the portfolio. High portfolio turnover involves correspondingly greater
transaction costs, which are borne directly by the Portfolio, and may also
result in the realization of substantial net short-term capital gains, taxable
at ordinary income tax rates to non-tax-exempt investors.
Net Asset Value
The net asset value of each Portfolio is computed as of the close of regular
trading of the New York Stock Exchange (the "Exchange") (normally 4:00 p.m., New
York time). Purchase and redemption orders are accepted by the Fund on each
business day, with the exception of Exchange and national bank holidays, as
determined from time to time. Currently, these holidays are: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and
Christmas Day. The net asset value per share of each Portfolio is the net worth
of the Portfolio (assets, including securities at market value, minus
liabilities) divided by the number of shares outstanding. The value of each
security for which readily available market quotations exist is based on the
most recent sale, the most recent available bid price or the mean between the
most recent available bid and asked prices in the broadest and most
representative market for that security as determined by the Manager. Debt
instruments with remaining maturities of 60 days or less may be valued at
amortized cost. Securities and other assets for which market quotations are not
readily available are valued by appraisal at their fair value as determined in
good faith under procedures established by and under the general supervision of
the Board of Directors. The Fund may use an independent pricing service to value
the Portfolios' assets at such times and to such extent as the Manager deems
appropriate. All assets and liabilities initially expressed in foreign
currencies will be translated into U.S. dollars. Dividends on foreign securities
are accrued and reflected in net asset value either on the date the security
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 19
<PAGE>
goes ex-dividend or the date the Manager becomes aware of them, whichever is
later; corporate actions of foreign issuers are reflected in net asset value on
the date on which they become effective, or the date the Manager becomes aware
of them, whichever is later.
Dividends, Distributions and Taxes
The Fixed-Income Portfolios intend to declare dividends daily and to pay them
monthly. The International Value Portfolio intends to declare and pay dividends
at least annually, generally in December. Capital-gains distributions are made
at least annually, generally in December. Each Portfolio's distributions and
dividends are paid in additional shares of that Portfolio based on the
Portfolio's net asset value at the close of business on the record date.
Each Portfolio intends to continue to qualify for taxation as a "regulated
investment company" under the Internal Revenue Code so that it will not be
subject to federal income tax to the extent that its income is distributed to
shareholders.
If you utilize the Fund as an investment option in an employer-sponsored
retirement or savings plan, dividend and capital-gains distributions from the
Fund will generally not be subject to current taxation, but will accumulate on a
tax-deferred basis. In general, employer-sponsored retirement and savings plans
are governed by a complex set of tax rules. If you participate in such a plan,
consult your plan administrator, your plan's Summary Plan Description or a
professional tax advisor regarding the tax consequences of your participation in
the plan and of any plan contributions or withdrawals.
Dividends and interest received by the International Value Portfolio may be
subject to foreign tax and withholding. However, tax conventions between certain
countries and the United States may reduce or eliminate such taxes. Shareholders
may be entitled to claim foreign tax credits or deductions on their own federal
income tax returns with respect to such taxes paid by the Portfolio.
If the International Value Portfolio qualifies as a regulated investment
company, if certain asset and distribution requirements are satisfied and if
more than 50% of the Portfolio's total assets at the close of its fiscal year
consist of stock or securities of foreign corporations, the Portfolio may elect
for United States income tax purposes to treat foreign income taxes paid by it
as paid by its shareholders. The Portfolio will make such an election only if it
deems it to be in the best interests of its shareholders.
Description of Shares
The shares of each Portfolio have no preemptive or conversion rights. Shares are
fully paid and nonassessable and redeemable at the option of the shareholder and
have a par value of $0.001. Shares are also redeemable at the option of the
Fund, if the net asset value of a shareholder's account is less than $1,000.
Pursuant to the Articles of Incorporation, the Board of Directors may also
authorize the creation of additional series of shares (the proceeds of which may
be invested in separate, independently managed portfolios) with such
preferences, privileges, limitations and voting and dividend rights as the Board
may determine.
Shareholders have certain rights, including the right to call a meeting of
shareholders for the purpose of voting on the removal of one or more Directors.
Such removal can be effected upon the action of two-thirds of the outstanding
shares of all of the Portfolios of the Fund, voting as a single class. The
shareholders of each Portfolio are entitled to a full vote for each full share
held and to the appropriate fractional vote for each fractional share. A matter
that affects a Portfolio of the Fund will not be deemed to have been effectively
acted upon unless approved by the holders of a majority of the outstanding
voting securities of that Portfolio. The voting rights of the shareholders are
not cumulative. The Directors have been elected at the initial meeting of the
public shareholders of the Fund, except for Mr. Kristol and Mr. Adelson, who
were elected by the other Directors. In order to avoid unnecessary expenses, the
Fund does not intend to hold annual meetings of shareholders.
Performance
Each of the Portfolios may, from time to time, advertise yield, average annual
total return and unannualized average total return. Yield is a measure of a
Portfolio's income; it does not measure changes in the net asset value of the
Portfolio's shares. Average annual total return reflects all elements of return,
including income, expenses and changes in the value of the principal. Yield and
average annual total return are based on historical results and are not intended
to indicate future performance.
The yield of a Portfolio is calculated by dividing the Portfolio's net
investment income per share during a specified month by the maximum offering
price per share on the last day of the month and annualizing it. Yield is
calculated in accordance with accounting methods prescribed by the Commission.
Because the yield accounting methods differ from the methods used for tax and
financial accounting purposes, a Portfolio's yield may not be
- --------------------------------------------------------------------------------
20 Sanford C. Bernstein Fund, Inc.
<PAGE>
comparable to the dividends paid to a shareholder or the net investment income
reported in the Portfolio's financial statements. The calculation of yield takes
into account all fees and expenses. The average annual total return of a
Portfolio is computed by finding the average annual compounded rate of return
since the commencement of the Portfolio's operations based on an initial
investment of $1,000 as compared to the ending redeemable value, assuming that
all dividends and distributions were reinvested. The calculation of average
annual total return takes into account all fees and expenses. The unannualized
average total return of a Portfolio for a period is calculated by dividing the
value of an investment at the end of the period, assuming all dividends and
distributions were reinvested, by the value of the investment at the beginning
of the period. The Fund may use an independent service to calculate yield and/or
performance data of any or all Portfolios at such times and to such extent as
the Manager deems appropriate. For further information and a description of the
method by which yield average annual total return and unannualized average total
return are calculated, see "Performance" in the SAI.
Custodian and Transfer Agent
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, serves as Custodian for the Fund and in that capacity holds the cash and
other assets for each Portfolio in the Fund and maintains certain financial and
accounting books and records pursuant to an agreement with the Fund. Foreign
securities and foreign currency owned by the Fund may be held by foreign
subcustodians of State Street Bank and Trust Company retained for such purpose
in accordance with the 1940 Act. State Street Bank and Trust Company also serves
as Transfer Agent for the Portfolios and in that capacity maintains certain
records pursuant to an agreement with the Fund.
Independent Accountants
And Legal Counsel
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036, has
been selected as the independent accountants to audit the annual financial
statements of each Portfolio of the Fund. Price Waterhouse LLP also has been the
independent accountants of the investment performance statistics of Bernstein's
separately managed accounts since 1978.
Shereff, Friedman, Hoffman & Goodman LLP, 919 Third Avenue, New York, New
York 10022, has been selected as legal counsel to the Fund. Shereff, Friedman,
Hoffman & Goodman LLP and partners of that firm have been legal counsel to
Bernstein since 1967, when Bernstein was organized.
- --------------------------------------------------------------------------------
Prospectus--January 31, 1997 21
<PAGE>
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<PAGE>
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<PAGE>
January 31, 1997
Bernstein Short Duration Plus
Bernstein Intermediate Duration
Bernstein International Value
PROSPECTUS
Sanford C. Bernstein Fund, Inc.
767 Fifth Avenue
New York, NY 10153
212-756-4097
Table of Contents
Fee Table 2
Financial Highlights 3
The Fund. 6
Investment Objectives and Policies
Of the Portfolios 6
Investment Objectives and Policies
Of the Fixed-Income Portfolios 6
o Bernstein Short Duration Plus Portfolio 7
o Bernstein Intermediate Duration Portfolio 7
Investment Objectives and Policies Of the
Bernstein International Value Portfolio. 8
Investments 9
Special Investment Techniques 13
Management Of the Portfolios 17
Directors and Officers. 17
The Manager 18
Participating in Your Plan 18
Portfolio Transactions and Brokerage 19
Net Asset Value 19
Dividends, Distributions and Taxes 20
Description of Shares 20
Performance 20
Custodian and Transfer Agent 21
Independent Accountants and Legal Counsel 21
<PAGE>
SANFORD C. BERNSTEIN FUND, INC.
767 Fifth Avenue
New York, New York 10153
(212) 756-4097
Statement of Additional Information
January 31, 1997
Sanford C. Bernstein Fund, Inc. (the "Fund") is an open-end management
investment company. This Statement of Additional Information relates to eleven
of the Fund's series of shares (the "Portfolios"), each with its own investment
objectives.
This Statement of Additional Information is not a prospectus, and should
be read in conjunction with the Fund's Prospectus, dated January 31, 1997, which
may be obtained by writing to or telephoning the Fund at the above address or
telephone number.
Cross Reference to
Page in
Regular
Page Prospectus
---- -----------------
Investment Objectives and Policies
Investment Restrictions
Directors and Officers and
Principal Holders of Securities
Manager and Distributor
Net Asset Value
Portfolio Transactions and Brokerage
Purchase and Redemption of Shares
Taxes
Custodian, Transfer Agent,
Independent Accountants and
Financial Statements
Performance
Appendix
<PAGE>
B-2
INVESTMENT OBJECTIVES AND POLICIES
For a description of the objectives and policies of the Portfolios, see
"Investment Objectives and Policies of the Portfolios" in the Fund's Prospectus.
The following information is provided for those investors desiring information
in addition to that contained in the Prospectus. This Statement of Additional
Information relates to the Fund's nine fixed-income Portfolios -- the Bernstein
Short Duration California Municipal Portfolio, Bernstein Short Duration
Diversified Municipal Portfolio, Bernstein Short Duration New York Municipal
Portfolio, Bernstein Government Short Duration Portfolio, Bernstein Short
Duration Plus Portfolio, Bernstein Intermediate Duration Portfolio, Bernstein
Diversified Municipal Portfolio, Bernstein New York Municipal Portfolio and
Bernstein California Municipal Portfolio (the "Fixed-Income Portfolios") -- and
the Fund's international equity Portfolios -- the Bernstein International Value
Portfolio and the Bernstein Emerging Markets Value Portfolio.
Bank Obligations
The Portfolios may invest in fixed-income obligations (including, but
not limited to, certificates of deposit, time deposits and bankers' acceptances)
of U.S. thrift institutions, U.S. commercial banks (including foreign branches
of such banks) and foreign banks (including U.S. branches of such banks).
Time deposits are non-negotiable obligations of banks or thrift
institutions with specified maturities and interest rates. Time deposits with
maturities of more than seven days are considered illiquid securities.
Certificates of deposit are negotiable obligations issued by commercial
banks or thrift institutions. Certificates of deposit may bear a fixed rate of
interest or a variable rate of interest based upon a specified market rate.
A banker's acceptance is a time draft drawn on a commercial bank, often
in connection with the movement, sale or storage of goods.
The Portfolios expect to invest no more than 5% of any Portfolio's net
assets in fixed-income investments of non-insured U.S. banks and U.S. thrift
institutions. The risks of investments in non-insured banks and thrifts are
individually evaluated since non-insured banks and thrifts are not subject to
supervision and examination by the FDIC or a similar regulatory authority. The
Portfolios limit their purchases to fixed-income obligations issued by insured
U.S. banks and U.S. thrift institutions which are rated B or higher by Standard
& Poor's or Moody's or which are not rated but which are determined by the
Manager to be of comparable quality. For investments in non-insured foreign
banks, the Fixed-Income Portfolios limit their purchases to fixed-income
obligations issued by foreign banks with a rating of B or higher by Standard &
Poor's or Moody's or of securities which are not rated but which are determined
by Bernstein to be of comparable quality.
<PAGE>
B-3
Zero Coupon Securities
The Portfolios may purchase zero coupon debt securities. A zero coupon
security pays no cash interest during its stated term. Its value lies in the
difference between the principal value to the holder at maturity and the
purchase price. Zero coupon securities are sold at a discount to principal
value, and their market values nearly always fluctuate more widely than do the
market values of similar-maturity debt securities which pay interest.
Asset-Backed Securities
The Portfolios may purchase securities backed by financial assets such
as loans or leases for various assets including automobiles, recreational
vehicles, computers and receivables on pools of consumer debt, most commonly
credit cards. Two examples of such asset-backed securities are CARS and CARDS.
CARS are securities, representing either ownership interests in fixed pools of
automobile receivables, or debt instruments supported by the cash flows from
such a pool. CARDS are participations in revolving pools of credit card
accounts. These securities have varying terms and degrees of liquidity.
Asset-backed securities may be pass-through, representing actual equity
ownership of the underlying assets, or pay-through, representing debt
instruments supported by cash flows from the underlying assets. Pay-through
asset-backed securities may pay all interest and principal to the holder, or
they may pay a fixed rate of interest, with any excess over that required to pay
interest going either into a reserve account or to a subordinate class of
securities, which may be retained by the originator. Credit enhancement of
asset-backed securities may take a variety of forms, including but not limited
to overcollateralizing the securities, subordinating other tranches of an
asset-backed issue to the securities, or by maintaining a reserve account for
payment of the securities. In addition, part or all of the principal and/or
interest payments on the securities may be guaranteed by the originator or a
third party insurer. The Manager takes all relevant credit enhancements into
account in making investment decisions on behalf of the Portfolios.
Convertible Securities
The Portfolios may purchase convertible corporate bonds and preferred
stock. These securities may be converted at a stated price (the "conversion
price") into underlying shares of preferred or common stock. Convertible debt
securities are typically subordinated to non-convertible securities of the same
issuer and are usually callable. Convertible bonds and preferred stocks have
many characteristics of non-
<PAGE>
B-4
convertible fixed-income securities. For example, the price of convertible
securities tends to decline as interest rates increase and increase as interest
rates decline. In addition, holders of convertibles usually have a claim on the
assets of the issuer prior to the holders of common stock in case of
liquidation.
The unusual feature of a convertible security is that changes in its
price can be closely related to changes in the market price of the underlying
stock. As the market price of the underlying stock falls below the conversion
price, the convertible security tends to trade increasingly like a
non-convertible bond. As the market price of the underlying common stock rises
above the conversion price, the price of the convertible security may rise
accordingly.
Other Securities
It is anticipated that, from time to time, other securities will be
developed, and they will be considered as potential investments for the
Portfolios, subject to Board guidelines.
Special Investment Techniques
Options
The Portfolios may each purchase put and call options on securities. A
Portfolio would normally purchase call options to hedge against an increase in
the market value of the securities in which the Portfolio may invest and put
options to hedge against a decline in market value of its portfolio securities.
Options may also be purchased to alter the effective duration of the
Fixed-Income Portfolios.
If a put is purchased for a Portfolio, the Portfolio may profit from a
decline in the market value of the underlying security. If a call is purchased,
a Portfolio may profit from a rise in the market value of the underlying
security. To realize these profits, the purchased put or call must be sold prior
to expiration or exercised. A Portfolio may also profit from an increase in the
volatility assumption implicit in the market price of the purchased put or call.
To realize this profit, the option must be sold prior to expiration. Any profit
or loss realized from the sale of an option is equal to the sale price less the
purchase cost and any transaction costs. Any profit or loss from the exercise of
a call option is equal to the market value of the underlying security at the
time of exercise less (i) the exercise price, (ii) the purchase cost of the
option, and (iii) any transaction costs. Any profit or loss from the exercise of
a put option is equal to the exercise price less (i) the market value of the
underlying security at the time of exercise, (ii) the purchase cost of the
option, and (iii) any transaction costs.
<PAGE>
B-5
Each Portfolio may write (i.e., sell short) covered put and call options
on its portfolio securities. These options will generally be sold when the
Manager perceives the options to be overpriced. They may also be sold to alter
the effective duration of the Fixed-Income Portfolios. When a Portfolio writes
an option, it receives a premium which it retains whether or not the option is
exercised. If the option is not exercised, this premium represents a profit on
the transaction (less any transaction costs).
By writing a call option, a Portfolio becomes obligated during the term
of the option to deliver the underlying securities, upon exercise of the option,
to the purchaser of the option at a specified price (the "exercise price"). The
purchaser of a call option has, for a specified period of time, the right, but
not the obligation, to purchase the securities subject to the option at the
exercise price. When a Portfolio writes a call option, the Portfolio loses the
opportunity for gain from an increase in the price of the underlying securities
beyond the exercise price of the option during the period that the option is
open, but retains the risk that the price of the securities may decrease.
By writing a put option, a Portfolio becomes obligated during the term
of the option to purchase the underlying securities from the option purchaser,
upon exercise of the option, at the exercise price. The purchaser of a put
option has, for a specified period of time, the right, but not the obligation,
to sell the securities subject to the option to the writer of the put at the
exercise price. A Portfolio might, therefore, be obligated to purchase the
underlying securities for more than the market price prevailing at the time of
exercise.
The Portfolios write only "covered" options. This means that so long as
a Portfolio is obligated as the writer of a call option, it will (i) own the
securities subject to the option; (ii) have an absolute and immediate right to
acquire those securities without additional cash consideration upon conversion
or exchange of other securities held in its portfolio; (iii) hold a call option
on the same security with an exercise price no higher than the exercise price of
the call sold or, if higher, deposit and maintain the differential in cash, U.S.
government securities or other liquid high-grade debt obligations ("liquid
assets") in a segregated account with its Custodian; or (iv) deposit and
maintain with its Custodian in a segregated account liquid assets having a value
that, when added to any amounts deposited with, or on behalf of, a broker as
margin, equals the market value of the instruments underlying the call. A
Portfolio is considered "covered" with respect to a put it writes if, so long as
it is obligated as the writer of a put, it (i) deposits and maintains with its
Custodian in a segregated account liquid assets having a value equal to or
greater than the exercise price of the option; (ii) holds a put on the same
security with an exercise price no lower than the exercise price of the put sold
or, if lower, the Portfolio deposits and maintains the differential in liquid
assets in a segregated account with its Custodian; or (iii) owns a short
position in the instrument underlying the put option, (or, if an index, a
portfolio representative of the index) at the same or a higher price than the
strike price of the put or, if lower, the Portfolio deposits and maintains the
differential in liquid assets in a segregated account with its Custodian.
A Portfolio may also write and purchase put and call options on any
securities index based on securities in which the Portfolio may invest for the
same purposes as it may write and purchase options on securities. Options on
securities indexes are similar to options on securities, except that the
exercise of
<PAGE>
B-6
securities index options requires cash payments and does not involve
the actual purchase or sale of securities. In addition, options are designed to
reflect price fluctuations in a group of securities or segment of the securities
market rather than price fluctuations in a single security. A Portfolio, in
purchasing or selling securities index options, is subject to the risk that the
value of its portfolio securities may not change as much as an index because the
Portfolio's investments generally cannot match the composition of an index.
In addition, a Portfolio may purchase and write put and call options on
foreign currencies for the purpose of protecting against declines in the dollar
value of its portfolio securities and against increases in the U.S. dollar cost
of foreign securities to be acquired. The writing of an option on foreign
currency will constitute only a partial hedge, up to the amount of the premium
received, and the Portfolio could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on foreign currency may constitute an effective hedge
against exchange rate fluctuations. However, in the event of unanticipated rate
movements adverse to the Portfolio's option position, the Portfolio may forfeit
the entire amount of the premium plus related transaction costs. Options on
foreign currencies to be written or purchased by the Portfolios will be traded
on U.S. and foreign exchanges or over-the-counter. The staff of the Securities
and Exchange Commission currently takes the position that all options which are
traded in the over-the-counter market are illiquid; if the staff amends its
position, the Fund may, in accordance with the amended position, consider such
options to be liquid.
The Portfolios may write covered straddles. A straddle is a combination
of a call and a put written on the same underlying security. A straddle will be
covered when sufficient assets are deposited to meet the requirements, as
defined above with respect to covered options. In accordance with the terms of a
no-action position from the staff of the Securities and Exchange Commission, the
Fund may use the same liquid assets to cover both the call and put options where
the exercise price of the call and put are the same, or the exercise price of
the call is higher than that of the put. In such cases, the Portfolios will also
segregate liquid assets equivalent to the amount, if any, by which the put is
"in the money."
The staff of the Securities and Exchange Commission has taken the
position that, in general, purchased dealer options and the assets used as cover
for written dealer options are illiquid securities. However, a Portfolio may
treat the securities it uses as cover for written dealer options as liquid,
provided it has arrangements with certain qualified dealers who agree that the
Portfolio may repurchase any option it writes for a maximum price to be
calculated by a predetermined formula. In these cases, the dealer option would
be considered illiquid to the extent that the maximum repurchase price under the
formula exceeds the intrinsic value of the option.
Possible Risks Associated with Options Transactions. In considering the
use of options, particular note should be taken of the following:
<PAGE>
B-7
(1) The value of an option position will reflect, among other things,
the current market price of the underlying security, the time remaining until
expiration, the relationship of the exercise price to the market price, the
expected price volatility of the underlying security and general market
conditions.
(2) A position in an exchange-traded option may be closed out only on an
exchange which provides a market for options of the same series. The ability to
establish and close out positions on the options exchanges is subject to the
maintenance of a liquid market. There can be no assurance that a liquid market
will exist for any option at any specific time. Although the Manager intends to
purchase or write only those exchange-traded options for which there appears to
be an active market, there is no assurance that a liquid market will exist for
any particular option and it is possible that, for some options, no market may
exist. In such event, it might not be possible to effect closing transactions
with respect to certain options, with the result that the Portfolio would have
to exercise those options which it has purchased in order to realize any profit.
With respect to options written by a Portfolio, the inability to enter into
closing transactions may result in losses.
(3) Exchange-traded options generally have a continuous liquid market
while dealer options do not. Consequently, the Portfolio will generally be able
to realize the value of a dealer option it has purchased only by exercising it
or reselling it to the issuing dealer. Similarly, when the Portfolio writes a
dealer option, it generally will be able to close out the option prior to its
expiration only by entering into a closing purchase transaction with the dealer
which originally purchased the option. While the Portfolio will enter into
dealer options only with dealers who are expected to be capable of entering into
closing transactions with the Portfolio, there can be no assurance that the
Portfolio will be able to liquidate a dealer option at a favorable price at any
time prior to its expiration. Until the Portfolio, as the writer of a covered
dealer option, is able to effect a closing purchase transaction, it will not be
able to liquidate securities used as cover until the option expires, is
exercised or the Portfolio provides substitute cover. In the event of insolvency
of the dealer, the Portfolio may be unable to liquidate a dealer option and
thereby release the securities used as cover for the option until expiration of
the option.
(4) A Portfolio's activities in the options markets may result in a
higher portfolio turnover rate and additional brokerage costs; however, the
Portfolio may also save on transaction costs by purchasing such contracts rather
than buying or selling individual securities.
(5) All options purchased or sold by the Portfolios will be traded on a
securities exchange or will be purchased or sold by securities dealers ("dealer
options") meeting creditworthiness standards approved by the Fund's Board of
Directors. While exchange-traded options are, in effect, guaranteed by the
Options Clearing Corporation, in the case of dealer options, a Portfolio relies
on the dealer from which it purchases a dealer option to perform if the option
is exercised. Thus, when a Portfolio purchases a dealer option, it relies on the
dealer from which it purchases the option to make or take delivery of the
underlying securities. Failure by the dealer to do so would result in the loss
of the premium paid by the Portfolio as well as loss of the expected benefit of
the transaction.
<PAGE>
B-8
Futures Contracts and Options on Futures.
The Portfolios may purchase or sell financial futures contracts
("futures contracts") and options thereon. Financial futures are commodity
futures contracts which obligate the buyer to take and the seller to make
delivery at a future date of a specified quantity of a financial instrument or
an amount of cash based on the value of a securities index or the market value
in U.S. dollars of a foreign currency. Currently, futures contracts are
available on various types of fixed-income securities and indexes, including but
not limited to U.S. Treasury bonds, notes, and bills, foreign government bonds,
Eurodollar certificates of deposit, municipal bonds, foreign exchange, and
various domestic and foreign stock indexes.
In connection with transactions in futures contracts and related short
options, the Portfolio is required to deposit with its Custodian in a segregated
account in the name of its futures commission merchant ("FCM") as "initial
margin" a specified amount of cash and/or short-term U.S. government securities.
Thereafter, subsequent payments (referred to as "variation margin") are made to
and from the FCM to reflect changes in the value of the futures contract or
short option positions. In accordance with the current rules and regulations of
the Commodity Futures Trading Commission (the "CFTC"), the aggregate initial
margins and premiums required from a Portfolio in connection with commodity
futures and options positions used for purposes other than "bona fide hedging"
will not exceed five percent of the liquidation value of the Portfolio.
If the Manager wishes to shorten the effective duration of a
Fixed-Income Portfolio, the Manager may sell a futures contract or a call option
thereon, or purchase a put option on that futures contract. If the Manager
wishes to lengthen the effective duration of a Fixed-Income Portfolio, the
Manager may buy a futures contract or a call option thereon, or sell a put
option.
The Portfolios' use of futures contracts will not result in leverage.
The Portfolio will segregate liquid assets, such as cash, government securities
or other high grade debt obligations, to cover its performance under such
contracts, or will employ alternative cover (such as owning an offsetting
position). Although the terms of futures contracts specify actual delivery or
receipt of securities or cash, in most instances the contracts are closed out
before the settlement date without the making or taking of delivery. Closing out
of a futures contract is effected by entering into an offsetting purchase or
sale transaction.
Unlike a futures contract, which requires the parties to buy and sell a
security or currency or make a cash settlement based on changes in a securities
index on an agreed date, an option on a futures contract entitles its holder to
decide on or before a future date whether to enter into such a contract. If the
holder decides not to exercise its option, the holder may sell the option or may
decide to let the option expire and forfeit the premium thereon. The purchaser
of an option on a futures contract makes no daily payments of cash in the nature
of "variation" margin payments to reflect the change in the value of the
underlying contract as does a purchaser or seller of a futures contract. The
value of the option changes and is thus reflected in the net asset value of the
Portfolio.
<PAGE>
B-9
Amounts equal to the initial margin and variation margin on any options
on futures contracts sold by the Portfolios are paid by the Portfolio directly
to the FCM or placed in a segregated account, in the name of the FCM, as
currently required by the Investment Company Act and the Securities and Exchange
Commission interpretations thereunder; in the future all such payments may be
made directly to the FCM in accordance with forthcoming Commission
interpretations.
A Portfolio may write (i.e., sell short) only covered put and call
options on futures contracts. A Portfolio is considered "covered" with respect
to a call option it writes on a futures contract if the Portfolio (i) owns a
long position in the underlying futures contract; (ii) segregates and maintains
with its Custodian liquid assets equal in value to the exercise price of the
call (less any initial margin deposited); (iii) owns a security or currency
which is deliverable under the futures contract; or (iv) owns an option to
purchase the security, currency or securities index, which is deliverable under
the futures contract or owns a call option to purchase the underlying futures
contract, in each case at a price no higher than the exercise price of the call
option written by the Portfolio, or if higher, the Portfolio deposits and
maintains the differential between the two exercise prices in liquid assets in a
segregated account with its Custodian. A Portfolio is considered "covered" with
respect to a put option it writes on a futures contract if it (i) segregates and
maintains with its Custodian liquid assets equal in value to the exercise price
of the put (less any initial and variation margin deposited); (ii) owns a put
option on the security, currency or securities index which is the subject of the
futures contract or owns a put option on the futures contract underlying the
option, in each case at an exercise price as high as or higher than the price of
the contract held by the Portfolio or, if lower, the Portfolio deposits and
maintains the differential between the two exercise prices in liquid assets in a
segregated account with its Custodian; or (iii) owns a short position in the
underlying futures contract.
The Portfolios may write covered straddles of options on futures. A
straddle is a combination of a call and a put written on the same underlying
futures contract. A straddle will be covered when sufficient assets are
deposited to meet the requirements, as defined in the preceding paragraph. A
Portfolio may use the same liquid assets to cover both the call and put options
where the exercise price of the call and put are the same, or the exercise price
of the call is higher than that of the put. In such cases, the Portfolios will
also segregate liquid assets equivalent to the amount, if any, by which the put
is "in the money."
Possible Risks Associated with Futures Transactions. In considering the
proposed use of futures contracts and related options, particular note should be
taken of the following:
(1) Successful use by the Portfolios of futures contracts and related
options will depend in part upon the Manager's ability to assess the market's
valuation of these instruments. There is, in addition, the risk that the
movements in the price of a futures contract will not correlate with the
movement in prices of any securities being hedged. If the price of the futures
contract moves less than the price of the securities which are the subject of
the hedge, the hedge will not be fully effective, but if the price of the
securities being hedged has moved in an unfavorable direction, the Portfolio
would be in a better position than if it had not hedged at all. If the price of
the securities being hedged has moved in a favorable direction, this advantage
may be partially offset by losses in the futures position. If the price of the
futures
<PAGE>
B-10
contract moves more than the price of the underlying securities, the Portfolio
will experience either a loss or a gain on the futures contract which may or may
not be completely offset by movements in the price of the securities which are
the subject of the hedge.
(2) The price of the futures contracts may not correlate perfectly with
movements in the prices of any hedged securities. There may be several reasons
unrelated to the value of the underlying securities which causes this situation
to occur. First, all the participants in the futures market are subject to
initial and variation margin deposit requirements. If, to avoid meeting
additional margin deposit requirements or for other reasons, investors choose to
close a significant number of futures contracts through offsetting transactions,
distortions in the normal price relationship between the securities and the
futures market may occur. Second, because the deposit requirements in the
futures market are less onerous than margin requirements in the securities
market, there may be increased participation by speculators in the futures
market; this speculative activity in the futures market may also cause temporary
price distortions. As a result, a correct evaluation of futures prices and
trends may still not result in successful transactions through the use of
futures contracts and options thereon over the short-term.
(3) The Portfolios purchase and sell futures contracts only on exchanges
where there appears to be a market in the futures sufficiently active to
accommodate the volume of trading activity. There can be no assurance that a
liquid market will always exist for any particular contract at any particular
time. Accordingly, there can be no assurance that it will always be possible to
close a futures position when desired. In the event of adverse price movements,
the Portfolios would be required to continue to make daily cash payments of
variation margin, except in the case of purchased options on futures contracts.
(4) The hours of trading of financial futures contracts may not conform
to the hours during which the Portfolios may trade securities. To the extent
that one market closes before the other market, significant price and rate
movements can take place that cannot be reflected in the correlating market on a
day-to-day basis.
(5) Futures exchanges may establish daily limits in the amount that the
price of a futures contract or related options contract may vary either up or
down from the previous day's settlement price. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond the limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may prevent the liquidation of unfavorable positions. Futures or options
contract prices could move to the daily limit for several consecutive trading
days with little or no trading and thereby prevent prompt liquidations of
positions and subject some traders to substantial losses. In such event, it may
not be possible for a Portfolio to close a position, and in the event of adverse
price movements, the Portfolio would have to make daily cash payments of
variation margin (except in the case of purchased options).
(6) Purchasers of options on futures contracts pay a premium in cash at
the time of purchase. This amount, and the transaction costs, is all that is at
risk. Sellers of options on futures contracts,
<PAGE>
B-11
however, must post an initial margin and are subject to additional margin calls
which could be substantial in the event of adverse price movements.
Foreign Currency Transactions
The Portfolios may employ certain risk management techniques to attempt
to protect against some or all effects of adverse changes in foreign currency
exchange rates, including foreign currency exchange contracts ("forward
contracts"). A forward contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are principally traded in the interbank market
conducted directly between currency traders (usually large, commercial banks)
and their customers. A forward contract generally has no deposit requirement and
no commissions are charged at any stage for trades.
Each Portfolio may enter into forward contracts for any lawful and
appropriate purpose in light of its activities, including the following two
circumstances. First, when a Portfolio enters into a contract for the purchase
or sale of a security denominated in a foreign currency, or has been notified of
a dividend or interest payment, it may desire to "lock in" the U.S. dollar price
of the security or the amount of the payment. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars, of the amount
of foreign currency involved in the underlying transactions, the Portfolio
should be able to protect itself against a possible loss resulting from an
adverse change in the relationship between the U.S. dollar and the subject
foreign currency during the period between the date the security is purchased or
sold and the date on which payment is made or received or when the dividend or
interest is actually received.
Second, when the Manager believes that the currency of a particular
foreign country may suffer or enjoy a substantial movement against another
currency, including the U.S. dollar, a Portfolio may enter into a forward
contract to sell or buy the amount of the former foreign currency, approximating
the value of some or all of its portfolio securities denominated in the latter
foreign currency. Alternatively, where appropriate, the Portfolio may hedge all
or part of its foreign currency exposure through the use of a basket of
currencies or a proxy currency where such currencies or currency act as an
effective proxy for other currencies. In such a case, the Portfolio may enter
into a forward contract where the amount of the foreign currency to be sold
exceeds the value of the securities denominated in such currency. The use of
this basket hedging technique may be more efficient and economical than entering
into separate forward contracts for each currency held in the Portfolio. The
precise matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. The projection of short-term currency
market movement is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain. Under certain circumstances,
each of the Bernstein International Value Portfolio and the Bernstein Emerging
Markets Value Portfolio may commit substantial portions or the entire value of
its assets to the consummation of these contracts. The Manager will consider the
effect a substantial commitment of its assets to forward
<PAGE>
B-12
contracts would have on the investment program of the Portfolio and the
flexibility of the Portfolio to purchase additional securities. Other than as
set forth above, a Portfolio will also not enter into such forward contracts or
maintain a net exposure to such contracts where the consummation of the
contracts would obligate the Portfolio to deliver an amount of foreign currency
in excess of the value of the Portfolio's securities and, if applicable, the
interest thereon, and other assets denominated in that currency.
At the maturity of a forward contract, a Portfolio may either sell the
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by purchasing an offsetting contract obligating it to purchase, on the
same maturity date, the same amount of the foreign currency.
As indicated above, it is impossible to forecast with absolute precision
the market value of portfolio securities at the expiration of the forward
contract. Accordingly, it may be necessary for a Portfolio to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security is less than the amount of foreign
currency the Portfolio is obligated to deliver and if a decision is made to sell
the security and make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received upon
the sale of the portfolio security if its market value exceeds the amount of
foreign currency the Portfolio is obligated to deliver.
If a Portfolio retains the portfolio security and engages in an
offsetting transaction, the Portfolio will incur a gain or a loss (as described
below) to the extent that there has been movement in forward contract prices. If
the Portfolio engages in an offsetting transaction, it may subsequently enter
into a new forward contract to sell the foreign currency. Should forward prices
decline during the period between the Portfolio's entering into a forward
contract for the sale of a foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign security, the Portfolio will
realize a gain to the extent the price at which it has agreed to sell exceeds
the price at which it has agreed to purchase. Should forward prices increase,
the Portfolio will suffer a loss to the extent of the price of the currency it
has agreed to purchase exceeds the price of the currency it has agreed to sell.
The Portfolios reserve the right to enter into forward foreign currency
contracts for different purposes and under different circumstances than those
described above. Of course, the Portfolios are not required to enter into
forward contracts with regard to their foreign currency-denominated securities
and will not do so unless deemed appropriate by the Manager. It also should be
realized that this method of hedging against a decline in the value of a
currency does not eliminate fluctuations in the underlying prices of the
securities. It simply establishes a rate of exchange at a future date.
Additionally, although such contracts tend to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time, they tend to
limit any potential gain which might result from an increase in the value of
that currency.
<PAGE>
B-13
The Portfolios do not intend to convert any holdings of foreign
currencies into U.S. dollars on a daily basis. A Portfolio may do so from time
to time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference (the "spread") between the prices at
which they are buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to a Portfolio at one rate, while offering a lesser
rate of exchange should the Portfolio desire to resell that currency to the
dealer.
Repurchase Agreements. The Portfolios may enter into repurchase
agreements with banks, brokers or securities dealers. In such agreements, the
Portfolio purchases a security, and the seller agrees to repurchase that
security from a Portfolio at a mutually agreed-upon time and price. The period
of maturity is usually quite short, either overnight or a few days, although it
may extend over a number of months. The resale price reflects an agreed-upon
rate of interest. Whenever a Portfolio enters into a repurchase agreement, the
Portfolio's custodian obtains collateral having a value at least equal to the
amount of the repurchase price, which includes accrued interest. The instruments
held subject to repurchase are valued daily, and if the value of the instruments
declines, the Portfolio will be entitled to additional collateral. If the seller
defaults and the value of the collateral securing the repurchase agreements
declines, the Portfolio may incur a loss. In addition, if bankruptcy proceedings
are commenced with respect to the seller of the security, realization of the
collateral by the Portfolio may be delayed or limited.
Equities and Warrants. The equity securities in which the Bernstein
International Value Portfolio and the Bernstein Emerging Markets Value Portfolio
may invest include common and preferred stocks, warrants and convertible
securities. Each such Portfolio may also invest in foreign securities directly
or in the form of American Depositary Receipts (ADRs), European Depositary
Receipts (EDRs) or other similar securities convertible into securities of
foreign issuers without limitation. In some circumstances, the Bernstein
International Value Portfolio and the Bernstein Emerging Markets Value Portfolio
may, in compliance with provisions of the Investment Company Act of 1940 ("1940
Act"), invest in the securities of investment companies that invest in foreign
securities. Equity securities of non-U.S. issuers may have somewhat different
features than those of U.S. equities. To illustrate, the Portfolios may purchase
"Savings Shares," which are equity securities which have priority rights
(compared with preferred or ordinary common shares) to dividends and on any
liquidation of the issuer but which carry no voting rights.
Restricted Securities. Restricted securities can generally be sold in
the U.S. in privately negotiated transactions or pursuant to some other
exemption from registration under the Securities Act of 1933 or in a registered
public offering. Where registration is required, the Portfolios may be obligated
to pay all or part of the registration expenses and a considerable period may
elapse between the time of the decision to sell and the time the Portfolio may
be permitted to sell a security under an effective registration statement. If,
during such a period, adverse market conditions were to develop, the Portfolio
might obtain a less favorable price than prevailed when it decided to sell.
Restricted securities will be priced at fair value under policies established by
and under supervision of the Board of Directors.
<PAGE>
B-14
The SEC has adopted Rule 144A to facilitate resales of restricted
securities in the U.S. by "qualified institutional buyers," including the
Portfolios. Provided that a dealer or institutional trading market in such
securities exists, these restricted securities are treated as exempt from the
Portfolios' limit on investments in illiquid securities. Because institutional
trading in restricted securities is relatively new, it is not possible to
predict how these institutional markets will develop. If institutional trading
in restricted securities were to decline to limited levels, the liquidity of the
Portfolios' securities could be adversely affected.
Industry Classification. In determining industry classifications, for
each Portfolio other than the Bernstein Emerging Markets Value Portfolio, the
Fund uses the current Directory of Companies Filing Annual Reports with the
Securities and Exchange Commission, (the "Directory"). Where a company is not
listed in the Directory, the Fund makes a reasonable determination as to the
industry classification, which determination may be made by using (1) the
classification of the company's parent corporation; or (2) the classification
the Fund reasonably believes the parent corporation would have if it were listed
in the Directory; or (3) the industry classification the Fund reasonably
believes the company would have if it were listed in the Directory. In the case
of the Bernstein Emerging Markets Value Portfolio, the Portfolio relies
primarily on the International Finance Corporation's ("IFC's") industry
classification.
Portfolio Turnover. During the one-year period ended September 30, 1996,
the portfolio turnover rates for six Fixed-Income Portfolios decreased
significantly as compared to the prior fiscal year. The turnover rate for the
Bernstein Diversified Municipal Portfolio decreased from 42.55% for the year
ended September 30, 1995 to 25.22% for the year ended September 30, 1996; the
Bernstein California Municipal Portfolio decreased from 63.89% to 23.87% for the
same period; the Bernstein New York Municipal Portfolio decreased from 44.84% to
26.19% for the same period; the Bernstein Short Duration California Municipal
Portfolio decreased from 89.33% to 60.76% for the same period; and the Bernstein
Short Duration New York Municipal Portfolio decreased from 112.15% to 55.81% for
the same period. The portfolio turnover ratio for these municipal Fixed-Income
Portfolios for fiscal year 1996 was lower because the Manager maintained a
consistent portfolio strategy throughout the period with respect to security,
sector and maturity. It is expected that there will be some change in portfolio
strategy as a result of market movements in the coming fiscal year and,
accordingly, an increase in portfolio turnover ratios for these municipal
Fixed-Income Portfolios. The turnover rate for the Bernstein Intermediate
Duration Portfolio decreased from 212.40% for the year ended September 30, 1995
to 141.04% for the year ended September 30, 1996. This reduction was due to
limited opportunities in the mortgage and corporate sectors of the market; in
fiscal year 1995 the Manager sold treasuries
<PAGE>
B-15
to purchase mortgage-related securities, but in fiscal year 1996 the Manager was
less active in selling out of one sector to purchase into another sector.
During the one-year period ended September 30, 1996, the portfolio
turnover rates for two of the Fixed Income Portfolios increased significantly as
compared to the prior fiscal year. The turnover rate for the Bernstein Short
Duration Plus Portfolio increased from 61.03% for the year ended September 30,
1995 to 169.96% for the year ended September 30, 1996; and the Bernstein
Government Short Duration Portfolio increased from 49.34% to 155.29% over the
same period. The high portfolio turnover rate in the Bernstein Short Duration
Plus Portfolio and the Bernstein Government Short Duration Portfolio in fiscal
year 1996 was mainly attributable to the Manager's change in yield curve
strategy; the Manager sold longer-term and short-term securities and
concentrated the portfolio in one to two year securities. This was primarily due
to a reversion of the yield curve to a more normal shape.
The Bernstein Emerging Markets Value Portfolio anticipates that there
will be an increase in its portfolio turnover ratio from that reported for the
fiscal year ended September 30, 1996. Since the Portfolio commenced operations
in fiscal year 1996, the portfolio turnover ratio was unusually low as cash from
new investors was used for the initial investment of the Portfolio.
Special Considerations Relating to Investment in New York Municipal
Securities
Because the Bernstein Short Duration New York Municipal Portfolio and
the Bernstein New York Municipal Portfolio invest primarily in New York
Municipal Securities, the Portfolios' performance is closely tied to economic
conditions within the State of New York and the financial condition of the State
and its agencies and municipalities. The following information concerning the
State's economic background is contained in an Annual Information Statement of
the State of New York dated July 26, 1996, which is part of an Official
Statement dated July 15, 1996 relating to the sale of $75,630,000 State of New
York General Obligation Bonds and the Update to Annual Information Statement of
the State of New York dated October 29, 1996 issued by the State of New York.
<PAGE>
B-16
New York is the third most populous state in the nation and has a
relatively high level of personal wealth. The State's economy is diverse, with a
comparatively large share of the nation's finance, insurance, transportation,
communications and services employment, and a very small share of the nation's
farming and mining activity. The State's location and its excellent air
transport facilities and natural harbors have made it an important link in
international commerce. Travel and tourism constitute an important part of the
economy. Like the rest of the nation, New York has a declining proportion of its
workforce engaged in manufacturing, and an increasing proportion engaged in
service industries.
During the 1982-83 recession, overall economic activity in the State
declined less than that of the nation as a whole. However, in the calendar years
1987 through 1995, the State's rate of economic growth was somewhat slower than
that of the nation. In particular, during the 1990-91 recession and
post-recession period, the economy of the State, and that of the rest of the
Northeast, was more heavily damaged than that of the nation as a whole and has
been slower to recover. The total employment growth rate in the State has been
below the national average since 1987. The unemployment rate in the State dipped
below the national rate in the second half of 1981 and remained lower until
1991. According to data published by the U.S. Bureau of Economic Analysis,
during the past ten years, total personal income in the State rose slightly
faster than the national average only from 1986 through 1988.
The national economy has resumed a more robust rate of growth after a
"soft landing" in 1995, with over 11 million jobs added nationally since early
1992. The State economy has continued to expand, but growth remains somewhat
slower than in the nation. Although the State has added approximately 240,000
jobs since late 1992, employment growth in the State has been hindered during
recent years by significant cutbacks in the computer and instrument
manufacturing, utility, defense, and banking industries. Government downsizing
has also moderated these job gains.
In recent years, State actions affecting the level of receipts and
disbursements, the relative strength of the State and regional economy, actions
of the Federal government and other factors have created structural budget gaps
for the State. These gaps resulted from a significant disparity between
recurring revenues and the costs of maintaining or increasing the level of
support for State programs. To address a potential imbalance in any given fiscal
year, the State
<PAGE>
B-17
would be required to take actions to increase receipts and/or reduce
disbursements as it enacts the budget for that year, and under the State
Constitution, the Governor is required to propose a balanced budget each year.
There can be no assurance, however, that the Legislature will enact the
Governor's proposals or that the State's actions will be sufficient to preserve
budgetary balance in a given fiscal year or to align recurring receipts and
disbursements in future fiscal years.
The 1996-97 State Financial Plan is projected to be balanced on a cash
basis. As compared to the Governor's proposed budget as revised on March 20,
1996, the State's adopted budget for 1996-97 increases General Fund spending by
$842 million, primarily from increases for education, special education and
higher education ($563 million). The State issued its first update to the
cash-basis 1996-97 State Financial Plan (the "Mid-Year Update") on October 25,
1996. Revisions have been made to estimates of both receipts and disbursements
based on: (1) updated economic forecasts for both the nation and the State, (2)
an analysis of actual receipts and disbursements through the first six months of
the fiscal year, and (3) an assessment of changing program requirements.
Uncertainties with regard to the economy, as well as the outcome of certain
litigation now pending against the State, could produce adverse effects on the
State's projections of receipts and disbursements. For example, changes to
current levels of interest rates or deteriorating world economic conditions
could have an adverse effect on the State economy and produce results in the
current fiscal year that are worse than predicted. Similarly, an adverse
judgment in legal proceedings against the State could exceed amounts reserved in
the 1996-97 Financial Plan for payment of such judgments and produce additional
unbudgeted costs to the State.
On August 13, 1996, the State Comptroller released a report entitled
"The 1996-97 Budget: Fiscal Review and Analysis" in which he identified several
risks to the State Financial Plan and estimated that the State faces a potential
imbalance in receipts and disbursements of approximately $3 billion for the
State's 1997-98 fiscal year and approximately $3.2 billion for the State's
1998-99 fiscal year.
Although revisions to the 1996-97 State Financial Plan contained in the
Mid-Year Update are favorable, the State faces certain risks which could
potentially cost the State up to one-half billion dollars. The Division of the
Budget believes these risks are balanced by reserves in the 1996-97 State
Financial Plan, including the $300 million reserve created in the Mid-Year
Update. However, there can be no assurance that these reserves will fully offset
litigation or other risks to the State Financial Plan.
<PAGE>
B-18
One major uncertainty to the 1996-97 State Financial Plan continues to
be risks related to the economy and tax collections, which could produce either
favorable or unfavorable variances during the balance of the year. While
adjustments to the forecast have been made to reflect recent economic events, it
is possible that an increase in interest rates or the impact of cost-cutting
measures in the health care industry could produce slower economic growth and a
deterioration in State receipts. On the other hand, the national or State
economy (particularly the financial sector) may continue to perform better than
projected, which could produce beneficial short-term results in State receipts.
An additional risk to the 1996-97 State Financial Plan arises from the
potential impact of certain litigation now pending against the State, which
could produce adverse effects on the State's projections of receipts and
disbursements. Similarly, certain litigation which by itself did not produce a
material judgment against the State could have an adverse impact on the State
Financial Plan because of the precedential nature of the court's decision.
Specifically, the State Court of Appeals has denied a motion to appeal a lower
court decision in the so-called "GTE Spacenet" case, in which the court ruled
that GTE Spacenet was not subject to the 3.5 percent tax on gross receipts
imposed under section 186-a of the tax law. The court decision is limited to
provisions of section 186-a as it existed prior to 1995 amendments, and has
little prospective effect. While this litigation in and of itself carries only a
small judgment in favor of GTE Spacenet and similar companies, the consequences
of the ruling could eventually entail refunds to other taxpayers of several
hundred million dollars. Refund claims of over $300 million have been filed
which, with interest and assuming a similar exposure for open years for which
claims have yet to be filed, could approach $600 million in potential claims.
Authorities. The fiscal stability of the State is related, in part, to
the fiscal stability of its public authorities. For purposes hereof, public
authorities refer to public benefit corporations, created pursuant to State law,
other than local authorities. Public authorities are not subject to the
constitutional restrictions on the incurrence of debt which apply to the State
itself and may issue bonds and notes within the amounts and restrictions set
forth in legislative authorization. The State's access to the public credit
markets could be impaired and the market price of its outstanding debt may be
materially adversely affected, if any of its public authorities were to default
on their respective obligations. As of September 30, 1995, there were 17 public
authorities that had outstanding debt of $100 million or more, and the aggregate
outstanding debt, including refunding bonds, of all State public authorities was
$73.45 billion.
There are numerous public authorities, with various responsibilities,
including those which finance, construct and/or operate revenue producing public
facilities. Public authority operating expenses and debt service costs are
generally paid by revenues generated by the projects financed or operated, such
as tolls charged for the use of highways, bridges or tunnels, rentals charged
for housing units, and charges for occupancy at medical care facilities.
<PAGE>
B-19
In addition, State legislation authorizes several financing techniques
for public authorities and there are statutory arrangements providing for State
local assistance payments otherwise payable to localities to be made under
certain circumstances to public authorities. Although the State has no
obligation to provide additional assistance to localities whose local assistance
payments have been paid to public authorities under these arrangements, if local
assistance payments are diverted the affected localities could seek additional
State assistance.
Some authorities also receive moneys from State appropriations to pay
for the operating costs of certain of their programs. The Mass Transit Authority
(the "MTA") receives the bulk of this money in order to provide transit and
commuter services. State legislation accompanying the 1996-97 adopted State
budget authorized the MTA, Triborough Bridge and Tunnel Authority (the "TBTA"),
the New York City Transit Authority and the Manhattan and Bronx Surface Transit
Operating Authority (collectively, the "TA") to issue an aggregate of $6.5
billion in bonds to finance a portion of a new $11.98 billion MTA capital plan
for the 1995 through 1999 calendar years (the "1995-99 Capital Program"), and
authorized the MTA to submit the 1995-99 Capital Program to the Capital Program
Review Board for approval. This plan will supersede the overlapping portion of
the MTA's 1992-96 Capital Program. This is the fourth capital plan since the
Legislature authorized procedures for the adoption, approval and amendment of
MTA capital programs and is designed to upgrade the performance of the MTA's
transportation systems by investing in new rolling stock, maintaining
replacement schedules for existing assets and bringing the MTA system into a
state of good repair. The 1995-99 Capital Program assumes the issuance of an
estimated $5.1 billion in bonds under this $6.5 billion aggregate bonding
authority. The remainder of the plan is projected to be financed through
assistance from the State, the federal government, and the City of New York, and
from various other revenues generated from actions taken by the MTA.
There can be no assurance that all the necessary governmental actions
for the 1995-99 Capital Program or future capital programs will be taken, that
funding sources currently identified will not be decreased or eliminated, or
that the 1995-99 Capital Program, or parts thereof, will not be delayed or
reduced. Should funding levels fall below current projections, the MTA would
have to revise its 1995-99 Capital Program accordingly. If the 1995-99 Capital
Program is delayed or reduced, ridership and fare revenues may decline, which
could, among other things, impair the MTA's ability to meet its operating
expenses without additional assistance.
<PAGE>
B-20
The State has never defaulted on any of its general obligation
indebtedness or its obligations under lease-purchase or contractual-obligation
financing arrangements and has never been called upon to make any direct
payments pursuant to its guarantees.
The fiscal health of the State may also be impacted by the fiscal health
of New York City (the "City"), which continues to require significant financial
assistance from the State. The City depends on State aid both to enable the City
to balance its budget and to meet its cash requirements. The City's projections
set forth in the Financial Plan are based on various assumptions and
contingencies, some of which are uncertain and may not materialize. Unforeseen
developments and changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and to meet its
annual cash flow and financing requirements. Implementation of the Financial
Plan is also dependent upon the ability of the City and certain Covered
Organizations to market their securities successfully. The City issues
securities to finance, refinance and rehabilitate infrastructure and other
capital needs, as well as for seasonal financing needs. The City currently
projects that if no action is taken, it will exceed its State Constitutional
general debt limit beginning in City fiscal year 1998. The current Financial
Plan includes certain alternative methods of financing a portion of the City's
capital program which require State or other outside approval. Future
developments concerning the City or its Covered Organizations, and public
discussion of such developments, as well as prevailing market conditions and
securities credit ratings, may affect the ability or cost to sell securities
issued by the City or such Covered Organizations and may also affect the market
for their outstanding securities.
In response to the City's fiscal crisis in 1975, the State took action
to assist the City in returning to fiscal stability. Among those actions, the
State established NYC MAC to provide financing assistance to the City; the New
York State Financial Control Board (the "Control Board") to oversee the City's
financial affairs; and the Office of the State Deputy Comptroller for the City
of New York ("OSDC") to assist the Control Board in exercising its powers and
responsibilities. A "Control Period" existed from 1975 to 1986 during which the
City was subject to certain statutorily-prescribed fiscal controls. Although the
Control Board terminated the Control Period in 1986 when certain statutory
conditions were met and suspended certain Control Board powers, upon the
occurrence or "substantial likelihood and imminence" of the occurrence of
certain events, including (but not limited to) a City operating budget deficit
of more than $100 million or impaired access to the public credit markets, the
Control Board is required by law to reimpose a Control Period. Currently, the
City and its Covered Organizations (i.e., those which receive or may receive
moneys from the City directly, indirectly or contingently) operate under a
four-year financial plan (the "Financial Plan") which the City prepares annually
and periodically updates.
<PAGE>
B-21
The staffs of the Control Board, OSDC and the City Comptroller issue
periodic reports on the City's Financial Plans which analyze the City's
forecasts of revenues and expenditures, cash flow, and debt service requirements
for, and Financial Plan compliance by, the City and its Covered Organizations.
According to recent staff reports, the City's economy has experienced weak
employment and moderate wage and income growth throughout the mid-1990s.
Although this trend is expected to continue for the rest of the decade, there is
the risk of a slowdown in the City's economy in the next few years, which would
depress revenue growth and put further strains on the City's budget. These
reports have also indicated that recent City budgets have been balanced in part
through the use of non-recurring resources; that the City's Financial Plan tends
to rely on actions outside its direct control; that the City has not yet brought
its long-term expenditure growth in line with recurring revenue growth; and that
the City is therefore likely to continue to face substantial future budget gaps
that must be closed with reduced expenditures and/or increased revenues.
Certain localities outside New York City have experienced financial
problems and have requested and received additional State assistance during the
last several State fiscal years. The potential impact on the State of any future
requests by localities for additional assistance is not included in the
projections of the State's receipts and disbursements for the State's 1996-97
fiscal year.
From time to time, Federal expenditure reductions could reduce, or in
some cases eliminate, federal funding of some local programs and accordingly
might impose substantial increased
<PAGE>
B-22
expenditure requirements on affected localities. If the State, the City or any
of the public authorities were to suffer serious financial difficulties
jeopardizing their respective access to the public credit markets, the
marketability of notes and bonds issued by localities within the State could be
adversely affected. Localities also face anticipated and potential problems
resulting from certain pending litigation, judicial decisions and long-range
economic trends. Long-range potential problems of declining urban population,
increasing expenditures and other economic trends could adversely affect
localities and require increasing State assistance in the future.
Special Considerations Relating to Investment in California Municipal
Securities
Because the Bernstein Short Duration California Municipal Portfolio and
the Bernstein California Municipal Portfolio invest primarily in California
Municipal Securities, the performance of these Portfolios is closely tied to
economic conditions within the State of California and the financial condition
of the State and its agencies and municipalities. Certain California
constitutional amendments, legislative measures, executive orders,
administrative regulations and voter initiatives could adversely affect the
ability of issuers of California Municipal Securities to pay interest and
principal on municipal securities. The following information concerning the
State's economic background is contained in an official statement dated November
1, 1996, which was issued in connection with the sale of $500 million of
California Various Purpose General Obligation Bonds.
California's economy is the largest among the 50 states and one of the
largest in the world. The State's July 1, 1995 population of approximately 32.1
million represented over 12 percent of the total United States population.
State Appropriations Limit. Article XIII B of the California State
Constitution prohibits the State from spending "appropriations subject to
limitation" in excess of the Appropriations Limit. No limit is imposed on
appropriations or funds which are not "proceeds of taxes," such as reasonable
user charges or fees, and certain other non-tax funds. Not included in the
Article XIII B Appropriations Limit are appropriations for the debt service
costs of bonds existing or authorized by January 1, 1979, or subsequently
authorized by the voters, appropriations required to comply with mandates of
courts or the federal government, appropriations for qualified capital outlay
projects, appropriations of revenues derived from any increase in gasoline taxes
and motor vehicle weight fees above January 1, 1990 levels, and appropriation of
certain special taxes imposed by initiative (e.g., cigarette and tobacco taxes).
The Appropriations Limit may also be exceeded in cases of emergency.
<PAGE>
B-23
The State's Appropriations Limit in each year is based on the limit for
the prior year, adjusted annually for changes in California per capita personal
income and changes in population, and adjusted, when applicable, for any
transfer of financial responsibility of providing services to or from another
unit of government. The measurement of change in population is a blended average
of statewide overall population growth, and change in attendance at local school
and community college ("K-14") districts. The Appropriations Limit is tested
over consecutive two-year periods. Any excess of the aggregate "proceeds of
taxes" received over such two-year period above the combined Appropriations
Limits for those two years is divided equally between transfers to K-14
districts and refunds to taxpayers.
Proposition 98. On November 8, 1988, voters of the State approved
Proposition 98, a combined initiative constitutional amendment and statute
called the "Classroom Instructional Improvement and Accountability Act".
Proposition 98 changed State funding of public education below the university
level, and the operation of the State Appropriations Limit, primarily by
guaranteeing K-14 schools a minimum share of General Fund revenues. Under
Proposition 98 (as modified by Proposition 111, which was enacted on June 5,
1990), K-14 schools are guaranteed the greater of (a) in general, a fixed
percent of General Fund revenues ("Test 1"), (b) the amount appropriated to K-14
schools in the prior year, adjusted for changes in the cost of living (measured
as in Article XIII B by reference to California per capita personal income) and
enrollment ("Test 2"), or (c) a third test, which would replace the Test 2 in
any year when the percentage growth in per capita General Fund revenues from the
prior year plus one half of one percent is less than the percentage growth in
State per capita personal income ("Test 3"). Under Test 3, schools would receive
the amount appropriated in the prior year adjusted for changes in enrollment and
per capita General Fund revenues, plus an additional small adjustment factor. If
Test 3 is used in any year, the difference between Test 3 and Test 2 would
become a "credit" to schools which would be the basis of payments in future
years when per capita General Fund revenue growth exceeds per capita personal
income growth. Proposition 98 permits the Legislature by two-thirds vote of both
houses, with the Governor's concurrence, to suspend the K-14 schools' minimum
funding formula for a one-year period.
Recent Fiscal Year Financial Results
Fiscal Years Prior to 1995-96
The 1989-90 Fiscal Year ended with revenues below estimates, so that the
State's budget reserve (the Special Fund for Economic Uncertainties or "SFEU")
was fully depleted by June 30, 1990. A recession began in mid-1990, which
severely affected State General Fund revenues, and increased expenditures above
initial budget appropriations due to greater health and welfare costs. The
State's budget problems in recent years have also been caused by a structural
imbalance in that the largest General Fund Programs -- K-14 education,
<PAGE>
B-24
health, welfare and corrections -- were increasing faster than the revenue base,
driven by the State's rapid population growth. These pressures will continue as
population trends maintain strong demand for health and welfare services, as the
school age population continues to grow, and as the State's corrections program
responds to a "Three Strikes" law enacted in 1994, which requires mandatory life
prison terms for certain third-time felony offenders.
As a result of these factors and others, from the late 1980's until
1992-93, the State had a period of budget imbalance. During this period,
expenditures exceeded revenues in four out of six years, and the State
accumulated and sustained a budget deficit in the SFEU approaching $2.8 billion
at its peak at June 30, 1993. Starting in the 1990-91 Fiscal Year and for each
fiscal year thereafter, each budget required multibillion dollar actions to
bring projected revenues and expenditures into balance and to close large
"budget gaps" which were identified. The Legislature and Governor eventually
agreed on a number of different steps to produce Budget Acts in the years
1991-92 to 1993-94, including:
o significant cuts in health and welfare program expenditures;
o transfers of program responsibilities and funding from the State to
local governments (referred to as "realignment"), coupled with some
reduction in mandates on local government;
o transfer of about $3.6 billion in local property tax revenues from
cities, counties, redevelopment agencies and some other districts to
local school districts, thereby reducing State funding for schools
under Proposition 98;
o reduction in growth of support for higher education programs,
coupled with increases in student fees;
o maintenance of the minimum Proposition 98 funding guarantee for K-14
schools, and the disbursement of additional funds to keep a constant
level of about $4,200 per K-12 pupil;
o revenue increases (particularly in the 1991-92 Fiscal Year budget),
most of which were for a short duration;
o increased reliance on aid from the federal government to offset the
costs of incarcerating, educating and providing health and welfare
services to illegal immigrants, although during this time frame,
most of the additional aid requested by the Administration was not
received; and
o various one-time adjustments and accounting changes.
Despite these budget actions, as noted, the effects of the recession led to
large, unanticipated deficits in the budget reserve, the SFEU, as compared to
projected positive balances. By the 1993-94 Fiscal Year, the accumulated deficit
was so large that it was impractical to budget to retire it in one year, so a
two-year program was implemented, using the issuance of revenue anticipation
warrants to carry a portion of the deficit over the end of the fiscal year. When
the economy failed to recover sufficiently in 1993-94, a second two-year plan
was implemented in 1994-95, again using cross-fiscal year revenue anticipation
warrants to partly finance the deficit into the 1995-96 fiscal year.
Another consequence of the accumulated budget deficits, together with
other factors such as disbursement of funds to local school districts "borrowed"
from future fiscal years and hence not shown in
<PAGE>
B-25
the annual budget, was to significantly reduce the State's cash resources
available to pay its ongoing obligations. When the Legislature and the Governor
failed to adopt a budget for the 1992-93 Fiscal Year by July 1, 1992, which
would have allowed the State to carry out its normal annual cash flow borrowing
to replenish its cash reserves, the State Controller issued registered warrants
to pay a variety of obligations representing prior years' or continuing
appropriations, and mandates from court orders. Available funds were used to
make constitutionally-mandated payments, such as debt service on bonds and
warrants. Between July 1 and September 4, 1992, when the budget was adopted, the
State Controller issued a total of approximately $3.8 billion of registered
warrants. After that date, all remaining outstanding registered warrants (about
$2.9 billion) were called for redemption from proceeds of the issuance of 1992
Interim Notes after the budget was adopted.
During the past several years, the State was forced to rely increasingly
on external debt markets to meet its cash needs, as a succession of notes and
revenue anticipation warrants were issued in the period from June 1992 to July
1994, often needed to pay previously maturing notes or warrants. These
borrowings were used also in part to spread out the repayment of the accumulated
budget deficit over the end of a fiscal year. The last and largest of these
borrowings was $4.0 billion of revenue anticipation warrants issued in July,
1994 and maturing on April 25, 1996.
1995-96 Fiscal Year
With strengthening revenues and reduced caseload growth based on an
improving economy, the State entered the 1995-96 Fiscal Year budget negotiations
with the smallest nominal "budget gap" to be closed in many years. Nonetheless,
serious policy differences between the Governor and Legislature prevented timely
enactment of the budget. The 1995-96 Budget Act was signed by the Governor on
August 3, 1995, 34 days after the start of the fiscal year. The Budget Act
projected General Fund revenues and transfers of $44.1 billion, a 3.5 percent
increase from the prior year. Expenditures were budgeted at $43.4 billion, a 4
percent increase.
The Department of Finance's May Revision to the 1996-97 Governor's
Budget, released on May 21, 1996 (the "May Revision"), updated the projections
for the 1995-96 Fiscal Year, so that revenues and transfers were estimated to be
$46.1 billion, some $2 billion over the original fiscal year estimate, which was
attributed to the strong economic recovery. Expenditures also increased, to an
estimated $45.4 billion, as a result of the requirement to expend revenues for
schools under Proposition 98, and, among other things failure of the federal
government to enact welfare reform and to budget new aid for illegal immigrant
costs, both of which the Administration had counted on to allow reductions in
State costs. The Special Fund for Economic Uncertainties was projected to have a
small negative balance of about $70 million at June 30, 1996, all but
eliminating the accumulated budget deficit from the early 1990's.
<PAGE>
B-26
1996-97 Fiscal Year
The 1996-97 Budget Act was signed by the Governor on July 15, 1996,
along with various implementing bills. The Governor vetoed about $82 million of
appropriations (both General Fund and Special Fund). With signing of the Budget
Act, the State implemented its regular cash flow borrowing program with the
issuance of $3.0 billion of Revenue Anticipation Notes to mature on June 30,
1997. The Budget Act appropriates a modest budget reserve in the SFEU of $305
million, as of June 30, 1997.
The following are principal features of the 1996-97 Budget Act:
1. Proposition 98 funding for schools and community college districts
increased by almost $1.6 billion (General Fund) and $1.65 billion
total above revised 1995-96 levels.
2. The Budget Act assumed savings of approximately $660 million in
health and welfare costs which required changes in federal law,
including federal welfare reform. The Budget Act further assumed
federal law changes in August 1996 which would allow welfare cash
grant levels to be reduced by October 1, 1996. These cuts totaled
approximately $163 million of the anticipated $660 million savings.
3. A 4.9 percent increase in funding for the University of California
($130 million General Fund) and the California State University
system ($101 million General Fund), with no increases in student
fees, maintaining the second year of the Governor's four-year
"Compact" with the State's higher education units.
4. The Budget Act assumed the federal government will provide
approximately $700 million in new aid for incarceration and health
care costs of illegal immigrants. These funds reduce appropriations
in these categories that would otherwise have to be paid from the
General Fund.
5. General Fund support for the Department of Corrections was increased
by about 7 percent over the prior year, reflecting estimates of
increased prison population.
6. With respect to aid to local governments, the principal new programs
included in the Budget Act are $100 million in grants to cities and
counties for law enforcement purposes, and budgeted $50 million for
competitive grants to local governments for programs to combat
juvenile crime.
Following enactment of the 1996-97 Budget Act, Congress passed and the
President signed (on August 22, 1996) the Personal Responsibility and Work
Opportunity Act of 1996 (P.L. 104-193, the "Law") making a fundamental reform of
the current welfare system. Among many
<PAGE>
B-27
provisions, the Law includes: (i) conversion of Aid to Families with Dependent
Children from an entitlement program to a block grant titled Temporary
Assistance for Needy Families (TANF), with lifetime time limits on TANF
recipients, work requirements and other changes; (ii) provision denying certain
federal welfare and public benefits to legal noncitizens, allowing states to
elect to deny additional benefits (including TANF) to legal noncitizens, and
generally denying almost all benefits to illegal immigrants; and (iii) changes
in the Food Stamp program, including reducing maximum benefits and imposing work
requirements.
The Law requires states to implement the new TANF program not later than
July 1, 1997 and provides California approximately $3.7 billion in block grant
funds for FY 1996-97 for the provisions of the LAW. The California State Plan is
to be submitted in time to allow grant reductions to implemented effective
January 1, 1997 (allowing $92 million of the $163 million referred to above to
be saved) and to allow the State to capture approximately $267 million in
additional federal block grant funds over the currently budgeted level. None of
the other federal changes needed to achieve the balance of the $660 million cost
savings were enacted. Thus in lieu of the $660 million savings initially assumed
to be saved, it is now projected that savings will total approximately $360
million.
A preliminary analysis of the Law by the Legislative Analyst's Office
indicates that an overall assessment of how these changes will affect the
State's General Fund will not be known for some time, and will depend on how the
State implements the Law. There are many choices including how quickly the State
implements the Law; the degree to which the State elects to makeup for cuts in
federal aid, provide more aid to counties, or cuts some of its own existing
programs for noncitizens; and the State's ability to avoid certain penalties
written into the Law.
The following information is contained in a Preliminary Official
Statement dated December 6, 1996 in connection with the sale of $306,815,000
County of Alameda 1996 Taxable Pension Obligation Bonds, Series B. On November
5, 1996, California voters approved the Right to Vote on Taxes Act ("Proposition
218") which requires voter approval for the imposition, extension or increase of
taxes by a local government. Proposition 218 also provides that any general tax
imposed without voter approval by any local government on or after January 1,
1995 will continue to be imposed only if approved by a majority vote.
Proposition 218 also extends to reducing or repealing local property-related
taxes regardless of the date such taxes were imposed. This extension of the
initiative power is not limited by the terms of Proposition 218 to impositions
after November 6, 1996 and could result in retroactive reduction in any existing
taxes, assessments, fees and charges. Proposition 218 could substantially
restrict the ability of California localities to raise future revenues, and
could subject their existing sources of revenue to reduction or repeal, and
increase their costs to hold elections, calculate fees and assessments, notify
the public and defend fees and assessments in court.
Special Considerations Relating to Risk Factors for the Bernstein
Emerging Markets Value Portfolio
<PAGE>
B-28
Investing in securities of companies in emerging markets countries
entails greater risks than investing in equity securities in developed markets.
In addition to the risks set forth in the Prospectus, the risks include the
following:
Investment restrictions. Some emerging markets countries prohibit or
impose substantial restrictions on investments in their capital markets,
particularly their equity markets, by foreign entities such as the Portfolio.
For example, certain emerging markets countries may require governmental
approval prior to investments by foreign persons, or limit the amount of
investment by foreign persons in the country, or limit the investment by foreign
persons to only specific class of securities of a company which may have less
advantageous terms (including price) than securities of the company available
for purchase by nationals. Certain emerging markets countries may restrict
investment opportunities in issuers or industries deemed important to national
interests. The manner in which foreign investors may invest in companies in
these emerging markets countries, as well as limitations on such investments,
may have an adverse impact on the operations of the Portfolio.
Theft or loss of assets. Security settlement and clearance procedures in
some emerging markets countries may not fully protect the Portfolio against loss
or theft of its assets. By way of example and without limitation, the Portfolio
could suffer losses in the event of a fraudulent or otherwise deficient security
settlement, or theft or default by a broker, dealer, or other intermediary. The
existence of overburdened infrastructure and obsolete financial systems
exacerbate the risks in certain emerging markets countries. The Fund's Custodial
Agreement provides that the custodian will not be liable to the Portfolio or its
shareholders for such losses incurred by the Portfolio in connection with any
action taken by the Custodian in the performance of its duties in good faith
without negligence. The Management Agreement provides that the Manager shall not
be liable to the Fund or the Portfolio for any error of judgment by the Manager
or for any loss sustained by the Fund or the Portfolio except in the case of
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations and duties under the Management Agreement.
Settlement and Brokerage Practices: Brokerage commissions, custodial
services, and other costs relating to investment in emerging markets countries
are generally more expensive than in the United States. For example, one
securities broker may represent all or a significant part of the trading volume
in a particular country, resulting in higher trading costs and decreased
liquidity due to a lack of alternative trading partners. Emerging markets also
have different clearance and settlement procedures, and in certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when assets of the
Portfolio are uninvested and no return is earned thereon. The inability of the
Portfolio to make intended security purchases due to settlement problems could
cause the Portfolio to miss attractive investment opportunities. Inability to
dispose of Portfolio securities due to settlement problems could result either
in losses to the Portfolio due to subsequent declines in value of the Portfolio
security or, if
<PAGE>
B-29
the Portfolio has entered into a contract to sell the security, could result in
possible liability to the purchaser.
Less sophisticated regulatory and legal framework. In emerging markets
countries, there is generally less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the U.S., and capital requirements for brokerage firms are generally
lower. There may also be a lower level of monitoring of activities of investors
in emerging securities markets, and enforcement of existing regulations may be
limited or inconsistent. The prices at which the Portfolio may acquire
investments may be affected by trading by persons with material non-public
information and by securities transactions by brokers in anticipation of
transactions by the Portfolio in particular securities.
The sophisticated legal systems necessary for the proper and efficient
functioning of modern capital markets have yet to be developed in most emerging
markets countries, although many of these countries have made significant
strides in this area in the past few years. A high degree of legal uncertainty
may therefore exist as to the nature and extent of investors' rights and the
ability to enforce those rights in the courts. Many advanced legal concepts
which now form significant elements of mature legal systems are not yet in place
or, if they are in place, have yet to be tested in the courts. It is difficult
to predict with any degree of certainty the outcome of judicial proceedings
(often because the judges themselves have little or no experience with complex
business transactions), or even the measure of damages which may be awarded
following a successful claim.
Less accurate information on companies and markets. Most of the foreign
securities held by the Portfolio will not be registered with the U.S. Securities
and Exchange Commission ("SEC"), nor will the issuers thereof be subject to SEC
or other U.S. reporting requirements. Accordingly, there will generally be less
publicly available information concerning foreign issuers of securities held by
the Portfolio than will be available concerning U.S. companies. Foreign
companies, and in particular companies in emerging markets countries, are not
generally subject to uniform accounting, auditing and financial reporting
standards or to other regulatory requirements comparable to those applicable to
U.S. companies.
Below Investment-Grade Bonds. Much emerging markets debt is rated below
investment-grade, or unrated but comparable to that rated below investment-grade
by internationally recognized rating agencies such as Standard & Poor's
Corporation ("S&P") or Moody's Investors Service ("Moody's"). Securities that
are rated BBB, A-2, or SP-2 by S&P or Baa or P-2 by Moody's are investment grade
(for a description of these rating categories, see Appendix). Lower-quality debt
securities, also known as "junk bonds," are often considered to be speculative
and involve greater risk of default or price change due to changes in the
issuer's creditworthiness. The market prices of these securities may fluctuate
more than those of higher quality securities and may decline significantly in
periods of general economic difficulty, which may follow periods of rising
interest rates. Securities in the lowest quality category may present the risk
of default, or may be in default.
<PAGE>
B-30
While Bernstein may refer to ratings issued by internationally
recognized rating agencies, when available, Bernstein may choose to rely upon,
or to supplement such ratings with, its own independent and ongoing review of
credit quality. The Portfolio's achievement of its investment objective may, to
the extent of its investment in medium- to lower-rated bonds, be more dependent
upon Bernstein's credit analysis than would be the case if the Portfolio were to
invest in higher quality bonds.
The secondary market on which medium- to lower-rated bonds are traded
may be less liquid than the market for higher grade bonds. Less liquidity in the
secondary trading market could adversely affect the price at which the Portfolio
could sell medium- to lower-rated bonds and could cause large fluctuations in
the daily net asset value of the Portfolio's shares. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may decrease
the values and liquidity of medium- to lower-rated bonds, especially in a thinly
traded market. When secondary markets for medium- to lower-rated securities are
less liquid than markets for higher grade securities, it may be more difficult
to value the securities because such valuation may require more research, and
elements of judgment may play a greater role in the valuation because there is
less reliable, objective data available. Furthermore, prices for medium- to
lower-rated bonds may be affected by legislative and regulatory developments.
The foregoing is not intended to be exhaustive and there may be other
risk factors to take into account in relation to a particular investment. In
addition, investors should be aware that the Portfolio may invest in foreign
countries or in companies in which foreign investors, including the Manager,
have had no or limited prior experience. Investors should also note that a
feature of emerging markets is that they are subject to rapid change and the
information set out above may become outdated relatively quickly.
<PAGE>
B-31
INVESTMENT RESTRICTIONS
All of the Portfolios are subject to fundamental investment
restrictions. The fundamental restrictions applicable to any one of the
Portfolios may not be changed without the approval of the holders of at least a
majority of the outstanding securities of that Portfolio, voting separately from
any other series of the Fund. "A majority of the outstanding securities" of a
Portfolio means the lesser of (i) 67% or more of the shares represented at a
meeting at which more than 50% of the outstanding shares are present in person
or represented by proxy or (ii) more than 50% of the outstanding shares. A vote
by the shareholders of a single Portfolio to modify or eliminate one or more of
the restrictions has no effect on the restrictions as applied to the other
Portfolios.
SHORT DURATION MUNICIPAL PORTFOLIOS' INVESTMENT RESTRICTIONS
None of the Bernstein Short Duration California Municipal Portfolio, the
Bernstein Short Duration Diversified Municipal Portfolio or the Bernstein Short
Duration New York Municipal Portfolio may, except as otherwise provided herein:
1) Purchase securities on margin, but the Portfolio may obtain such
short-term credits as may be necessary for the clearance of transactions;
<PAGE>
B-32
2) Make short sales of securities or maintain a short position, unless
at all times when a short position is open the Portfolio owns or has the right
to obtain at no added cost securities identical to those sold short;
3) Borrow money including pursuant to reverse repurchase agreements
except that the Portfolio may borrow money for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 33 1/3% of its
total assets (including the amount borrowed) less liabilities (other than
borrowings). Any borrowings that come to exceed 33 1/3% of the Portfolio's total
assets by reason of a decline in net assets will be reduced within three days
(not including Saturdays, Sundays and holidays) to the extent necessary to
comply with the 33 1/3% limitation. The Portfolio may not enter into reverse
repurchase agreements if the Portfolio's obligations thereunder would be in
excess of one-third of the Portfolio's total assets, less liabilities other than
obligations under such reverse repurchase agreements.
4) Issue senior securities, except as permitted under the 1940 Act;
5) Purchase or sell commodities or commodity contracts, except financial
futures and currency futures and options thereon;
6) Purchase or sell real estate or interests in real estate, although
the Portfolio may purchase and sell securities which are secured by real estate,
and securities of companies which invest and deal in real estate;
7) Purchase oil, gas or other mineral interests;
8) Make loans although the Portfolio may (i) purchase fixed-income
securities and enter into repurchase agreements, or (ii) lend portfolio
securities provided that no more than 33 1/3% of the Portfolio's total assets
will be lent to other parties;
9) Act as an underwriter, except to the extent that, in connection with
the disposition of certain portfolio securities, it may be deemed to be an
underwriter under certain federal securities laws;
10) Purchase any security if, as a result, more than 25% of the
Portfolio's total assets (taken at current value) would be invested in a single
industry. (For purposes of this restriction, assets invested in obligations
issued or guaranteed by the U.S. Government and its agencies or
instrumentalities or tax-exempt securities issued by governments or political
subdivisions of states, possessions or territories of the U.S. are not
considered to be invested in any industry);
11) Invest more than 5% of its total assets in the securities of any one
issuer if as a result of the purchase less than 75% of the Portfolio's total
assets is represented by cash and cash items (including receivables), Government
securities, securities of other investment companies, and other securities for
the purposes of this calculation limited in respect of any one issuer to an
amount not greater in value than 5%
<PAGE>
B-33
of the value of the total assets of the Portfolio determined at the time of
investment and to not more than 10% of the outstanding voting securities of such
issuer. This restriction does not apply to the Bernstein Short Duration
California Municipal Portfolio and the Bernstein Short Duration New York
Municipal Portfolio;
12) Make investments for the purpose of exercising control or
management.
The following investment limitations are not fundamental, and may be
changed without shareholder approval. None of the Short Duration Municipal
Portfolios has or currently intends to:
1) Issue senior securities, borrow money or pledge its assets except to
the extent that forward commitments and securities loans may be considered loans
and except that the Portfolio may borrow from a bank for temporary or emergency
purposes in amounts not exceeding 5% (taken at the lower of cost or current
value) of its total assets (not including the amount borrowed) and pledge its
assets to secure such borrowings. The Portfolio does not intend to purchase a
security while borrowings exceed 5% of its total assets.
2) Purchase any security if, as a result, the Portfolio would then have
more than 15% of its net assets (at current value) invested in securities
restricted as to disposition under federal securities laws (excluding restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933 ("144A securities") that have been determined to be liquid under procedures
adopted by the Board of Directors based on the trading market for the security)
or otherwise illiquid or not readily marketable, including repurchase agreements
with maturities of more than 7 days;
3) Invest in securities of other investment companies except in the open
market where no commission other than the ordinary broker's commission is paid
or except when the purchase is part of a plan of merger, consolidation,
reorganization or acquisition; any such purchase will be in compliance with the
1940 Act; and
4) Invest in any securities of any issuer if, to the knowledge of the
Fund, any officer or director of the Fund or of the Manager owns more than 1/2
of 1% of the securities of the issuer, and such officers or directors who own
more than 1/2 of 1% own in the aggregate more than 5% of the outstanding
securities of such issuer.
<PAGE>
B-34
FIXED-INCOME PORTFOLIOS' (OTHER THAN THE SHORT DURATION MUNICIPAL
PORTFOLIOS') INVESTMENT RESTRICTIONS
None of the Bernstein Government Short Duration Portfolio, the Bernstein
Short Duration Plus Portfolio, the Bernstein New York Municipal Portfolio, the
Bernstein Diversified Municipal Portfolio, the Bernstein California Municipal
Portfolio, or the Bernstein Intermediate Duration Portfolio, will, except as
otherwise provided herein:
<PAGE>
B-35
1) Purchase securities on margin, but any Portfolio may obtain such
short-term credits as may be necessary for the clearance of transactions;
2) Make short sales of securities or maintain a short position;
3) Issue senior securities, borrow money or pledge its assets except to
the extent that forward commitments and reverse repurchase agreements may be
considered senior securities or loans and except that any Portfolio may borrow
from a bank for temporary or emergency purposes in amounts not exceeding 5%
(taken at the lower of cost or current value) of its total assets (not including
the amount borrowed) and pledge its assets to secure such borrowings. A
Portfolio may not purchase a security while borrowings (other than forward
commitments and reverse repurchase agreements which may be considered loans)
exceed 5% of its total assets. A Portfolio may not enter into reverse repurchase
agreements if the Portfolio's obligations thereunder would be in excess of
one-third of the Portfolio's total assets, less liabilities other than
obligations under such reverse repurchase agreements;
4) Purchase or sell commodities or commodity contracts, except financial
futures and options thereon;
5) Purchase or sell real estate or interests in real estate, although
each Portfolio may purchase and sell securities which are secured by real
estate, and securities of companies which invest and deal in real estate;
6) Purchase oil, gas or other mineral interests;
7) Lend money, except to the extent that repurchase agreements or the
purchase of fixed-income securities may be considered loans of money or loan
participations;
8) Lend securities if, as a result, the total current value of the
loaned securities is equal to more than 30% of the Portfolio's total assets;
9) Act as an underwriter, except to the extent that, in connection with
the disposition of certain portfolio securities, it may be deemed to be an
underwriter under certain federal securities laws;
10) Invest in any securities of any issuer if, to the knowledge of the
Fund, any officer or director of the Fund or of the Manager owns more than 1/2
of 1% of the securities of the issuer, and such officers or directors who own
more than 1/2 of 1% own in the aggregate more than 5% of the outstanding
securities of such issuer;
11) Purchase any security if, as a result, the Portfolio would then have
more than 10% of its net assets (at current value) invested in securities
restricted as to disposition under federal securities laws or otherwise illiquid
or not readily marketable, including repurchase agreements with maturities of
more than 7 days;
<PAGE>
B-36
12) Purchase any security if, as a result, the Portfolio would then have
more than 5% of its total assets (taken at current value) invested in securities
of companies (including predecessors) less than three years old;
13) Purchase any security if, as a result, more than 25% of the
Portfolio's total assets (taken at current value) would be invested in a single
industry. (For purposes of this restriction as applied to all Portfolios but the
Bernstein California Municipal Portfolio, assets invested in obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities or
securities issued by governments or political subdivisions of governments of
states, possessions, or territories of the U.S. are not considered to be
invested in any industry. For purposes of this restriction as applied to the
Bernstein California Municipal Portfolio, assets invested in obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities or
tax-exempt securities issued by governments or political subdivisions of
governments of states, possessions, or territories of the U.S. are not
considered to be invested in any industry.);
14) Invest more than 5% of its total assets in the securities of any one
issuer other than obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities if as a result of the purchase less than 75% of
the Portfolio's total assets is represented by cash and cash items (including
receivables), Government securities, and other securities for the purposes of
this calculation limited in respect of any one issuer to an amount not greater
in value than 5% of the value of the total assets of such Portfolio determined
at the time of investment. (This restriction does not apply to the Bernstein New
York Municipal Portfolio or the Bernstein California Municipal Portfolio.);
15) Purchase any security if, as a result, it would hold more than 10%
of the voting securities of any issuer;
16) Make investments for the purpose of exercising control or
management;
17) Invest in securities of other registered investment companies;
18) Purchase warrants if as a result the Fund would then have more than
5% of its total assets (determined at the time of investment) invested in
warrants.
In addition, as a non-fundamental policy, no Fixed-Income Portfolio
(other than the Short Duration Municipal Portfolios) of the Fund will invest in
a reverse repurchase agreement if the amount
<PAGE>
B-37
received by the Portfolio through such an agreement, together with all other
borrowings, will exceed 5% of the Portfolio's total assets.
INTERNATIONAL VALUE PORTFOLIO'S INVESTMENT RESTRICTIONS
The International Value Portfolio may not, except as otherwise provided
herein:
1) Purchase securities on margin, but the Portfolio may obtain such
short-term credits as may be necessary for the clearance of transactions;
2) Make short sales of securities or maintain a short position, unless
at all times when a short position is open the Portfolio owns or has the right
to obtain at no added cost securities identical to those sold short;
3) Borrow money except that the Portfolio may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed 33 1/3%
of the Portfolio's total assets by reason of a decline in net assets will be
reduced within three days (not including Saturdays, Sundays and holidays) to the
extent necessary to comply with the 33 1/3% limitation. The Portfolio may not
enter into reverse repurchase agreements if the Portfolio's obligations
thereunder would be in excess of one-third of the Portfolio's total assets, less
liabilities other than obligations under such reverse repurchase agreements.
4) Issue senior securities, except as permitted under the 1940 Act;
5) Purchase or sell commodities or commodity contracts, except financial
futures and currency futures and options thereon;
6) Purchase or sell real estate or interests in real estate, although
the Portfolio may purchase and sell securities which are secured by real estate,
and securities of companies which invest and deal in real estate;
7) Purchase oil, gas or other mineral interests;
8) Make loans although the Portfolio may (i) purchase fixed-income
securities and enter into repurchase agreements, or (ii) lend portfolio
securities provided that no more than 33 1/3% of the Portfolio's total assets
will be lent to other parties;
9) Act as an underwriter, except to the extent that, in connection with
the disposition of certain portfolio securities, it may be deemed to be an
underwriter under certain federal securities laws;
<PAGE>
B-38
10) Purchase any security if, as a result, more than 25% of the
Portfolio's total assets (taken at current value) would be invested in a single
industry. (For purposes of this restriction, assets invested in obligations
issued or guaranteed by the U.S. Government and its agencies or
instrumentalities, are not considered to be invested in any industry);
11) Invest more than 5% of its total assets in the securities of any one
issuer if as a result of the purchase less than 75% of the Portfolio's total
assets is represented by cash and cash items (including receivables), Government
securities, securities of other investment companies, and other securities for
the purposes of this calculation limited in respect of any one issuer to an
amount not greater in value than 5% of the value of the total assets of the
Portfolio determined at the time of investment and to not more than 10% of the
outstanding voting securities of such issuer;
12) Make investments for the purpose of exercising control or
management;
The following investment limitations are not fundamental, and may be
changed without shareholder approval. The International Value Portfolio has not
and currently does not intend to:
1) Issue senior securities, borrow money or pledge its assets except to
the extent that forward commitments and securities loans may be considered loans
and except that the Portfolio may borrow from a bank for temporary or emergency
purposes in amounts not exceeding 5% (taken at the lower of cost or current
value) of its total assets (not including the amount borrowed) and pledge its
assets to secure such borrowings. The Portfolio does not intend to purchase a
security while borrowings exceed 5% of its total assets. The Portfolio will not
enter into reverse repurchase agreements and securities loans if the Portfolio's
obligations thereunder would be in excess of one-third of the Portfolio's total
assets, less liabilities other than obligations under such reverse repurchase
agreements and securities loans;
2) Purchase any security if, as a result, the Portfolio would then have
more than 15% of its net assets (at current value) invested in securities
restricted as to disposition under federal securities laws (excluding restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933 ("144A Securities") that have been determined to be liquid under procedures
adopted by the Board of Directors based on the trading market for the security)
or otherwise illiquid or not readily marketable, including repurchase agreements
with maturities of more than 7 days;
3) Invest in securities of other investment companies except in the open
market where no commission other than the ordinary broker's commission is paid
or except when the purchase is part of a plan of merger, consolidation,
reorganization or acquisition; any such purchase will be in compliance with
<PAGE>
B-39
the 1940 Act;
4) Invest in any securities of any issuer if, to the knowledge of the
Fund, any officer or director of the Fund or of the Manager owns more than 1/2
of 1% of the securities of the issuer, and such officers or directors who own
more than 1/2 of 1% own in the aggregate more than 5% of the outstanding
securities of such issuer.
BERNSTEIN EMERGING MARKETS VALUE PORTFOLIO'S INVESTMENT RESTRICTIONS
The Bernstein Emerging Markets Value Portfolio may not, except as
otherwise provided herein:
1) Purchase securities on margin, but the Portfolio may obtain such
short-term credits as may be necessary for the clearance of
transaction;
2) Make short sales of securities or maintain a short position, unless
at all times when a short position is open the Portfolio owns or has
the right to obtain at no added cost securities identical to those
sold short;
3) Borrow money except that the Portfolio may borrow money for
temporary or emergency purposes (not for leveraging or investment)
in an amount not exceeding 33 1/3% of its total assets (including
the amount borrowed) less liabilities (other than borrowings). Any
borrowings that come to exceed 33 1/3% of the Portfolio's total
assets by reason of a decline in net assets will be reduced within
three days (not including Saturdays, Sundays and holidays) to the
extent necessary to comply with the 33 1/3 % limitation. Borrowings,
including reverse repurchase agreements, will not exceed 33 1/3%.
4) Issue senior securities, except as permitted under the 1940 Act;
5) Purchase or sell commodities or commodity contracts, except
financial futures and currency futures and options thereon;
6) Purchase or sell real estate or interests in real estate, although
the Portfolio may purchase and sell securities which are secured by
real estate, and securities of companies which invest and deal in
real estate;
7) Purchase oil, gas or other mineral interests;
<PAGE>
B-40
8) Make loans although the Portfolio may (i) purchase fixed-income
securities and enter into repurchase agreements, or (ii) lend
portfolio securities provided that no more than 33 1/3% of the
Portfolio's total assets will be lent to other parties;
9) Act as an underwriter, except to the extent that, in connection with
the disposition of certain portfolio securities, it may be deemed to
be an underwriter under certain federal securities laws;
10) Purchase any security if, as a result, more than 25% of the
Portfolio's total assets (taken at current value) would be invested
in a single industry. (For purposes of this restriction, assets
invested in obligations issued or guaranteed by the U.S. Government
and its agencies or instrumentalities, are not considered to be
invested in any industry);
11) Invest more than 5% of its total assets in the securities of any one
issuer if as a result of the purchase less than 75% of the
Portfolio's total assets is represented by cash and cash items
(including receivables), Government securities, securities of other
investment companies, and other securities for the purposes of this
calculation limited in respect of any one issuer to an amount not
greater in value than 5% of the value of the total assets of the
Portfolio determined at the time of investment and to not more than
10% of the outstanding voting securities of such issuer;
12) Make investments for the purpose of exercising control or
management;
The following investment limitations are not fundamental, and may be
changed without shareholder approval. The Emerging Markets Value portfolio
currently does not intend to:
1) Issue senior securities, borrow money or pledge its assets except to
the extent that forward commitments and securities loans may be
considered loans and except that the Portfolio may borrow from a
bank for temporary or emergency purposes in amounts not exceeding 5%
(taken at the lower of cost or current value) of its total assets
(not including the amount borrowed) and pledge its assets to secure
such borrowings. The Portfolio does not intend to purchase a
security while borrowings exceed 5% of its total assets. The
Portfolio will not enter into reverse repurchase agreements and
securities loans if the Portfolio's obligations thereunder would be
in excess of one-third of the Portfolio's total assets, less
liabilities other than obligations under such reverse repurchase
agreements and securities loans;
2) Purchase any security if, as a result, the Portfolio would then have
more than 15% of its net assets (at current value) invested in
securities restricted as to disposition under federal securities
laws (excluding restricted securities eligible for resale pursuant
to Rule
<PAGE>
B-41
144A under the Securities Act of 1933 ("144A Securities") that have
been determined to be liquid under procedures adopted by the Board
of Directors based on the trading market for the security) or
otherwise illiquid or not readily marketable, including repurchase
agreements with maturities of more than 7 days;
3) Invest in securities of other investment companies except in the
open market where no commission other than the ordinary broker's
commission is paid or except when the purchase is part of a plan of
merger, consolidation, reorganization or acquisition; any such
purchase will be in compliance with the 1940 Act;
4) Invest in any securities of any issuer if, to the knowledge of the
Fund, any officer or director of the Fund or if the Manager owns
more than 1/2 of 1% of the securities of the issuer, and such
officers or directors who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding securities of such issuer.
DIRECTORS AND OFFICERS AND
PRINCIPAL HOLDERS OF SECURITIES
The following table lists the directors and executive officers of the
Fund, their business addresses and their principal occupations during the past
five years.
<TABLE>
<CAPTION>
NAME AND POSITION WITH PRINCIPAL OCCUPATION
ADDRESS THE FUND DURING PAST FIVE YEARS
<S> <C> <C>
Roger Hertog* President, 1993-Present: President, Chief Operating Officer and
767 Fifth Avenue Treasurer, Director-Bernstein
New York, NY 10153 Director Previously: Executive Vice President and Director-
Bernstein
Andrew S. Adelson* Senior Vice President, Senior Vice President, Chief Investment Officer-
767 Fifth Avenue Director International and Director-Bernstein
New York, NY 10153
Arthur Aeder Director 1987-Present: Consultant;
20 West 55th Street Formerly Senior Partner of Oppenheim, Appel
New York, NY 10019 Dixon & Co. (subsequently Spicer & Oppenheim)
Certified Public Accountants, and Chairman of
Spicer & Oppenheim International
Peter L. Bernstein** Director President & Chief Executive Officer of Peter L.
575 Madison Avenue Bernstein, Inc., Economic Consultants
Suite 1006
New York, NY 10022
William Kristol Director 6/95-Present: Editor and Publisher, The Weekly
1150 17th Street, N.W. Standard; 11/93-5/95: Chairman, Project for the
5th Floor Republican Future; 1/93-11/93: Director, The
Washington, D.C. 20036 Bradley Project on the 90's; 5/89-1/93: Chief of
Staff to the Vice President, The White House
Theodore Levitt Director Professor Emeritus of Business Administration,
Harvard Business School Harvard University
Cumnock 300 1985-1989: Editor, Harvard Business Review
Boston, MA 02163
Francis H. Trainer, Jr. Senior Vice President Senior Vice President, Director-Fixed Income
767 Fifth Avenue Investments and Director-Bernstein
New York, NY 10153
Jean Margo Reid Secretary 1997: Vice President and General Counsel-Bernstein
767 Fifth Avenue Previously: Vice President and Associate General
New York, NY 10153 Counsel-Bernstein
</TABLE>
* An "interested person" of the Fund, as defined in the 1940 Act.
** Not related to Zalman C. Bernstein, Chairman of the Executive
Committee-Bernstein.
The officers conduct and supervise the daily business operations of the
Portfolios, while the directors exercise general oversight over these actions
and decide on general policy. The directors have designated Mr. Hertog and Mr.
Adelson to be the Executive Committee of the Fund. Between meetings of the Board
of Directors, the Executive Committee may exercise all the powers of the Board
of Directors except the power to (1) declare dividends or distributions on
stock; (2) issue stock except pursuant to a method specified by the Board of
Directors; (3) recommend to the stockholders any action which requires
stockholder approval; (4) amend the bylaws; (5) approve any merger or share
exchange which does not require stockholder approval; or (6) approve any matter
which, pursuant to the 1940 Act, must be approved by the Board of Directors,
including those matters which must be approved by a majority of the directors
who are not interested persons of the Fund.
The Fund paid each of the four directors who is not an affiliated person
of Bernstein, in addition to reimbursement of out-of-pocket expenses in
connection with attendance at meetings of the Board of Directors, annual
compensation of $33,750 for the fiscal year ended September 30, 1996. Officers
receive no direct remuneration in such capacity from the Fund. The directors may
also appoint committees of directors. Directors who are not affiliated persons
of Bernstein serving on such committees may receive additional compensation as
well as reimbursement of their out-of-pocket expenses.
<PAGE>
B-42
The directors have been elected by the public shareholders of the Fund,
except for Mr. Kristol and Mr. Adelson, who were elected by the other Directors.
In order to avoid unnecessary expenses, the Fund does not normally intend to
hold annual meetings of shareholders. The Board of Directors or the shareholders
may call Special Meetings of Shareholders for the removal of directors or for
other actions for which a shareholder vote may be required by the 1940 Act (such
as a change in fundamental policies or diversified status) or the Fund's
Articles of Incorporation or By-Laws.
On January 2, 1997, directors and officers of the Fund, as a group,
owned beneficially 143,972.031 shares of the Bernstein Government Short Duration
Portfolio, being 1.3496% of such Portfolio. On January 2, 1997, directors and
officers of the Fund, as a group, owned less than one percent of the outstanding
shares of Bernstein Short Duration California Municipal Portfolio, Bernstein
Short Duration New York Municipal Portfolio, Bernstein Short Duration
Diversified Municipal Portfolio, Bernstein Short Duration Plus Portfolio,
Bernstein New York Municipal Portfolio, Bernstein California Municipal
Portfolio, Bernstein Diversified Municipal Portfolio, Bernstein Intermediate
Duration Portfolio, Bernstein International Value Portfolio and Bernstein
Emerging Markets Value Portfolio.
MANAGER AND DISTRIBUTOR
Manager. Bernstein, 767 Fifth Avenue, New York, New York 10153, has
entered into Management Agreements with the Fund, on behalf of each of the
Portfolios, under which Bernstein acts as investment adviser for each of the
Portfolios. Bernstein is controlled by its Board of Directors, which consists of
the following individuals: Andrew S. Adelson, Zalman C. Bernstein, Kevin R.
Brine, Charles C. Cahn, Jr., Marilyn Goldstein Fedak, Michael L. Goldstein,
Roger Hertog, Lewis A. Sanders, and Francis H. Trainer, Jr. Subject to the
general oversight of the Board of Directors of the Fund, and in conformity with
the stated policies of each of the Portfolios, Bernstein manages the investment
of each Portfolio's assets. Bernstein makes investment decisions for each
Portfolio and places purchase and sale orders. The services of the Manager are
not exclusive under the terms of the Management Agreements. Bernstein is free to
render similar services to others.
Bernstein has authorized those of its directors, officers or employees
who are elected as directors or officers of the Fund to serve in the capacities
in which they are elected. All services furnished by Bernstein under the
Management Agreements may be furnished through the medium of any such directors,
officers or employees of Bernstein. In connection with the provision of its
services under the Management Agreements, the Manager bears various expenses,
including the salaries and expenses of all personnel, except the fees and
expenses of directors not affiliated with Bernstein.
Each Portfolio pays the Manager for the services performed on behalf of
that Portfolio, as well as for the services performed on behalf of the Fund as a
whole. The fee paid by each of the Fixed-Income Portfolios (other than the Short
Duration Municipal Portfolios) is at an annual rate of 0.50% of each such
Portfolio's average daily net assets up to and including $1 billion and at an
annual rate of 0.45% of each
<PAGE>
B-43
such Portfolio's average daily net assets in excess of $1 billion. The fee paid
by each of the Short Duration Municipal Portfolios is at an annual rate of 0.50%
of each such Portfolio's average daily net assets. The fee paid by the
International Value Portfolio is at an annual rate of 1.00% of that Portfolio's
average daily net assets up to but not exceeding $2 billion and at an annual
rate of .90 of 1% of that Portfolio's average daily net assets that exceed $2
billion. The fee is computed daily and paid monthly. The fee paid by the
Bernstein Emerging Markets Value Portfolio is at an annual rate of 1.25% of the
Portfolio's average daily net assets, except that, during the first two years of
operations of the Bernstein Emerging Markets Value Portfolio, the Bernstein
Emerging Markets Value Portfolio will not pay any portion of the fee that,
together with the other operating expenses of the Portfolio (excluding interest,
taxes, brokerage commissions, and extraordinary expenses, but including fees
payable to Bernstein under the Shareholder Servicing and Administrative
Agreement described below), exceeds the rate of 2% per annum of the Portfolio's
average daily net assets. The term "the first full two years of operation" means
the period ending December 31, 1997. The fee is computed daily and paid monthly.
For the fiscal years ended September 30, 1994, 1995 and 1996, the investment
management fees accrued or paid to Bernstein pursuant to the Management
Agreements were, respectively, $22,165,266, $30,738,193 and $44,743,986.
The Management Agreements provide that the Manager shall not be liable
to the Fund or the Portfolios for any error of judgment by the Manager or for
any loss sustained by the Fund or the Portfolios except in the case of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations
and duties under the Management Agreements.
In addition to the Management Agreements, the Fund, on behalf of each of
the Portfolios, has entered into Shareholder Servicing and Administrative
Agreements with Bernstein. Pursuant to these Agreements, Bernstein pays all
expenses incurred by it in connection with administering the ordinary course of
the Fund's and each Portfolio's business. Bernstein also pays the costs of
office facilities and of clerical and administrative services which are not
provided by State Street Bank and Trust Company, the Fund's Custodian and
Transfer Agent. Bernstein serves as Shareholder Servicing Agent and in such
capacity may enter into agreements with other organizations whereby some or all
of Bernstein's duties in this regard may be delegated. The shareholder servicing
that will be provided by Bernstein or other
<PAGE>
B-44
organizations might include, among other things, proxy solicitations and
providing information to shareholders concerning their mutual fund investments,
systematic withdrawal plans, dividend payments, reinvestments, and other
matters. The fee paid by each of the Fixed-Income Portfolios for shareholder
servicing and administration is 0.10% of each Portfolio's average daily net
assets and the fee paid by the Bernstein International Value Portfolio and the
Bernstein Emerging Markets Value Portfolio for these services is 0.25% of that
Portfolio's average daily net assets. For the fiscal years ended September 30,
1994, 1995 and 1996, the fees accrued or paid to Bernstein pursuant to the
Shareholder Servicing and Administrative Agreements were $4,906,167, $6,964,714
and $10,438,251, respectively.
Except as indicated above, each Portfolio is responsible for the payment
of its expenses and an allocable share of the common expenses of the Fund,
including: (i) the fees payable to Bernstein under the Management Agreements and
the Shareholder Servicing and Administrative Agreements; (ii) the fees and
expenses of Directors who are not affiliated with Bernstein; (iii) the fees and
expenses of the Custodian and Transfer Agent, including but not limited to fees
and expenses relating to fund accounting, pricing of fund shares, and
computation of net asset value; (iv) the fees and expenses of calculating yield
and/or performance pursuant to any independent servicing agreement; (v) the
charges and expenses of legal counsel and independent accountants; (vi) all
taxes and corporate fees payable to governmental agencies; (vii) the fees of any
trade association of which the Fund is a member; (viii) reimbursement of each
Portfolio's share of the organization expenses of the Fund; (ix) the fees and
expenses involved in registering and maintaining registration of the Fund and
the Portfolios' shares with the Securities and Exchange Commission, registering
the Fund as a broker or dealer and qualifying the shares of the Portfolios under
state securities laws, including the preparation and printing of the
registration statements and prospectuses for such purposes, allocable
communications expenses with respect to investor services, all expenses of
shareholders' and Board of Directors' meetings and preparing, printing and
mailing proxies, prospectuses and reports to shareholders; (x) brokers'
commissions, dealers' markups, and any issue or transfer taxes chargeable in
connection with the Portfolios' securities transactions; (xi) the cost of stock
certificates representing shares of the Portfolios; (xii) insurance expenses,
including but not limited to, the cost of a fidelity bond, directors' and
officers insurance, and errors and omissions insurance; and (xiii) litigation
and indemnification expenses, expenses incurred in connection with mergers, and
other extraordinary expenses not incurred in the ordinary course of the
Portfolios' business.
The Management Agreements provide that if at any time the Manager shall
cease to act as investment adviser to any Portfolio or to the Fund, or if the
Manager shall change its name to delete the reference to Sanford C. Bernstein,
the Fund shall take all steps necessary under corporate law to change its
corporate name to delete the reference to Sanford C. Bernstein or to delete the
reference to Bernstein as to any such Portfolio and shall thereafter refrain
from using such name with reference to any such Portfolio and, if applicable,
the Fund.
The Management Agreements provide that they will terminate automatically
if assigned and that they may be terminated without penalty by any Portfolio (by
vote of the directors or by a vote of a majority of the outstanding voting
securities of the Portfolio voting separately from any other Portfolio of
<PAGE>
B-45
the Fund) on not less than 30 days' written notice. The Management Agreements
also provide that they will continue for more than two years only if such
continuance is annually approved in the manner required by the 1940 Act and the
Manager shall not have notified the Fund that it does not desire such
continuance.
Distributor. Bernstein acts as Distributor of each Portfolio's shares
pursuant to Distribution Agreements.
NET ASSET VALUE
The Fund computes the net asset value of each Portfolio once daily as of
the close of regular trading of the New York Stock Exchange (normally 4:00 p.m.,
New York time), each business day, except for New York Stock Exchange and
national bank holidays, as determined from time to time. Currently, these
holidays are: New Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day,
Thanksgiving Day, and Christmas Day. Because the investment securities of the
Bernstein International Value Portfolio and the Bernstein Emerging Markets Value
Portfolio are traded on foreign markets that may be open when the New York Stock
Exchange is closed, the value of the net assets of the Bernstein International
Value Portfolio and the Bernstein Emerging Markets Value Portfolio may be
significantly affected on days when no net asset values are calculated. If the
primary market in which a portfolio security is traded is not open for trading
on a day which the Fund computes net asset value, then the security's valuation
will be valued as of the last preceding trading date in its primary market,
unless, under procedures established by the Board of Directors, it is determined
that such price does not reflect the security's fair value.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Manager is responsible for decisions to buy and sell securities for
each of the Portfolios and for broker-dealer selection. In general, securities
in which the Fixed-Income Portfolios invest are traded on a "net" rather than a
transaction-charge basis with dealers acting as principals for their own
accounts without a stated transaction charge. Accordingly, the price of the
security may reflect an increase or decrease from the price paid by the dealer
together with a spread between the bid and asked price, which provides the
opportunity for a profit or loss to the dealer. Both the International Value
Portfolio and the Bernstein Emerging Markets Value Portfolio generally effect
transactions on stock exchanges and markets which involve the payment of
brokerage commissions. In transactions on stock exchanges in the United States,
these commissions are negotiated. Traditionally, commission rates have generally
not been negotiated on stock markets outside the United States. In recent years,
however, an increasing number of developed foreign stock markets have adopted a
system of negotiated rates, although a few developed foreign markets and most
emerging foreign markets continue to be subject to an established schedule of
minimum commission rates. Each Portfolio may purchase securities from
underwriters at prices which
<PAGE>
B-46
include a concession paid by the issuer to the underwriter. On occasion, certain
money market instruments may be purchased directly from an issuer, in which case
no commissions or discounts are paid. In some cases, the Portfolios might engage
in purchase or sale transactions with another Portfolio of the Fund, subject to
conditions specified under the 1940 Act. There might also be occasions where the
Portfolios engage in purchase or sale transactions with another mutual fund.
For the fiscal year ended September 30, 1996, the Fund paid total
brokerage commissions of $6,044,134, of which $56,956 or .9423% was paid to
Bernstein for effecting 1.1525% of the aggregate dollar amount of transactions
on which the Fund paid brokerage commissions. The increase in transaction
charges in 1996 was primarily attributable to the growth in net assets of the
Bernstein International Value Portfolio and the commencement of the Bernstein
Emerging Markets Value Portfolio; the net assets for the Bernstein International
Value Portfolio went from $1,996,111,905 at the end of fiscal year 1995 to
$3,131,258,261 at the end of fiscal year 1996 and the net assets for the
Bernstein Emerging Markets Value Portfolio went up from $0 at the end of fiscal
year 1995 to $273,924,132 at the end of fiscal year 1996. The Fund paid
aggregate brokerage commissions of $3,155,636 and $3,587,366 during the fiscal
years ended September 30, 1994 and 1995, respectively. Of the $3,155,636 in
brokerage commissions paid by the Fund in fiscal year 1994, $1,191 or .04% was
paid to Bernstein for effecting .0297% of the aggregate dollar amount of
transactions on which the Fund paid commissions. Of the $3,587,366 in brokerage
commissions paid by the Fund in fiscal year 1995, none was paid to Bernstein for
effecting transactions.
At September 30, 1996, the Bernstein Short Duration Plus Portfolio owned
$838,401 of Lehman Brothers, Inc. 9.50% Senior Subordinated Notes; $4,470,392 of
Lehman Brothers Holdings, Inc. 5.75% Notes; and $2,522,500 of Salomon, Inc.
8.36% Medium-Term Notes. The Bernstein Intermediate Duration Portfolio owned
$4,576,540 of Lehman Brothers Holdings, Inc. 8.375% Notes; $1,042,889 of Lehman
Brothers Inc. 9.50% Senior Subordinated Notes; $1,679,495 of Lehman Brothers
Inc. 10.00% Senior Subordinated Notes; and $4,298,340 of Salomon Inc. 8.36%
Medium-Term Notes. Lehman Brothers Holdings, Inc. is the parent corporation of
Lehman Brothers, Inc., which is the parent corporation of Lehman Commercial
Paper Inc., which is the parent corporation of Lehman Government Securities,
Inc.; Lehman Brothers, Inc., Lehman Government Securities, Inc. and Salomon Inc.
are three of the Fund's regular brokers or dealers as defined in Rule 10b-1
under the 1940 Act.
Effecting Transactions for the Fixed-Income Portfolios
The Manager's primary consideration in effecting a security transaction
for the Fixed-Income Portfolios is to obtain the best net price and the most
favorable execution of the order. To the extent that the executions and prices
offered by more than one dealer are comparable, the Manager may, in its
discretion, effect transactions with dealers that furnish statistical, research
or other information or
<PAGE>
B-47
services, which are deemed by the Manager to be beneficial to one or more of the
Fixed-Income Portfolios or any other investment companies or other accounts
managed by the Manager.
Effecting Transactions for the Bernstein International Value Portfolio and the
Bernstein Emerging Markets Value Portfolio
In effecting a security transaction for the Bernstein International
Value Portfolio and the Bernstein Emerging Markets Value Portfolio, the Manager
seeks to obtain best execution at the most favorable prices through responsible
broker-dealers; however, under certain conditions the Fund may pay higher
brokerage commissions in return for brokerage and research services. The factors
that the Manager may consider are: price, rate of commission, the broker's
trading expertise, stature in the industry, execution ability, facilities,
clearing capabilities and financial services offered, long-term relations with
the Manager, reliability and financial responsibility, integrity, timing and
size of order and execution, difficulty of execution, current market conditions,
depth of the market, and the broker's ability and willingness to commit capital
in over-the-counter transactions by taking positions in order to effect
executions. While the Manager considers commissions, which are a component of
price, in making broker selections the Manager does not obligate itself to seek
the lowest commissions except to the extent that it contributes to the overall
goal of obtaining the most favorable execution of the order. In accordance with
Section 28(e) of the Securities Exchange Act of 1934, a higher commission may be
determined reasonable in light of the value of the brokerage and research
services provided.
Brokerage and research services provided by brokers and dealers are of
the type described in Section 28(e) of the Securities Exchange Act of 1934.
These services may include pricing data, statistical information and analyses
and reports regarding issuers, industries, securities, economic factors and
trends from both a domestic and international perspective. Research services may
be received in the form of written reports, computer generated services,
telephone contacts and personal meetings with security analysts, conferences and
seminars and meetings arranged with corporate and industry representatives,
economists, academicians and government representatives. Research services may
be generated by the broker itself or by third parties, in which case the
research would be provided to the Manager by or through the broker. Some of the
third party products or research services received by the Manager may have more
than one function; such services may be used to make investment decisions for
investment management clients, to prepare research reports that are provided to
institutional brokerage clients for which Bernstein executes trades and for
non-research purposes. If this is the case, the Manager makes a good faith
determination of the anticipated use of the product or service for its
investment management clients and for its institutional brokerage clients and/or
for non-research purposes, as the case may be, and allocates brokerage only with
respect to the portion of the cost of such research that is attributable to use
for its investment management clients. The Manager pays with its own funds the
portion of the cost of such research attributable to use for its institutional
brokerage clients and for non-research purposes.
The research services described above are designed to augment the
Manager's internal research and investment-strategy capabilities. As a practical
matter, the Manager could not generate all of the information currently provided
by broker-dealers and its expenses would be increased if it
<PAGE>
B-48
attempted to generate such information through its own efforts. The Manager pays
for certain of the research services that it obtains from external sources but
also allocates brokerage for research services which are available for cash;
accordingly, the Manager may be relieved of expenses that it might otherwise
bear.
Annually, the Manager assesses the contribution of the brokerage and
research services provided by broker-dealers, and attempts to allocate a portion
of its brokerage business in response to these assessments. Research analysts,
members of the investment policy groups and the Trading Department each seek to
evaluate the brokerage and research services they receive from broker-dealers
and make judgments as to the level of business which would recognize such
services. The Manager doesn't commit a specific amount of business to any
broker-dealer over any specific time period. Broker-dealers sometimes suggest a
level of business they would like to receive in return for the various brokerage
and research services they provide. However, since the total business is
allocated to a broker-dealer on the basis of all the considerations described
above, the actual brokerage received by a broker-dealer may be more or less than
the suggested allocations. Virtually all of the brokerage is allocated to
broker-dealers who provide research services.
Research services furnished by broker-dealers through whom the Fund
effects securities transactions may be used by the Manager in servicing all of
its accounts and not all such services may be used by the Manager in connection
with the Fund. Similarly, research services furnished by broker-dealers who
effect securities transactions for the Manager's other managed accounts may be
used by the Manager to benefit the Fund.
PURCHASE AND REDEMPTION OF SHARES
Shares of each Portfolio are sold at the net asset value next calculated
after receipt of a purchase order. In order to purchase shares, an investor must
fill out an application. A confirmation of each capital-share transaction is
sent to the shareholder. The methods of purchase and redemption of shares and
the methods used to value the Fund's assets are more fully set forth in the
Prospectus. The Bernstein Emerging Markets Value Portfolio assesses a portfolio
transaction fee on purchases of Portfolio shares equal to 2% of the dollar
amount invested in the Portfolio (including purchases made by exchanging shares
of other Fund portfolios for shares of the Bernstein Emerging Markets Value
Portfolio) and a portfolio transaction fee on redemptions of 2% of the dollar
amount redeemed from the Portfolio (including redemptions made by exchanging
shares of the Bernstein Emerging Markets Value Portfolio for shares of other
Fund portfolios).
The Portfolios, having filed with the SEC a notification of election
pursuant to Rule 18f-1 under the 1940 Act, may pay the redemption price in whole
or in part by a distribution in kind of securities held by the Portfolio, in
lieu of cash. In conformity with applicable rules of the SEC, the Portfolios are
each committed to pay in cash all requests for redemption by any shareholder of
record, limited in amount with respect to each shareholder during any 90-day
period to the lesser of (i) $250,000, or (ii) 1% of the net
<PAGE>
B-49
asset value of the Portfolio at the beginning of such period. If shares are
redeemed in kind, the redeeming shareholder might incur brokerage costs in
converting the assets into cash. The method of valuing portfolio securities is
described under "Net Asset Value," and this valuation is made as of the same
time the redemption price is determined.
TAXES
Each Portfolio intends to distribute to the registered holders of its
shares all of its net investment income, which includes dividends and interest
as well as net short-term capital gains, if any, in excess of any net long-term
capital losses and any net long-term capital gains, if any, in excess of any net
short-term capital losses. The Internal Revenue Code of 1986 (the "Code")
requires all regulated investment companies (such as the Portfolios) to pay a
nondeductible 4% excise tax to the extent the registered investment company does
not distribute 98% of its ordinary income, determined on a calendar-year basis,
and 98% of its capital and foreign currency gains, determined, in general, on an
October 31 year-end. Each Portfolio intends to distribute its income and capital
gains in the manner necessary to avoid imposition of the 4% excise tax. The
current policy of each Fixed-Income Portfolio is to declare investment income
dividends daily and pay them monthly and to pay capital gains distributions
annually. The policy for both the Bernstein International Value Portfolio and
the Bernstein Emerging Markets Value Portfolio is to declare and pay investment
income dividends and capital gains distributions annually. In determining
amounts of capital gains to be distributed, any capital loss carryovers from
prior periods are offset against capital gains.
Gains or losses on sales of securities by a Portfolio are long-term
capital gains or losses to the Portfolio if the securities have been held by it
for more than one year. Other gains or losses on the sale of securities are
short-term capital gains or losses. Special rules applicable to gains and losses
on futures and options are discussed below.
The Portfolios each intend to qualify as a regulated investment company
under the requirements of the Code for each taxable year. Currently, in order to
qualify as a regulated investment company, a Portfolio must generally, among
other things, (i) derive at least 90% of its gross income from dividends,
interest, gains from the sale of securities (excluding losses), or foreign
currencies, and certain other related income (the "90% test"); (ii) derive less
than 30% of its gross income, excluding losses, from the sale or other
disposition of (a) securities; (b) options, futures, forward contracts (other
than options, futures, or forward contracts on foreign securities); or (c)
foreign currencies (or options, futures or forward contracts on foreign
currencies) but only if such currencies (or options, futures, or forward
contracts) are not directly related to the Portfolio's principal business of
investing in stock or securities, held less than three months (the "30% test");
and (iii) diversify its holdings so that, at the end of each fiscal quarter, (a)
50% of the market value of the Portfolio's total assets is represented by cash,
U.S. Government securities and other securities limited, in respect of any one
issuer, to an amount no greater than 5% of the Portfolio's assets and not
greater than 10% of the outstanding voting securities of such issuer, and (b)
not more than 25% of the value of its assets is invested in such securities of
any one issuer other than U.S. Government securities or the securities of other
regulated investment companies (the "diversification requirements").
<PAGE>
B-50
The 30% test affects the Portfolios' ability to engage in options and
futures transactions. The Portfolios may be deterred from entering into options
or futures transactions which might result in a Portfolio realizing gains of a
term of less than three months.
Currently, distributions of net investment income and net capital gains
are taxable to the shareholder, subject to federal income tax regardless of
whether the shareholder receives such distributions in additional shares or in
cash. Distributions of net long-term capital gains, if any, are taxable as
long-term capital gains, regardless of whether the shareholder receives such
distributions in additional shares or in cash or how long the investor has held
his shares.
The Bernstein Short Duration New York Municipal Portfolio and the
Bernstein New York Municipal Portfolio provide income which is tax-free (except
for alternative minimum taxes) for federal and New York State and local
individual income tax purposes to the extent that their income is derived from
New York State Municipal Securities or securities issued by possessions of the
United States. The Bernstein Short Duration California Municipal Portfolio and
the Bernstein California Municipal Portfolio provide income which is tax-free
(except for alternative minimum taxes) for federal and California personal
income tax purposes to the extent that their income is derived from California
Municipal Securities or securities issued by possessions of the United States.
The Bernstein Short Duration Diversified Municipal Portfolio and the Bernstein
Diversified Municipal Portfolio provide income which is tax-free for federal
individual income tax purposes (except for the alternative minimum tax) and
which may be partially tax-free for state tax purposes, to the extent of their
income derived from municipal securities. For this purpose, gains on
transactions in options, futures contracts and options on futures contracts as
well as gains on municipal securities are not tax-exempt. In addition, the
Bernstein Short Duration New York Municipal Portfolio, the Bernstein New York
Municipal Portfolio, the Bernstein Short Duration California Municipal
Portfolio, the Bernstein California Municipal Portfolio, the Bernstein Short
Duration Diversified Municipal Portfolio, and the Bernstein Diversified
Municipal Portfolio will comply with the requirement of Code Section 852(b)(5)
that at least 50% of each Portfolio's total assets consist of municipal
securities. This requirement may limit these Portfolios' ability to engage in
transactions in options, futures contracts and options on futures contracts or
in certain other transactions. A portion of the income of these Portfolios may
be exempt from state income taxes in certain states to the extent the
Portfolio's income is derived from securities the interest on which is exempt
from income taxes in that state. Shareholders may wish to consult a tax adviser
about the status of distributions from the Portfolios in their individual states
or localities.
The Code includes special rules applicable to forward contracts and to
certain exchange-listed options, futures contracts and options on futures
contracts which the Portfolios may write, purchase or sell. Such forward
contracts, options and futures contracts are classified as Section 1256
contracts under the Code. The character of gain or loss resulting from the sale,
disposition, closing out, expiration or other termination of Section 1256
contracts, other than certain foreign currency forward contracts, options, or
futures contracts (discussed below), is generally treated as long-term capital
gain or loss to the extent of 60% thereof and short-term capital gain or loss to
the extent of 40% thereof. These contracts,
<PAGE>
B-51
when held by a Portfolio at the end of a fiscal year (or, for purposes of the
excise tax, at the end of a period ending October 31) generally are required to
be treated as sold at market value on the last day of such fiscal year for
federal income tax purposes ("marked to market").
Certain Section 1256 contracts undertaken by a Portfolio may result in
"straddles" for federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by the Portfolios. In addition, losses
realized by the Portfolios on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which such losses are
realized. Further, the Portfolios may be required to capitalize, rather than
deduct currently, any interest expense on indebtedness incurred to purchase or
carry any positions that are part of a straddle. Because only a few regulations
implementing the straddle rules have been promulgated, the tax consequences of
straddle transactions to the Portfolios are not entirely clear. The straddle
transactions may increase the amount of short-term capital gain recognized by
the Portfolios.
The Portfolios may make one or more of the elections available under the
Code which are applicable to straddles. If a Portfolio makes any of the
elections, the amount, character and timing of the recognition of gains or
losses from the affected straddle positions will be determined under rules that
vary according to the election(s) made. The rules applicable under certain of
the elections may accelerate the recognition of gains or losses from the
affected straddle positions.
Because application of the straddle rules may affect the character of
gains or losses, defer and/or accelerate the recognition of gains or losses from
the affected straddle positions and require the capitalization of interest
expense, the amount which must be distributed to shareholders as ordinary income
or long-term capital gain by a Portfolio, may be increased or decreased
substantially as compared to a portfolio that did not engage in such hedging
transactions.
The Fund, on behalf of the Bernstein Government Short Duration
Portfolio, the Bernstein Short Duration Plus Portfolio, the Bernstein New York
Municipal Portfolio, the Bernstein Diversified Municipal Portfolio and the
Bernstein Intermediate Duration Portfolio requested a private-letter ruling from
the Internal Revenue Service to the effect that (i) gains realized upon the sale
or other disposition of options, futures contracts or options on futures
contracts, on securities or on certain securities indices, including gains which
are recognized as the result of a Section 1256 contract being marked to market,
are treated as gains from the sale or other disposition of securities for
purposes of the 90% test; (ii) gains realized as the result of a Section 1256
contract being marked to market are not considered gains from the sale or other
disposition of stock or securities held for less than three months for purposes
of the 30% test, and (iii) for purposes of the diversification requirements, (a)
options, futures contracts and options on futures contracts on U.S. Government
securities are treated as issued by the issuer of the securities and (b)
options, futures contracts and options on futures contracts on a securities
index, including a municipal bond index, will be treated as issued
proportionately by the issuers of the securities underlying the securities index
irrespective of whether the index is broadly based or narrowly based. The Fund
received the ruling requested as to (i) above; there can be no assurance that
the requested private-letter ruling as
<PAGE>
B-52
to items (ii) and (iii) will be obtained. In the event that the Fund does not
receive the private-letter ruling, the Portfolios' ability to engage in the
latter described transactions may be limited.
The Fund, on behalf of the Bernstein Government Short Duration
Portfolio, the Bernstein Short Duration Plus Portfolio, the Bernstein New York
Municipal Portfolio, the Bernstein Diversified Municipal Portfolio and the
Bernstein Intermediate Duration Portfolio, has also requested a private-letter
ruling from the Internal Revenue Service to the effect that certain securities,
including GNMA Certificates and FNMA Certificates are treated as government
securities for purposes of the diversification requirements under Section
851(b)(4) of the Internal Revenue Code of 1986. The Fund received the requested
ruling, except as to FHLMC Participation Certificates and securities of the
Financing Corporation; there can be no assurance that the requested
private-letter ruling will be obtained as to these securities. In the event the
Fund receives an adverse ruling, the Portfolios' investment in the latter
securities may have to be limited because of the diversification requirements
under Section 851 of the Internal Revenue Code.
The Fund, on behalf of the Bernstein Government Short Duration
Portfolio, the Bernstein Short Duration Plus Portfolio, the Bernstein New York
Municipal Portfolio, the Bernstein Diversified Municipal Portfolio and the
Bernstein Intermediate Duration Portfolio, has also received a private-letter
ruling from the Internal Revenue Service to the effect that a Portfolio which
holds a U.S. government security and enters into certain transactions involving
options and futures contracts is treated as having made a designated hedge, with
the result that the gains and losses on the U.S. government security and the
futures contract or option will be netted for purposes of the 30% test.
The diversification requirements applicable to the Portfolio's assets
and other restrictions imposed on the Portfolio by the Code may limit the extent
to which the Portfolio will be able to engage in transactions in forward
contracts, options, futures contracts or options on futures contracts.
Under Code Section 988, foreign currency gains or losses from forward
contracts and futures contracts that are not "regulated futures contracts", and
from unlisted options will generally be treated as ordinary income or ordinary
loss. In addition, gains or losses on the disposition of debt securities
denominated in a foreign currency attributable to fluctuations in the value of
the foreign currency between the date of acquisition of the security and the
date of disposition are generally treated as ordinary income or loss. Also,
gains or losses attributable to fluctuations in foreign currency exchange rates
which occur between the time the Portfolio accrues interest or other receivables
or accrues expenses or other liabilities denominated in a foreign currency and
the time the Portfolio actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary loss. These
gains or losses may increase or decrease the amount of the Portfolio's
investment company taxable income to be distributed to its stockholders as
ordinary income, rather than increasing or decreasing the amount of the
Portfolio's capital gains or losses. Additionally, if Code Section 988 losses
exceed other investment company taxable income during a taxable year, the
Portfolio would not be able to make any ordinary dividend distributions, and any
distributions made
<PAGE>
B-53
before the losses were realized but in the same taxable year would be
recharacterized as a return of capital to shareholders, thereby reducing each
shareholder's basis in the shares.
If the Bernstein International Value Portfolio and the Bernstein
Emerging Markets Value Portfolio qualify as a regulated investment company, if
certain asset and distribution requirements are satisfied and if more than 50%
of each of the Portfolio's total assets at the close of its fiscal year consist
of stocks or securities of foreign corporations, the Portfolios may elect for
United States income tax purposes to treat foreign income taxes paid by each as
paid by their shareholders. The Portfolios will make such an election only if
they deem it to be in the best interests of their shareholders. As a result of
making such an election, shareholders of the Portfolios would be required to
include their pro rata portions of such foreign taxes in computing their taxable
incomes and then treat an amount equal to those foreign taxes as a United States
federal income tax deduction or as foreign tax credits against their United
States federal income taxes. Within 60 days after the close of each taxable year
of the Portfolios, the Fund will notify shareholders if the foreign taxes paid
by the Portfolios will pass through for that year, and, if so, the amount of
each shareholder's pro rata share of (i) the foreign taxes paid and (ii) the
Portfolios' gross income from foreign sources. Shareholders who are not liable
for federal income taxes will not benefit from any such pass through of foreign
tax credits. No deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions. Certain limitations will be imposed on the extent
to which the credit and the deduction for foreign taxes may be claimed.
Generally, a credit for foreign taxes may not exceed the United States
shareholder's U.S. tax attributable to its foreign source taxable income.
Generally, also, the source of the Portfolio's income flows through to its
holders. Thus, dividends and interest received by the Portfolio in respect of
foreign securities will give rise to foreign source income to the shareholders.
The overall limitation on a foreign tax credit is also applied separately to
specific categories of foreign source income, among which is "passive income,"
which includes foreign source dividends, interest and capital gains. As a result
of these rules, certain United States shareholders may be unable to claim a
credit for the full amount of their proportionate share of the foreign taxes
paid by the Portfolio.
The Bernstein International Value Portfolio and the Bernstein Emerging
Markets Value Portfolio may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under the PFIC rules, an "excess distribution"
received with respect to PFIC stock is treated as having been realized ratably
over the period during which the Portfolios held the PFIC stock. The Portfolios
themselves will be subject to tax on the portion, if any, of the excess
distribution that is allocated to the Portfolios' holding period in prior
taxable years (and an interest factor will be added to the tax, as if the tax
had actually been payable in such prior taxable years) even though the
Portfolios distribute the corresponding income to shareholders. Excess
distributions include any gain from the sale of PFIC stock as well as certain
distributions from a PFIC. All excess distributions are taxable as ordinary
income. The balance of the PFIC income will be
<PAGE>
B-54
included in the Portfolios' investment company taxable income and, accordingly,
will not be taxable to it to the extent that income is distributed to its
shareholders. The Portfolios may be able to elect alternative tax treatment with
respect to PFIC stock. Under an election which may be available, the Portfolios
would be required to include in income each year their pro rata share of the
qualified electing fund's annual ordinary earnings and net capital gain, even if
they are not distributed to the Portfolios; those amounts would be subject to
the distribution requirements described above. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof. Other elections may become available that would affect the
tax treatment of PFIC stock held by the Portfolios.
Under Treasury Regulations, the Portfolio is required to withhold and
remit to the U.S. Treasury 31% of dividend and capital gains income from the
accounts of certain shareholders who provide either an incorrect tax
identification number or no number at all or who do not provide certain required
certifications.
A foreign shareholder may be subject to dividend tax withholding at the
30% rate or at a lower applicable treaty rate on certain dividends from the
Portfolio. Foreign shareholders should consult their tax advisers regarding
application of these withholding rules.
The discussion in the Prospectus, together with the foregoing, is a
general summary of the tax consequences of investments in the Portfolios.
Investors are urged to consult their own tax advisers to determine the effect of
investments in the Portfolios upon their individual tax situations.
CUSTODIAN, TRANSFER AGENT, INDEPENDENT ACCOUNTANTS AND
FINANCIAL STATEMENTS
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is the Custodian for the Fund. Foreign securities and
currency owned by the Fund may be held by foreign subcustodians of State Street
Bank and Trust Company retained for such purpose in accordance with the 1940
Act. State Street Bank and Trust Company also serves as Transfer Agent, and in
that capacity maintains certain books and records pursuant to an agreement
within the Fund.
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York
10036, has been selected as the Fund's independent accountants to audit the
annual financial statements of each Portfolio. Shareholders are sent audited
annual and unaudited semiannual reports that include financial statements,
including a schedule of investments. A copy of the Annual Report and the
Schedules of Investments with respect to each Portfolio accompany this Statement
of Additional Information. The following financial statements and the report of
the independent accountants with respect to each Portfolio are incorporated by
reference into this Statement of Additional Information:
<PAGE>
B-55
<TABLE>
<CAPTION>
Annual Report Page
------------------
<S> <C>
Statement of Assets and Liabilities, September 30, 1996 12-13
Statements of Operations for the Year Ended September 30, 1996 14-16
Statements of Changes in Net Assets, Year Ended September 30, 1996 and Year
Ended September 30, 1995(or as applicable) 17-19
Financial Highlights for the periods ended September 30, 1996; September 30,
1995; September 30, 1994; September 30, 1993;
and September 30, 1992 (or as applicable) 20-25
Notes to Financial Statements, September 30, 1996 26-32
Schedule of Investments-Taxable Bond Portfolios, dated Separate Insert to
September 30, 1996 and Report of Independent Accountants Annual Report
with respect to such Portfolios dated November 15, 1996
Schedule of Investments-Municipal Bond Portfolios, dated September 30, 1996 and Separate Insert to
Auditor's Letter with respect to such Portfolios dated November 15, 1996 Annual Report
Schedule of Investments - Stock Portfolios, dated September 30, 1996 and Separate Insert to
Auditor's Letter with respect to such Portfolios dated November 15, 1996 Annual Report
</TABLE>
PERFORMANCE
Each of the Portfolios may, from time to time, advertise yield, average
annual total return, and aggregate total return. (See "Performance" in the
Prospectus.)
For the thirty-day period ending September 30, 1996, yields for the
Fixed-Income Portfolios were as follows: Government Short Duration Portfolio -
5.51%; Short Duration Plus Portfolio 5.55%; Intermediate Duration Portfolio -
6.13%; New York Municipal Portfolio - 4.35%; California Municipal Portfolio -
4.20%; Diversified Municipal Portfolio - 4.32%; Short Duration California
Municipal - 3.63%; Short Duration
<PAGE>
B-56
Diversified Portfolio - 3.74%; and Short Duration New York Municipal Portfolio -
3.61%.
Yields are calculated based on a rolling 30-day average. Yield
quotations are based on each Portfolio's income and expenses for a given month.
Expenses are subtracted from the total interest and dividends for the month; the
result is divided by the Portfolio's average daily market capitalization -- the
product of the average daily number of shares outstanding and the net asset
value of the last day of the month, to give the monthly yield, which is
compounded over six months and then multiplied by two so as to compute the
"bond-equivalent yield." The calculation may be expressed in the following
formula:
6
Yield = 2 [( a-b + 1)- 1]
---
cd
Where:
a = total interest and dividends earned during the month;
b = total expenses accrued during the month (net of reimbursements);
c = the average daily number of shares outstanding during the month
that were entitled to receive dividends; and
d = the maximum offering price per share on the last day of the month.
The total of interest and dividends earned during the month is
calculated by adding together the interest and dividends earned per day on each
security held during the month (30 days). Solely for the purpose of computing
yield, dividend income is recognized by accruing 1/360th of the stated dividend
rate of the security each day that the security is in the Portfolio. For most
debt securities, the interest earned per day is determined by first computing
the security's yield to maturity on each day during the month. The yield to
maturity is divided by 360, and multiplied by the market value (including
accrued interest) of the security position each day. Each interest earned per
day calculation is added to all of the other such applicable calculations during
the month to determine the interest earned during the month. If a bond is
callable, yield to the appropriate call date is substituted for yield to
maturity if, in the opinion of the Manager, the bond is expected to be called.
If a bond is putable, yield to the appropriate put date is substituted for yield
to maturity if, in the opinion of the Manager, the put is expected to be
exercised.
For tax-exempt obligations that are selling below $100 and were not
issued at original-issue discounts, the coupon rate is substituted for the yield
to maturity in the calculation described in the paragraph above, and the par
value of the bond is used in place of market value. For tax-exempt obligations
that are selling below $100 and that were issued at original-issue discounts, if
the yield to maturity, based upon the current market price, is higher than the
yield to maturity at the time of issuance, the yield to maturity at the time of
issuance is used in the interest-earned calculation. Otherwise, the yield to
maturity based upon the current market price is used.
<PAGE>
B-57
For receivable-backed obligations (such as mortgage pass-throughs),
which are expected to be subject to periodic payments of principal as well as
interest, the interest earned is the income based on the coupon rate and
outstanding principal balance. This income is adjusted by adding or subtracting
the gain or loss attributable to actual monthly paydowns based upon the historic
cost. For purposes of the yield calculation, the Portfolios do not amortize
premium or discount on interest-bearing mortgage-backed securities.
Expenses accrued include all expenses and all fees that are charged to
all shareholder accounts. The maximum offering price reflects the subtraction of
any undeclared earned income, which is the net investment income earned by the
Portfolio that is reasonably expected to be declared as a dividend within a
reasonable time from the end of the month.
For the thirty-day period ending September 30, 1996, tax-equivalent
yield for the Government Short Duration Portfolio was 6.1%, assuming a combined
state and local tax of 10% and reflecting that 0.7% of the income was estimated
to be subject to state and local taxes. Tax-equivalent yield for the New York
Municipal Portfolio at September 30, 1996 was 8.1%, assuming an investor was
subject to a combined federal, state and New York City tax rate of 46.6% and
reflecting that 1.2% of the income was estimated to be subject to federal taxes
and 0.7% to be subject to state and local taxes. Tax-equivalent yield for the
California Municipal Portfolio at September 30, 1996 was 7.5%, assuming an
investor was subject to a combined federal and state tax rate of 45.2% and
reflecting that 4.5% of the income was estimated to be subject to federal taxes
and 2.9% to be subject to state taxes. Tax-equivalent yield for the Diversified
Municipal Portfolio at September 30, 1996 was 7.1%, assuming an investor was
subject to federal tax rate of 39.6% and reflecting that 0.3% of the income was
estimated to be subject to federal taxes.
Tax-equivalent yield for the Short Duration New York Municipal Portfolio
at September 30, 1996 was 6.4%, assuming an investor was subject to a combined
federal, state and New York City tax rate of 46.6% and reflecting that 12.4% of
the income was estimated to be subject to federal taxes and 1.2% to be subject
to state and local taxes. Tax-equivalent yield for the Short Duration California
Municipal Portfolio at September 30, 1996 was 6.1%, assuming an investor was
subject to a combined federal and state tax rate of 45.2% and reflecting that
20.6% of the income was estimated to be subject to federal taxes and 0.9% to be
subject to state taxes. Tax-equivalent yield for the Short Duration Diversified
Municipal Portfolio at September 30, 1996 was 6.1%, assuming an investor was
subject to federal tax rate of 39.6% and reflecting that 2% of the income was
estimated to be subject to federal taxes.
Tax-equivalent yield for the Bernstein Short Duration New York Municipal
Portfolio and the Bernstein New York Municipal Portfolio is computed by first
determining the portion of the yield (calculated as set forth above) for the
respective Portfolio that is exempt from (i) federal and New York State and
local taxation; (ii) federal taxation only; (iii) New York State and local
taxation only and (iv)
<PAGE>
B-58
neither New York State and local nor federal income taxation; dividing each
portion of the yield by one minus the relevant combined tax rate, and adding the
quotients together as expressed in the following formula:
Tax-equivalent Yield = a + c + e + g
--- --- ---
1-b 1-d 1-f
Where:
a = the portion of the yield which is exempt from federal and New York
State and local income taxation;
b = the highest combined marginal income tax rate imposed on an
individual's unearned ordinary income subject to federal, state
and local income taxation;
c = the portion of the yield which is exempt from federal, but not New
York State and local income taxation;
d = the highest marginal income tax imposed on an individual's unearned
ordinary income subject to federal income taxation;
e = the portion of the yield which is exempt from New York State and
local, but not federal, income taxation;
f = the highest marginal income tax imposed on an individual's unearned
ordinary income subject to New York State and local, but not
federal, income taxation; and
g = the portion of the yield which is not exempt from federal, New York
State or local income taxation.
Tax-equivalent yield for the Bernstein Short Duration California
Municipal Portfolio and the Bernstein California Municipal Portfolio is computed
by first determining the portion of the yield (calculated as set forth above)
for the respective Portfolio that is exempt from (i) federal and California
personal income taxation; (ii) federal taxation only; (iii) California personal
income taxation only and (iv) neither California personal nor federal income
taxation; dividing each portion of the yield by one minus the relevant combined
tax rate, and adding the quotients together as expressed in the following
formula:
Tax-equivalent Yield = a + c + e + g
--- --- ---
1-b 1-d 1-f
Where:
<PAGE>
B-59
a = the portion of the yield which is exempt from federal and
California personal income taxation;
b = the highest combined marginal income tax rate imposed on an
individual's unearned ordinary income subject to federal and
California personal income taxation;
c = the portion of the yield which is exempt from federal, but not
California personal income taxation;
d = the highest marginal income tax imposed on an individual's unearned
ordinary income subject to federal income taxation;
e = the portion of the yield which is exempt from California personal,
but not federal, income taxation;
f = the highest marginal income tax imposed on an individual's unearned
ordinary income subject to California personal, but not federal,
income taxation; and
g = the portion of the yield which is not exempt from federal or
California personal income taxation.
Tax-equivalent yield for the Bernstein Short Duration Diversified
Municipal Portfolio and the Bernstein Diversified Municipal Portfolio is
computed by first determining the fraction of the yield calculated as set forth
above for the respective Portfolio (i) that is exempt from federal taxation and
(ii) that is not exempt from federal taxation, then dividing that portion of the
yield which is exempt from federal taxation by one minus the highest marginal
federal individual income taxation and adding the quotient to that portion, if
any, of the yield which is not exempt from federal income taxation, as expressed
in the following formula:
Tax-equivalent Yield = h + j
---
1-i
Where:
h = the portion of the yield which is exempt from federal taxes;
i = the highest marginal tax rate imposed on individual income subject
to federal income taxation; and
j = the portion of the yield which is not exempt from federal income
taxation.
Tax-equivalent yield for the Bernstein Government Short Duration
Portfolio is computed by first determining the portion of the yield that is (i)
exempt from state and local, but not federal, income
<PAGE>
B-60
taxation and (ii) not exempt from state and local or federal income taxation;
dividing each portion of the yield by one minus the relevant combined tax rate,
and adding the quotients together as expressed in the following formula:
Tax-equivalent Yield = a + c
---
1-b
Where:
a = the portion of the yield which is exempt from state and local, but
not federal, income taxation;
b = the highest marginal income tax imposed on an individual's unearned
ordinary income subject to state and local, but not federal, income
taxation; and
c = the portion of the yield which is not exempt from federal or state
and local income taxation.
The average annual total returns for (1) the Portfolios from their
inception until September 30, 1996; (2) the Portfolios for the one year period
ended September 30, 1996; and (3) the Fixed-Income Portfolios (other than the
Short Duration Municipal Portfolios) for the five year period ended September
30, 1996, were as follows:
<TABLE>
<CAPTION>
Period Average Annual
Since Total Return One Year Five Year
Portfolio Inception Since Inception Total Return Total Return
- --------- ---------- ---------------- ------------ -------------
% % %
<S> <C> <C> <C> <C>
Government Short Duration Portfolio 7.74 years 6.73 4.76 5.33
Short Duration Plus Portfolio 7.80 years 7.10 5.54 5.79
Intermediate Duration Portfolio 7.70 years 8.76 5.05 7.59
New York Municipal Portfolio 7.72 years 6.69 4.31 6.049
California Municipal Portfolio 6.15 years 6.52 4.60 5.94
Diversified Municipal Portfolio 7.72 years 6.58 4.38 5.98
International Value Portfolio 4.27 years 11.63 15.83 N/A
Short Duration New York Municipal 2.16 years 4.40 3.53 N/A
Short Duration California Municipal 2.16 years 4.549 3.50 N/A
Short Duration Diversified Municipal 2.16 years 4.62 3.68 N/A
Emerging Markets Value Portfolio 0.79 years 6.05 N/A N/A
</TABLE>
The average annual total return for each Portfolio is calculated by
finding the average annual percentage rate of return that would, compounded and
multiplied by the initial amount invested (less any applicable sales load),
result in the ending redeemable value, as expressed in the following formula:
Average Annual Total Return = ERV 1/n - 1
-----
P
Where:
P = a hypothetical initial investment of $1,000 on beginning date less
any charges deducted from the amount invested;
ERV = ending redeemable value of the hypothetical account on the date of
the balance sheet assuming a complete redemption and deduction of
all nonrecurring charges deducted at the end of the period; and
n = number of years (1, 5, 10 or the life of the Fund).
The above calculations reflect all fees and expenses charged to the
Portfolios.
<PAGE>
B-61
The Portfolios may advertise aggregate total return, also called
unannualized total return, in addition to average annual total return. The
aggregate total return of each Portfolio from its inception until September 30,
1995 was as follows:
Period Aggregate
Since Total
Portfolio Inception Return
- --------- --------- --------
Government Short Duration Portfolio 7.74 years 65.60
Short Duration Plus Portfolio 7.80 years 70.81
Intermediate Duration Portfolio 7.70 years 91.00
New York Municipal Portfolio 7.72 years 64.99
California Municipal Portfolio 6.15 years 47.49
Diversified Municipal Portfolio 7.72 years 63.62
International Value Portfolio 4.27 years 60.00
Short Duration New York Municipal Portfolio 2.16 years 8.96
Short Duration California Municipal Portfolio 2.16 years 9.28
Short Duration Diversified Municipal Portfolio 2.16 years 9.43
Emerging Markets Value Portfolio 0.79 years 4.78
The aggregate total return for each Portfolio is calculated by dividing
the ending value of an investment by the beginning value of this investment, as
expressed in the following formula:
Aggregate Total Return = ERV - P
-------
P
Where:
P = a hypothetical initial investment of $1,000 on beginning date, less
any charges deducted from the amount invested; and
ERV = ending redeemable value of the hypothetical account on the date of
the balance sheet assuming a complete redemption and the deduction
of all non-recurring charges deducted at the end of the period.
From time to time, in reports and promotional literature, the
Portfolios' total return or other performance data may be compared to one or
more relevant market indices, including but not limited to (1) Lehman Brothers
Aggregate Bond Index; (2) Lehman Brothers Government Corporate Bond Index; (3)
Merrill Lynch 1-3 Year Treasury Index; (4) Lehman Brothers One Year Municipal
Index; (5) Lehman Brothers 3-5-7 year Laddered G/O Index; (6) Lehman Brothers
1-10 year Municipal Bond Index Blend; (7) the Standard & Poor's 500 Stock Index
so that shareholders may compare the Portfolio's results with those of a group
of unmanaged securities widely regarded by investors as representative of the
U.S. stock market in general; (8) with other groups of mutual funds tracked by
(A) Lipper Analytical Services, Inc.,
<PAGE>
B-62
a widely used independent research firm which ranks mutual funds by overall
performance, investment objectives, and assets; or (B) Morningstar, Inc.,
another widely used independent research firm which rates mutual funds; or (C)
by other financial business publications, including, but not limited to,
Business Week, Money Magazine, Forbes and Barron's, which provide similar
information; (9) Morgan Stanley Capital International ("MSCI") Indices,
including the EAFE index, the EAFE GDP 50%-Hedged Index, the MSCI Emerging
Markets Global Index and the MSCI Emerging Markets Free Index, which are widely
recognized indices in international market performance; (10) the International
Finance Corporation (an affiliate of the World Bank established to encourage
economic development in less developed countries), World Bank, Organization for
Economic Co-Operation and Development and International Monetary Fund as a
source of economic statistics; and (11) the International Finance Corporation
Global Index ("IFCG Index") and International Finance Corporation Investable
Index ("IFCI Index"), which are widely recognized indices of emerging markets
performance.
<PAGE>
B-63
APPENDIX
Description of Corporate and Municipal Bond Ratings
The following descriptions of Standard & Poor's Corporation ("Standard &
Poor's"), Fitch Investors Service, Inc. ("Fitch") and Moody's Investors Service,
Inc. ("Moody's") corporate and municipal bond ratings have been published by
Standard & Poor's, Fitch and Moody's, respectively.
Standard & Poor's(1)
AAA Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher-rated issues only in small degree.
A Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
BB, B, CCC, CC, C Debt rated BB, B, CCC, CC and C is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, they are
outweighed by large uncertainties or major risk exposure to adverse conditions.
CI The rating CI is reserved for income bonds on which no interest is being
paid.
D Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-) The ratings from "AA" to "CCC" may be modified by the
additions of a plus or minus sign to show relative standing within the major
rating categories.
- ---------------------------------------
(1) Reprinted from Standard & Poor's Bond Guide
<PAGE>
B-64
Fitch(2)
A Fitch bond rating represents an assessment of the issuer's ability to meet its
debt obligations in a timely manner. The rating is not a recommendation to buy,
sell or hold any security. It does not comment on the adequacy of market price,
investor suitability or the taxability of interest.
Ratings are based on information obtained from issuers or sources believed to be
reliable. Fitch does not audit or verify the accuracy of the information.
Ratings may be changed, suspended or withdrawn to changes in or unavailability
of information.
AAA Highest credit quality, obligor has exceptionally strong ability to pay
interest and repay principal.
AA Very high credit quality, obligor's ability to pay interest and repay
principal is very strong, although not as strong as AAA.
A High credit quality, obligor's ability to pay interest and repay principal is
strong, but more vulnerable to adverse economic conditions than higher rated
bonds.
BBB Satisfactory credit quality, obligor's ability to pay interest and repay
principal is adequate, adverse economic conditions could impair timely payment.
BB Speculative, obligor's ability to pay interest and repay principal may be
affected by adverse economic conditions.
B Highly speculative, obligor has a limited margin of safety to make timely
payments of principal and interest.
CCC Identifiable characteristics which, if not remedied, may lead to default.
CC Minimal protection, default in payment of interest and or principal seems
probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD Bonds are in default on interest and or principal and are extremely
speculative.
DD represents highest potential for recovery and
D the lowest potential for recovery.
Plus(+) Minus (-) Plus and minus signs are used to indicate relative position of
a credit within the rating category and only apply to AA to CCC categories.
- ---------------------------------------
(2) As provided by Fitch Investors Service, Inc.
<PAGE>
B-65
Moody's(3)
Aaa Bonds which are rated Aaa by Moody's are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edged." Interest payments are protected by a large or by an
exceptionally stable margin, and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations or
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable attributes and are considered
upper-medium-grade obligations. Factors giving security to principal and
interest are considered adequate but susceptible to impairment some time in the
future.
Baa Bonds which are rated Baa are considered medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and have
speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
(3) Reprinted from Moody's Bond Record and Short Term Market Record
<PAGE>
B-66
C Bonds which are rated C are the lowest-rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
Description of Corporate and Municipal Commercial Paper Ratings.
The following descriptions of commercial paper ratings have been
published by Standard & Poor's, Fitch and Moody's, respectively.
Standard & Poor's(4)
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt having an original maturity of no more
than 365 days. Ratings are graded into several categories, ranging from "A-1"
for the highest quality obligations to "D" for the lowest. These categories are
as follows:
A-1 This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-3 Issues carrying this designation have adequate capacity for timely payment.
They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B Issues rated "B" are regarded as having only speculative capacity for timely
payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated "D" is in payment default. The "D" rating category is used when
interest payments are not made on the date due even if the applicable grace
period has not expired, unless Standard & Poor's believes that such payments
will be made during such grace period.
- ---------------------------------------
(4) Reprinted from Standard & Poor's Bond Guide
<PAGE>
B-67
Fitch(5)
Short term ratings apply to obligations payable on demand or with original
maturities of up to three years. The rating emphasizes the existence of
liquidity required for timely payment of the obligation.
F-1+ Exceptionally Strong Credit Quality, strongest degree of assurance for
timely payment.
F-1 Very Strong Credit Quality, assurance of timely payment only slightly less
than F-1+.
F-2 Good Credit Quality, satisfactory degree of assurance for timely payment.
F-3 Fair Credit Quality, degree for assurance of timely repayment is adequate,
however, near term adverse changes could put rating below investment grade.
F-S Weak Credit Quality, minimal degree of assurance for timely repayment and
vulnerable to near adverse changes in economic and financial conditions.
D Default, actual or imminent payment default.
Moody's(6)
Moody's employs the following three designations, all judged to be
investment-grade, to indicate the relative repayment ability of rated issuers:
P-1 Issuers rated Prime-1 (or supporting institutions) have a superior ability
for repayment of senior short-term debt obligations. Prime-1 repayment ability
will often be evidenced by many of the following characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
o Well-established access to a range of financial markets and assured
sources of alternate liquidity.
- ---------------------------------------
(5) As provided by Fitch Investors Service Inc.
(6) Reprinted from Moody's Bond Record and Short Term Market Record
<PAGE>
B-68
P-2 Issuers rated Prime-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
P-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Not Prime Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Description of Municipal Note Ratings
The following descriptions of municipal bond ratings have been published
by Standard & Poor's, Fitch and Moody's, respectively.
Standard & Poor's(7)
SP-1 Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
Moody's
MIG 1/VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
- ---------------------------------------
(7) Reprinted from Standard & Poor's Bond Guide
<PAGE>
B-69
MIG 4/VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although not
distinctly or predominantly speculative, there is specific risk.
SG This designation denotes speculative quality. Debt instruments in this
category lack margins of protection.
Fitch(8)
Short term ratings apply to obligations payable on demand or with original
maturities of up to three years. The rating emphasizes the existence of
liquidity required for timely payment of the obligation.
F-1+ Exceptionally Strong Credit Quality, strongest degree of assurance for
timely payment.
F-1 Very Strong Credit Quality, assurance of timely payment only slightly less
than F-1+.
F-2 Good Credit Quality, satisfactory degree of assurance for timely payment.
F-3 Fair Credit Quality, degree for assurance of timely repayment is adequate,
however, near term adverse changes could put rating below investment grade.
F-S Weak Credit Quality, minimal degree of assurance for timely repayment and
vulnerable to near adverse changes in economic and financial conditions.
D Default, actual or imminent payment default.
- ---------------------------------------
(8) As provided by Fitch Investors Service, Inc.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements: See "Custodian, Transfer Agent, Independent
Accountants and Financial Statements", Regular and Institutional Services
Statement of Additional Information, Part B pages B-54 - B-55.
(b) Exhibits:
(1)(a) Articles of Incorporation of the Registrant dated May 3, 1988
(supplied by Pre-Effective Amendment No. 1 and submitted
electronically herewith).
(1)(b) Articles Supplementary of the Registrant dated October 14, 1988
(supplied by Pre-Effective Amendment No. 2 and submitted
electronically herewith).
(1)(c) Articles Supplementary of the Registrant dated April 25, 1990
(supplied by Post-Effective Amendment No. 4 and submitted
electronically herewith).
(1)(d) Articles Supplementary of the Registrant dated March 16, 1992
(supplied by Post-Effective Amendment No. 7 and submitted
electronically herewith).
(1)(e) Articles Supplementary of the Registrant undated, filed with
State of Maryland May 11, 1994 (supplied by Post-Effective
Amendment No. 10 and submitted electronically herewith).
(1)(f) Articles Supplementary of the Registrant dated October 10, 1994
(supplied by Post-Effective Amendment No. 11 and submitted
electronically herewith).
(1)(g) Articles Supplementary of the Registrant dated August 29, 1995
(supplied by Post-Effective Amendment No. 12 and submitted
electronically herewith).
(1)(h) Articles Supplementary of the Registrant dated February 26, 1996
(submitted electronically herewith).
8
<PAGE>
(2)(a) By-Laws of the Registrant as Revised and Restated October 4, 1988
(supplied by Pre-Effective Amendment No. 2).
(2)(b) Amendment to Article I, Section 2 of the By-Laws of Registrant
dated January 30, 1992 (supplied by Post-Effective Amendment No.
7).
(3) Not Applicable.
(4)(a) Specimen Share Certificates - Government Short Duration; Short
Duration Plus; New York Municipal; Diversified Municipal;
Intermediate Duration (supplied by Pre-Effective Amendment No.
2).
(4)(b) Specimen Share Certificate - California Municipal Portfolio
(supplied by Post-Effective Amendment No. 4).
(4)(c) Specimen Share Certificate - International Value Portfolio
(supplied by Post-Effective Amendment No. 7).
(4)(d) Specimen Share Certificates - Short Duration California Municipal
Portfolio; Short Duration Diversified Municipal Portfolio; Short
Duration New York Municipal Portfolio (supplied by Post-Effective
Amendment No. 10).
(4)(e) Specimen Share Certificate - Emerging Markets Value Portfolio
(supplied by Post-Effective Amendment No. 12).
(5)(a) Investment Management Agreement dated October 12, 1988 between
the Registrant on behalf of Government Short Duration; Short
Duration Plus; New York Municipal; Diversified Municipal;
Intermediate Duration and Sanford C. Bernstein & Co., Inc.
("Bernstein") (supplied by Pre-Effective Amendment No. 2).
(5)(a)(1) Investment Management Agreement dated May 1, 1990 between the
Registrant on behalf of California Municipal Portfolio and
Bernstein (supplied by Post-Effective Amendment No. 4).
(5)(a)(2) Investment Management Agreement dated March 18, 1992 between the
Registrant on behalf of International Value Portfolio and
Bernstein (supplied by Post-Effective Amendment No. 7).
9
<PAGE>
(5)(a)(3) Investment Management Agreement dated May 2, 1994 between the
Registrant on behalf of the Short Duration California Municipal
Portfolio; Short Duration Diversified Municipal Portfolio; Short
Duration New York Municipal Portfolio and Bernstein (supplied by
Post-Effective Amendment No. 10).
(5)(a)(4) Amendment to Investment Management Agreement dated October 5,
1994 between the Registrant on behalf of Government Short
Duration; Short Duration Plus; New York Municipal; Diversified
Municipal; and Intermediate Duration Portfolios and Bernstein
(supplied by Post-Effective Amendment No. 11).
(5)(a)(5) Amendment to Investment Management Agreement dated October 5,
1994 between the Registrant on behalf of the California Municipal
Portfolio and Bernstein (supplied by Post-Effective Amendment No.
11).
(5)(a)(6) Investment Management Agreement dated October 11, 1995 between
the Registrant on behalf of the Emerging Markets Value Portfolio
and Bernstein (supplied by Post-Effective Amendment No. 12 and
submitted electronically herewith).
(5)(a)(7) Amendment No. 1 to Investment Management Agreement dated October
11, 1995 between the Registrant on behalf of the International
Value Portfolio and Bernstein (submitted electronically by
Post-Effective Amendment No. 13).
(5)(b) Shareholder Servicing and Administrative Agreement dated October
12, 1988 between the Registrant on behalf of Government Short
Duration; Short Duration Plus; New York Municipal; Diversified
Municipal; Intermediate Duration and Bernstein (supplied by Post
Effective Amendment No. 3).
(5)(b)(1) Shareholder Servicing and Administrative Agreement dated May 1,
1990 between the Registrant on behalf of California Municipal
Portfolio and Bernstein (supplied by Post-Effective Amendment No.
4)
10
<PAGE>
(5)(b)(2) Shareholder Servicing and Administrative Agreement dated March
18, 1992 between the Registrant on behalf of International Value
Portfolio and Bernstein (supplied by Post-Effective Amendment No.
7).
(5)(b)(3) Shareholder Servicing and Administrative Agreement dated May 2,
1994 between the Registrant on behalf of the Short Duration
California Municipal Portfolio; Short Duration Diversified
Municipal Portfolio; Short Duration New York Municipal Portfolio
and Bernstein (supplied by Post-Effective Amendment No. 10).
(5)(b)(4) Shareholder Servicing and Administrative Agreement dated October
11, 1995 between the Registrant on behalf of the Emerging Markets
Value Portfolio and Bernstein (supplied by Post-Effective
Amendment No. 12 and submitted electronically herewith).
(6)(a) Distribution Agreement dated October 12, 1988 between the
Registrant on behalf of Government Short Duration; Short Duration
Plus; New York Municipal; Diversified Municipal; Intermediate
Duration and Bernstein (supplied by Pre-Effective Amendment No.
2)
(6)(b) Distribution Agreement dated May 1, 1990 between the Registrant
on behalf of California Municipal Portfolio and Bernstein
(supplied by Post-Effective Amendment No. 4).
(6)(c) Distribution Agreement dated March 18, 1992 between the
Registrant on behalf of International Value Portfolio and
Bernstein (supplied by Post-Effective Amendment No. 7).
(6)(d) Distribution Agreement dated May 2, 1994 between the Registrant
on behalf of the Short Duration California Municipal Portfolio;
Short Duration Diversified Municipal Portfolio; Short Duration
New York Municipal Portfolio and Bernstein (supplied by
Post-Effective Amendment No. 10).
(6)(e) Distribution Agreement dated October 11, 1995 between the
Registrant on behalf of the Emerging Markets Value Portfolio and
Bernstein (supplied by Post-Effective Amendment No. 12 and
submitted electronically herewith).
11
<PAGE>
(7) Not applicable.
(8)(a) Custodian Contract dated October 12, 1988 between the Registrant
and State Street Bank and Trust Company (supplied by
Pre-Effective Amendment No. 2).
(8)(b) Custodian Contract Fee Schedule dated October 12, 1988 (supplied
by Post-Effective Amendment No. 2).
(8)(c) Fee Information for Automated Securities Pricing dated October
12, 1988 (supplied by Post-Effective Amendment No. 2).
(8)(d) Amendment to the Custodian Contract dated May 8, 1989 (supplied
by Post-Effective Amendment No. 2).
(8)(e) Second Amendment to the Custodian Contract dated July 24, 1989
(supplied by Post-Effective Amendment No. 3).
(8)(f) Third Amendment to the Custodian Contract dated April 30, 1990
(supplied by Post-Effective Amendment No. 4).
(8)(g) Custodian Contract Fee Schedule dated October 1, 1991 (supplied
by Post-Effective Amendment No. 6).
(8)(h) Fourth Amendment to the Custodian Contract dated March 18, 1992
(supplied by Post-Effective Amendment No. 7).
(8)(i) Custodian Fee Schedule dated August 20, 1993 - International
Value Portfolio (supplied by Post-Effective Amendment No. 9).
(8)(j) Fifth Amendment to the Custodian Contract dated April 19, 1994
(supplied by Post-Effective Amendment No. 10).
(8)(k) Custodian Fee Schedule dated May 20, 1994 - Short Duration
California Municipal Portfolio; Short Duration Diversified
Municipal Portfolio and Short Duration New York Municipal
Portfolio (supplied by Post-Effective Amendment No. 10).
(8)(l) Sixth Amendment to the Custodian Contract dated August 21, 1995
(supplied by Post-Effective Amendment No. 12).
12
<PAGE>
(8)(m) Custodian Fee Schedule dated July 27, 1995 - International Value
Portfolio (submitted electronically by Post-Effective Amendment
No. 13).
(8)(n) Custodian Fee Schedule dated August 21, 1995 - Emerging Markets
Value Portfolio (submitted electronically by Post-Effective
Amendment No. 13).
(8)(o) Custodian Fee Schedule Amendment dated December 8, 1995 -
International Value Portfolio (submitted electronically by
Post-Effective Amendment No. 13).
(8)(p) Custodian Fee Schedule Amendment dated December 8, 1995 -
Government Short Duration, Short Duration Plus, New York
Municipal, Diversified Municipal, Intermediate Duration,
California Municipal, Short Duration New York Municipal, Short
Duration California Municipal and Short Duration Diversified
Municipal Portfolios (submitted electronically by Post-Effective
Amendment No. 13).
(8)(q) Seventh Amendment to the Custodian Contract dated May 6, 1996
(submitted electronically herewith).
(8)(r) Custodian Fee Schedule dated July 9, 1996 - Government Short
Duration, Short Duration Plus, New York Municipal, Diversified
Municipal Portfolio, Intermediate Duration, California Municipal,
Short Duration New York Municipal, Short Duration California
Municipal and Short Duration Diversified Municipal Portfolios
(submitted electronically herewith).
(8)(s) Custodian Fee Schedule dated July 9, 1996 - International Value
and Emerging Markets Value Portfolios (submitted electronically
herewith).
(8)(t) Eighth Amendment to the Custodian Contract dated September 25,
1996 (submitted electronically herewith).
(9)(a) Transfer Agency Agreement dated October 12, 1988 between the
Registrant and State Street Bank and Trust Company (supplied by
Pre-Effective Amendment No. 2).
13
<PAGE>
(9)(b) Fee Schedule for Services under Transfer Agency Agreement, dated
December 22, 1992 (supplied by Post-Effective Amendment No. 9 to
this registration statement).
(9)(c) Amendment to the Transfer Agency Agreement dated April 30, 1990
(supplied by Post-Effective Amendment No. 4).
(9)(d) Second Amendment to the Transfer Agency Agreement dated March 18,
1992 (supplied by Post-Effective Amendment No. 7).
(9)(e) Third Amendment to the Transfer Agency Agreement dated April 19,
1994 (supplied by Post-Effective Amendment No. 10).
(9)(f) Fee Schedule for Services under Transfer Agency Agreement, dated
May 20, 1994 (supplied by Post-Effective Amendment No. 10).
(9)(g) Fourth Amendment to Transfer Agency Agreement dated August 21,
1995 (supplied by Post-Effective Amendment No. 12).
(9)(h) Fifth Amendment to Transfer Agency Agreement dated July 18, 1996
(submitted electronically herewith).
(9)(i) Fee Schedule for Fee Information Services under Transfer Agency
Agreement, dated July 18, 1996 - Government Short Duration, Short
Duration Plus, Diversified Municipal, Intermediate Duration, New
York Municipal, California Municipal, International Value, Short
Duration California Municipal, Short Duration Diversified
Municipal, Short Duration New York Municipal and Emerging Markets
Value Portfolios (submitted electronically herewith).
(9)(j) Securities Lending Agreement dated July 17, 1996 between the
Registrant, on behalf of the International Value Portfolio and
State Street Bank and Trust Company and Amendment dated September
30, 1996 (submitted electronically herewith).
14
<PAGE>
(10)(a) Opinion of Counsel dated October 13, 1988 - Government Short
Duration, Short Duration Plus, New York Municipal, Diversified
Municipal and Intermediate Duration Portfolios. (supplied by
Pre-Effective Amendment No. 2).
(10)(b) Opinion of Counsel dated May 2, 1990 - California Municipal
Portfolio (supplied Post-Effective Amendment No. 4).
(10)(c) Opinion of Counsel dated March 30, 1992 - International Value
Portfolio (supplied by Post-Effective Amendment No. 7).
(10)(d) Opinion of Counsel dated May 23, 1994 - Short Duration California
Municipal Portfolio; Short Duration Diversified Municipal
Portfolio; Short Duration New York Municipal Portfolio (supplied
by Post-Effective Amendment No. 10).
(10)(e) Opinion of Counsel dated September 25, 1995 - Emerging Markets
Value Portfolio (supplied by Post-Effective Amendment No. 12).
(11) Consent of Independent Accountants.
(12) Not applicable.
(13) Purchase Agreement dated October 12, 1988 (supplied by
Pre-Effective Amendment No. 2).
(14) Not applicable.
(15) Not applicable.
(16)(a) Schedules of Computation of Performance Quotations - Government
Short Duration Portfolio; Short Duration Plus Portfolio; New York
Municipal Portfolio; Diversified Municipal Portfolio;
Intermediate Duration Portfolio (supplied by Post-Effective
Amendment No. 2).
(16)(b) Schedule of Computation of Performance Quotations - California
Municipal Portfolio (supplied by Post-Effective Amendment No. 5).
15
<PAGE>
(16)(c) Schedule of Computation of Performance Quotations - Government
Short Duration Portfolio; New York Municipal Portfolio,
Diversified Municipal Portfolio; California Municipal Portfolio
(supplied by Post-Effective Amendment No. 6).
(16)(d) Schedule of Computation of Performance Quotations - International
Value Portfolio (supplied by Post-Effective Amendment No. 8).
(16)(e) Schedules of Computation of Performance Quotations - Short
Duration California Municipal Portfolio; Short Duration
Diversified Municipal Portfolio; Short Duration New York
Municipal Portfolio (supplied by Post-Effective Amendment No.
11).
(16)(f) Schedule of Computation of Performance Quotations - Emerging
Markets Value Portfolio (submitted electronically herewith).
(17) Financial Data Schedules for 12 Months Ending September 30, 1996
- Government Short Duration, Short Duration Plus, New York
Municipal, Diversified Municipal, Intermediate Duration,
California Municipal, International Value, Short Duration New
York Municipal, Short Duration Diversified Municipal, Short
Duration California Municipal and Emerging Markets Value
Portfolios (submitted electronically herewith).
(18) Not applicable.
Item 25. Persons Controlled By or Under Common Control with
Registrant.
None.
Item 26. Number of Holders of Securities.
Title of Class Number of Record Holders
-------------- ------------------------
Bernstein Government
Short Duration Portfolio 760 (As of January 2,
(Par value .001 per share) 1997)
Bernstein Short Duration
Plus Portfolio 2,558 (As of January 2,
(Par value .001 per share) 1997)
Bernstein New York
Municipal Portfolio 1,963 (As of January 2,
(Par value .001 per share) 1997)
16
<PAGE>
Bernstein Diversified
Municipal Portfolio 2,885 (As of January 2,
(Par value .001 per share) 1997)
Bernstein Intermediate
Duration Portfolio 5,091 (As of January 2,
(Par value .001 per share) 1997)
Bernstein California
Municipal Portfolio 920 (As of January 2,
(Par Value .001 per share) 1997)
Bernstein International 16,712 (As of January 2,
Value Portfolio 1997)
(Par Value .001 per share)
Bernstein Short Duration
California Municipal Portfolio 281 (As of January 2,
(Par Value .001 per share) 1997)
Bernstein Short Duration
Diversified Municipal Portfolio 523 (As of January 2,
(Par Value .001 per share) 1997)
Bernstein Short Duration
New York Municipal Portfolio 361 (As of January 2,
(Par Value .001 per share) 1997)
Bernstein Emerging Markets 6,977 (As of January 2,
Value Portfolio 1997)
(Par Value .001 per share)
Item 27. Indemnification.
As permitted by Section 17(h) and (i) of the Investment Company Act of 1940
(the "1940 Act") and pursuant to Article VII of the Fund's By-Laws (Exhibit 2 to
this Registration Statement), directors, officers and employees of the Fund will
be indemnified to the maximum extent permitted by Maryland General Corporation
Law. Article VII provides that nothing therein contained protects any director
or officer of the Fund against any liability to the Fund or its stockholders to
which the director or officer would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. Maryland General Corporation Law permits
a corporation to indemnify any director, officer, employee or agent made a party
to any threatened, pending or completed action, suit or proceeding by reason of
service in that capacity, against, judgments, penalties, fines, settlements and
reasonable expenses actually incurred in connection with the proceeding,
17
<PAGE>
unless it is proved that: (i) an act or omission by the director, officer,
employee or agent that was material to the cause of action adjudicated in the
proceeding was committed in bad faith or the result of active and deliberate
dishonesty; (ii) the director, employee, or agent actually received an improper
personal benefit in money, property, or services; or (iii) in the case of any
criminal proceeding, the director, employee or agent had reasonable cause to
believe that the act or omission was unlawful. Maryland law does not permit
indemnification in respect of any proceeding by or in the right of the
corporation in which the director shall have been held liable to the
corporation.
As permitted by Section 17(i) of the 1940 Act, pursuant to Section 3 of the
respective Investment Management Agreements, Section 3 of the respective
Shareholder Servicing and Administrative Agreements, and Section 8 of the
respective Distribution Agreements between the Registrant on behalf of its
various Portfolios and Bernstein, Bernstein may be indemnified against certain
liabilities which it may incur.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
As permitted by Article VII, Section 2 of the Bylaws, the Registrant has
purchased an insurance policy insuring its officers and directors against
certain liabilities, and certain costs of defending claims against such officers
and directors, to the extent such officers and directors are not found to have
omitted conduct constituting conflict of interest, intentional non-compliance
with statutes or regulations or dishonest, fraudulent or criminal acts or
omissions. The insurance policy also insures the Registrant against the cost of
indemnification payments to officers and directors under certain circumstances.
18
<PAGE>
Insurance will not be purchased that protects, or purports to protect, any
officer or director from liability to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of duty.
Section 2 of the respective Investment Management Agreements limits the
liability of Bernstein to loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for service (in which case any award of
damages shall be limited to the period and the amount set forth in Section
36(b)(3) of the 1940 Act) or loss resulting from willful misfeasance, bad faith
or gross negligence in the performance of its duties or from reckless disregard
by Bernstein of its obligations and duties under the Management Agreements.
Section 2 of the respective Shareholder Servicing and Administrative
Agreements and Section 9 of the respective Distribution Agreements limit the
liability of Bernstein to loss resulting from willful misfeasance, bad faith or
gross negligence in the performance of its duties or from reckless disregard by
Bernstein of its obligations and duties under those Agreements.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws, and the respective Investment Management Agreements,
Shareholder Servicing and Administrative Agreements, and Distribution Agreements
in a manner consistent with Release No. 11330 of the Securities and Exchange
Commission under the 1940 Act so long as the interpretation of Sections 17(h)
and 17(i) of such Act remain in effect and are consistently applied.
Item 28. Business and Other Connections of Investment Adviser.
See "Manager and Distributor" in the Statement of Additional Information
constituting Part B of this Registration Statement and incorporated herein by
reference and "Management of the Portfolios" in the Regular and Institutional
Services constituting Parts A-1 and A-2 of this Registration Statement,
respectively, and incorporated herein by reference.
Item 29. Principal Underwriters
(a) Sanford C. Bernstein & Co., Inc. is the Distributor for no investment
company other than the Registrant.
19
<PAGE>
(b)
Name and Positions and Positions and
Principal Business Offices with Offices with
Address Underwriter Registrant
- ------------------ ------------- -------------
Zalman C. Bernstein* Chairman of the
Executive Committee
Lewis A. Sanders* Chairman of the
Board, Chief Executive
Officer and Chief
Financial Officer
Roger Hertog* President and Chief President,
Operating Officer Treasurer and
Director
Andrew S. Adelson* Senior Vice President Senior Vice
President &
Director
Kevin R. Brine* Senior Vice President
Charles C. Cahn, Jr.* Senior Vice President
Marilyn Goldstein Fedak* Chief Investment
Officer - Large
Capitalization Equities
Michael L. Goldstein* Investment Strategist -
Institutional Services
Francis H. Trainer, Jr.* Senior Vice President Senior Vice
President
- -------------------
* Business Address is 767 Fifth Avenue
New York, New York 10153
(c) Registrant has no principal underwriter who is not an affiliated person
of the Registrant.
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by Rules
31a-1 through 31a-3 pursuant to the Investment Company Act are maintained at the
offices of Bernstein, One State Street Plaza, New York, NY 10004 and 767 Fifth
Avenue, New York, New York 10153, except that some records pursuant to Rule
31a-1(b)
20
<PAGE>
are maintained at the offices of State Street Bank and Trust Company, 1776
Heritage Drive and 2 Heritage Drive, North Quincy, Massachusetts 02171, the
Registrant's Transfer Agent, and some records pursuant to Rule 31a-1(b)(4) are
maintained at the offices of Shereff, Friedman, Hoffman & Goodman LLP, 919 Third
Avenue, New York, New York 10022, counsel to the Registrant.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
21
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this amended registration statement pursuant
to rule 485(b) under the Securities Act of 1933 and has duly caused this
registration statement to be signed on its behalf by the undersigned, hereto
duly authorized in the City and State of New York on the 23rd day of January,
1997.
Sanford C. Bernstein Fund, Inc.
By: Roger Hertog, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following in the capacity
and on the date indicated.
Signature Title Date
- --------- ----- ----
Roger Hertog President January 23, 1997
(Principal
Executive
Officer),
Treasurer,
(Principal
Financial and
Accounting
Officer) and
Director
Andrew S. Adelson Senior Vice January 23, 1997
President
and Director
Arthur Aeder Director January 23, 1997
Peter L. Bernstein Director January 23, 1997
Theodore Levitt Director January 23, 1997
William Kristol Director January 23, 1997
<PAGE>
Index to Exhibits
-----------------
Exhibit No. Description
- ----------- -----------
(1)(a) Articles of Incorporation of the Registrant dated May 3, 1988.
(1)(b) Articles Supplementary of the Registrant dated October 14, 1988.
(1)(c) Articles Supplementary of the Registrant dated April 25, 1990.
(1)(d) Articles Supplementary of the Registrant dated March 16, 1992.
(1)(e) Articles Supplementary of the Registrant undated, filed May 11,
1994.
(1)(f) Articles Supplementary of the Registrant dated October 10, 1994.
(1)(g) Articles Supplementary of the Registrant dated August 29, 1995.
(1)(h) Articles Supplementary of the Registrant dated February 26, 1996.
(5)(a)(6) Investment Management Agreement dated October 11, 1995 between
the Registrant on behalf of the Emerging Markets Value Portfolio
and Bernstein.
(5)(b)(4) Shareholder Servicing and Administrative Agreement dated October
11, 1995 between the Registrant on behalf of the Emerging Markets
Value Portfolio and Bernstein.
(6)(e) Distribution Agreement dated October 11, 1995 between the
Registrant on behalf of the Emerging Markets Value Portfolio and
Bernstein.
(8)(q) Seventh Amendment to the Custodian Contract dated May 6, 1996.
(8)(r) Custodian Contract Fee Schedule dated July 9, 1996 Government
Short Duration, Short Duration Plus, New York Municipal,
Diversified Municipal, Intermediate Duration, California
Municipal, Short Duration New York Municipal, Short Duration
California Municipal, Short Duration Diversified Municipal
Portfolios.
(8)(s) Custodian Contract Fee Schedule dated July 9, 1996 -
International Value and Emerging Markets Value Portfolios
<PAGE>
Exhibit No. Description
- ----------- -----------
(8)(t) Eighth Amendment to the Custodian Contract dated September 25,
1996.
(9)(h) Fifth Amendment to the Transfer Agency Agreement dated July 18,
1996.
(9)(i) Fee Schedule for Fee Information Services under Transfer Agency
Agreement, dated July 18, 1996 - Government Short Duration, Short
Duration Plus, Diversified Municipal, Intermediate Duration, New
York Municipal, California Municipal, International Value, Short
Duration California Municipal, Short Duration Diversified
Municipal, Short Duration New York Municipal and Emerging Markets
Value Portfolios.
(9)(j) Securities Lending Agreement dated July 17, 1996 between the
Registrant, on behalf of the International Value Portfolio, and
State Street Bank and Trust Company and Amendment dated
September 30, 1996.
(11) Consent of Independent Accountants.
(16)(f) Schedule of Computation of Performance Quotation - Emerging
Markets Value Portfolio.
(17) Financial Data Schedules for 12 Months Ending September 30, 1996
- Government Short Duration, Short Duration Plus, New York
Municipal, Diversified Municipal, Intermediate Duration,
California Municipal, International Value, Short Duration New
York Municipal, Short Duration Diversified Municipal, Short
Duration California Municipal and Emerging Markets Value
Portfolios.
<PAGE>
Exhibit (1)(a)
MARYLAND STATE DEPARTMENT OF ASSESSMENTS
AND TAXATION, APPROVED FOR RECORD 5/4/88
ARTICLES OF INCORPORATION
OF
SANFORD C. BERNSTEIN FUND, INC.
ARTICLE I
I, the incorporator, Jennifer A. Deland, whose post office address is 919
Third Avenue, 20th floor, New York, New York 10022, being at least eighteen
years of age, am, under and by virtue of the General Laws of the State of
Maryland authorizing the formation of corporations, forming a corporation.
ARTICLE II
The name of the corporation (hereinafter called the "Corporation") is
Sanford C. Bernstein Fund, Inc.
ARTICLE III
Purposes
The purpose for which the Corporation is formed is to act as an open-end
investment company of the management type registered as such with the Securities
and Exchange Commission pursuant to the Investment Company Act of 1940 as
amended (the "1940 Act") and to exercise and generally to enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by the
General Laws of the State of Maryland now or hereinafter in force.
ARTICLE IV
Address in Maryland
The post office address of the principal office of the Corporation in the
State of Maryland is c/o The Prentice-Hall Corporation System, Maryland, 929
North Howard Street, Baltimore, Maryland 21201. The name of the Corporation's
resident agent is The Prentice-Hall Corporation System, Maryland and its post
office address is 929 North Howard Street, Baltimore, Maryland 21201. Said
resident agent is a corporation of the State of Maryland.
<PAGE>
ARTICLE V
Common Stock
Section 1. (a) The Corporation has authority to issue one billion
(1,000,000,000) shares of common stock (the "Shares") of the par value of
$.001 each, having an aggregate par value of $1,000,000, in any class or
classes, each comprising such number of Shares and having such preferences,
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms of redemption as shall be determined by resolution of
the Board of Directors of the Corporation.
The establishment and designation of any class of shares shall be effective
upon (a) the authorization of such class by a resolution of the Board of
Directors, authorizing the issuance of Shares of such a class and determining
the preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption of the Shares and (b) the filing for record of the articles
supplementary if required by Section 2-208, or the successor thereto, of the
Maryland General Corporation Law with the State Department of Assessments and
Taxation of Maryland. At any time when there are no Shares outstanding for a
particular class previously established and designated by the Board of
Directors, that class may be eliminated by a resolution of the Board of
Directors and the filing of the articles supplementary if required by Section
2-208, or the successor thereto, of the Maryland General Corporation Law. The
Board of Directors of the Corporation shall have the power and authority, to, by
resolution, increase or decrease the aggregate number of Shares of stock or the
number of Shares of any class that the Corporation has authority to issue. The
Board of Directors of the Corporation shall have the power and authority to, by
resolution, classify or reclassify any unissued Shares from time to time by
setting or changing the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of such unissued Shares.
(b) A description of the relative preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption of all classes of Shares is as follows,
unless otherwise set forth in the articles supplementary filed with the Maryland
State
2
<PAGE>
Department of Assessments and Taxation describing any further class or classes
from time to time created by the Board of Directors:
(i) Assets Belonging to Class. All consideration received by the
Corporation for the issue or sale of Shares of a particular class,
together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits and proceeds thereof, including
any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall irrevocably belong to
that class for all purposes, subject only to the rights of creditors, and
shall be so recorded upon the books of account of the Corporation. Such
consideration, assets, income, earnings, profits and proceeds, including
any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, together with any General
Items (as hereinafter defined) allocated to that class as provided in the
following sentence, are herein referred to as "assets belonging to" that
class. In the event that there are any assets, income, earnings, profits
or proceeds thereof, funds or payments which are not readily identifiable
as belonging to any particular class (collectively "General Items"), the
Board of Directors shall allocate such General Items to and among any one
or more of the classes created from time to time, in such manner and on
such basis as the Board of Directors in its sole discretion deems fair and
equitable; and any General Items so allocated to a particular class shall
belong to that class. Each such allocation by the Board of Directors
shall be conclusive and binding upon the stockholders of all classes for
all purposes.
(ii) Liabilities Belonging to class. The assets belonging to each
particular class shall be charged with the liabilities of the Corporation
in respect of that class and with all expenses, costs, charges and
reserves attributable to that class, and shall be so recorded upon the
books of account of the Corporation. Such liabilities,
3
<PAGE>
expenses, costs, charges and reserves, together with any General Items (as
hereinafter defined) allocated to that class as provided in the following
sentence, so charged to that class are herein referred to as "liabilities
belonging to" that class. In the event there are any general liabilities,
expenses, costs, charges or reserves of the Corporation which are not
readily identifiable as belonging to any particular class (collectively
"General Items"), the Board of Directors shall allocate and charge such
General Items to and among any one or more of the classes created from
time to time, in such manner and on such basis as the Board of Directors
in its sole discretion deems fair and equitable; and any General Items so
allocated and charged to a particular class shall belong to that class.
Each such allocation by the Board of Directors shall be conclusive and
binding upon the stockholders of all classes for all purposes.
(iii) Dividends. Dividends and distributions with respect to Shares of
a particular class may be paid to the holders of Shares of that class at
such times, in such manner and from such of the income and capital gains
accrued or realized from the assets belonging to that class, after
providing for actual and accrued liabilities belonging to that class, as
the Board of Directors may determine.
(iv) Liquidation. In the event of the liquidation or dissolution of
the Corporation or of one or more classes, the stockholders of each class
that is being liquidated shall be entitled to receive, as a class, when
and as declared by the Board of Directors, the excess of the assets
belonging to that class over the liabilities belonging to that class. The
assets so distributable to the stockholders of any particular class shall
be distributed among such stockholders in proportion to the number of
Shares of that class held by them and recorded on the books of the
Corporation.
(v) Equality. Each Share of any particular class shall represent
an equal and proportionate interest in the assets belonging to that class
(subject to the liabilities belonging to
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that class); however, the provisions of this sentence shall not restrict
any distinctions permissible pursuant to subsection (iii) of this Section
1(b) or otherwise under these Articles of Incorporation that may exist
with respect to stockholder elections to receive dividends or
distributions in cash or Shares of the same class or that may otherwise
exist with respect to dividends and distributions with respect to Shares
of the same class.
(vi) Conversion or Exchange Rights. Subject to compliance with the
requirements of the 1940 Act, and unless the Board of Directors shall have
provided otherwise by resolution, holders of Shares of any class shall
have the right to convert or exchange said Shares into Shares of one or
more other classes of Shares in accordance with such requirements and
procedures as may be established by the Board of Directors.
(vii) Fractional Shares. The Corporation may issue, sell, redeem,
repurchase and otherwise deal in and with its Shares in fractional Shares,
and any such fractional Share shall carry proportionately all the rights
of a whole Share, excepting any right to receive a certificate evidencing
such fractional Share, but including, without limitation, the right to
vote, the right to receive dividends and distributions, and the right to
participate upon liquidation of the Corporation or any class.
Section 2. Each Share shall also be subject to the following provisions:
(a) The net asset value per Share of a particular class shall be the
quotient obtained by dividing the value of the net assets of that class
(being the value of the total assets belonging to that class less the
liabilities belonging to that class) by the total number of Shares of that
class outstanding. Subject to subsection (b) of this Section 2, the value
of the total assets belonging to each class shall be determined by,
determined pursuant to the direction of, or determined pursuant to
procedures or methods (which procedures or methods may differ from class
to class) prescribed or approved by the Board of Directors in its sole
discretion, and shall be so
5
<PAGE>
determined at the time or times (which time or times may differ from
class to class) prescribed or approved by the Board of Directors in its
sole discretion.
(b) The net asset value of each Share of a particular class shall be
determined in accordance with any applicable provision of the 1940 Act, any
applicable rule, regulation or order of the Securities and Exchange
Commission thereunder, and any applicable rule or regulation made or
adopted by any securities association registered under the Securities
Exchange Act of 1934.
(c) All Shares now or hereafter authorized shall be subject to
redemption and redeemable at the option of the stockholder, in the sense
used in the General Laws of the State of Maryland authorizing the
formation of corporations. Each holder of a Share of any class, upon
request to the Corporation accompanied by surrender of the appropriate
stock certificate or certificates (if any) in proper form for transfer,
shall be entitled to require the Corporation to redeem all or any part of
the Shares of that class standing in the name of such holder on the books
of the Corporation at the net asset value per Share of that class
determined in accordance with subsection (a) of this Section 2 less any
applicable contingent deferred sales charge.
(d) Notwithstanding subsection (c) of this Section 2, the Board of
Directors of the Corporation may suspend the right of the holders of
Shares of any or all classes to require the Corporation to redeem such
Shares or may suspend any voluntary purchase of such Shares;
(i) for any period (A) during which the New York Stock Exchange is
closed other than customary weekend and holiday closings or (B) during
which trading on the New York Stock Exchange is restricted;
(ii) for any period during which an emergency, as defined by the rules
of the Securities and Exchange Commission or any successor thereto,
exists as a result of which (A) disposal by the Corporation of
Securities owned by it and belonging to the affected class or classes
is not reasonably practicable, or (B) it is not reasonably practicable
for the Corporation fairly to determine the value of the net assets of
the affected class or classes; or
6
<PAGE>
(iii) for such periods as the Securities and Exchange Commission or
any successor thereto may by order permit for the protection of
security holders of the Corporation.
(e) The Corporation may in its discretion redeem, at the current net
asset value less any applicable contingent deferred sales charge,
outstanding Shares not offered for redemption which are held by any
stockholder whose Shares of a particular class, in the aggregate, have a
then total net asset value of less than $1000 or such other amount as the
Directors shall determine by resolution and subject to any limitations of
applicable law (the "Minimum Amount"), provided that prior to any such
proposed redemption the Corporation shall have given such stockholder
written notice that the then current aggregate net asset value of the
stockholder's shares is less than the Minimum Amount and allowed the
stockholder to make additional investments in order to increase the then
current aggregate net asset value of the stockholder's shares to at least
the Minimum Amount.
(f) The Board of Directors may by resolution from time to time
authorize the purchase by the Corporation, either directly or through an
agent, of Shares of any class upon such terms and conditions and for such
consideration as the Board of Directors shall deem advisable out of funds
legally available therefor at prices per Share not in excess of their net
asset value per Share of that class determined in accordance with
subsection (a) of this Section 2 and to take all other steps deemed
necessary or advisable in connection therewith.
(g) Except as otherwise permitted by the Investment Company Act of
1940, payment of the redemption price of Shares of any class surrendered
to the Corporation for redemption pursuant to the provisions of subsection
(c) or (e) of this Section 2 or for purchase by the Corporation pursuant
to the provisions of subsection (f) of this Section 2 shall be made by the
Corporation within seven days after surrender of such Shares to the
Corporation for such purpose. Any such payment may be made in whole or in
part in portfolio securities or in cash belonging to such class, as the
Board of Directors shall deem advisable, and no stockholder shall have the
right, other than as determined by the Board of Directors, to have any
Shares redeemed in portfolio securities.
7
<PAGE>
(h) In the absence of any specification as to the purposes for
which Shares are redeemed or repurchased by the Corporation, all Shares
so redeemed or repurchased shall be deemed to be acquired for retirement
in the sense contemplated by the laws of the State of Maryland. Shares
of any class retired by repurchase or redemption shall thereafter have
the status of authorized but unissued Shares of that class.
Section 4. No holder of Shares of any class shall, as such holder, have any
preemptive right to purchase or subscribe for any Shares of that or any other
class which the Corporation may issue or sell (whether out of the number of
Shares authorized by the Articles of Incorporation, or out of any Shares
acquired by the Corporation after the issue thereof, or otherwise).
Section 5. All persons who shall acquire Shares in the Corporation shall
acquire the same subject to the provisions of these Articles of Incorporation.
ARTICLE VI
Directors
The initial number of directors of the Corporation shall be two; and the
names of those who shall act as such until the first meeting of stockholders and
until their successors are duly elected and qualify are as follows:
Roger Hertog
Stuart K. Nelson
The By-Laws of the Corporation may fix the number of directors at no less
than two and may authorize the Board of Directors, by the vote of a majority of
the entire Board of Directors, to increase or decrease the number of directors
within a limit specified in the By-Laws, and to fill the vacancies created by
any such increase in the number of directors. Unless otherwise provided by the
By-Laws of the Corporation, the directors of the Corporation need not be
stockholders.
The By-Laws of the Corporation may divide the directors of the Corporation
into classes and prescribe the tenure of office of the several classes; but no
class shall be elected for a shorter period than one year or for a longer period
than five years, and the term of office of at least one class shall expire each
year.
8
<PAGE>
ARTICLE VII
Miscellaneous
The following provisions are inserted for the management of the business
and for the conduct of the affairs of the Corporation, and for creating,
defining, limiting and regulating the powers of the Corporation, the directors
and the stockholders.
Section 1. The Board of Directors shall have the management and control of
the property, business and affairs of the Corporation and is hereby vested with
all the powers possessed by the Corporation itself so far as is not inconsistent
with law or these Articles of Incorporation. In furtherance and without
limitation of the foregoing provisions, it is expressly declared that, subject
to these Articles of Incorporation, the Board of Directors shall have power:
(a) To make, alter, amend or repeal from time to time the By-Laws
of the Corporation except as such power may otherwise be limited in the
By-Laws;
(b) To issue Shares of any class of the Corporation;
(c) To authorize the purchase of Shares of any class in the open
market or otherwise, at prices not in excess of their net asset value for
Shares of that class determined in accordance with subsection (a) of
Section 2 or Article V hereof, provided that the corporation has assets
legally available for such purpose, and to pay for such Shares in cash,
securities or other assets then held or owned by the Corporation;
(d) To declare and pay dividends and distributions from funds legally
available therefor on Shares of such class or classes, in such amounts,
if any, and in such manner (including declaration by means of a formula
or other similar method of determination whether or not the amount of the
dividend or distribution so declared can be calculated at the time of
such declaration) and to the stockholders of record as of such date, as
the Board of Directors may determine.
9
<PAGE>
Section 2. To the fullest extent permitted by Maryland and federal
statutory and decisional law, as amended or interpreted, no director or officer
of this Corporation shall be personally liable to the Corporation or its
stockholders for money damages; provided, however that nothing herein shall be
deemed to protect any director or officer of the Corporation against any
liability to the Corporation or its stockholders to which such director or
officer would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
Section 3. Any determination made in good faith and, so far as accounting
matters are involved, in accordance with generally accepted accounting
principles by or pursuant to the direction of the Board of Directors, shall be
final and conclusive, and shall be binding upon the Corporation and all holders
of Shares, past, present and future, of each class, and Shares are issued and
sold on the condition and undertaking, evidenced by acceptance of certificates
for such Shares by, or confirmation of such Shares being held for the account
of, any stockholder, that any and all such determinations shall be binding as
aforesaid.
Nothing in this Section 3 shall be construed to protect any director or
officer of the Corporation against any liability to the Corporation or its
stockholders to which such director or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office.
Section 4. The directors of the Corporation may receive compensation for
their services, subject, however, to such limitations with respect thereto as
may be determined from time to time by the stockholders.
Section 5. Except as required by law, the holders of Shares shall have
only such right to inspect the records, documents, accounts and books of the
Corporation as may be granted by the Board of Directors of the Corporation.
Section 6. Any vote of stockholders authorizing liquidation of the
Corporation or any one or more classes or proceedings for the dissolution of
the Corporation or any
10
<PAGE>
one or more classes may authorize the Board of Directors to determine, as
provided herein, or if provision is not made herein, in accordance with
generally accepted accounting principles, which assets are the assets belonging
to each class available for distribution to stockholders of that class and may
divide, or authorize the Board of Directors to divide, such assets among the
stockholders of that class in such manner as to ensure that each stockholder
will receive an equal and proportionate amount of the value of the assets
(determined as aforesaid) belonging to that class upon such liquidation or
dissolution.
ARTICLE VIII
Voting
1. On each matter submitted to a vote of the stockholders, each holder of a
Share shall be entitled to one vote for each full Share and a fractional vote
for each fractional share, irrespective of the class, standing in such holder's
name on the books of the Corporation irrespective of the class thereof and all
Shares of all classes shall vote as a single class ("Single class Voting");
provided, however, that (A) as to any matter with respect to which a separate
vote of any class is required by the Investment Company Act of 1940 or under the
Maryland General Corporation Law, such requirements as to a separate vote by
that class shall apply in lieu of Single class Voting as described above; (B) in
the event that the separate vote requirements referred to in (A) above apply
with respect to one or more classes, then, subject to (C) below, the Shares of
all other classes shall vote as a single class; and (C) as to any matter which
does not affect the interest of a particular class, including but not limited to
any proposal to liquidate any other class, only the holders of Shares of the one
or more affected classes shall be entitled to vote.
2. Quorum. The presence in person or by proxy of the holders of record of
one-third of the Shares of all classes issued and outstanding and entitled to
vote thereat shall constitute a quorum for the transaction of any business at
all meetings of the stockholders except as otherwise provided by law or in these
Articles of Incorporation and except that where the holders of Shares of any
class are entitled to a separate vote as a class (a "Separate Class") or where
the holders of Shares of two or
11
<PAGE>
more (but not all) classes are required to vote as a single class (a "Combined
Class"), the presence in person or by proxy of the holders of record of
one-third of the Shares of that Separate Class or Combined Class, as the case
may be, issued and outstanding and entitled to vote thereat shall constitute a
quorum for such vote.
Notwithstanding any provision of law requiring action to be taken or
authorized by the affirmative vote of the holders of a designated proportion
greater than a majority of the outstanding Shares of all classes or of the
outstanding Shares of a particular class or classes, as the case may be, such
action shall be valid and effective if taken or authorized by the affirmative
vote of the holders of a majority of the total number of Shares of all classes
or of the total number of Shares of such class or classes, as the case may be,
outstanding and entitled to vote thereupon pursuant to the provisions of these
Articles of Incorporation.
ARTICLE IX
Amendments
The Corporation reserves the right from time to time to amend, alter or
repeal any of the provisions of these Articles of Incorporation (including any
amendment that changes the terms of any of the outstanding Shares by
classification, reclassification or otherwise), and to add or insert any other
provisions that may, under the statutes of the State of Maryland at the time in
force, be lawfully contained in articles of incorporation, and all rights at any
time conferred upon the stockholders of the Corporation by these Articles of
Incorporation are subject to the provisions of this Article IX.
ARTICLE X
PERPETUAL EXISTENCE
The duration of the Corporation shall be perpetual.
The term "Articles of Incorporation" as used herein and in the By-Laws of
the Corporation shall be deemed to
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<PAGE>
mean these Articles of Incorporation as amended from time to time and any
restatement thereof.
I acknowledge this document to be my act, and state that with respect to
all matters and facts herein, to the best of my knowledge, information and
belief such matters and facts are true in all material respects and that this
statement is made under the penalties of perjury.
May 3, 1988
Jennifer A. Deland,
Sole Incorporator
13
<PAGE>
Exhibit (1)(b)
MARYLAND STATE DEPARTMENT OF ASSESSMENTS
AND TAXATION, APPROVED FOR RECORD 10/18/88
SANFORD C. BERNSTEIN FUND, INC.
ARTICLES SUPPLEMENTARY
Sanford C. Bernstein Fund, Inc., a Maryland corporation, having its
principal office c/o the Prentice-Hall Corporation System, Maryland, 929 North
Howard Street, Baltimore, Maryland 21201 (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The total number of shares of capital stock of all classes that
the Corporation has authority to issue is one billion (1,000,000,000) shares, of
the par value of one tenth of one cent $.001 (the "Shares"), and of the
aggregate par value of one million dollars ($1,000,000).
SECOND: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Article V of the Charter of the Corporation,
the Board of Directors has duly designated and established the following classes
of shares:
Bernstein Government 100,000,000 shares
Short Duration
Bernstein Short 100,000,000 shares
Duration Plus
Bernstein New York
Municipal 100,000,000 shares
Bernstein Diversified
Municipal 100,000,000 shares
Bernstein Intermediate
Duration 100,000,000 shares
The relative preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of all such classes are as set forth in paragraph (b)
of Section 1 of Article V of the Charter of the Corporation.
<PAGE>
FOURTH: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
FIFTH: The total number of Shares of capital stock that the
Corporation has authority to issue has not been changed by the Board of
Directors.
The undersigned, President of Sanford C. Bernstein Fund, Inc., has
signed these Articles Supplementary in the Corporation's name and on its
behalf and acknowledges that these Articles Supplementary are the act of the
Corporation, that to the best of his knowledge, information and belief all
matters and facts set forth therein relating to the authorization and approval
of the Articles Supplementary are true in all material respects and that this
statement is made under the penalties of perjury.
IN WITNESS WHEREOF, these Articles Supplementary have been executed on
behalf of Sanford C. Bernstein Fund, Inc. this 14th day of October, 1988.
SANFORD C. BERNSTEIN FUND, INC.
Roger Hertog, President
Attest:
Sarah J. Sturtevant
Secretary
<PAGE>
Exhibit (1)(c)
MARYLAND STATE DEPARTMENT OF ASSESSMENTS
AND TAXATION, APPROVED FOR RECORD 4/27/90
SANFORD C. BERNSTEIN FUND, INC.
ARTICLES SUPPLEMENTARY
Sanford C. Bernstein Fund, Inc., a Maryland corporation, having its
principal office c/o the Prentice-Hall Corporation System, Maryland, 1123 North
Eutaw Street, Baltimore, Maryland 21201 (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The total number of shares of capital stock of all classes that
the Corporation has authority to issue is one billion (1,000,000,000) shares,
of the par value of one tenth of one cent $.001 (the "Shares"), and of the
aggregate par value of one million dollars ($1,000,000).
SECOND: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by Article V of the Charter of the Corporation, the Board
of Directors has duly designed and established the following classes of shares:
Bernstein California
Municipal 100,000,000 shares
Bernstein Short
Duration Plus 100,000,000 shares
Bernstein New York
Municipal 100,000,000 shares
Bernstein Diversified
Municipal 100,000,000 shares
Bernstein Intermediate
Duration 100,000,000 shares
Bernstein Government
Short Duration 100,000,000 shares
<PAGE>
The relative preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of all such classes are as set forth in paragraph (b)
of Section 1 of Article V of the Charter of the Corporation.
THIRD: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
FOURTH: The total number of Shares of capital stock that the Corporation
has authority to issue has not been changed by the Board of Directors.
The undersigned, President of Sanford C. Bernstein Fund, Inc., has signed
these Articles Supplementary in the Corporation's name and on its behalf and
acknowledges that these Articles Supplementary are the act of the Corporation,
that to the best of his knowledge, information and belief all matters and facts
set forth therein relating to the authorization and approval of the Articles
Supplementary are true in all material respects and that this statement is made
under the penalties of perjury.
IN WITNESS WHEREOF, these Articles Supplementary have been executed on
behalf of Sanford C. Bernstein Fund, Inc. this 25th day of April, 1990.
SANFORD C. BERNSTEIN FUND, INC.
Roger Hertog
President
Attest:
Jean Margo Reid
Acting Secretary
<PAGE>
Exhibit (1)(d)
MARYLAND STATE DEPARTMENT OF ASSESSMENTS
AND TAXATION, APPROVED FOR RECORD 3/17/92
SANFORD C. BERNSTEIN FUND, INC.
ARTICLES SUPPLEMENTARY
Sanford C. Bernstein Fund, Inc., a Maryland corporation, having its
principal office c/o the Prentice-Hall Corporation System, Maryland, 1123
North Eutaw Street, Baltimore, Maryland 21201 (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The total number of shares of capital stock of all classes that
the Corporation has authority to issue is one billion (1,000,000,000) shares,
of the par value of one tenth of one cent $.001 (the "Shares"), and of the
aggregate par value of one million dollars ($1,000,000).
SECOND: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by Article V of the Charter of the Corporation, the Board of
Directors has duly designed and established the following classes of shares:
Bernstein International
Value Portfolio 100,000,000 shares
Bernstein California
Municipal 100,000,000 shares
Bernstein Short
Duration Plus 100,000,000 shares
Bernstein New York
Municipal 100,000,000 shares
Bernstein Diversified
Municipal 100,000,000 shares
Bernstein Intermediate
Duration 100,000,000 shares
<PAGE>
Bernstein Government
Short Duration 100,000,000 shares
The relative preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of all such classes are as set forth in paragraph (b)
of Section 1 of Article V of the Charter of the Corporation.
THIRD: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
FOURTH: The total number of Shares of capital stock that the Corporation
has authority to issue has not been changed by the Board of Directors.
The undersigned, President of Sanford C. Bernstein Fund, Inc., has signed
these Articles Supplementary in the Corporation's name and on its behalf and
acknowledges that these Articles Supplementary are the act of the Corporation,
that to the best of his knowledge, information and belief all matters and facts
set forth therein relating to the authorization and approval of the Articles
Supplementary are true in all material respects and that this statement is made
under the penalties of perjury.
IN WITNESS WHEREOF, these Articles Supplementary have been executed on
behalf of Sanford C. Bernstein Fund, Inc. this 16th day of March, 1992.
SANFORD C. BERNSTEIN FUND, INC.
Roger Hertog
President
Attest:
Sarah J. Sturtevant
Secretary
<PAGE>
Exhibit (1)(e)
MARYLAND STATE DEPARTMENT OF ASSESSMENTS
AND TAXATION, APPROVED FOR RECORD MAY 11, 1994
SANFORD C. BERNSTEIN FUND, INC.
ARTICLES SUPPLEMENTARY
Sanford C. Bernstein Fund, Inc., a Maryland corporation, having its
principal office c/o the Prentice-Hall Corporation System, Maryland, 1123 North
Eutaw Street, Baltimore, Maryland 21201 (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The total number of shares of capital stock of all classes that
the Corporation has authority to issue is one billion (1,000,000,000) shares,
of the par value of one tenth of one cent $.001 (the "Shares"), and of the
aggregate par value of one million dollars ($1,000,000).
SECOND: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by Article V of the Charter of the Corporation, the Board of
Directors has duly designed and established the following classes of shares:
Bernstein Short Duration
California Municipal 50,000,000 shares
Bernstein Short Duration
Diversified Municipal 50,000,000 shares
Bernstein Short Duration
New York Municipal 50,000,000 shares
Bernstein International
Value 100,000,000 shares
Bernstein California
Municipal 100,000,000 shares
Bernstein Short
Duration Plus 100,000,000 shares
Bernstein New York
Municipal 100,000,000 shares
Bernstein Diversified
Municipal 100,000,000 shares
<PAGE>
Bernstein Intermediate
Duration 100,000,000 shares
Bernstein Government
Short Duration 100,000,000 shares
The relative preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of all such classes are as set forth in paragraph (b)
of Section 1 of Article V of the Charter of the Corporation.
THIRD: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
FOURTH: The total number of Shares of capital stock that the Corporation
has authority to issue has not been changed by the Board of Directors.
The undersigned, President of Sanford C. Bernstein Fund, Inc., has signed
these Articles Supplementary in the Corporation's name and on its behalf and
acknowledges that these Articles Supplementary are the act of the Corporation,
that to the best of his knowledge, information and belief all matters and facts
set forth therein relating to the authorization and approval of the Articles
Supplementary are true in all material respects and that this statement is made
under the penalties of perjury.
IN WITNESS WHEREOF, these Articles Supplementary have been executed on
behalf of Sanford C. Bernstein Fund, Inc. this day of May, 1994.
SANFORD C. BERNSTEIN FUND, INC.
Roger Hertog
President
Attest:
Jean Margo Reid
Secretary
<PAGE>
Exhibit (1)(f)
MARYLAND STATE DEPARTMENT OF ASSESSMENTS
AND TAXATION, APPROVED FOR RECORD 10/21/94
SANFORD C. BERNSTEIN FUND, INC.
ARTICLES SUPPLEMENTARY
Sanford C. Bernstein Fund, Inc., a Maryland corporation, having its
principal office c/o the Prentice-Hall Corporation System, Maryland, 1123 North
Eutaw Street, Baltimore, Maryland 21201 (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The total number of shares of capital stock of all classes that
the Corporation has authority to issue is one billion (1,000,000,000) shares, of
the par value of one tenth of one cent $.001 (the "Shares"), and of the
aggregate par value of one million dollars ($1,000,000).
SECOND: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by Article V of the Charter of the Corporation, the Board
of Directors has duly designed and established the following classes of shares:
Bernstein Short Duration
California Municipal 50,000,000 shares
Bernstein Short Duration
Diversified Municipal 50,000,000 shares
Bernstein Short Duration
New York Municipal 50,000,000 shares
Bernstein International
Value 200,000,000 shares
Bernstein California
Municipal 100,000,000 shares
Bernstein Short
Duration Plus 100,000,000 shares
Bernstein New York
Municipal 100,000,000 shares
Bernstein Diversified
Municipal 100,000,000 shares
<PAGE>
Bernstein Intermediate
Duration 100,000,000 shares
Bernstein Government
Short Duration 100,000,000 shares
The relative preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of all such classes are as set forth in paragraph (b)
of Section 1 of Article V of the Charter of the Corporation.
THIRD: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
FOURTH: The total number of Shares of capital stock that the Corporation
has authority to issue has not been changed by the Board of Directors.
The undersigned, President of Sanford C. Bernstein Fund, Inc., has signed
these Articles Supplementary in the Corporation's name and on its behalf and
acknowledges that these Articles Supplementary are the act of the Corporation,
that to the best of his knowledge, information and belief all matters and facts
set forth therein relating to the authorization and approval of the Articles
Supplementary are true in all material respects and that this statement is made
under the penalties of perjury.
IN WITNESS WHEREOF, these Articles Supplementary have been executed on
behalf of Sanford C. Bernstein Fund, Inc. this 10th day of October, 1994.
SANFORD C. BERNSTEIN FUND, INC.
Roger Hertog
President
Attest:
Jean Margo Reid
Secretary
<PAGE>
Exhibit (1)(g)
MARYLAND STATE DEPARTMENT OF ASSESSMENTS
AND TAXATION, APPROVED FOR RECORD 8/31/95
SANFORD C. BERNSTEIN FUND, INC.
ARTICLES SUPPLEMENTARY
Sanford C. Bernstein Fund, Inc., a Maryland corporation, having its
principal office c/o the Prentice-Hall Corporation System, Maryland, 1123 North
Eutaw Street, Baltimore, Maryland 21201 (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The total number of shares of capital stock of all classes that
the Corporation has authority to issue is increased to two billion
(2,000,000,000) shares, of the par value of one tenth of one cent $.001 (the
"Shares"), and of the aggregate par value of two million dollars ($2,000,000).
Immediately prior to this increase, the Corporation had the authority to issue
one billion (1,000,000,000) shares, of the par value of one tenth of one cent
$.001 and of the aggregate par value of one million dollars ($1,000,000).
SECOND: The total number of shares of capital stock that the Corporation
has authority to issue has been increased by the Board of Directors in
accordance with Section 2-105(c) of Title 2 of the General Corporation Law of
Maryland.
THIRD: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by Article V of the Charter of the Corporation, the Board of
Directors has duly designated and established the following classes of shares:
Bernstein Government
Short Duration 100,000,000 shares
Bernstein Short
Duration Plus 100,000,000 shares
Bernstein Diversified
Municipal 100,000,000 shares
Bernstein Intermediate
Duration 100,000,000 shares
Bernstein New York
Municipal 100,000,000 shares
<PAGE>
Bernstein California
Municipal 100,000,000 shares
Bernstein Short Duration
California Municipal 50,000,000 shares
Bernstein Short Duration
Diversified Municipal 50,000,000 shares
Bernstein Short Duration
New York Municipal 50,000,000 shares
Bernstein International
Value 200,000,000 shares
Bernstein Emerging Markets
Value 100,000,000 shares
The relative preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of all such classes are as set forth in paragraph (b)
of Section 1 of Article V of the Charter of the Corporation.
FOURTH: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
The undersigned, President of Sanford C. Bernstein Fund, Inc., has
signed these Articles Supplementary in the Corporation's name and on its behalf
and acknowledges that these Articles Supplementary are the act of the
Corporation, that to the best of his knowledge, information and belief all
matters and facts set forth therein relating to the authorization and approval
of the Articles Supplementary are true in all material respects and that this
statement is made under the penalties of perjury.
IN WITNESS WHEREOF, these Articles Supplementary have been executed on
behalf of Sanford C. Bernstein Fund, Inc. this 29th day of August, 1995.
SANFORD C. BERNSTEIN FUND, INC.
Roger Hertog
President
Attest:
Jean Margo Reid
Secretary
<PAGE>
Exhibit (1)(h)
MARYLAND STATE DEPARTMENT OF ASSESSMENTS
AND TAXATION, APPROVED FOR RECORD 2/28/96
SANFORD C. BERNSTEIN FUND, INC.
ARTICLES SUPPLEMENTARY
Sanford C. Bernstein Fund, Inc., a Maryland corporation, having its
principal office c/o the Prentice-Hall Corporation System, Maryland, 1123 North
Eutaw Street, Baltimore, Maryland 21201 (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The total number of shares of capital stock of all
classes that the Corporation has authority to issue is two billion
(2,000,000,000) shares, of the par value of one tenth of one cent $.001
(the "Shares"), and of the aggregate par value of two million dollars
($2,000,000).
SECOND: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Article V of the Charter of the
Corporation, the Board of Directors has duly designated and established
the following classes of shares:
Bernstein Government
Short Duration 100,000,000 shares
Bernstein Short
Duration Plus 100,000,000 shares
Bernstein Diversified
Municipal 100,000,000 shares
Bernstein Intermediate
Duration 200,000,000 shares
Bernstein New York
Municipal 100,000,000 shares
Bernstein California
Municipal 100,000,000 shares
Bernstein Short Duration
California Municipal 50,000,000 shares
Bernstein Short Duration
Diversified Municipal 50,000,000 shares
Bernstein Short Duration
New York Municipal 50,000,000 shares
Bernstein International
Value 300,000,000 shares
<PAGE>
Bernstein Emerging Markets
Value 100,000,000 shares
The relative preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of all such classes are as set forth in paragraph (b)
of Section 1 of Article V of the Charter of the Corporation.
THIRD: The Corporation is registered as an open-end company under
the Investment Company Act of 1940.
FOURTH: The total number of Shares of capital stock that the
Corporation has authority to issue has not been changed by the Board of
Directors.
The undersigned, President of Sanford C. Bernstein Fund, Inc.,
has signed these Articles Supplementary in the Corporation's name and
on its behalf and acknowledges that these Articles Supplementary are the
act of the Corporation, that to the best of his knowledge, information
and belief all matters and facts set forth therein relating to the
authorization and approval of the Articles Supplementary are true in all
material respects and that this statement is made under the penalties of
perjury.
IN WITNESS WHEREOF, these Articles Supplementary have been executed on
behalf of Sanford C. Bernstein Fund, Inc. this 26th day of February, 1996.
SANFORD C. BERNSTEIN FUND, INC.
Roger Hertog
President
Attest:
Jean Margo Reid
Secretary
2
<PAGE>
Exhibit (5)(a)(6)
SANFORD C. BERNSTEIN FUND, INC.
INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT MANAGEMENT AGREEMENT, dated as of October 11, 1995 between SANFORD C.
BERNSTEIN FUND, INC., a Maryland Corporation, (the "Fund"), on behalf of the
Bernstein Emerging Markets Value Portfolio (the "Portfolio"), and SANFORD C.
BERNSTEIN & CO., INC., a New York Corporation (the "Adviser" or "Bernstein").
In consideration of the mutual agreements herein made, the parties hereto agree
as follows:
1. Duties of the Adviser. The Adviser shall manage the investment operations
of the Portfolio and the Fund including, but not limited to, continuously
providing the Portfolio with investment management, including investment
research, advice and supervision, determining which securities or other
investments including, but not limited to, debt and equity securities, futures,
options and options on futures, shall be purchased or sold by the Portfolio,
making purchases and sales of securities and such other investments on behalf
of the Portfolio and determining how voting and other rights with respect to
securities and other investments owned by the Fund on behalf of the Portfolio
shall be exercised, subject in each case to oversight by the Board of
Directors of the Fund (the "Directors" or the "Board") and in accordance with
the investment objectives and policies of the Fund and of the Portfolio set
forth in the Registration Statement and the current Prospectus and Statement
of Additional Information relating to the Fund or the Portfolio, as amended
from time to time, the requirements of the Investment Company Act of 1940, as
amended (the "Act") and other applicable law. The Fund understands that the
Adviser may also act as the investment manager to other persons or entities,
including other investment companies.
2. Limitation of Liability. Subject to Section 36 of the Act, the Adviser, and
the directors, officers and employees of the Adviser, shall not be liable to the
Fund or the Portfolio for any error of judgment or mistake of law or for any
loss arising out of any investment or the performance or non-performance of
duties under this Agreement, except for willful misfeasance, bad faith or gross
negligence in the performance of, or by reason of reckless disregard of,
obligations and duties under this Agreement.
3. Indemnification.
(a) The Fund, on behalf of the Portfolio, shall indemnify and hold harmless
the Adviser, and the directors, officers, and
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<PAGE>
employees of the Adviser, against any loss, liability, claim, damage or expense
(including the reasonable cost of investigating or defending any alleged loss,
liability, claim, damage or expenses and reasonable counsel fees incurred in
connection therewith) arising out of the performance or non-performance of any
duties under this Agreement, provided, however, that nothing herein shall be
deemed to protect the Adviser or any director, officer or employee thereof
against any liability to the Fund or its stockholders, to which the Adviser or
any director, officer or employee thereof would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of
duties or by reason of reckless disregard of obligations and duties under this
Agreement.
4. Expenses. The Adviser shall pay all of its expenses arising from the
performance of its obligations under Section 1 of this Agreement and shall pay
any salaries, fees and expenses of the Directors who are employees of the
Adviser. In addition, during the first two years of operation of the Portfolio,
the Adviser will pay any Portfolio operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) which, together with
fees payable to Bernstein pursuant to the Shareholder Servicing and
Administrative Agreement entered into by the Fund on behalf of the Portfolio and
Adviser, exceed the rate of 2.00% per annum of the Portfolio's average daily net
assets. Portfolio transaction fees on purchases and redemptions are not
operating expenses; no portion of the portfolio transaction fees will be paid by
the Adviser. For the purposes of this Agreement, the term "the first two years
of operation" means the 24-month period commencing with the first day of the
first month after shares of the Portfolio are first issued to the public. The
Adviser shall not be required to pay any other expenses of the Fund or the
Portfolio, including (a) the fees payable to Bernstein under this Agreement and
the Shareholder Servicing and Administrative Agreement; (b) the fees and
expenses of Directors who are not affiliated with Bernstein; (c) the fees and
expenses of the Custodian and Transfer Agent including but not limited to fees
and expenses relating to Fund accounting, pricing of the Portfolio's shares, and
computation of net asset value; (d) the fees and expenses of calculating yield
and/or performance of the Portfolio; (e) the charges and expenses of legal
counsel and independent accountants; (f) all taxes and corporate fees payable to
governmental agencies; (g) the fees of any trade association of which the Fund
is a member; (h) reimbursement of the Portfolio's share of the organization
expenses of the Portfolio or the Fund; (i) the fees and expenses involved in
registering and maintaining registration of the Fund and the shares of the
Portfolio with the Securities and Exchange Commission, registering the Fund as a
broker or dealer and qualifying the shares of the Portfolio under state
securities laws, including the preparation and printing of
2
<PAGE>
the registration statements and prospectuses for such purposes, allocable
communications expenses with respect to investor services, all expenses of
shareholders' and Board of Directors' meetings and preparing, printing and
mailing proxies, prospectuses and reports to shareholders; (j) brokers'
commissions, dealers' mark-ups and any issue or transfer taxes chargeable in
connection with the Portfolio's transactions; (k) the cost of stock
certificates representing shares of the Portfolio; (l) insurance expenses,
including, but not limited to, the cost of a fidelity bond, directors and
officers insurance and errors and omissions insurance; and (m) litigation and
indemnification expenses, expenses incurred in connection with mergers, and
other extraordinary expenses not incurred in the ordinary course of the
Portfolio's business.
5. Compensation. As compensation for the services performed and the facilities
and personnel provided by the Adviser pursuant to Section 1 of this Agreement,
the Fund, on behalf of the Portfolio, will pay to the Adviser, promptly after
the end of each month, a fee assessed at an annual rate of 1.25% of the average
daily net assets of the Portfolio during the month. If the Adviser shall serve
hereunder for less than the whole of any month, the fee hereunder shall be
prorated.
6. Purchase and Sale of Securities. The Adviser shall purchase securities from
or through and sell securities to or through such persons, brokers, or dealers
as the Adviser shall deem appropriate in order to carry out the policy with
respect to portfolio transactions as set forth in the Registration Statement and
the current Prospectus or Statement of Additional Information covering the
Portfolio, as amended from time to time, or as the Directors may direct from
time to time. Nothing herein shall prohibit the Directors from approving the
payment by the Fund of additional compensation to others for consulting
services, supplemental research and security and economic analysis.
7. Term of Agreement. This Agreement shall continue in effect with respect to
the Portfolio for a period of more than two years from the date hereof only so
long as such continuance is specifically approved at least annually in
conformity with the requirements of the Act with regard to investment advisory
contracts; provided, however, that this Agreement may be terminated at any time
without the payment of any penalty, on behalf of the Portfolio, by the Fund, by
the Board or, with respect to the Portfolio, by vote of a majority of the
outstanding voting securities (as defined in the Act) of the Portfolio, or by
the Adviser on not more than 60 days' nor less than 30 days' written notice to
the other party. This Agreement shall terminate automatically in the event of
its assignment (as defined in the Act).
3
<PAGE>
8. Miscellaneous. The Fund hereby agrees that if at any time the Adviser shall
cease to act as investment adviser to the Portfolio or to the Fund, or if at any
time during the continuation of this Agreement the Adviser shall change its name
to delete the reference to Sanford C. Bernstein, the Fund shall take all steps
necessary under law to change its corporate name to delete the reference to
Sanford C. Bernstein or to delete the reference to Bernstein from the name of
the Portfolio, and shall thereafter refrain from using such name with reference
to the Portfolio and, if applicable, the Fund.
This Agreement contains the entire agreement between the parties hereto and
supersedes all prior agreements, understandings and arrangements with respect to
the subject matter hereof. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Anything herein to the
contrary notwithstanding, this Agreement shall not be construed to require, or
to impose any duty upon, either of the parties to do anything in violation of
any applicable laws or regulations.
IN WITNESS WHEREOF, the Fund, on behalf of the Portfolio, and the Adviser have
caused this Agreement to be executed by their duly authorized officers as of the
date first above written.
SANFORD C. BERNSTEIN & CO., INC.
By: Lewis A. Sanders, Chairman
SANFORD C. BERNSTEIN FUND, INC.
By: Jean Margo Reid, Secretary
4
<PAGE>
Exhibit (5)(b)(4)
SANFORD C. BERNSTEIN FUND, INC.
SHAREHOLDER SERVICING AND ADMINISTRATIVE AGREEMENT
SHAREHOLDER SERVICING AND ADMINISTRATIVE AGREEMENT, dated as of October 11,
1995, between SANFORD C. BERNSTEIN FUND, INC., a Maryland Corporation (the
"Fund"), on behalf of the Bernstein Emerging Markets Value Portfolio (the
"Portfolio"), and SANFORD C. BERNSTEIN & CO., INC., a New York Corporation
("Bernstein").
In consideration of the mutual agreements herein made, the parties hereto agree
as follows:
1. Duties of Bernstein.
a. Shareholder Servicing.
Bernstein shall provide shareholder servicing to the Fund, the Portfolio, or its
shareholders, including, but not limited to: (i) processing share purchase and
redemption requests transmitted or delivered to the office of Bernstein; (ii)
proxy solicitations and providing information to shareholders concerning their
mutual fund investments, systematic withdrawal plans, dividend payments and
reinvestments, shareholder account or transaction status, net asset value of
shares, Portfolio performance, Fund services, plans and options, investment
policies, Portfolio holdings and distributions and the taxation thereof; and
(iii) dealing with shareholder complaints and correspondence directed to or
brought to the attention of Bernstein. Bernstein may enter into agreements with
other organizations whereby some or all of Bernstein's duties in this regard may
be delegated, and such organizations will be compensated therefor by Bernstein.
b. Administration.
Bernstein shall also manage the corporate affairs of the Portfolio including,
but not limited to (i) providing office space, clerical, secretarial, and
administrative services (exclusive of, and in addition to, any such service
provided by any others retained by the Fund on behalf of the Portfolio) and
executive and other personnel necessary for the operations of the Fund and of
the Portfolio, (ii) supervising those responsible for the financial and
accounting records required to be maintained by the Fund and (iii) overseeing
the performance of services provided to the Fund on behalf of the Portfolio by
others, including the Custodian and Transfer Agent. Bernstein's performance of
its duties under this Agreement shall be subject in each case to oversight by
the Board of Directors of the Fund (the "Board") and in accordance with the
objectives and policies set forth in the
<PAGE>
Registration Statement and the current Prospectus and Statement of
Additional Information relating to the Fund or the Portfolio, as amended
from time to time, the requirements of the Investment Company Act of
1940, as amended (the "Act") and other applicable law.
2. Limitation of Liability. Subject to Section 36 of the Act, Bernstein, and the
directors, officers and employees of Bernstein, shall not be liable to the Fund
or the Portfolio for any error of judgment or mistake of law or for any loss
arising out of the performance or non-performance of duties under this
Agreement, except for willful misfeasance, bad faith or gross negligence in the
performance of, or by reason of reckless disregard of, obligations and duties
under this Agreement.
3. Indemnification. The Fund, on behalf of the Portfolio, shall indemnify and
hold harmless Bernstein, and the directors, officers, and employees of
Bernstein, against any loss, liability, claim, damage or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damage or expenses and reasonable counsel fees incurred in connection
therewith) arising out of the performance or non-performance of any duties under
this Agreement, provided, however, that nothing herein shall be deemed to
protect Bernstein or any director, officer or employee thereof against any
liability to the Fund or its stockholders, to which Bernstein or any director,
officer or employee thereof would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under this Agreement.
4. Expenses. Bernstein shall pay all of its expenses arising from the
performance of its obligations under Section 1 of this Agreement and shall pay
any salaries, fees and expenses of the Directors who are employees of Bernstein.
Bernstein shall not be required to pay any other expenses of the Fund or the
Portfolio, including (a) the fees payable to Bernstein under this Agreement and
the Investment Management Agreement; (b) the fees and expenses of Directors who
are not affiliated with Bernstein; (c) the fees and expenses of the Custodian
and Transfer Agent, including but not limited to fees and expenses relating to
Fund accounting, pricing of the shares of the Portfolio and computation of net
asset value; (d) the fees and expenses of calculating yield and/or performance
of the Portfolio; (e) the charges and expenses of legal counsel and independent
accountants; (f) all taxes and corporate fees payable to governmental agencies;
(g) the fees of any trade association of which the Fund is a member; (h)
reimbursement of the Portfolio's share of the organization expenses of the
Portfolio or the Fund; (i) the fees and expenses involved in registering and
maintaining registration of the Fund
<PAGE>
and the Portfolio's shares with the Securities and Exchange Commission,
registering the Fund as a broker or dealer and qualifying the shares of
the Portfolio under state securities laws, including the preparation and
printing of the registration statements and prospectuses for such
purposes, allocable communications expenses with respect to investor
services, all expenses of shareholders' and Board of Directors' meetings
and preparing, printing and mailing proxies, prospectuses and reports to
shareholders; (j) brokers' commissions, dealers' mark-ups and any issue
or transfer taxes chargeable in connection with the Portfolio's
transactions; (k) the cost of stock certificates representing shares of
the Portfolio; (l) insurance expenses, including, but not limited to,
the cost of a fidelity bond, directors and officers insurance and errors
and omissions insurance; and (m) litigation and indemnification
expenses, expenses incurred in connection with mergers, and other
extraordinary expenses not incurred in the ordinary course of the
Portfolio's business.
5. Compensation. As compensation for the services performed and the facilities
and personnel provided by Bernstein pursuant to Section 1 of this Agreement, the
Fund, on behalf of the Portfolio, will pay to Bernstein, promptly after the end
of each month, a fee assessed at an annual rate of .25 of 1% of the average
daily net assets of the Portfolio during the month. If Bernstein shall serve
hereunder for less than the whole of any month, the fee hereunder shall be
prorated. Nothing herein shall prohibit the Directors from approving the payment
by the Fund, or the Portfolio, of additional compensation to others for
consulting services, supplemental research and security and economic analysis.
6. Term of Agreement. This Agreement shall continue in effect with respect to
the Portfolio for a period of more than two years from the date hereof only so
long as such continuance is specifically approved at least annually in
conformity with the requirements of the Act with regard to investment advisory
contracts; provided, however, that this Agreement may be terminated at any time
without the payment of any penalty, on behalf of the Portfolio, by the Fund, by
the Board or, with respect to the Portfolio, by vote of a majority of the
outstanding voting securities (as defined in the Act) of the Portfolio, or by
Bernstein, on not more than 60 days' nor less than 30 days' written notice to
the other party. This Agreement shall terminate automatically in the event of
its assignment (as defined in the Act).
7. Miscellaneous. This Agreement may be amended by mutual written consent. This
Agreement contains the entire agreement between the parties hereto and
supersedes all prior agreements,
<PAGE>
understandings and arrangements with respect to the subject matter
hereof. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York. Anything herein to the contrary
notwithstanding, this Agreement shall not be construed to require, or to
impose any duty upon, either of the parties to do anything in violation
of any applicable laws or regulations. Bernstein may perform the same
services for other persons or entities, including other investment
companies.
IN WITNESS WHEREOF, the Fund, on behalf of the Portfolio, and Bernstein have
caused this Agreement to be executed by their duly authorized officers as of the
date first above written.
SANFORD C. BERNSTEIN & CO., INC.
By: Lewis A. Sanders, Chairman
SANFORD C. BERNSTEIN FUND, INC.
By: Stuart K. Nelson, Senior Vice President
<PAGE>
Exhibit (6)(e)
SANFORD C. BERNSTEIN FUND, INC.
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 11th day of October, 1995, between SANFORD C. BERNSTEIN
FUND, INC., a Maryland corporation (the "Fund"), on behalf of the Bernstein
Emerging Markets Value Portfolio (the "Portfolio"), and SANFORD C. BERNSTEIN &
CO., INC., a New York corporation, 767 Fifth Avenue, New York, New York 10153
(the "Distributor").
In consideration of the mutual covenants contained herein, the parties agree as
follows:
1. Appointment of the Distributor.
The Fund, on behalf of the Portfolio, hereby appoints the Distributor as its
exclusive agent to sell the stock of the Portfolio (the "Shares"), on a best
efforts basis, and the Distributor hereby accepts such appointment. All sales
by the Distributor shall be subject to acceptance by the Fund on behalf of the
Portfolio. The Distributor shall be the exclusive representative of the Fund
to act as principal underwriter and distributor, except that:
The exclusive rights granted to the Distributor to sell Shares on behalf of the
Fund shall not apply to Shares issued in connection with the merger or
consolidation of any other investment company or personal holding company with
the Fund or the Portfolio or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding shares of any such company by
the Fund or the Portfolio. Such exclusive rights shall also not apply to shares
issued by the Fund or the Portfolio pursuant to reinvestment of dividends or
capital gains distributions.
2. Sales of Shares.
The Distributor agrees that (i) all Shares sold by the Distributor shall be sold
at the net asset value thereof as described in Section 3 hereof, and (ii) the
Fund, on behalf of the Portfolio, shall receive 100% of such net asset value.
The Distributor may enter into agreements, in form and substance satisfactory to
the Fund on behalf of the Portfolio, with dealers selected by the Distributor,
providing for 1) the sale to such dealers and resale by such dealers of Shares,
or 2) the sale of Shares through such Distributor acting as agent, either to
clients of the Distributor or other persons, in all cases at the Shares' net
asset value. The Fund shall have the right to suspend the
1
<PAGE>
sale of Shares at times when redemption is suspended pursuant to the conditions
set forth in Section 4 hereof. The Fund, on behalf of the Portfolio, shall also
have the right to suspend the sale of Shares if trading on the New York Stock
Exchange shall have been suspended, if a banking moratorium shall have been
declared by Federal or New York authorities, or if there shall have been some
other event, which, in the judgment of the Fund, makes it impracticable or
inadvisable to sell the shares.
3. Net Asset Value.
The Fund, on behalf of the Portfolio, agrees to supply to the Distributor,
promptly after the time or times at which the net asset value for the Portfolio
is determined, on each day on which the net asset value of the Portfolio is
determined as set forth in the then-current Prospectus of the Fund or the
Portfolio, (each such day being hereinafter called a "business day") a statement
of the net asset value per share of the Portfolio determined in the manner set
forth in the then-current Prospectus and Statement of Additional Information of
the Fund or the Portfolio. Each determination of net asset value per share shall
take effect as of such time or times on each business day as set forth in the
then-current Prospectus of the Fund or the Portfolio and shall prevail until the
time as of which the next determination is made.
The Distributor may reject any order for Shares. The Fund, on behalf of the
Portfolio, or any agent of the Fund designated in writing by the Fund, shall be
promptly advised of all purchase orders for Shares received by the Distributor.
Any order may be rejected by the Fund (or its agent) on behalf of the Portfolio.
The Fund (or its agent) will confirm orders upon their receipt, will make
appropriate book entries and upon receipt by the Fund (or its agent) of payment
therefor, will deliver any required certificates for such Shares pursuant to the
instructions of the Distributor. The Distributor agrees to cause payment and
such instructions to be delivered promptly to the Fund (or its agent).
4. Repurchase or Redemption of Shares by the Fund.
Any of the outstanding Shares may be tendered for redemption at any time, and
the Fund, on behalf of the Portfolio, agrees to repurchase or redeem the Shares
so tendered on behalf of the Portfolio in accordance with its obligations as set
forth in Article V of its Articles of Incorporation, as amended from time to
time, and in accordance with the applicable provisions set forth in the
Prospectus. The price to be paid to redeem or repurchase the Shares shall be
equal to the net asset value per share determined as set forth in the
Prospectus. All payments by the Fund on behalf of the Portfolio hereunder shall
be made in the manner set forth below.
2
<PAGE>
The Fund, on behalf of the Portfolio, shall pay the total amount of the
redemption price as defined in the above paragraph pursuant to the instructions
of the Distributor on or before the seventh day subsequent to its having
received the notice of redemption in proper form. The proceeds of any redemption
of Shares shall be paid by the Fund to or for the account of the redeeming
stockholder, in accordance with applicable provisions of the then-current
Prospectus of the Fund or the Portfolio.
Redemption of, or payment with regard to, the Shares of the Portfolio may be
suspended at times when the New York Stock Exchange is closed, when trading on
said Exchange is closed, when trading on said Exchange is restricted, when an
emergency exists as a result of which disposal by the Fund of securities owned
by it on behalf of the Portfolio is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of the
Portfolio's net assets, or during any other period when the Securities and
Exchange Commission, by order, so permits.
5. Sales Literature.
The Fund, on behalf of the Portfolio, shall have the right to review, to the
extent it deems appropriate, all sales literature and advertisements used by the
Distributor in connection with sales of Shares. No such sales literature or
advertisements shall be used if the Fund objects thereto. The Fund authorizes
the Distributor, in connection with the sale or arranging for the sale of
Shares, to provide only such information and to make only such statements or
representations as are contained in the Fund's or the Portfolio's then-current
Prospectus or Statement of Additional Information, sales literature or
advertisements or in such financial and other statements as are furnished to the
Distributor pursuant to the next paragraph. Neither the Fund nor the Portfolio
shall be responsible in any way for any information provided, or statements or
representations made, by the Distributor or its representatives or agents other
than the information, statements and representations described in the preceding
sentence.
6. Expenses.
The Distributor shall pay all of its expenses arising from the performance of
its obligations under Section 1 of this Agreement and shall pay any salaries,
fees and expenses of the Directors who are employees of the Distributor. The
Distributor shall not be required to pay any other expenses of the Fund or the
Portfolio, including (a) the fees payable to Bernstein under the Investment
Management Agreement and the Shareholder Servicing and Administrative Agreement;
(b) the fees and expenses of Directors
3
<PAGE>
who are not affiliated with the Distributor; (c) the fees and expenses of the
Custodian and Transfer Agent, including but not limited to fees and expenses
relating to Fund accounting, pricing of Portfolio shares, and computation of
net asset value; (d) the fees and expenses of calculating yield and/or
performance of the Portfolio; (e) the charges and expenses of legal counsel
and independent accountants; (f) all taxes and corporate fees payable to
governmental agencies; (g) the fees of any trade association of which the Fund
is a member; (h) reimbursement of the Portfolio's share of the organization
expenses of the Portfolio or the Fund; (i) the fees and expenses involved in
registering and maintaining registration of the Fund and the Portfolio's shares
with the Securities and Exchange Commission, registering the Fund as a broker
or dealer and qualifying the shares of the Portfolio under state securities
laws, including the preparation and printing of the registration statements and
prospectuses for such purposes, allocable communications expenses with respect
to investor services, all expenses of shareholders' and Board of Directors'
meetings and preparing, printing and mailing proxies, prospectuses and reports
to shareholders; (j) brokers' commissions, dealers' mark-ups and any issue or
transfer taxes chargeable in connection with the Portfolio's transactions;
(k) the cost of stock certificates representing shares of the Portfolio;
(l) insurance expenses, including, but not limited to, the cost of a fidelity
bond, directors and officers insurance and errors and omissions insurance; and
(m) litigation and indemnification expenses, expenses incurred in connection
with mergers, and other extraordinary expenses not incurred in the ordinary
course of the Portfolio's business.
7. Duties of the Fund.
The Fund shall maintain a currently effective Registration Statement on the
appropriate form and shall file with the Securities and Exchange Commission
("SEC") such reports and other documents as may be required under the Securities
Act of 1933 as amended and the Investment Company Act of 1940, as amended (the
"1940 Act"), or by the rules and regulations of the SEC thereunder. The Fund
shall keep the Distributor fully informed with regard to its affairs and the
affairs of the Portfolio, shall furnish the Distributor with a certified copy of
all financial statements and a signed copy of each report prepared by its
independent auditors, and shall cooperate fully in the efforts of the
Distributor to negotiate and sell the Shares and in the performance by the
Distributor of all its duties under this Agreement.
8. Indemnification.
4
<PAGE>
The Fund, on behalf of the Portfolio, shall indemnify and hold harmless the
Distributor, against any loss, liability, claim, damage or expense (including
the reasonable cost of investigating or defending any alleged loss, liability,
claim, damage or expenses and reasonable counsel fees incurred in connection
therewith) arising out of its activities as a Distributor to the Fund or the
Portfolio, provided, however, that nothing herein shall be deemed to protect the
Distributor or any director, officer, or employee thereof against any liability
to the Fund or its stockholders, to which the Distributor or any director,
officer, or employee thereof would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under this Agreement.
9. Limitation of Liability.
Subject to Section 36 of the Act, the Distributor, and the directors,
officers and employees of the Distributor, shall not be liable to the Fund or
the Portfolio for any error of judgment or mistake of law or for any loss
arising out of the performance or non-performance of duties under this
Agreement, except for willful misfeasance, bad faith or gross negligence in the
performance of, or by reason of reckless disregard of, obligations and duties
under this Agreement.
10. Term of Agreement.
This Agreement shall continue in effect with respect to the Portfolio for a
period of more than two years from the date hereof only so long as such
continuance is specifically approved at least annually in conformity with the
requirements of the Act; provided, however, that this Agreement may be
terminated at any time, without the payment of any penalty, by the Fund on
behalf of the Portfolio, by the Board of Directors of the Fund or, with respect
to the Portfolio, by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Portfolio, or by the Distributor, on not more
than 60 days' nor less than 30 days' written notice to the other party.
11. Miscellaneous.
This Agreement may be amended by mutual written consent. This Agreement contains
the entire agreement between the parties hereto and supersedes all prior
agreements, understandings and arrangements with respect to the subject matter
hereof. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. Anything herein to the contrary notwithstanding,
this Agreement shall not be construed to require, or to impose any duty upon
either of the parties, to do anything
5
<PAGE>
in violation of any applicable laws or regulations. The Distributor may
perform the same services to the Fund, on behalf of the Portfolio, and to
other persons or other entities, including other investment companies.
IN WITNESS WHEREOF, the Fund, on behalf of the Portfolio, and the
Distributor have caused this Agreement to be executed by their duly authorized
officers as of the date first above written.
SANFORD C. BERNSTEIN & CO., INC.
By: Lewis A. Sanders, Chairman
SANFORD C. BERNSTEIN FUND, INC.
By: Stuart K. Nelson, Senior Vice President
6
<PAGE>
Exhibit (8)(q)
SEVENTH AMENDMENT TO CUSTODIAN CONTRACT
AGREEMENT dated as of the 6th day of May, 1996 between State Street Bank
and Trust Company (the "Custodian") and Sanford C. Bernstein Fund, Inc.
(the "Fund").
WHEREAS, the Custodian and the Fund are parties to a Custodian Contract dated as
of October 12, 1988, as amended as of May 8, 1989, July 24, 1989, April 30,
1990, March 18, 1992, April 19, 1994 and August 21, 1995; and
WHEREAS, the Custodian and the Fund desire to amend Schedule A to the
Custodian Contract to change the approved German subcustodian for the
Fund from BHF-Bank Aktiengesellsehaft to Dresdner Bank AG;
NOW THEREFORE, in consideration of the premises and convenants contained
herein, the Custodian and the Fund hereby agree that the reference to
"BHF-Bank Aktiengesellsehaft" as the German subcustodian bank on
Schedule A to the Custodian Contract shall be deleted and "Dresdner Bank
AG" shall be substituted therefor.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative as
a sealed instrument as of the date first above written.
SANFORD C. BERNSTEIN FUND, INC.
By: Jean Margo Reid, Secretary
STATE STREET BANK AND TRUST COMPANY
By: Jeff D. Conway, Vice President
<PAGE>
Exhibit (8)(r)
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
SANFORD C. BERNSTEIN FUND, INC.
- - Bernstein Government Short Duration Portfolio
- - Bernstein Short Duration Plus Portfolio
- - Bernstein New York Municipal Portfolio
- - Bernstein Diversified Municipal Portfolio
- - Bernstein Intermediate Duration Portfolio
- - Bernstein California Municipal Portfolio
- - Bernstein Short Duration New York Municipal Portfolio
- - Bernstein Short Duration California Municipal Portfolio
- - Bernstein Short Duration Diversified Municipal Portfolio
I. ADMINISTRATION
Custody. Portfolio and Fund Accounting Service - Maintain custody of fund
assets. Settle portfolio purchases and sales. Report buy and sell fails.
Determine and collect portfolio income. Make cash disbursements and report cash
transactions. Maintain investment ledgers, provide selected portfolio
transactions, position and income reports. Maintain general ledger and capital
stock accounts. Prepare daily trial balance. Calculate net asset value daily.
Provide selected general ledger reports. Securities yield or market value
quotations will be provided to State Street by the fund.
The administration fee shown below is an annual charge, billed and payable
monthly, based on average monthly net assets.
ANNUAL FEES PER PORTFOLIO
Custody, Portfolio
Fund Net Assets and Fund Accounting
First $20 Million 1/15 of 1%
Next $80 Million 1/30 of 1%
Next $100 Million 1/100 of 1%
Excess 1/200 of 1%
Minimum Monthly Charges: $2,500*
* For new portfolios, the monthly minimum fee will be phased in as follows:
Minimum
Month 1 $ 0
Month 2 500
Month 3 1,000
Month 4 1,500
Month 5 2,000
Month 6 2,500
<PAGE>
II. GLOBAL CUSTODY
Includes: Maintain custody of assets. Settling portfolio purchases and sales.
Reporting buy and sell fails. Determine and collecting portfolio income. Making
cash disbursements and reporting cash transactions. Monitoring corporate
actions. Withholding foreign taxes. Filing foreign tax reclaims.
A. Holdings Fees (basis points per portfolio per annum):
<TABLE>
<CAPTION>
Group I Group II Group III Group IV Group V Group VI Group VII Group VIII
<S> <C> <C> <C> <C> <C> <C> <C>
Canada Australia Austria Finland Indonesia Argentina Chile Bangladesh
Denmark Belgium Malaysia Thailand Philippines Brazil China Columbia
Euroclear France Mexico Hong Kong S. Korea Taiwan Greece India
Germany Ireland Singapore Turkey Poland Israel
Japan Italy S. Africa Portugal Pakistan
U.K. Netherlands Spain Sri Lanka Peru
New Zealand Sweden Uruguay
Norway Venezuela
Switzerland
</TABLE>
<TABLE>
<CAPTION>
Group I Group II Group III Group IV Group V Group VI Group VII Group VIII
<S> <C> <C> <C> <C> <C> <C> <C>
3.0 5.0 8.0 10.0 15.0 25.0 30.0 40.0
</TABLE>
B. Transaction Charges (U.S. Dollars): *
Group I Group II Group III Group IV Group V Group VI
$30 $60 $75 $100 $125 $150
Canada Australia Argentina China Hungary Bangladesh
Euroclear Austria Belgium Columbia Jordan Uruguay
Germany France Brazil Greece Pakistan
Japan Hong Kong Chile India Peru
Mexico Italy Denmark New Zealand
Netherlands S. Africa Finland Norway
Spain Indonesia Singapore
Switzerland Ireland Zimbabwe
Thailand Israel
U.K. Malaysia
Philippines
Poland
Portugal
S. Korea
Sri Lanka
Sweden
Taiwan
Turkey
Venezuela
<PAGE>
III. DOMESTIC PORTFOLIO TRADES
For each line item processed:
State Street Bank Repos $7.00
DTC or Fed Book Entry $12.00
New York Physical Settlements $25.00
Maturity Collections $8.00
All Other Trades $16.00
IV. OPTIONS
Option charge for each option written or closing contract,
per issue, per broker $25.00
Option expiration charge, per issue, per broker $15.00
Option exercised charge, per issue, per broker $15.00
V. LENDING OF SECURITIES
Deliver loaned securities versus cash collateral $20.00
Deliver loaned securities versus securities collateral $30.00
Receive/deliver additional cash collateral $6.00
Substitutions of securities collateral $30.00
Deliver cash collateral versus receipt of loaned securities $15.00
Deliver securities collateral versus receipt of loaned securities $25.00
Loan administration - mark-to-market per day, per loan $3.00
VI. INTEREST RATE FUTURES
Transactions - no security movement $8.00
VII. HOLDINGS CHARGE
For each issue maintained - monthly charge $5.00
VIII. PRINCIPAL REDUCTION PAYMENTS
Per paydown $10.00
<PAGE>
IX. FEE INFORMATION FOR AUTOMATED PRICING
This service provides securities pricing on request. Services and fees are based
on the schedule below. Reports can be generated at State Street or on a remote
basis via PC. Reporting has both up load and down load capabilities. Customized
reports may require programming fees:
Monthly charges for the State Street Bank Automated Pricing System are
determined by:
1. Mix of security positions.
2. The number of positions that are priced during the month.
Monthly Base Fee Per Fund $ 375.00
Monthly Quote Charge:
Municipal Bonds via Muller Date $ 21.00
Municipal Bonds via Kenny Information Systems $ 16.00
Government, Corporate and Convertible Bonds via
Merrill Lynch $ 11.00
Corporate and Government Bonds via Muller Data $ 11.00
Options, Futures and Private Placements $ 6.00
Foreign Equities and Bonds $ 6.00
Listed Equities, OTC Equities, and Bonds $ 6.00
Corporate, Municipal, Convertible and Government Bonds,
adjustable Rate Preferred Stocks via IDSI $ 6.00
For billing purposes, the monthly quote charge will be based on the average
number of positions in the portfolio.
X. ADVERTISED YIELD SERVICE
GENERAL:
Provide performance results of the fund in accordance with the provisions of our
Yield Calculation Service Agreement.
ANNUAL MAINTENANCE FEE:
For each portfolio maintained, monthly charge is based on the number of
holdings* as follows:
Holding per Portfolio Monthly Charge
0 to 50 $250
50 to 100 $300
Over 100 $350
* For mortgage backed assets, the charge is per composite holding.
XI. DIVIDEND CHARGES
(For items held at the Request of Traders over record
date in street form) $50.00
<PAGE>
XII. SPECIAL SERVICES
Fees for activities of a non-recurring nature such as fund consolidations or
reorganizations, extraordinary security shipments and the preparation of special
reports will be subject to negotiation. Fees for tax accounting/record keeping
for options, financial futures, and special items will be negotiated separately.
XIII. OUT-OF-POCKET EXPENSES
A billing for the recovery of applicable out-of-pocket expenses will be made as
of the end of each month. Out-of-pocket expenses include, but are not limited to
the following:
- - Telephone - Transfer Fees
- - Wire Charges ($5.25 in and $5 out) - Sub-custodian Charges
- - Postage and Insurance - Price Waterhouse Audit Letter
- - Courier Service - Federal Reserve Fee for Return
- - Duplicating Check items over $2,500 ($4.25 each)
- - Legal Fees - GNMA Transfer ($15 each)
- - Supplies Related to Fund Records
- - Rush Transfer ($8 each)
XIV. PAYMENT
The above fees will be charged against the fund's custodian checking account
five (5) days after the invoice is mailed to the fund's offices.
SANFORD C. BERNSTEIN FUND, INC.
By: Jean Margo Reid
Title: Secretary
Date: July 9, 1996
STATE STREET BANK & TRUST COMPANY
By: Jeff D. Conway
Title: Vice President
Date: July 3, 1996
<PAGE>
Exhibit (8)(s)
STATE STREET BANK AND TRUST COMPANY
Custodian Fee Schedule
Sanford Bernstein International Fund
Sanford Bernstein Emerging Market Fund
I. GLOBAL CUSTODY
Includes: Maintaining custody of assets. Settling portfolio purchases and sales.
Reporting buy and sell fails. Determining and collecting portfolio income.
Making cash disbursements and reporting cash transactions. Monitoring corporate
actions. Withholding foreign taxes. Filing foreign tax reclaims.
A. Holdings Fees (basis points per portfolio per annum):
<TABLE>
<CAPTION>
Group I Group II Group III Group IV Group V Group VI Group VII Group VIII
<S> <C> <C> <C> <C> <C> <C> <C>
Canada Australia Austria Finland Indonesia Argentina Chile Bangladesh
Denmark Belgium Malaysia Thailand Philippines Brazil China Columbia
Euroclear France Mexico Hong Kong S. Korea Taiwan Greece India
Germany Ireland Singapore Turkey Poland Israel
Japan Italy S. Africa Portugal Pakistan
U.K. Netherlands Spain Sri Lanka Peru
New Zealand Sweden Uruguay
Norway Venezuela
Switzerland
</TABLE>
<TABLE>
<CAPTION>
Group I Group II Group III Group IV Group V Group VI Group VII Group VIII
<S> <C> <C> <C> <C> <C> <C> <C>
3.0 5.0 8.0 10.0 15.0 25.0 30.0 40.0
</TABLE>
B. Transaction Charges (U.S. Dollars): *
<TABLE>
<CAPTION>
Group I Group II Group III Group IV Group V Group VI
<S> <C> <C> <C> <C> <C>
$30 $60 $75 $100 $125 $150
Canada Australia Argentina China Hungary Bangladesh
Euroclear Austria Belgium Columbia Jordan Uruguay
Germany France Brazil Greece Pakistan
Japan Hong Kong Chile India Peru
Mexico Italy Denmark New Zealand
Netherlands S. Africa Finland Norway
Spain Indonesia Singapore
Switzerland Ireland Zimbabwe
Thailand Israel
U.K. Malaysia
Philippines
Poland
Portugal
S. Korea
Sri Lanka
Sweden
Taiwan
Turkey
Venezuela
</TABLE>
<PAGE>
* Electronic delivered trade transactions will be lowered by $3.00
Settlement of Third Party Foreign Exchange (per transaction) $50.00
II. DOMESTIC CUSTODY CHARGES
Transactions
Holding Fees Annual Fee in Basis Points
First 50 million 3
Next 50 million 2
Over 100 million 1
State Street Bank Repos $ 7.00
DTC or Fed Book Entry Buy/Sell $12.00
New York Physical Buy/Sell $25.00
PTC Buy/Sell $12.00
All other trades $16.00
Option charge for each option written or closing contract,
per issue, per broker $25.00
Option expiration/Option exercised $15.00
Deliver loaned securities versus cash collateral $20.00
Deliver loaned securities versus securities collateral $30.00
Receive/deliver additional cash collateral $ 6.00
Substitutions of securities collateral $30.00
Deliver cash collateral versus receipt of loaned securities $15.00
Deliver securities collateral versus receipt of loaned securities $25.00
Loan administration - mark-to-market per day, per loan $ 3.00
Interest Rate Futures - no security movement $ 8.00
Monitoring for calls and processing coupons - $ 5.00
for each coupon issue held - monthly charge
Principal reduction payments per paydown $10.00
Dividend charges (for items held at the request of $50.00
traders over record date in street form)
<PAGE>
III. PORTFOLIO AND FUND ACCOUNTING
Maintain investment ledgers selected portfolio transactions, position and income
reports. Maintain general ledger and capital stock accounts. Prepare daily trial
balance. Calculate net asset value. Provide selected general ledger reports.
Securities yield or market value quotations will be provided to State Street by
the fund or via State Street's pricing service. (see schedule IV.)
$3,750 per month
IV. PRICING SERVICE
Monthly Quote Charge: (Based on the average number of positions in portfolio)
Municipal Bonds via Muller Data $21.00
Municipal Bonds via Kenny Information System $16.00
Government, Corporate and Convertible Bonds via Merrill Lynch $12.00
Corporate and Government Bonds via Muller Data $11.00
Options, Futures and Private Placements $ 6.00
Foreign Equities and Bonds via Extel Ltd. $ 5.00
Listed Equities, OTC Equities, and Bonds $ 6.00
Corporate, Municipal, Convertible and Government Bonds, $ 6.00
Adjustable Rate Preferred Stocks via IDSI
V. SPECIAL SERVICES
Fees for activities of non-recurring nature such as consolidations or
reorganizations, extraordinary security shipments and the preparation of special
reports will be subject to negotiation. Fees for tax accounting/recordkeeping
for options, financial futures and other special items will be negotiated
separately.
<PAGE>
VI. OUT-OF-POCKET EXPENSES
A billing for the recovery of applicable out-of-pocket expenses will be made as
of the end of each month. Out-of-pocket expenses include, but are not limited to
the following:
Telephone
Wire Charges ($5.25 per wire in and $5.00 out)
Postage and Insurance
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfer - $8.00 each
Transfer Fees
Sub-Custodian Out-of-Pocket Charges (e.g. stamp duties, registration, etc.)
Price Waterhouse Audit Letter
Federal Reserve Fee for Return Check Items Over $2,500 - $4.25
GNMA Transfer - $15.00 Each
VII. BALANCE CREDITS
A balance credit equal to 90% of the 90-day Treasury Bill rate, in effect the
last business day of each month, will be applied to the Custodian Demand Deposit
Account (U.S.) balance, net of check redemption service overdrafts, on a
pro-rated basis against the fund's Custodian Fees, excluding out-of-pocket
expenses. The balance credit will be cumulative and carried forward each month.
Any excess credit remaining at year-end (December 3lst) will not be carried
forward.
SANFORD C. BERNSTEIN FUND, INC.
By: Jean Margo Reid
Title: Secretary
Date: July 9, 1996
STATE STREET BANK AND TRUST CO.
By: Jeff D. Conway
Title: Vice President
Date: June 26, 1996
<PAGE>
Exhibit (8)(t)
EIGHTH AMENDMENT TO CUSTODIAN CONTRACT
AGREEMENT dated as of the 25th day of September, 1996 between State Street
Bank and Trust Company (the "Custodian") and Sanford C. Bernstein Fund, Inc.
(the "Fund").
WHEREAS, the Custodian and the Fund are parties to a Custodian Contract dated as
of October 12, 1988, as amended as of May 8, 1989, July 24, 1989, April 30,
1990, March 18, 1992, April 19, 1994, August 21, 1995 and May 6, 1996; and
WHEREAS, the Custodian and the Fund desire to amend (1) Schedule A to the
Custodian Contract to change the approved Italian subcustodian for the Fund from
Morgan Guaranty Trust Company to Banque Paribas and to add The Fuji Bank,
Limited as an additional subcustodian in Japan and (2) Schedule B to the
Custodian Contract to add The Hongkong and Shanghai Banking Corporation as an
additional subcustodian in India;
NOW THEREFORE, in consideration of the premises and covenants contained herein,
the Custodian and the Fund hereby agree to amend Schedules A and B to the
Custodian Contract in their entirety to read as set forth on Schedules A and B
hereto.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative as a
sealed instrument as of the date first above written.
SANFORD C. BERNSTEIN FUND, INC.
By: Jean Margo Reid, Secretary
STATE STREET BANK AND TRUST COMPANY
By: Jeff D. Conway, Vice President
<PAGE>
SCHEDULE A COVERING
BERNSTEIN GOVERNMENT SHORT DURATION PORTFOLIO
BERNSTEIN SHORT DURATION PLUS PORTFOLIO
BERNSTEIN INTERMEDIATE DURATION PORTFOLIO
BERNSTEIN DIVERSIFIED MUNICIPAL PORTFOLIO
BERNSTEIN NEW YORK MUNICIPAL PORTFOLIO
BERNSTEIN CALIFORNIA MUNICIPAL PORTFOLIO
BERNSTEIN SHORT DURATION CALIFORNIA MUNICIPAL PORTFOLIO
BERNSTEIN SHORT DURATION DIVERSIFIED MUNICIPAL PORTFOLIO
BERNSTEIN SHORT DURATION NEW YORK MUNICIPAL PORTFOLIO
BERNSTEIN INTERNATIONAL VALUE PORTFOLIO
BERNSTEIN EMERGING MARKETS VALUE PORTFOLIO
Country Subcustodian(s)
- ------- ---------------
Australia Bank: Westpac Banking Corporation
Depository: Austraclear Limited
Austria Bank: GiroCredit Bank
Aktiengesellschaft der Sparkassen
Depository: Oesterreichische Kontrollbank AG
Belgium Bank: Generale Bank
Depository: Caisse Interprofessionelle de
Depots et de Virements de
Titres S.A. (CIK)
Canada Bank: Canada Trustco Mortgage Company
Depository: The Canadian Depository for
Securities Limited (CDS)
Denmark Bank: Den Danske Bank
Depository: Vaerdipapircentralen - The
Danish Securities Center (VP)
Finland Bank: Merita Bank Limited
Depository: The Central Share Register
of Finland
France Bank: Banque Paribas
Depository: Societe Interprofessionnelle
pour la Compensation des Valeurs
Mobilieres (SICOVAM)
Germany Bank: Dresdner Bank AG
Depository: The Deutscher Kassenverein AG
Hong Kong Bank: Standard Chartered Bank
Depository: The Central Clearing and
Settlement System (CCASS)
Ireland Bank: Bank of Ireland
Italy Bank: Banque Paribas
Depository: Monte Titoli S.p.A.
Japan Banks: The Sumitomo Trust & Banking
Co., Ltd.
The Daiwa Bank, Limited
The Fuji Bank, Limited
Depository: Japan Securities Depository
Center (JASDEC)
Malaysia Bank: Standard Chartered Bank
Malaysia Berhad
<PAGE>
Depository: Malaysian Central Depository
Sdn. Bhd. (MCD)
Netherlands Bank: MeesPierson N.V.
Depository: Nederlands Centraal Instituut
voor Giraal Effectenverkeer B.V.
(NECIGEF)
New Zealand Bank: ANZ Banking Group (New Zealand)
Limited
Norway Bank: Christiania Bank og Kreditkasse
Depository: Verdipapirsentralen, The
Norwegian Registry of
Securities (VPS)
Singapore Bank: The Development Bank of
Singapore Ltd.
Depository: The Central Depository (Pte)
Limited (CDP)
Spain Bank: Banco Santander, S.A.
Depository: Servicio de Compensacion y
Liquidacion de Valores (SCLV)
Sweden Bank: Skandinaviska Enskilda Banken
(SEB)
Depository: Vardepapperscentralen VPC AB,
The Swedish Securities Register
Center
Switzerland Bank: Union Bank of Switzerland
Depository: Schweizerische Effekten-Giro AG
(SEGA)
United
Kingdom Bank: State Street Bank and Trust
Company, London Branch
State Street London Limited
(Subsidiary) -- access to Euroclear
and Cedel
General Depositories: The Euroclear System (Euroclear)
Cedel Bank societe anonyme
<PAGE>
SCHEDULE B COVERING
BERNSTEIN EMERGING MARKETS VALUE PORTFOLIO
Country Subcustodians
- ------- -------------
Argentina Bank: Citibank, N.A.
Depository: Caja de Valores S.A.
Brazil Bank: Citibank, N.A.
Depositories: Bolsa de Valores de Sao
Paulo (Bovespa)
Banco Central do Brasil,
Systema Especial de
Liquidacao e Custodia
(SELIC)
Chile Bank: Citibank, N.A.
People's Republic
of China Bank: The Hongkong and Shanghai
Banking Corporation
Limited, Shanghai and
Shenzhen Branches
Depositories: Shanghai Securities Central
Clearing and Registration
Corporation (SSCCRC)
Shenzhen Securities
Registrars Co., Ltd. and
its designated agent
banks
Greece Bank: National Bank of Greece S.A.
Depository: The Central Securities
Depository (Apothetirion Titlon
A.E.)
India Bank: Deutsche Bank AG
The Hongkong and Shanghai
Banking Corporation
Limited, Bombay Branch
Indonesia Bank: Standard Chartered Bank
Israel Bank: Bank Hapoalim B.M.
Depository: The Clearing House of the
Tel Aviv Stock Exchange
Republic of
Korea Bank: SEOULBANK
Depository: Korea Securities
Depository (KSD)
Mexico Bank: Citibank Mexico, S.A.
Depositories: S.D. INDEVAL, S.A. de
C.V. (Instituto para el
Deposito de Valores)
Banco de Mexico
Philippines Bank: Standard Chartered Bank
Portugal Bank: Banco Comercial Portugues
Depository: Central de Valores
Mobiliarios (Central)
<PAGE>
South Africa Bank: Standard Bank of South
Africa Limited
Taiwan - R.O.C. Bank: Central Trust of China
Depository: The Taiwan Securities
Central Depository
Company, Ltd. (TSCD)
Thailand Bank: Standard Chartered Bank
Depository: Thailand Securities
Depository Company
Limited (TSD)
Turkey Bank: Citibank, N.A.
Depository: Istanbul Stock Exchange
Settlement and Custody
Co., Inc. (I.M.K.B. Takas
ve Saklama A.S.)
<PAGE>
Exhibit (9)(h)
FIFTH AMENDMENT TO THE TRANSFER AGENCY AGREEMENT
AGREEMENT made as of July 16 , 1996, by and between Sanford C. Bernstein Fund,
Inc. (the "Fund") and State Street Bank and Trust Company, a Massachusetts trust
company having its principal office and place of business at 225 Franklin
Street, Boston, Massachusetts, 02110 (the "Transfer Agent");
WHEREAS the Transfer Agent and the Fund are parties to a Transfer Agency
Agreement dated October 12, 1988, as amended April 30, 1990, March 18, 1992,
April 19, 1994 and August 21, 1995 (the "Transfer Agency Agreement"); and
WHEREAS, Sanford C. Bernstein & Co., Inc., the Fund's investment advisor
("Bernstein"), intends to make available to certain of its customers, a
qualified plan program (the "Program") pursuant to which the customers
("Employers") may adopt certain prototype defined contribution plans ("Plan" or
"Plans") qualified under section 401(a) of the Internal Revenue Code of 1986,
as amended ("Code"); and
WHEREAS, Trust Consultants, Inc. ("TCI") is mass submitter sponsor in accordance
with IRS procedure 89.9 of the Plans to be adopted by Employers who participate
in the Program and each Employer who participates in the Program shall retain
TCI to provide certain administrative services to the Plan adopted by the
Employer and appoint the Transfer Agent to serve as trustee of the trust(s)
established under the Plan(s) (in such capacity, the "Trustee");
WHEREAS, the Fund will make available to Plans, for investment pursuant to the
Plans, shares ("Shares") of the following portfolios of the Fund: Bernstein
Intermediate Duration Portfolio, Bernstein Short Duration Plus Portfolio,
Bernstein International Value Portfolio, Bernstein Emerging Markets Value
Portfolio (the "Portfolios"); and
WHEREAS, the Transfer Agent and the Fund wish to amend the Transfer Agency
Agreement to provide for the Transfer Agent to maintain records and provide
certain additional services to the Fund as set forth in Articles 1 through 5
hereof and to make the other amendments to the Transfer Agency Agreement set
forth in Article 6 hereof.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. Availability of Shares
1.1 The Fund will give the Transfer Agent and each Participating Employer one
hundred and twenty (120) days prior notice of the Fund's ceasing to offer Shares
to Plans, or the best possible notice in the event that the Fund is required by
law to cease offering Shares.
2. Appointment of the Transfer Agent as Record-Keeper
2.1 Each Employer participating in the Program who retains TCI and appoints the
Transfer Agent to serve as Trustee is hereinafter referred to as a
"Participating Employer". For each Plan of a Participating Employer, the
Transfer Agent shall maintain individual 401(k) accounts on its records in its
name as Trustee for the benefit of the individual 401(k) Plan participants (the
"Plan Participants") and shall provide to the Fund all of the services described
in Article 1 of the Transfer Agency Agreement with respect to Plan Participants
as if they were Shareholders (as defined in the Transfer Agency Agreement) of
the Fund.
3. Acknowledgments About the Transfer Agent, the Fund and Bernstein
3.1 The Transfer Agent and the Fund agree that:
(a) The Transfer Agent shall have no responsibility for the selection of any
investments made for the Plans other than to provide the services set forth in
Article 2 hereof; and
<PAGE>
(b) in any communication from the Transfer Agent to any prospective or actual
Employer adopting a Plan or to any Plan Participant, the Transfer Agent shall
not state or represent that it has any investment discretion or other power
concerning investments of any Plan or shall act as Plan Administrator or have
administrative or other responsibility for the administration or operation of
any Plan except as set forth herein.
4. Fees and Expenses; Indemnification
4.1 For the performance by the Transfer Agent pursuant to this Agreement, the
Fund agrees to pay the Transfer Agent fees for each Plan Participant investment
account as set out in the initial Fee Schedule attached hereto.
4.2 The parties agree that there is added to Section 5.01 of the Transfer Agency
Agreement, immediately following subparagraph (e) thereof, the following
subparagraph:
(f) the failure of a Participating Employer to properly direct the investment of
funds in cases where no Participant directions are received or where Participant
directions cannot otherwise be implemented.
5. Covenants of the Fund and the Transfer Agent
5.1 The Transfer Agent shall keep records relating to the services to be
performed hereunder in such form and manner as it may deem advisable. The
Transfer Agent agrees that all such records prepared or maintained by the
Transfer Agent relating to the services to be performed by the Transfer Agent
hereunder are the property of the Fund and each Plan or each Plan Participant as
the case may be, and will be preserved, maintained and made available to each
Plan or each Plan Participant as the case may be, upon their request.
5.2 The Transfer Agent and the Fund agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other
person, except as may be required by law.
5.3 In case of any requests or demands for the inspection of the Plan
Participant records, the Transfer Agent will notify the Fund and the Fund will
endeavor to secure instructions from an authorized officer of the applicable
Participating Employer as to such inspection. The Transfer Agent reserves the
right, however, to exhibit the Plan Participant records to each Plan
Participantor to any person whenever it is advised by counsel that it may be
held liable for the failure to exhibit the Plan Participant records to such
person.
5.4 The Fund agrees that at the time that a Program is adopted by a
Participating Employer and an agreement is entered into between the Fund or
Bernstein and the Participating Employer, the Fund or Bernstein shall require,
as part of such agreement with the Participating Employer that the Participating
Employer or another authorized fiduciary of the Plan deliver directions to the
Trustee regarding the investment of plan assets for which no Participant
directions are received or where implementing Participant directions is
administratively infeasible.
6. Data Access and Proprietary Information
6.1 The Fund acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and other information
furnished to the Fund by the Transfer Agent constitute copyrighted trade secrets
or propriety information of substantial value to the Transfer Agent. Such
databases, programs, formats, designs, techniques and other information
constitute "Proprietary Information" of the Transfer Agent. The Fund agrees that
it shall treat all such Proprietary Information as proprietary to the Transfer
Agent and further agrees that it shall not divulge any Proprietary Information
to any person or organization except as required pursuant to the Program or as
expressly permitted hereunder. The Fund agrees for itself and its employees and
agents:
(a) to use such programs and databases (i) solely on the Fund's computers, or
(ii) solely from equipment at the locations agreed to between the Fund and the
Transfer Agent and (iii) in accordance with the Transfer Agent's applicable user
documentation;
<PAGE>
(b) to refrain from copying or duplicating in any way (other than in the normal
course of performing processing on the Fund's computers) any part of any
Proprietary Information;
(c) to refrain from obtaining unauthorized access to any programs, data or other
information not owned by the Fund, and if such access is accidentally obtained,
to respect and safeguard as Proprietary Information of the Transfer Agent;
(d) to refrain from causing or allowing information transmitted from the
Transfer Agent's computer to the Fund's terminal to be retransmitted to any
other computer terminal or other device except as expressly permitted by the
Transfer Agent, (such permission not to be unreasonably withheld);
(e) that the Fund shall have access only to those authorized transactions as
agreed to between the Fund and the Transfer Agent; and
(f) to honor reasonable written requests made by the Transfer Agent to protect
at the Transfer Agent's expense the rights of the Transfer Agent in Proprietary
Information at common law and under applicable statutes.
Each Party shall take reasonable efforts to advise its employees and agents of
their obligations pursuant to this Section 6.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Transfer Agency Agreement to be executed in their names and on their behalf by
and through their duly authorized officers, as of the day and year first above
written.
SANFORD C. BERNSTEIN FUND, INC.
By: Jean Margo Reid
Title: Secretary
Attest: Louis Mangan
STATE STREET BANK AND TRUST COMPANY
By: Ronald E. Logue
Title: Executive Vice President
Attest: Francine D. Hayes
<PAGE>
Fee Schedule
There will be an annual account maintenance fee of $10 for each investment
account maintained pursuant to this Fifth Amendment to the Transfer Agency
Agreement. The fees provided for in this Fee Schedule are separate from the fees
and expenses for other transfer agency accounts and services provided for in
Article 2 of the Transfer Agency Agreement.
<PAGE>
Exhibit (9)(i)
STATE STREET BANK & TRUST COMPANY
Fee Information for Services as Plan, Transfer and Dividend Disbursing Agent
SANFORD C. BERNSTEIN FUND, INC.
- - Bernstein Government Short Duration Portfolio
- - Bernstein Short Duration Plus Portfolio
- - Bernstein New York Municipal Portfolio
- - Bernstein Diversified Municipal Portfolio
- - Bernstein Intermediate Duration Portfolio
- - Bernstein California Municipal Portfolio
- - Bernstein Short Duration New York Municipal Portfolio
- - Bernstein Short Duration California Municipal Portfolio
- - Bernstein Short Duration Diversified Municipal Portfolio
- - Bernstein International Value Portfolio
- - Bernstein Emerging Markets Value Portfolio
General: Fees are based on an annual per shareholder account charge for account
maintenance plus out-of-pocket expenses. Annual maintenance charges are given
below. There is a minimum charge per portfolio on the following schedule:
Year One $1,000/month/portfolio
Year Two $1,250/month/portfolio
Year Three $l,800/month/portfolio
Annual Maintenance Charges: Fees are billable on a monthly basis at the rate of
1/12 of the annual fee. A charge is made for an account in the month opens or
closes.
Daily Dividend Funds
Basic annual per account fee $10.00
(This includes the processing of 8 share transaction
per account)
Any manual share transaction over the 8 per year $1.50 each
Disaster Recovery/Emergency backup per account,
per year $0.25 each
Other Fees:
Omnibus Accounts - per transaction $2.50 each
Closed Accounts - per account, per month $0.10
Out-Of-Pocket Expenses: Out-of-Pocket expenses include but are not limited to:
confirmation production, postage, forms, telephone, microfilm, microfiche, and
expenses incurred at the specific direction of the Fund. Postage of mass
mailings is due seven days in advance of the mailing date.
<PAGE>
Payment: The above fees will be charged against the Fund's custodian checking
account five days after the invoice is mailed to the Fund's offices.
SANFORD C. BERNSTEIN FUND, INC.
By: Jean Margo Reid
Title: Secretary
Date: July 18, 1996
STATE STREET BANK & TRUST CO.
By: Ronald E. Logue
Title: Executive Vice President
Date:
<PAGE>
Exhibit (9)(j)
SECURITIES LENDING AUTHORIZATION AGREEMENT
Between
SANFORD C. BERNSTEIN FUND, INC. ON
BEHALF OF THE INTERNATIONAL VALUE PORTFOLIO
and
STATE STREET BANK AND TRUST COMPANY
Cover Page
<PAGE>
TABLE OF CONTENTS PAGE
1. APPOINTMENT OF STATE STREET 1
2. SECURITIES TO BE LOANED 1
3. BORROWERS 2
4. SECURITIES LENDING AGREEMENTS 3
5. LOANS OF AVAILABLE SECURITIES 4
6. DISTRIBUTIONS ON AND VOTING RIGHTS WITH
RESPECT TO LOANED SECURITIES 5
7. COLLATERAL 6
8. COMPENSATION FOR THE CLIENT AND STATE
STREET 7
9 ADMINISTRATIVE FEE DISCLOSURE 9
10. RECORDKEEPING AND REPORTS 9
11. STANDARD OF CARE 10
12. REPRESENTATIONS AND WARRANTIES 11
13. DEFINITIONS 11
14. CONTINUING AGREEMENT; TERMINATION;
REMEDIES 13
15. NOTICES 14
16. MISCELLANEOUS 15
17. SECURITIES INVESTORS PROTECTION ACT 15
18. LIMITED RECOURSE 16
19. INDEMNIFICATION 16
20. MODIFICATION 18
EXHIBIT 3.1
SCHEDULE 3.1
SCHEDULE 7.1
SCHEDULE 7.2
SCHEDULE 7.3
SCHEDULE 7.4
SCHEDULE 10.1
SCHEDULE 10.2
<PAGE>
SECURITIES LENDING AUTHORIZATION AGREEMENT
Agreement dated the 17th day of July, 1996 between SANFORD C. BERNSTEIN FUND,
INC., organized and existing under the laws of the State of Maryland, on behalf
of the International Value Portfolio (in such capacity, the "Client"), and STATE
STREET BANK AND TRUST COMPANY, a Massachusetts trust company ("State Street"),
setting forth the terms and conditions under which State Street is authorized to
act on behalf of the Client with respect to the lending of certain securities of
the Client held by State Street as trustee, Collateral agent or custodian.
Certain capitalized terms used in this Agreement are defined in Section 13.
The Client and State Street, as the parties hereto, hereby agree as follows:
1. Appointment of State Street. The Client hereby authorizes State Street as its
agent to lend Available Securities to Borrowers in accordance with the terms of
this Agreement. State Street shall have the responsibility and authority to do
or cause to be done all acts State Street shall determine to be desirable,
necessary, or appropriate to implement and administer this securities lending
program. Client agrees that State Street is acting as a fully disclosed agent
and not as principal in connection with the securities lending program. State
Street may take action as agent of the Client on an undisclosed or a disclosed
basis. State Street is also hereby authorized to request a third party bank to
undertake certain custodial functions in connection with holding of the
Collateral provided by a Borrower pursuant to the terms hereof. In connection
therewith, State Street may instruct said third party to establish and maintain
a Borrower's account and a State Street account wherein all Collateral,
including cash shall be maintained by said third party in accordance with the
terms of a form of custodial arrangement which shall also be consistent with the
terms hereof.
2. Securities to be Loaned. State Street acts or will act as agent, trustee or
custodian of certain securities owned by the Client. All of the Client's
securities contained in the Portfolio and held by State Street as agent, trustee
or custodian shall be subject to this securities lending program and constitute
Available Securities hereunder, except those
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securities which the Client or the Investment Manager specifically identifies in
notices to State Street as not being Available Securities, and provided that
State Street shall not effect any Loan where, immediately following effecting
such Loan, the Market Value of all Loaned Securities with respect to the
Portfolio would exceed 28% of the Market Value of the Portfolio's total assets.
Except as provided in the immediately preceding sentence, State Street shall
have no authority or responsibility for determining whether any of the Client's
securities contained in the Portfolio should be excluded from the lending
program.
3. Borrowers. The Available Securities may be loaned to any Borrower selected by
State Street, in its sole discretion, including without limitation, the Capital
Markets division of State Street; provided, however, if Available Securities are
loaned to the Capital Markets division, in addition to being consistent with the
terms hereof, said Loan shall be made in accordance with the terms of the
Securities Lending Agreement attached hereto as Schedule 3.1, as modified from
time to time in accordance with the provisions hereof (hereinafter, the "State
Street Securities Lending Agreement"). The form of the State Street Securities
Lending Agreement may be modified by State Street from time to time, without the
consent of the Client, in order to comply with the requirements of law or any
regulatory authority having jurisdiction over State Street, the Client or the
securities lending program or in any other manner that is not material and
adverse to the interests of the Client.
Client acknowledges that it is aware that State Street, acting as "Lender's
Agent" hereunder and thereunder, is or may be deemed to be the same legal entity
as State Street acting as "Borrower" under the State Street Securities Lending
Agreement, notwithstanding the different designations used herein and therein or
the dual roles assumed by State Street hereunder and thereunder. Client
represents that transactions effected pursuant to and in compliance with this
Agreement and the State Street Securities Lending Agreement will not constitute
a breach of trust or other fiduciary duty by State Street.
Client further acknowledges that it has granted State Street the power to effect
securities lending transactions with the Capital Markets division of State
Street and other powers assigned to State Street hereunder as a result of
Client's desire to increase the opportunity for it to lend securities held in
its
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account on fair and reasonable terms to qualified Borrowers without such loans
being considered a breach of State Street's fiduciary duty. In connection
therewith, each party hereby agrees that it shall furnish to the other party (i)
the most recent available audited statement of its financial condition, and (ii)
the most recent available unaudited statement of its financial condition, if
more recent than the audited statement. As long as any Loan is outstanding under
this Agreement, each party shall also promptly deliver to the other party all
such financial information that is subsequently available, and any other
financial information or statements that such other party may reasonably
request.
In the event any such Loan is made to the Capital Markets division, State Street
hereby covenants and agrees for the benefit of the Client that it has adopted
and implemented procedural safeguards to help ensure that all actions taken by
it hereunder will be effected by individuals other than, and not under the
supervision of, individuals who are acting in a capacity as Borrower thereunder,
and that all Loans effected hereunder will take place at the same fully
negotiated "arms length" prices offered to similarly situated third parties by
State Street when it acts as lending agent, notwithstanding the inherent
conflict of interest with respect to Loans to be effected by State Street to the
Capital Markets division.
In the event Client approves lending to borrowers resident in the United
Kingdom, Client shall complete Part 1 of the document known as a "MOD-2 form,"
which is attached hereto as Exhibit 3.1.
4. Securities Lending Agreements. The Client authorizes State Street to enter
into one or more Securities Lending Agreements with such Borrowers as may be
selected by State Street. Each Securities Lending Agreement shall have such
terms and conditions as State Street may negotiate with the Borrower, provided
that each Securities Lending Agreement with Borrowers shall not contain terms or
conditions materially inconsistent with the terms and conditions of this
Agreement. Certain terms of individual loans, however, including rebate fees to
be paid to the Borrower for the use of cash Collateral, shall be negotiated at
the time a loan is made.
Page 3
<PAGE>
5. Loans of Available Securities. State Street shall have authority to make
Loans of Available Securities to Borrowers, and to deliver such securities to
Borrowers. State Street shall be responsible for determining whether any such
Loan shall be made, and for negotiating and establishing the terms of each such
Loan. State Street shall have the authority to terminate any Loan in its
discretion, at any time and without prior notice to the Client. Client may
terminate any Loan at any time upon giving notice to State Street. State Street
shall return the Loaned Securities subject to such terminated Loan(s) by the
Return Date.
The Client acknowledges that State Street administers securities lending
programs for other clients of State Street. State Street will allocate
securities lending opportunities among its clients, using reasonable and
equitable methods established by State Street from time to time. State Street
does not represent or warrant that any amount or percentage of the Client's
Available Securities will in fact be loaned to Borrowers. Client agrees that, so
long as State Street allocates securities lending opportunities among its
clients using reasonable and equitable methods, it shall have no claim against
State Street and State Street shall have no liability arising from, based on, or
relating to, loans made for other clients, or loan opportunities refused
hereunder, whether or not State Street has made fewer or more loans for any
other client, and whether or not any loan for another client, or the opportunity
refused, could have resulted in loans made under this Agreement.
The Client also acknowledges that, under the applicable Securities Lending
Agreements, Borrowers will not be required to return Loaned Securities
immediately to State Street upon receipt of notice from State Street terminating
the applicable Loan, but instead will be required to return such Loaned
Securities to State Street within such period of time following such notice as
is specified in the applicable Securities Lending Agreement; however, the
foregoing acknowledgment by the Client shall not in any way affect State
Street's obligations to the Client pursuant to Section 19 hereof. Upon receiving
a notice from the Client or the Investment Manager that Available Securities
which have been loaned to a Borrower should no longer be considered Available
Securities (whether because of the sale of such securities or otherwise), State
Street shall notify promptly thereafter the Borrower which has borrowed such
securities that the Loan of such securities is terminated and that such
securities are to be
Page 4
<PAGE>
returned within the time specified by the applicable Securities Lending
Agreement; however, failure by the Borrower to return the securities to State
Street by the Return Date shall in no way affect State Street's obligations to
the Client pursuant to Section 19 hereof.
6. Distributions on and Voting Rights with Respect to Loaned Securities. The
Client represents and warrants that it is the beneficial owner of (or exercises
complete investment discretion over) all Available Securities free and clear of
all liens, claims, security interests and encumbrances and no such security has
been sold, and that it is entitled to receive all distributions made by the
issuer with respect to Loaned Securities. Except as provided in the next
sentence, all interest, dividends, and other distributions paid with respect to
Loaned Securities shall be credited to the Portfolio's account on the date such
amounts are delivered by the Borrower to State Street in an amount equal to (A)
such interest, dividend or other distribution less (B) the amount of any
withholding taxes payable with respect to such interest, dividend or other
distribution plus (C) any withholding or other amount that Client would be
entitled to reclaim if Client had been in possession of the Loaned Securities at
the time such interest, dividend or other distribution was paid. Any non-cash
distribution on Loaned Securities which is in the nature of a stock split or a
stock dividend shall be added to the Loan (and shall be considered to constitute
Loaned Securities) as of the date such non-cash distribution is received by the
Borrower; provided that the Client (or Investment Manager) may, by giving State
Street ten (10) Business Days' notice prior to the date of such non-cash
distribution, direct State Street to request that the Borrower deliver such
non-cash distribution to State Street, pursuant to the applicable Securities
Lending Agreement, in which case State Street shall credit such non-cash
distribution to the Portfolio's account on the date it is delivered to State
Street.
The Client acknowledges that it will not be entitled to participate in any
dividend reinvestment program or to vote with respect to securities that are on
loan on the applicable record date for such securities.
The Client also acknowledges that any payments of distributions from Borrower to
Client are in substitution for the interest or dividend accrued or paid in
respect of Loaned
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<PAGE>
Securities and that the tax treatment of such payment may differ from the tax
treatment of such interest or dividend.
If an installment, call or rights issue becomes payable on or in respect of any
Loaned Securities, State Street shall use all reasonable endeavors to ensure
that any timely instructions from the Client are complied with, but State Street
shall not be required to make any payment unless the Client has first placed it
in funds to make such payment.
7. Collateral. The Client authorizes State Street to receive and to hold, as
Collateral agent on the Client's behalf, Collateral from Borrowers to secure the
obligations of Borrowers with respect to any loan of securities made on behalf
of the Client pursuant to the Securities Lending Agreements. All investments of
cash Collateral shall be for the account and risk of the Client. Concurrently
with the delivery of the Loaned Securities to the Borrower under any Loan, State
Street shall receive from the Borrower Collateral in any of the forms listed on
Schedule 7.1. Said Schedule may be amended from time to time by State Street
upon written notice from the Client. The Collateral received shall upon receipt,
(i) in the case of Loaned Securities denominated in United States Dollars or
whose primary trading market is located in the United States or sovereign debt
issued by foreign governments, have a value of 102% of the Market Value of the
Loaned Securities or (ii) in the case of Loaned Securities which are not
denominated in United States Dollars or whose primary trading market is not
located in the United States, have a value of 105% of the Market Value of the
Loaned Securities.
Thereafter, State Street shall take such action as is appropriate with respect
to the Collateral under the applicable Securities Lending Agreement which action
shall include marking the Collateral to market in accordance with State Street's
reasonable and customary practices as required to maintain Collateral at a
minimum of 102% or 105%, as the case may be, of the Market Value of the Loaned
Securities. State Street shall submit Earnings Statements monthly in the form
attached hereto as Schedule 7.2 or in such other form as the parties hereto may
agree from time to time, indicating the value of Collateral held by State Street
on Client's behalf. In the event that any Borrower delivers Collateral in the
form of short-term securities issued or guaranteed by the United States
government or its
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<PAGE>
agencies as permitted by Schedule 7.1 hereto, State Street agrees that, in
addition to providing the information required to be reported on the daily
reports pursuant to Schedule 7.2 hereto with respect to such Collateral, it will
identify such short-term securities in reasonable detail on such daily reports.
State Street shall hold all Collateral, including any units representing
investment of any cash Collateral in an "E" account in the name of the Client
separate and apart from State Street's assets.
The Collateral shall be returned to Borrower at the termination of the Loan upon
the return of the Loaned Securities by Borrower to State Street in accordance
with the applicable Securities Lending Agreement. State Street shall invest cash
Collateral in accordance with the directions and limitations set forth on
Schedule 7.3 hereto and in accordance with any directions, including any
limitations established by the Client in a writing identified to this Agreement
and acknowledged in writing by State Street and shall exercise reasonable care,
skill, diligence and prudence of an agent acting in a like capacity and familiar
with such assets in the investment of Collateral. Subject to the foregoing
limits and standard of care, State Street does not assume any market or
investment risk of loss with respect to the investment of cash Collateral and
subject to State Street's obligation set forth below, if, at any time during the
term of any Loan, the value of the cash Collateral so invested is insufficient
to return the full amount of the Collateral due to such Borrower pursuant to the
Securities Lending Agreement, Client shall be solely responsible for such
shortfall and hereby agrees to pay an amount equal to such shortfall to State
Street. In the event the investment of cash Collateral is insufficient to return
the rebate fee (i.e., the return to the Borrower) (hereinafter referred to as a
"Rebate Shortfall"), Client and State Street shall each be liable for their
respective share of the Rebate Shortfall based on the fee split set forth in
Schedule 7.4. State Street shall be entitled to charge the Portfolio's account
for its share of any amounts owed under Section 8.
8. Compensation for the Client and State Street. To the extent that a Loan is
secured by cash Collateral, such Collateral, including money received with
respect to the investment of the same, or upon the maturity, sale, or
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liquidation of any such investments, shall be invested by State Street in
accordance with the terms set forth above. The Client hereby authorizes State
Street to purchase or sell investments of cash Collateral to or from other
accounts held by State Street or its affiliates.
The net income generated by any investment made pursuant to the preceding
paragraph of this Section 8 shall be allocated among the Borrower, State Street,
and the Client, as follows: (a) a portion of such income shall be paid to the
Borrower in accordance with the agreement negotiated between the Borrower and
State Street; (b) the balance, if any, shall be split between State Street, as
compensation for its services in connection with this securities lending
program, and the Client, in accordance with the fee schedule attached hereto as
Schedule 7.4.
In the event that there is a Rebate Shortfall, State Street shall debit the
account of the Portfolio by an amount equal to the Portfolio's share of the
Rebate Shortfall in accordance with Schedule 7.4 hereto and shall pay the
remaining amount of the Rebate Shortfall to the appropriate Borrower. In the
event debits to the Portfolio's account produce a deficit therein, State Street
shall sell or otherwise liquidate investments made with cash Collateral and
credit the net proceeds of such sale or liquidation to satisfy the deficit. In
the event the foregoing does not eliminate the deficit, State Street shall have
the right to charge the deficiency to any other accounts of the Portfolio
maintained by the Client at State Street.
In the event of a Loan to a Borrower resident in Canada, which is made over
record date for a dividend reinvestment program ("DRP") and is secured by cash
Collateral, the Borrower shall pay the Client a substitute payment equal to the
full amount of the cash dividend declared, and may pay a loan premium, the
amount of which shall be negotiated by State Street, above the amount of the
cash dividend. Such loan premium shall be allocated between State Street and the
Client as follows: (a) a portion of such loan premium shall be paid to State
Street as compensation for its services in connection with this securities
lending program, in accordance with Schedule 7.4 and (b) the remainder of such
loan premium shall be credited to the Client's account.
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To the extent that a Loan is secured by non-cash Collateral, the Borrower shall
be required to pay a loan premium, the amount of which shall be negotiated by
State Street. Such loan premium shall be allocated between State Street and the
Client as follows: (a) a portion of such loan premium shall be paid to State
Street as compensation for its services in connection with this securities
lending program, in accordance with Schedule 7.4 hereto; and (b) the remainder
of such loan premium shall be credited to the Client's account.
Client acknowledges that in the event that Client's participation in securities
lending generates income for the Client, State Street may be required to
withhold tax or may claim such tax from the Client as is appropriate in
accordance with applicable law.
The Client shall reimburse State Street for such reasonable fees and expenses
that State Street may incur in connection with the performance of its
obligations hereunder, including, without limitation: (i) the ordinary
telecommunication charges associated with the movement of securities in
connection with the securities lending activity contemplated by this Agreement;
and (ii) except for funds advanced by State Street to Client pursuant to Section
19 hereof, any and all funds advanced by State Street on behalf of the Client or
the Portfolio as a consequence of their obligations hereunder.
9. Administrative Fee Disclosure. The administrative fees associated with the
investment of cash Collateral in accordance with the provisions of Section 7
hereto are disclosed on Schedule 7.4 hereto.
10. Recordkeeping and Reports. State Street will establish and maintain such
records as are reasonably necessary to account for Loans that are made and the
income derived therefrom. On a daily basis, State Street will provide the Client
and the mutual fund accounting department at State Street with a statement
describing the Loans made, including the Securities loaned and the identity of
the Borrower(s), and the income derived from Loans, during the period covered by
such statement (hereinafter, "Schedule 10.1"). State Street shall also provide
on a daily basis information regarding Loans in the form attached hereto as
Schedule 10.2. Each party to this Agreement shall comply with the reasonable
requests of the other for information necessary to the requester's performance
of its duties in connection with this securities lending program.
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11. Standard of Care. Subject to the requirements of applicable law and except
as provided in Sections 7 and 19 hereof, State Street shall not be liable for
any loss or damage, including counsel fees and court costs, whether or not
resulting from their acts or omissions to act hereunder or otherwise, unless the
loss damage arises out of State Street's own negligence. Except for any
liability, loss, or expense arising from or connected with State Street's own
negligence and except as provided in Sections 7 and 19 hereof, the Client agrees
to reimburse and hold State Street harmless from and against any liability, loss
and expense, including counsel fees and expenses and court costs, arising in
connection with this Agreement or any Loan or arising from or connected with
claims of any third parties, including any Borrower, from and against all taxes
and other governmental charges, and from and against any out-of-pocket or
incidental expenses. State Street may charge any amounts to which it is entitled
hereunder against the Portfolio's account. Without limiting the generality of
the foregoing, Client agrees: (i) that State Street shall not be responsible for
any statements, representations or warranties which any Borrower makes in
connection with any securities loans hereunder, or, except as provided in
Section 19, for the performance by any Borrower of the terms of a Loan or any
agreement related thereto, and shall not be required to ascertain or inquire as
to the performance or observance of, or a default under the terms of, a Loan or
any agreement related thereto, provided that in the case of default on the part
of a Borrower, State Street shall be responsible for making payments to Client
in accordance with Section 19 hereof; (ii) that State Street shall be fully
protected in acting in accordance with the oral or written instructions of any
person believed by State Street to be authorized to execute this Agreement on
behalf of the Client (an "Authorized Person"); and (iii) that in the event of a
default by a Borrower under a Loan, State Street shall be fully protected in
acting in its sole discretion in a manner it deems appropriate.
State Street, in determining the Market Value of Collateral, may rely upon any
recognized independent pricing service reasonably selected by State Street and
shall not be liable for any errors made by such service. State Street, in
determining the Market Value of Available Securities or Loaned Securities and
the Portfolio, may rely upon the pricing services used by State Street and
selected by the Portfolio to price the securities of the Portfolio, as such
pricing services may change
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from time to time at the request of the Portfolio. State Street shall not be
liable for any errors made by any such services.
12. Representations and Warranties. Each party hereto represents and warrants
that (a) it has the power to execute and deliver this Agreement, to enter into
the transactions contemplated hereby, and to perform its obligations hereunder;
(b) it has taken all necessary action to authorize such execution, delivery, and
performance; (c) this Agreement constitutes a legal, valid, and binding
obligation enforceable against it; and (d) the execution, delivery, and
performance by it of this Agreement will at all times comply with all applicable
laws and regulations. Client represents and warrants that it has made its own
determination as to the tax treatment of any dividends, remuneration or other
funds received hereunder. Client and State Street represent and warrant that the
financial statements delivered to the other party pursuant to Section 3 fairly
present its financial condition and there has been no material adverse change in
its financial condition or the financial condition of any parent company since
the date of the balance sheet included within such financial statements. Each
Loan shall constitute a present representation by Client and State Street that
there has been no material adverse change in its financial condition or the
financial condition of any parent company that has not been disclosed in writing
to the other party since the date of the most recent financial statements
furnished to the other party pursuant to Section 3.
The person executing this Agreement on behalf of each party hereto represents
that he or she has the authority to execute this Agreement on behalf of such
party.
The Client hereby represents to State Street that it is not subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") with
respect to this Agreement and the Securities and it qualifies as an "accredited
investor" within the meaning of Rule 501 of Regulation D under the Securities
Act of 1933, as amended.
13. Definitions. For the purposes hereof:
(a) "Available Securities" means the securities of the Client that are available
for Loans pursuant to Section 2.
(b) "Borrower" means any of the entities to which Available Securities may be
loaned under a Securities Lending Agreement and shall be limited to
broker-dealers, banks and financial institutions.
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(c) "Business Day" means (i) a day which is not a New York Stock Exchange
holiday and (ii) a day on which commercial banks in Massachusetts are not
authorized or required by law to close.
(d) "Collateral" means collateral in the forms listed on Schedule 7.1 hereto
delivered by a Borrower to secure its obligations under a Securities Lending
Agreement.
(e) "Default" means the occurrence of one or more Loan Default or Substitute
Payment Default.
(f) "Investment Manager," when used in any provision, means the person or entity
who has discretionary authority over the investment of the Available Securities
to which the provision applies.
(g) "Loan" means a loan of Available Securities to a Borrower.
(h) "Loan Default" means State Street failing to return all or a portion of the
Loaned Securities to the Client by the Return Date.
(i) "Loaned Security" shall mean any "security" which is delivered as a Loan
under a Securities Lending Agreement and any non-cash dividend that has not been
credited to the Portfolio's account in accordance with Section 6 hereof;
provided that, if any new or different security shall be exchanged for any
Loaned Security by recapitalization, merger, consolidation, or other corporate
action, such new or different security shall, effective upon such exchange, be
deemed to become a Loaned Security in substitution for the former Loaned
Security for which such exchange was made.
(j) "Market Value" of a security means the market value of such security
(including, in the case of a Loaned Security that is a debt security, the
accrued interest on such security) as determined in accordance with the last
paragraph of Section 11 hereof.
(k) "Portfolio" means the International Value Portfolio of the Sanford C.
Bernstein Fund, Inc.
(l) "Rebate Shortfall" shall have the meaning assigned thereto in Section 7
hereof.
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(m) "Replacement Securities" means securities of the same issuer, class and
denomination as Loaned Securities that a Borrower fails to return upon
termination of a Loan.
(n) "Requisite Number" means the customary number of days necessary to settle a
purchase or sale of securities in such country.
(o) "Return Date" means the date which is the Requisite Number of days from and
including the date on which Client gives notice to State Street of termination
of any Loan or this Agreement.
(p) "Securities Lending Agreement" means the agreement between a Borrower and
State Street (on behalf of the Client) that governs Loans, as described in
Section 4.
(q) "Substitute Payment Default" means the failure by State Street to credit the
Portfolio's account within 5 days after the issuer pays any interest, dividend
or other distribution with respect to Loaned Securities in an amount equal to
(A) such interest, dividend or other distribution less (B) the amount of any
withholding taxes payable with respect to such interest, dividend or other
distribution plus (C) any withholding or other amount that Client would be
entitled to reclaim if Client had been in possession of the Loaned Securities at
the time such interest, dividend or other distribution was paid. Such credit by
State Street being in lieu of the actual interest, dividend or distribution
payment by the issuer.
14. Continuing Agreement; Termination; Remedies. It is the intention of the
parties hereto that this Agreement shall constitute a continuing agreement in
every respect and shall apply to each and every Loan, whether now existing or
hereafter made. The Client and State Street may each at any time terminate this
Agreement upon the earlier of (i) the Requisite Number of days' or (ii) five (5)
Business Days' written notice to the other to that effect. The only effects of
any such termination of this Agreement will be that (a) following such
termination, no further Loans shall be made hereunder by State Street on behalf
of the Client, (b) subject to State Street's obligations under Section 19, State
Street shall terminate any and all outstanding Loans and (c) State Street shall
return all Loaned Securities to the Client by the Return Date. The provisions
hereof shall continue in full force and effect in all other respects until all
Loans
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have been terminated and all obligations satisfied as herein provided.
15. Notices. Except as otherwise specifically provided herein, notices under
this Agreement may be made orally, in writing, or by any other means mutually
acceptable to the parties. If in writing, a notice shall be sufficient if
delivered to the party entitled to receive such notices at the following
addresses:
If to Client:
Sanford C. Bernstein Fund, Inc.
c/o Sanford C. Bernstein & Co., Inc.
1 State Street Plaza, 28th Floor
New York, New York 10004
Attention: Mike Borgia
Telephone: (212) 504-5133
Facsimile: (212) 504-5121
Attention: Rich Goodman
Telephone: (212) 504-5069
Facsimile: (212) 504-5148
with a copy to:
Sanford C. Bernstein Fund, Inc.
c/o Sanford C. Bernstein & Co., Inc.
767 Fifth Avenue
New York, New York 10153-0185
Telephone:(212) 756-4164
Facsimile: (212) 756-4168
Attention: Jean Margo Reid
If to State Street:
State Street Bank and Trust Company
Global Securities Lending Division
Two International Place, Floor 31
Boston, Massachusetts 02110
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or to such other addresses as either party may furnish the other party by
written notice under this section.
Whenever this Agreement permits or requires the Client to give notice to,
direct, or provide information to State Street, such notice, direction, or
information shall be provided to State Street on the Client's behalf by any
individual designated for such purpose by the Client in a written notice to
State Street. (This Agreement shall be considered such a designation of the
person executing the Agreement on the Client's behalf.) After its receipt of
such a notice of designation, and until its receipt of a notice revoking such
designation, State Street shall be fully protected in relying upon the notices,
directions, and information given by such designee.
16. Miscellaneous. This Agreement supersedes any other agreement between the
parties or any representations made by one party to the other, whether oral or
in writing, concerning loans of securities by State Street on behalf of the
Client. This Agreement shall not be assigned by either party without the prior
written consent of the other party. Subject to the foregoing, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, representatives, successors, and assigns. This Agreement
shall be governed and construed in accordance with the laws of the Commonwealth
of Massachusetts. Client hereby submits to the jurisdiction of the State and
Federal Courts located in the Commonwealth of Massachusetts including any
appellate courts thereof. The provisions of this Agreement are severable and the
invalidity or unenforceability of any provision hereof shall not affect any
other provision of this Agreement. If in the construction of this Agreement any
court should deem any provision to be invalid because of scope or duration, then
such court shall forthwith reduce such scope or duration to that which is
appropriate and enforce this Agreement in its modified scope or duration.
17. Securities Investors Protection Act of 1970 Notice. CLIENT IS HEREBY ADVISED
AND ACKNOWLEDGES THAT THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION ACT
OF 1970 MAY NOT PROTECT THE CLIENT WITH RESPECT TO THE LOAN OF SECURITIES
HEREUNDER AND THAT, THEREFORE, THE COLLATERAL DELIVERED TO THE CLIENT MAY
CONSTITUTE THE ONLY SOURCE OF SATISFACTION OF THE BORROWER'S OBLIGATION IN THE
EVENT THE BORROWER FAILS TO RETURN THE SECURITIES.
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18. Limited Recourse. State Street may look solely to the assets of the
Portfolio for the enforcement of any claims related to this Agreement and
Sanford C. Bernstein Fund, Inc., shall not have any personal liability under
this Agreement other than liability to satisfy any obligations to State Street
under this Agreement from the assets of the Portfolio. State Street acknowledges
that it will enter into each Loan on the foregoing basis.
19. Indemnification.
(a) Upon the occurrence of a Default, and subject to the terms of this
Agreement, State Street shall indemnify Client as follows. In the case of a Loan
Default, State Street shall purchase a number of Replacement Securities equal to
the number of such unreturned Loaned Securities to the extent that such
Replacement Securities are available (as determined in accordance with Section
19(b) below). Such Replacement Securities shall be purchased by applying the
proceeds of the Collateral with respect to such Loan to the purchase of such
Replacement Securities. If and to the extent that such proceeds are insufficient
or the Collateral is unavailable, the purchase of such Replacement Securities
shall be made at State Street's expense. In the case of a Substitute Payment
Default, State Street hereby agrees to pay to the Client a substitute payment in
an amount equal to any interest or cash dividend with respect to any Loaned
Security.
(b) If and to the extent that State Street is unable to purchase Replacement
Securities pursuant to Paragraph (a) hereof within thirty business days of the
date of the Loan Default, because the subject Securities are unavailable in the
market by reason of a cease trading order, delisting or some other legal bar,
impediment or prohibition to trading in such Securities, State Street shall
credit to the Client's account an amount equal to the Market Value of the
unreturned Loaned Securities for which Replacement Securities are not so
purchased, determined as of the close of trading on the business day on which
the Client gave notice to State Street of termination of the Loan or this
Agreement, as the case may be, which termination gave rise to the Loan Default
for which Replacement Securities were not so purchased.
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(c) In addition to making the purchases or credits required by Paragraphs (a)
and (b) hereof, State Street shall credit to the Portfolio's account the value
of all distributions on the Loaned Securities (not otherwise credited to the
Portfolio's account with State Street), the record dates for which occur before
the date that State Street purchases Replacement Securities pursuant to
Paragraph (a) or credits the Portfolio's account pursuant to Paragraph (b).
(d) Any credits required under Paragraphs (b) and (c) hereof shall be made by
application of the proceeds of the Collateral (if any) that remains after the
purchase of Replacement Securities pursuant to Paragraph (a). If and to the
extent that the Collateral is unavailable or the value of the proceeds of the
remaining Collateral is less than the value of the sum of the credits required
to be made under Paragraphs (b) and (c), such credits shall be made at State
Street's expense.
(e) If after application of Paragraphs (a) through (d) hereof, additional
Collateral remains or any previously unavailable Collateral becomes available or
any additional amounts owed by the Borrower with respect to such Loan are
received from the Borrower, State Street shall apply the proceeds of such
Collateral or such additional amounts first to reimburse itself for any amounts
expended by State Street pursuant to Paragraphs (a) through (d) above, and then
to credit to the Client's account all other amounts owed by the Borrower to
State Street, on behalf of the Client, with respect to such Loan under the
applicable Securities Lending Agreement.
(f) In the event that State Street is required to make any payment and/or incur
any loss or expense under this Section, State Street shall, to the extent of
such payment, loss, or expense, be surrogated to, and succeed to, all of the
rights of the Client against the Borrower under the applicable Securities Loan
Agreement.
(g) The provisions of this Section shall not apply to losses attributable to
war, riot, revolution, acts of government or other like causes beyond the
reasonable control or apprehension of State Street.
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20. Modification. This Agreement shall not be modified, except by an instrument
in writing signed by the party against whom enforcement is sought.
SANFORD C. BERNSTEIN FUND, INC., on
behalf of the International Value Portfolio
By: Jean Margo Reid
Title: Secretary
STATE STREET BANK AND TRUST COMPANY
By: Donald Hodgman
Title: Senior Vice President
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SCHEDULE 3.1
The attached document is proprietary, and contains information which is
confidential and proprietary, to State Street Bank and Trust Company ("State
Street"). It is being provided for the exclusive purpose of allowing you to
assess your participation in a securities lending program operated by State
Street and in which State Street is the Borrower. Its use for any other purpose
or its distribution to anyone other than your own personnel engaged in this
assessment is prohibited without State Street's prior written permission.
SECURITIES LOAN AGREEMENT
(United States Government Securities)
Between
STATE STREET BANK AND TRUST AND COMPANY,
as Lender's Agent
And
STATE STREET BANK AND TRUST COMPANY, as Borrower
<PAGE>
TABLE OF CONTENTS PAGE
1. TERMS OF LOAN 1
2. DELIVERIES AND TREATMENT OF
BORROWED SECURITIES 2
3. DELIVERIES AND TREATMENT OF
COLLATERAL 3
4. MARKS TO MARKET; MAINTENANCE
OF COLLATERAL 4
5. FEES 5
6. REPRESENTATIONS OF THE PARTIES 6
7. COVENANTS 7
8. TERMINATION OF LOAN WITHOUT DEFAULT 8
9. EVENTS OF DEFAULT 8
10. LENDER'S REMEDIES ON BORROWER'S
DEFAULT 9
11. BORROWER'S REMEDIES ON LENDER'S
DEFAULT 10
12. DEFINITIONS 11
13. INDEMNIFICATION 12
14. WAIVERS, GENERAL 13
15. STANDARD OF CARE 13
16. CONTINUING AGREEMENT; TERMINATION;
REMEDIES 13
17. NOTICES 13
18. TIME 14
19. SECURITIES CONTRACTS 14
20. DECLARATION OF TRUST 14
21. MISCELLANEOUS 15
22. MODIFICATION 15
<PAGE>
SECURITIES LOAN AGREEMENT
(United States Government Securities)
Agreement dated the day of , 199 between STATE STREET BANK AND
TRUST COMPANY, a Massachusetts trust company, acting through its Global
Securities Lending Division, in its capacity as trustee, agent or custodian for
certain securities of its clients (in such capacity, "Lender's Agent"), and
STATE STREET BANK AND TRUST COMPANY, acting through the Money Market Division of
its Capital Markets Area, as Borrower ("Borrower"), setting forth the terms and
conditions under which one or more clients of Lender's Agent (hereinafter, each
a "Lender") from time to time, may lend to a Borrower U.S. Securities (as
defined herein), against the receipt of collateral as specified herein.
WHEREAS, each Lender has appointed Lender's Agent as its agent to act on its
behalf with respect to the lending of securities to Borrower in accordance with
the terms of a Securities Lending Authorization Agreement between such Lender
and Lender's Agent.
WHEREAS, pursuant to each Securities Lending Authorization Agreement, Lender's
Agent has been granted the responsibility and authority to do or cause to be
done all acts Lender's Agent shall determine to be desirable, necessary or
appropriate to implement or administer a securities lending program on behalf of
the Lender party thereto.
WHEREAS, upon request of Borrower, Lender's Agent may, from time to time, in its
discretion and on behalf of one or more Lenders, lend Available Securities to
Borrower against the receipt of Collateral delivered by Borrower.
NOW, THEREFORE, Lender's Agent and Borrower agree as follows:
1. Terms of Loan.
1.1 Lender's Agent and Borrower shall agree on the terms of each Loan, including
the identity and amount of the securities to be loaned (all of which shall be
U.S. Securities), the basis of compensation, and the type and amount of
Collateral to be delivered by Borrower (subject to the terms and conditions of
this Agreement), which terms may be amended during the period of the Loan only
by mutual agreement of the parties hereto.
1.2 Loans, all applicable terms and conditions thereof, and amendments and
activity, if any, with respect thereto, shall be evidenced by Lender's Agent's
records pertaining to such Loans maintained by Lender's Agent in the regular
course of its business and such records shall represent conclusive evidence
thereof except for manifest error or willful misconduct. Lender's Agent will
send Borrower monthly statements of outstanding Loans showing Loan activity
which Borrower agrees to
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examine promptly and to advise Lender's Agent of any error or exceptions.
Borrower's failure to so advise Lender's Agent within twenty (20) days after
delivery of any such statement shall be deemed to be such party's admission of
the accuracy and correctness of the contents thereof and such party shall be
fully bound thereby.
1.3 Notwithstanding any other provisions in this Agreement with respect to when
a Loan occurs, a Loan hereunder shall not occur until the Borrowed Securities
and the Collateral therefor are delivered. If, on any Business Day, Borrower
delivers Collateral, as provided in Section 3.1 hereunder, and Lender's Agent
does not deliver the Borrowed Securities, Borrower shall have the absolute right
to the prompt return of the Collateral; and if, on any Business Day, Lender's
Agent delivers Borrowed Securities and Borrower does not deliver Collateral as
provided in Section 3.1 hereunder, Lender's Agent shall have the absolute right
to the prompt return of the Borrowed Securities.
1.4 Lender's Agent shall maintain records in accordance with its usual practice
showing the allocation among the participating Lenders of the Loans, the
compensation therefor, the collateral with respect thereto and other relevant
information. Lender's Agent shall implement appropriate procedures and policies
to restrict lending of U.S. Securities hereunder on behalf of the respective
Clients beyond the maximum credit risk and financial exposure limits which may
be set by such Lenders and Borrower.
2. Deliveries and Treatment of Borrowed Securities.
2.1 With respect to each Loan, Lender's Agent shall deliver the Borrowed
Securities to Borrower by causing the Borrowed Securities to be credited to
Borrower's Account and debited from the Relevant Lender's Account, and such
crediting and debiting shall result in receipt by Borrower and Lender's Agent of
a notice of such crediting and debiting, which notice shall constitute a
schedule of the Borrowed Securities.
2.2 Except as provided in Section 2.3, Borrower shall exercise all of the
incidents of ownership with respect to the Borrowed Securities, including the
right to transfer the Borrowed Securities to others, until the Borrowed
Securities are returned to Lender's Agent in accordance herewith.
2.3 Lender's Agent, on behalf of the Relevant Lender, shall be entitled to
receive all distributions (including payments upon maturity and other
redemption) made on or in respect of the Borrowed Securities, the payable dates
for which are during the term of the Loan and which are not otherwise received
by Lender's Agent, to the full extent the Relevant Lender would be so entitled
if the Borrowed Securities had not been loaned to Borrower, including, without
limitation, interest payments and any other distributions or other income.
Payment of each such distribution
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shall be made by delivery of federal funds by Borrower to the Lender's Agent for
the Account of the Relevant Lender on payable, maturity, or redemption date of
such distribution.
3. Deliveries and Treatment of Collateral.
3.1 Simultaneous to the transfer of Borrowed Securities hereunder, Borrower
shall deliver to Lender's Agent Collateral in an amount not less than the Margin
Percentage of the current Market Value of the Borrowed Securities. The
Collateral shall be delivered by one or both of the following methods, as agreed
to by the parties pursuant to Section 1.2: (a) Borrower delivering U.S.
Securities to Lender's Agent and/or (b) Borrower delivering funds to the
Lender's Agent for the Account of the Relevant Lender.
3.2 With respect to each Loan, the Collateral delivered by Borrower to Lender's
Agent, as adjusted pursuant to Section 4 below, shall be security for the due
and punctual performance by Borrower of any and all of its obligations to
Lender's Agent on behalf of the Relevant Lender hereunder now or hereafter
arising, and Borrower hereby pledges with, assigns to, and grants to Lender's
Agent on behalf of the Relevant Lender a continuing first security interest in,
and a lien upon, the Collateral. Borrower shall make appropriate notations on
its books and records so as to ensure the validity of such security interest.
Such first security interest shall attach upon the delivery of the Collateral to
Lender's Agent, shall survive the termination of this Agreement, and shall cease
only upon the return of the Collateral to Borrower subsequent to the return of
the Borrowed Securities to Lender's Agent. In addition to the rights and
remedies given to Lender's Agent hereunder, Lender's Agent, on behalf of the
Relevant Lender, shall have all the rights and remedies of a secured party under
the Uniform Commercial Code of Massachusetts.
3.3 Borrower understands that Lender's Agent may use or invest the Collateral,
to the extent that such Collateral consists of cash. Such use or investment
shall be at the risk of the Relevant Lender and, subject to the payment of an
agreed rebate fee pursuant to Section 5.2, and any other fees payable hereunder,
the Relevant Lender shall be entitled to retain all income and profits therefrom
and shall bear all losses therefrom. Except as provided in Section 10, neither
Lender's Agent nor any Lender may pledge, repledge, hypothecate, rehypothecate,
lend, or relend the Collateral, to the extent such Collateral consists of other
than cash. However, Lender's Agent may commingle and hold non-cash Collateral in
bulk.
3.4 With the approval of Lender's Agent, Borrower may at any time substitute for
any securities held by Lender's Agent as Collateral for the Borrowed Securities
other Collateral with respect to the Borrowed Securities of equal current Market
Value to the Securities for which it is to be substituted. Prior to the
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maturity of any U.S. Security that is delivered to Lender's Agent as Collateral,
Borrower shall replace such U.S. Security with other Collateral acceptable to
Lender's Agent and of equal current Market Value to the U.S. Security for which
it is to be substituted. Substituted collateral shall be considered Collateral
for all purposes hereof.
3.5 Borrower shall be entitled to receive all distributions made on or in
respect of non-cash Collateral the payable dates for which are during the term
of a Loan and which are not otherwise received by Borrower, to the full extent
it would be so entitled if the Collateral had not been delivered to Lender's
Agent. Any distributions made on or in respect of such Collateral which Borrower
is entitled to receive under this section shall be paid by Lender's Agent,
acting on behalf of the Relevant Lender, to Borrower forthwith upon receipt
thereof by Lender's Agent, so long as Borrower has not committed a Default at
the time of such receipt.
3.6 Except as provided in Sections 10 and 11 hereunder, Lender's Agent shall be
obligated to return the Collateral to Borrower upon the return to Lender's Agent
of the Borrowed Securities.
4. Marks to Market: Maintenance of Collateral.
4.1 Borrower shall daily mark to market any Loans hereunder and in the event
that at the close of trading on any day the Market Value of all the Collateral
delivered by Borrower to Lender's Agent with respect to any Loan hereunder shall
be less than one hundred percent (100%) of the Market Value of all Borrowed
Securities outstanding with respect to such Loan, Borrower shall deliver to
Lender's Agent for the benefit of the Relevant Lender additional Collateral by
the close of the next Business Day so that the Market Value of the additional
Collateral when added to the Market Value of the Collateral with respect to such
Loan shall equal at least the Margin Percentage of the Market Value of the
Borrowed Securities outstanding with respect to such Loan. Such additional
Collateral shall be delivered as provided in Section 3.1 above.
4.2 In the event that at the close of trading on any day the Market Value of all
the Collateral delivered by Borrower to Lender's Agent with respect to any Loan
hereunder shall be less than the Margin Percentage of the Market Value of all
the Borrowed Securities outstanding with respect to such Loan, Lender's Agent
may, by oral notice to Borrower, demand that Borrower deliver to Lender's Agent
for the benefit of the Relevant Lender additional Collateral such that the
Market Value of such additional Collateral when added to the Market Value of the
Collateral with respect to such Loan shall equal at least the Margin Percentage
of the Market Value of the Borrowed Securities outstanding with respect to such
Loan. Such delivery is to be made by the close of
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business on the day of Lender's Agent's notice to Borrower if such notice is
given before 11:30 a.m. on a Business Day. If Lender's Agent's notice is given
after 11:30 a.m. on a Business Day or is given on a day other than a Business
Day, such delivery is to be made by the close of business of the next Business
Day, unless such notice has been superseded by a proper demand made pursuant to
Section 4.3 before 11:30 a.m. of that next Business Day. Such Collateral shall
be delivered as provided in Section 3.1 above.
4.3 In the event that at the close of trading on any day the Market Value of all
the Collateral delivered by Borrower to Lender's Agent with respect to any Loan
hereunder shall be greater than the Margin Percentage of the Market Value of all
the Borrowed Securities outstanding with respect to such Loan, Borrower may, by
oral notice to Lender's Agent, demand that Lender's Agent deliver to Borrower
such amount of Collateral as may be selected by Borrower, so long as the Market
Value of the remaining Collateral equals at least the Margin Percentage of the
Market Value of the Borrowed Securities outstanding with respect to such Loan.
Such delivery is to be made by the close of business on the day of Borrower's
notice to Lender's Agent if such notice is given before 11:30 a.m. on a Business
Day. If Borrower's notice is given after 11:30 a.m. on a Business Day or is
given on a day other than a Business Day, such delivery is to be made by the
close of business of the next Business Day, unless (a) such notice has been
superseded by a proper demand made pursuant to Section 4.2 or this Section 4.3
given before 11:30 a.m. of that next Business Day, or (b) additional Collateral
is required to be delivered on that next Business Day pursuant to Section 4.1.
Such Collateral shall be delivered as provided in Section 3.1 above.
5. Fees and Investment of Cash Collateral.
5.1 When an agreement to lend securities is made, Lender's Agent and Borrower
shall agree on the basis of compensation to be paid in respect of the Loan.
5.2 To the extent that a Loan of Borrowed Securities is collateralized by cash,
the parties hereby agree that Lender's Agent for the benefit of the Relevant
Lender shall use and invest such cash Collateral, and that, in consideration for
such right to use and invest cash Collateral, Lender's Agent, on behalf of the
Relevant Lender, will pay Borrower a loan rebate fee computed daily for each
such Loan and based on the amount of cash Collateral delivered with respect to
such Loan. The amount of such loan rebate fee shall be computed daily from the
first Business Day that cash Collateral is delivered to Lender's Agent, through
and including the earliest of: (a) the date next preceding the date that such
cash Collateral is returned to Borrower; (b) the date of a Default by Borrower;
and (c) the date Lender's Agent gives notice of termination pursuant to Section
8.2, provided that the parties may mutually agree that a loan rebate fee will be
paid for all or an agreed upon number of days
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after such notice is given (but in no event for a period beyond the earlier of
the dates described in clauses (a) and (b) of this sentence). Provided the
Borrower is not in Default, such loan rebate fee shall be payable upon the date
the Borrowed Securities are returned to the Lender's Agent upon termination of
the Loan. If requested by any party to this agreement, Lender's Agent and
Borrower shall renegotiate the loan rebate fee from time to time.
5.3 To the extent that a Loan of Borrowed Securities is collateralized by other
than cash, Lender's Agent and Borrower may agree that Borrower shall pay to
Lender's Agent, for the account of the Relevant Lender, a loan premium based on
the par value of the borrowed securities. The amount of such loan premium shall
be computed from the first Business Day that the Borrowed Securities are
delivered to Borrower, through and including the date next preceding the date
that securities identical to the Borrowed Securities are returned to Lender's
Agent pursuant to Section 8 or the date that Lender's Agent makes a purchase of
securities or an election to treat the Borrowed Securities as sold pursuant to
Section 10.1. Any fee payable by Borrower hereunder shall be payable upon the
earliest of the following: (a) the seventh Business Day of the month following
the month in which the fee was incurred; or (b) immediately, in the event of a
Default hereunder by Borrower; or (c) the date this Agreement is terminated.
5.4 All transfer taxes and transfer fees with respect to any transfers hereunder
of Borrowed Securities shall be paid by Borrower.
6. Representations of the Parties.
The parties hereby make the following representations and warranties, which
shall continue during the term of any Loan hereunder;
6.1 Each party hereto represents and warrants that (a) it has the power to
execute and deliver this Agreement, to enter into the Loans contemplated hereby,
and to perform its obligations hereunder; (b) it has taken all necessary action
to authorize such execution, delivery, and performance; and (c) this Agreement
constitutes a legal, valid, and binding obligation enforceable against it.
6.2 Each party hereto represents and warrants that the execution, delivery and
performance by it of this Agreement and each Loan hereunder will at all times
comply with all applicable laws and regulations, including those of applicable
securities regulatory and self-regulatory agencies and organizations.
6.3 Borrower represents and warrants for the benefit of Lender's Agent and each
Lender that (a) it is a trust company duly organized and validly existing under
the laws of the Commonwealth of Massachusetts, (b) it is a bank within the
meaning of Section
Page A-6
<PAGE>
3(a)(6)(A)-(C) of the Exchange Act, (c) it has, or will have at the time of
delivery of any Collateral, the right to grant a first security interest therein
subject to the terms and conditions hereof, and (d) the purposes for which it
borrows securities hereunder shall not violate the laws of the Commonwealth of
Massachusetts or the federal laws applicable therein.
6.4 Borrower represents that the statements provided pursuant to Section 7.1
fairly represent its financial condition, and that there has been no material
adverse change in its financial condition or the financial condition of any
parent company since that date that it has not been disclosed in writing to
Lender's Agent. Lender's Agent represents that Lender has advised it that the
statements provided pursuant to Section 7.2 fairly represent its financial
condition, and that it has not been informed of any material adverse change in
Lender's financial condition since that date that has not been disclosed in
writing to Borrower. Each Loan effected hereunder shall constitute a present
representation by: (i) Borrower that there has been no material adverse change
in its financial condition or the financial condition of any parent company that
has not been disclosed in writing to Lender's Agent since the date of the most
recent statement furnished to Lender's Agent pursuant to Section 7.1; and (ii)
Lender's Agent that it knows of no material adverse change in the financial
condition of any Lender that has not been disclosed in writing to Borrower since
the date of the most recent statement furnished by such Lender to Lender's Agent
pursuant to Section 7.2.
7. Covenants.
7.1 Borrower hereby makes the following covenants. Upon execution of this
Agreement, Borrower shall furnish to Lender's Agent (i) the most recent
available audited statement of Borrower's financial condition, and (ii) the most
recent available unaudited statement of Borrower's financial condition. As long
as any Loan is outstanding under this Agreement, Borrower will promptly deliver
to Lender's Agent all such financial information that is subsequently available,
and any other financial information or statements that Lender's Agent may
reasonably request.
7.2 Lender's Agent hereby makes the following covenants. Subject to
confidentiality restrictions, if any, Lender's Agent shall furnish to Borrower
any of the following statements received from each Lender, promptly upon much
receipt (i) the most recent available audited statement of such Lender's
financial condition, and (ii) the most recent available unaudited statement of
such Lender's financial condition. As long as any Loan is outstanding under this
Agreement, Lender's Agent will promptly deliver to Borrower all such financial
information that is subsequently delivered to Lender's Agent and any other
financial information or
Page A-7
<PAGE>
statements pertaining to a Lender and received by Lender's Agent that Borrower
may reasonably request.
7.3 Lender's Agent and Borrower hereby covenant and agree for the benefit of the
Lenders that they each have adopted and implemented procedural safeguards to
help ensure that all actions taken by Lender's Agent hereunder will be effected
by individuals other than, and not under the supervision of, individuals who are
acting in a capacity as Borrower hereunder, and that all trades effected
hereunder will take place at the same fully negotiated "arms length" prices
offered to similarly situated third parties by Lender's Agent when it acts as
lending agent for the various participants in its securities lending program,
notwithstanding the inherent conflict of interest with respect to Loans to be
effected by Lender's Agent to Borrower.
8. Termination of Loan without Default.
8.1 Borrower may cause the termination of a Loan at any time by returning the
Borrowed Securities to Lender's Agent.
8.2 Lender's Agent may cause the termination of a Loan by giving notice of
termination of such Loan to Borrower, prior to the close of business on any
Business Day. Upon such notice, Borrower shall deliver the applicable Borrowed
Securities to Lender's Agent no later than the close of business on the next
Business Day.
8.3 Borrower's delivery of the Borrowed Securities to Lender's Agent pursuant to
Section 8.1 or 8.2 shall be made by causing Lender's Agent to credit the Account
of the Relevant Lender with the Borrowed Securities. Upon such delivery by or on
behalf of Borrower, Lender's Agent shall concurrently therewith deliver the
Collateral (as adjusted pursuant to Section 4) to Borrower; provided, however,
that if upon the return of the Borrowed Securities there is not sufficient time
for Lender's Agent to effect a return of the Collateral to Borrower's Account,
Lender's Agent may return such Collateral on the next Business Day such return
can be so effected.
9. Events of Default.
With respect to each Loan, the following shall constitute defaults hereunder
(individually, a "Default")
(a) if Lender's Agent or Borrower fails to return the relevant Borrowed
Securities or Collateral as required by Section 8 hereof;
(b) if Lender's Agent or Borrower fails to deliver or return the relevant
Collateral, as required by Section 4 hereof;
(c) if Lender's Agent or Borrower fails to make the payment of distributions
with respect to such Loan as required by Section 2.3
Page A-8
<PAGE>
and 3.5 hereof and such default is not cured within one Business Day of notice
of such failure to Borrower or Lender's Agent, as the case may be;
(d) if any party fails to make any payment with respect to such Loan due
hereunder;
(e) if any party, or any parent company of Borrower, or the Relevant Lender
makes a general assignment for the benefit of creditors, or admits in writing
its inability to pay its debts as they become due, or files or becomes subject
to a petition in bankruptcy or is adjudicated as bankrupt or insolvent, or files
or becomes subject to a petition seeking reorganization, liquidation,
dissolution, or similar relief under any present or future law or regulation, or
seeks, consents to or acquiesces in the appointment of any trustee, receiver, or
liquidator of it or any material part of its properties;
(f) if Borrower or the Relevant Lender has its license, charter, or other
authorization necessary to conduct a material portion of its business withdrawn,
suspended or revoked by any applicable federal or state government or agency
thereof;
(g) if it is found that Borrower or the Relevant Lender has made a material
misrepresentation of its financial condition;
(h) if Borrower breaches any covenants, representations, or agreements herein;
(i) if a final judgment for the payment of money shall be rendered against
Borrower and such judgment shall not have been discharged or its execution
stayed pending appeal within sixty (60) days of entry or such judgment shall not
have been discharged within sixty (60) days of expiration of any such stay.
10. Lender's Remedies on Borrower's Default.
10.1 In the event of any Default by Borrower under Section 9 hereof with respect
to a Loan, Lender's Agent, on behalf of the Relevant Lender, shall have the
right, in addition to any other remedies provided herein or under applicable
law, to terminate all Loans of such Relevant Lender, effective immediately upon
receipt of notice to that effect by Borrower, and at the option of Lender's
Agent (without further notice to Borrower) with respect to any or each such
Loan, either (a) to purchase a like amount of the Borrowed Securities in any
market for such securities or (b) to elect to treat the Borrowed Securities as
having been purchased by Borrower at a purchase price equal to the Replacement
Value. Lender's Agent may apply the relevant Collateral to the payment of such
purchase, after deducting therefrom all amounts, if any, due the Relevant
Lender, or Lender's Agent on its behalf, from Borrower under this Agreement. In
such event, Borrower's obligation to return the applicable Borrowed Securities
shall
Page A-9
<PAGE>
terminate. Borrower shall be liable to Lender's Agent, on behalf of the Relevant
Lender, for the cost of funds which Lender's Agent, on behalf of the Relevant
Lender, must advance to purchase such securities during any stay on the
application of the Collateral (whether such stay is automatic or imposed by a
court or any other governmental agency). In the event such purchase price or
Replacement Value exceeds the amount of the Collateral, Borrower shall be liable
to Lender's Agent, on behalf of the Relevant Lender for the amount of such
excess (plus all amounts, if any, due by Borrower to the Lender's Agent, on
behalf of the Relevant Lender hereunder) together with interest on all such
amounts at the Prime Rate, as it fluctuates from day to day, on demand from the
date of such purchase or election until the date of payment of such excess. Each
Lender shall have, as security for Borrower's obligation to such Lender to pay
such excess, a first security interest in or right of setoff against any
property of Borrower then held by such Lender and any other amount payable by
such Lender to Borrower. The purchase price of securities purchased under this
Section 10 shall include broker's fees and commissions and all other reasonable
costs, fees, and expenses related to such purchase. Lender's Agent shall
allocate among the Lenders and their respective Loans, in accordance with any
reasonable allocation method selected by Lender's Agent, the funds received,
Collateral realized upon and the costs of collection, including without
limitation, the cost of purchase of replacement securities. Upon the
satisfaction of all of Borrower's obligations to Lender's Agent, on behalf of
the Relevant Lender hereunder, any remaining Collateral held by Lender's Agent
on behalf of the Relevant Lender shall be returned to Borrower.
11. Borrower's Remedies on by Lender or Lender's Agent Default.
11.1 With respect to each Loan, in the event of any Default by the Relevant
Lender, or by Lender's Agent by reason of the Relevant Lender's failure to
perform its obligations under the terms of its Securities Lending Authorization
Agreement, Borrower shall have the right to sell an amount of the Borrowed
Securities applicable to the Loans from the Relevant Lender, in the principal
market for such securities, that will provide proceeds equal in value to the
Market Value of the Collateral on the date of Default. In such event, Borrower
may retain the proceeds of such sale and the obligation of Lender's Agent to
return the Collateral applicable to the Loans from the Relevant Lender shall
terminate. In the event the sale price received from such securities is less
than the value of the Collateral, Lender's Agent shall be liable to Borrower
(but only if and to the extent of the funds received from the Relevant Lender
under its Securities Lending Authorization Agreement) for the amount of any
deficiency (plus all amounts, if any, due to Borrower hereunder). Upon the
satisfaction of all of the obligations of Lender's Agent thereunder, any
remaining Borrowed Securities applicable to the Loans from the Relevant Lender
shall be returned to Lender's Agent.
Page A-10
<PAGE>
12. Definitions.
For the purposes hereof:
12.1 "Account of the Relevant Lender" shall mean, with respect to each Relevant
Lender, either: (i) such Relevant Lender's sub-account reflected on the books
and records of Lender's Agent within the 3E Special Account of Lender's Agent
held in the Federal Reserve Book-Entry System; or (ii) an account designated on
the books and records of State Street Bank and Trust Company as representing
cash Collateral held by Lender's Agent as custodian on the Relevant Lender's
behalf.
12.2 "Affiliate" means (i) any person directly or indirectly, through one or
more intermediaries, controlling, controlled by, or under common control with
another person; (ii) any officer, director, or partner, or employee of such
other person; and (iii) any corporation or partnership of which such other
person is an officer, director or partner. For purposes of this definition the
term "control" means the power to exercise a controlling influence over the
management or policies of a person other than an individual.
12.3 "Available Securities" shall mean the securities available to be loaned
hereunder, as described in Section 1 hereof.
12.4 "Borrowed Security" shall mean any "security" (as defined in the Exchange
Act) which is a U.S. Security, and is delivered as a Loan hereunder, until such
security is credited to Lender's Agent for the Account of the Relevant Lender or
until the security is replaced by purchase. For purposes of the return of
Borrowed Securities by Borrower pursuant to Section 8 or the purchase of
securities pursuant to Section 10, such term shall include securities of the
same issuer, class, and quantity as the Borrowed Securities.
12.5 "Borrower's Account" shall mean the 3A Investment Account of State Street
Bank and Trust Company held through the Federal Reserve Book-Entry System.
12.6 "Business Day" shall mean any day recognized as a settlement day by the
Federal Reserve Bank of Boston and on which Lender's Agent is open for business
to the public.
12.7 "Collateral" shall mean, with respect to each Loan whether now owned or
hereafter acquired, (a) that collateral delivered to Lender's Agent pursuant to
Section 3 or 4, and (b) all accounts in which such collateral is deposited and
all securities and the like in which all cash collateral is invested or
reinvested.
Page A-11
<PAGE>
12.8 "Default" shall have the meaning set forth in Section 9 hereof.
12.9 "Loan" shall mean a single transaction for the loan of securities hereunder
by Lender's Agent to Borrower on behalf of a designated Relevant Lender.
12.10 "Loaned Securities" shall mean securities subject to a Loan.
12.11 "Margin Percentage" shall mean one hundred and two percent (102%) or such
other percentage as is agreed to by the parties pursuant to Section 1.1.
12.12 "Market Value" of a security shall mean the fair market value of such
security (including, in the case of any Borrowed Security that is a debt
security, the accrued interest on such security) as determined by the
independent pricing service designated by Lender's Agent, or by such other
independent sources as may be selected on a reasonable basis by Lender's Agent.
"Market Value" of cash shall mean the notional amount thereof.
12.13 "Prime Rate" shall mean the prime rate as quoted in The Wall Street
Journal, New York Edition, for the business day preceding the date on which such
determination is made. If more than one rate is so quoted, the Prime Rate shall
be the average of the rates so quoted.
12.14 "Relevant Lender" shall mean, with respect to each Loan, the Lender to
whom such Loan is allocated as shown on the books of Lender's Agent maintained
pursuant to Section 1.4 hereof.
12.15 "Replacement Value" shall mean the price, including any brokerage or other
expenses and accrued interest, at which a like amount of securities identical to
the Borrowed Securities could be purchased in the principal market for such
securities at the time of the election of Lender's Agent under Section 10.1
hereof.
12.16 "State Street" shall mean State Street Bank and Trust Company.
12.17 "U.S. Security" means a security issued or guaranteed by the United States
government or any of its agencies.
13. Indemnification.
Borrower hereby agrees to indemnify and hold harmless each Lender and Lender's
Agent from any and all damages, losses, costs, and expenses (including
attorney's fees) that such Lender or Lender's Agent may incur or suffer due to
the failure of the Borrower to perform its obligations under this Agreement.
This
Page A-12
<PAGE>
right to indemnification shall survive the termination of any Loan or of this
Agreement.
14. Waivers, General.
The failure of either party to insist upon strict adherence to any term of this
Agreement on any occasion shall not be considered a waiver or deprive that party
of the right thereafter to insist upon strict adherence to that term or any
other term of this Agreement. All waivers in respect of a Default must be in
writing.
15. Standard of Care.
Subject to the requirements of applicable law, Lender's Agent shall not be
liable with respect to any losses incurred by Borrower in connection with this
Agreement except to the extent that such losses result from the negligence of
Lender's Agent in the performance of its duties hereunder.
16. Continuing Agreement; Termination; Remedies.
It is the intention of the parties hereto that, subject to the termination
provisions set forth herein, this Agreement shall constitute a continuing
agreement in every respect and shall apply to each and every Loan, whether now
existing or hereafter made by Lender's Agent to Borrower. Lender's Agent and
Borrower may each at any time terminate this Agreement upon five (5) days'
written notice to the other parties to that effect. The sole effect of any such
termination of this Agreement will be that, following such termination, no
further Loans by Lender's Agent shall be made or considered made hereunder, but
the provisions hereof shall continue in full force and effect in all other
respects until all Loans have been terminated and all obligations satisfied as
herein provided.
17. Notices.
Except as otherwise specifically provided herein, notices under this Agreement
may be made orally, in writing, or by any other means mutually acceptable to the
parties. If in writing, a notice shall be sufficient if delivered to the party
entitled to receive such notices at the following addresses:
If to Lender's Agent:
State Street Bank and Trust Company
Two International Place
Boston, Massachusetts 02110
Attn: Securities Lending Department
Page A-13
<PAGE>
If to Borrower:
State Street Bank and Trust Company
Capital Markets Area
P.O. Box 1992
Boston, Massachusetts 02105-1992
Attn: Capital Markets Area
or to such other addresses as either party may furnish the other party by
written notice under this section.
Telephone and facsimile notices shall be sufficient if communicated to the party
entitled to receive such notice at the following numbers:
If to Lender's Agent:
Telephone: (617) 664-2500 Facsimile: (617) 664-2660
If to Borrower:
Telephone: 654-6360 Facsimile: 654-4270
18. Time.
All times specified herein shall be based on Boston time.
19. Securities Contracts.
Each party hereto agrees that this Agreement and the Loans made hereunder shall
be a "qualified financial contract" for purposes of Section 11 (e)(8) of the
Federal Deposit Insurance Act, as amended, and any receivership or
conservationship proceeding thereunder.
20. Declaration of Trust.
Lender's Agent hereby covenants and agrees that with respect to any Collateral
delivered to Lender's Agent by Borrower hereunder, Lender's Agent shall hold
such Collateral, or, in the case of cash Collateral, shall hold any securities
or units representing the investment of such cash Collateral, separate and apart
from Lender's Agent's assets and Lender's Agent hereby further declares that it
holds such Collateral or such securities or units, as the case may be, in trust
for the benefit of the Relevant Lender.
Page A-14
<PAGE>
21. Miscellaneous.
With respect to loans of U.S. Securities to Borrower by Lender's Agent on behalf
of Lenders, this Agreement supersedes any other agreement between the parties.
This Agreement shall not be assigned by any party without the prior written
consent of the other parties. Subject to the foregoing, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, representatives, successors and assigns. This Agreement shall
be governed and construed in accordance with the laws of the Commonwealth of
Massachusetts. The provisions of this Agreement are severable and the invalidity
or unenforceability of any provision hereof shall not affect any other provision
of this Agreement. If in the construction of this Agreement any court should
deem any provision to be invalid because of scope or duration, then such court
shall forthwith reduce such scope or duration to that which is appropriate and
enforce this Agreement in its modified scope or duration.
22. Modification.
This Agreement shall not be modified, except by an instrument in writing signed
by the party against whom enforcement is sought.
BORROWER: STATE STREET BANK AND TRUST COMPANY
Officer
Title
Signature
LENDER'S AGENT: STATE STREET BANK AND TRUST COMPANY
Officer:
Title:
Signature:
Page A-15
<PAGE>
EXHIBIT 3.1
Ref No
(for insertion by Inland Revenue when photocopy)
APPLICATION FOR RELIEF FROM UK INCOME TAX ON MANUFACTURED OVERSEAS DIVIDENDS
(Double Taxation Relief (Taxes on Income) (General) (Manufactured Overseas
Dividends) Regulations S I 1993 No 1957)
Part 1 Claimant's Declaration
I declare, to the best of my knowledge and belief, that (insert name of
claimant) Claimant's address
is beneficially entitled to the manufactured overseas dividends receivable from
approved UK intermediaries or approved UK collecting agents as defined in SI
1993 Number 2004 and claim exemption under the Other Income article of the
/UK Tax Convention in respect of the
manufactured overseas dividends
(claimant's signature)
Part 2 Certificate of Tax Authority
I certify
(a) that (insert name of claimant) is resident in within
the meaning of the /United Kingdom Tax Convention and
(b)* is subject to tax on the manufactured dividends or interest to which it
is entitled.
* delete if not required by Other Income article of convention
(signature) (date)
Stamp of overseas Overseas revenue
revenue authority reference No.
Copy of Inland Revenue original
Issued on
Signature
<PAGE>
Schedule 7.1
This Schedule is attached to and made part of the Securities Lending
Authorization Agreement, dated the day of , 1996
between SANFORD C. BERNSTEIN FUND, INC. on behalf of the International Value
Portfolio ("Client") and STATE STREET BANK AND TRUST COMPANY ("State Street").
Acceptable Forms of Collateral
- - Cash (U.S. Currency);
- - Short-term Securities issued or guaranteed by the United States government or
its agencies;
- - Such other Collateral as the parties may agree to in writing from time to
time.
<PAGE>
Schedule 7.2
This Schedule is attached to and made part of the Securities Lending
Authorization Agreement, dated the day of , 1996 between
SANFORD C. BERNSTEIN FUND, INC. on behalf of the International Value
Portfolio("Client") and STATE STREET BANK AND TRUST COMPANY ("State Street").
Form of Report
<PAGE>
STATE STREET BANK & TRUST CO.
P.O. BOX 1992
BOSTON, MA 02105
SECURITIES LENDING DEPARTMENT
CORP CASH
TO: SUMMARY EARNINGS STATEMENT PAGE 1
BILLING DATE:
BILLING PERIOD:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
SETTLEMENT: AUSTRALIAN DOLLAR COLLATERAL: US DOLLARS
ACCOUNT NAME GROSS EARNINGS REBATE PAID COMMISSION NET EARNINGS BANK FEE INCOME
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
EQUITIES
EQUITY TOTALS
TOTALS
<PAGE>
STATE STREET BANK & TRUST CO.
P.O. BOX 1992
BOSTON, MA 02105
SECURITIES LENDING DEPARTMENT
CORP EQUITY CASH
TO: EARNINGS STATEMENT PAGE 1
BILLING DATE:
BILLING PERIOD:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SETTLEMENT: AUSTRALIAN DOLLAR COLLATERAL: US DOLLARS
OPENDATE OPER-ID QUANTITY TDE PRICE FROM - THRU CLOSED BALANCE NUM RESPRN BANK AVG. MNY
BALANCE (# #) ON LOAN DAYS RATE FEE MKT RATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
303 080 003 AMPULEX LTD AUSO.50
AUD USD
6/12/95 F07 383,000 CAR 2.500000 07/01 07/02 957,500.00 2 5.500 30.00 5.90000
</TABLE>
TOTAL EARNINGS
LESS REBATE
LESS BANK FEE
TRANSACTION # 00000000 BROKER XXXXX NET EARNINGS
TOTAL CASH A/C GROSS EARNINGS
TOTAL NON-CASH A/C GROSS EARNINGS
TOTAL A/C REBATES
TOTAL CASH A/C NET EARNINGS
TOTAL NON-CASH A/C NET EARNINGS
TOTAL CASH A/C BANKFEES
TOTAL NON-CASH A/C BANKFEES
TOTAL CASH A/C INCOME
TOTAL NON-CASH A/C INCOME
<PAGE>
STATE STREET BANK & TRUST CO.
P.O. BOX 1992
BOSTON, MA 02105
SECURITIES LENDING DEPARTMENT
CORP EQUITY CASH
TO: SUMMARY OF TRANSACTIONS PAGE 1
BILLING DATE:
BILLING PERIOD:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SETTLEMENT: COLLATERAL: CURRENCY:
ACCOUNT SHORT NAME NEW LOANS NEW BORROWER FULL RETURNS PARTIAL RETURNS ACCOUNT MARKS BROKER MARKS ADJUSTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
EQUITIES
EQUITY TOTALS
TOTALS
<PAGE>
Schedule 7.3
DIRECTIONS TO STATE STREET REGARDING
THE INVESTMENT OF CASH COLLATERAL
Except as provided below, State Street shall invest cash Collateral in
repurchase agreement transactions ("Repo Transactions") so long as each of the
following conditions have been met.
(i) The counterparty of each such Repo Transaction is listed on Schedule 7.3-A
hereto or has been approved in writing by the Client or the Investment Advisor
(each an "Approved Repo Counterparty").
(ii) Each Repo Transaction shall (A) mature in one Business Day; (B) be
collateralized 102% by securities issued by the U.S. Treasury; and (C) be
entered into only in accordance with the terms of a master repurchase agreement
substantially in the form attached as Schedule 7.3-B hereto, with such changes
as State Street shall deem necessary for administrative purposes.
(iii) State Street shall not enter into a Repo Transaction with any Approved
Repo Counterparty if, as a result of entering into such Repo Transaction, there
shall be outstanding with such Approved Repo Counterparty an aggregate amount of
Repo Transactions that exceed 20% of the Market Value of the Collateral with
respect to the Loaned Securities.
(iv) State Street shall not enter into any Repo Transaction with an Approved
Repo Counterparty listed on Schedule 7.3-A hereto under the heading "Restricted
Repo Counterparties" or identified in writing to State Street by the Client or
the Investment Advisor as such (collectively, the "Restricted Repo
Counterparties") if, as a result of entering into such Repo Transaction, there
shall be outstanding with the Restricted Repo Counterparties and the Restricted
Time Deposit Counterparties (as defined below) an aggregate amount of Repo
Transactions and Time Deposits (as defined below) that exceed 20% of the Market
Value of the Collateral with respect to the Loaned Securities.
In the event that (1) after reasonable efforts, State Street is unable to enter
into Repo Transactions on the terms set forth above or (2) at the time of
investment of cash Collateral, Repo Transactions are not available in the
marketplace, State Street shall invest cash Collateral in U.S. dollar time
deposits ("Time Deposits") so long as each of the following conditions are met.
(i) The counterparty of each such Time Deposit is listed on Schedule 7.3-C
hereto or has been approved in writing by the Client or the Investment Advisor
(each an "Approved Time Deposit Counterparty").
(ii) Each Time Deposit shall mature in one Business Day.
(iii) State Street shall not invest in a Time Deposit with any Approved Time
Deposit Counterparty if, as a result of investing in such Time Deposit, there
shall be outstanding with such Approved Time Deposit Counterparty an aggregate
amount of Time Deposits that exceed 20% of the Market Value of the Collateral
with respect to the Loaned Securities.
(iv) State Street shall not invest in any Time Deposit with any Approved Time
Deposit Counterparty listed on Schedule 7.3-C hereto under the heading
"Restricted Time Deposit Counterparties" or identified in writing to State
Street by the Client or the Investment Adviser as such (collectively, the
"Restricted Time Deposit Counterparties") if, as a result of investing in such
Time Deposit, there shall be outstanding with the Restricted Repo Counterparties
(as defined above) and the Restricted Time Deposit Counterparties an
<PAGE>
aggregate amount of Repo Transactions (as defined above) and Time Deposits that
exceed 20% of the Market Value of the Collateral with respect to the Loaned
Securities.
<PAGE>
Schedule 7.3-A
APPROVED REPO COUNTERPARTIES
Aubrey G. Lanston & Co., Inc.
Bear Stearns Securities Corp.
BT Securities Corp.
Chase Securities Corp.
Chemical Securities Inc.
Citicorp Securities Inc.
Dean Witter Securities
DLJ Securities Corp.
First Chicago Capital Markets Inc.
Goldman, Sachs & Co. L.P.
Greenwich Capital Markets
Lehman Brothers Inc.
Merrill Lynch Govt. Securities Inc.
Morgan Stanley & Co.
NationsBanc Capital Markets Inc.
NationsBank Corporation
Paine Webber Inc.
Salomon Brothers Inc.
Smith Barney Shearson Inc.
Restricted Repo Counterparties:
CS First Boston Inc.
Deutsche Morgan Grenfell
Dresdner Securities USA Inc.
H.K. Shanghai Bank Securities
SBC Capital Markets Inc.
UBS Securities Inc.
<PAGE>
Schedule 7.3-B
Form of Master Repurchase Agreement
Account Name(s) Account Number(s)
Master Repurchase Agreement
Dated as of:
Between: State Street Bank and Trust Company, not individually, but on behalf
of each entity set forth in the Annex hereto
and
1. Applicability
From time to time the parties hereto may enter into transactions in which one
party ("Seller") agrees to transfer to the other ("Buyer") securities or
financial instruments ("Securities") against the transfer of funds by Buyer,
with a simultaneous agreement by Buyer to transfer to Seller such Securities at
a date certain or on demand, against the transfer of funds by Seller. Each such
transaction shall be referred to herein as a "Transaction" and shall be governed
by this Agreement, including any supplemental terms or conditions contained in
Annex I hereto, unless otherwise agreed in writing.
2. Definitions
(a) "Act of Insolvency," with respect to any party; (i) the commencement by such
party as debtor of any case or proceeding under any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar law, or such party seeking
the appointment of a receiver, trustee, custodian or similar official for such
party or any substantial part of its property, or (ii) the commencement of any
such case or proceeding against such party, or another seeking such an
appointment, or the filing against a party of an application for a protective
decree under the provisions of the Securities Investor Protection Act of 1970,
which (A) is consented to or not timely contested by such party, (B) results in
the entry of an order for relief, such an appointment, the issuance of such a
protective decree or the entry of an order having a similar effect, or (C) is
not dismissed within 15 days, (iii) the making by a party of a general
assignment for the benefit of creditors, or (iv) the admission in writing by a
party of such party's inability to pay such party's debts as they become due;
(b) "Additional Purchased Securities," Securities provided by Seller to Buyer
pursuant to Paragraph 4(a) hereof;
(c) "Buyer's Margin Amount," with respect to any Transaction as of any date, the
amount obtained by application of a percentage (which may be equal to the
percentage that is agreed to as the Seller's Margin Amount under subparagraph
(q) of this Paragraph), agreed to by Buyer and Seller prior to entering into the
Transaction, to the Repurchase Price for such Transaction as of such date;
(d) "Confirmation," the meaning specified in Paragraph 3(b) hereof;
(e) "Income," with respect to any Security at any time, any principal thereof
then payable and all interest, dividends or other distributions thereon;
(f) "Margin Deficit," the meaning specified in Paragraph 4(a) hereof;
<PAGE>
(g) "Margin Excess," the meaning specified in Paragraph 4(b) hereof;
(h) "Market Value," with respect to any Securities as of any date, the price for
such Securities on such date obtained from a generally recognized source agreed
to by the parties or the most recent closing bid quotation from such a source,
plus accrued income to the extent not included therein (other than any income
credited or transferred to, or applied to the obligations of, Seller pursuant to
Paragraph 5 hereof) as of such date (unless contrary to market practice for such
Securities);
(i) "Price Differential," with respect to any Transaction hereunder as of any
date, the aggregate amount obtained by daily application of the Pricing Rate for
such Transaction to the Purchase Price for such Transaction on a 360 day per
year basis for the actual number of days during the period commencing on (and
including) the Purchase Date for such Transaction and ending on (but excluding)
the date of determination (reduced by any amount of such Price Differential
previously paid by Seller to Buyer with respect to such Transaction);
(j) "Pricing Rate," the per annum percentage rate for determination of the Price
Differential;
(k) "Prime Rate," the prime rate of U.S. money center commercial banks as
published in The Wall Street Journal;
(l) "Purchase Date," the date on which Purchased Securities are transferred by
Seller to Buyer;
(m) "Purchase Price," (i) on the Purchase Date, the price at which Purchased
Securities are transferred by Seller to Buyer, and (ii) thereafter, such price
increased by the amount of any cash transferred by Buyer to Seller pursuant to
Paragraph 4(b) hereof and decreased by the amount of any cash transferred by
Seller to Buyer pursuant to Paragraph 4(a) hereof or applied to reduce Seller's
obligations under clause (ii) of Paragraph 5 hereof;
(n) "Purchased Securities," the Securities transferred by Seller to Buyer in a
Transaction hereunder, and any Securities substituted therefor in accordance
with Paragraph 9 hereof. The term "Purchased Securities" with respect to any
Transaction at any time also shall include Additional Purchased Securities
delivered pursuant to Paragraph 4(a) and shall exclude Securities returned
pursuant to Paragraph 4(b);
(o) "Repurchase Date," the date on which Seller is to repurchase the Purchased
Securities from Buyer, including any date determined by application of the
provisions of Paragraphs 3(c) or 11 hereof;
(p) "Repurchase Price," the price at which Purchased Securities are to be
transferred from Buyer to Seller upon termination of a Transaction, which will
be determined in each case (including Transactions terminable upon demand) as
the sum of the Purchase Price and the Price Differential as of the date of such
determination, increased by any amount determined by the application of the
provisions of Paragraph 11 hereof;
(q) "Seller's Margin Amount," with respect to any Transaction as of any date,
the amount obtained by application of a percentage (which may be equal to the
percentage that is agreed to as the Buyer's Margin Amount under subparagraph (c)
of this Paragraph), agreed to by Buyer and Seller prior to entering into the
Transaction, to the Repurchase Price for such Transaction as of such date.
3. Initiation; Confirmation; Termination
<PAGE>
(a) An agreement to enter into a Transaction may be made orally or in writing at
the initiation of either Buyer or Seller. On the Purchase Date for the
Transaction, the Purchased Securities shall be transferred to Buyer or its agent
against the transfer of the Purchase Price to an account of Seller.
(b) Upon agreeing to enter into a Transaction hereunder, Buyer or Seller (or
both), as shall be agreed, shall promptly deliver to the other party a written
confirmation of each Transaction (a "Confirmation"). The Confirmation shall
describe the Purchased Securities (including CUSIP number, if any), identify
Buyer and Seller and set forth (i) the Purchase Date, (ii) the Purchase Price,
(iii) the Repurchase Date, unless the Transaction is to be terminable on demand,
(iv) the Pricing Rate or Repurchase Price applicable to the Transaction, and (v)
any additional terms or conditions of the Transaction not inconsistent with this
Agreement. The Confirmation, together with this Agreement, shall constitute
conclusive evidence of the terms agreed between Buyer and Seller with respect to
the Transaction to which the Confirmation relates, unless with respect to the
Confirmation specific objection is made promptly after receipt thereof. In the
event of any conflict between the terms of such Confirmation and this Agreement,
this Agreement shall prevail.
(c) In the case of Transactions terminable upon demand, such demand shall be
made by Buyer or Seller, no later than such time as is customary in accordance
with market practice, by telephone or otherwise on or prior to the business day
on which such termination will be effective. On the date specified in such
demand, or on the date fixed for termination in the case of Transactions having
a fixed term, termination of the Transaction will be effected by transfer to
Seller or its agent of the Purchased Securities and any income in respect
thereof received by Buyer (and not previously credited or transferred to, or
applied to the obligations of, Seller pursuant to Paragraph 5 hereof) against
the transfer of the Repurchase Price to an account of Buyer.
4. Margin Maintenance
(a) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions in which a particular party hereto is acting as
Buyer is less than the aggregate Buyer's Margin Amount for all such Transactions
(a "Margin Deficit"), then Buyer may by notice to Seller require Seller in such
Transactions, at Seller's option, to transfer to Buyer cash or additional
Securities reasonably acceptable to Buyer ("Additional Purchased Securities"),
so that the cash and aggregate Market Value of the Purchased Securities,
including any such Additional Purchased Securities, will thereupon equal or
exceed such aggregate Buyer's Margin Amount (decreased by the amount of any
Margin Deficit as of such date arising from any Transactions in which such Buyer
is acting as Seller).
(b) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions in which a particular party hereto is acting as
Seller exceeds the aggregate Seller's Margin Amount for all such Transactions at
such time (a "Margin Excess"), then Seller may by notice to Buyer require Buyer
in such Transactions, at Buyer's option, to transfer cash or Purchased
Securities to Seller, so that the aggregate Market Value of the Purchased
Securities, after deduction of any such cash or any Purchased Securities so
transferred, will thereupon not exceed such aggregate Seller's Margin Amount
(increased by the amount of any Margin Excess as of such date arising from any
Transactions in which such Seller is acting as Buyer).
(c) Any cash transferred pursuant to this Paragraph shall be attributed to such
Transactions as shall be agreed upon by Buyer and Seller.
(d) Seller and Buyer may agree, with respect to any or all Transactions
hereunder, that the respective rights of Buyer or Seller (or both) under
subparagraphs (a) and (b) of this Paragraph may be exercised only where a Margin
Deficit or Margin Excess exceeds a specified dollar amount or specified
percentage of the Repurchase
<PAGE>
Prices for such Transactions (which amount or percentage shall be agreed to by
Buyer and Seller prior to entering into any such Transactions).
(e) Seller and Buyer may agree, with respect to any or all Transactions
hereunder, that the respective rights of Buyer and Seller under subparagraphs
(a) and (b) of this Paragraph to require the elimination of a Margin Deficit or
a Margin Excess, as the case may be, may be exercised whenever such a Margin
Deficit or Margin Excess exists with respect to any single Transaction hereunder
(calculated without regard to any other Transaction outstanding under this
Agreement).
5. Income Payments
Where a particular Transaction's term extends over an income payment date on the
Securities subject to that Transaction, Buyer shall, as the parties may agree
with respect to such Transaction (or, in the absence of any agreement, as Buyer
shall reasonably determine in its discretion), on the date such income is
payable either (i) transfer to or credit to the account of Seller an amount
equal to such income payment or payments with respect to any Purchased
Securities subject to such Transaction or (ii) apply the income payment or
payments to reduce the amount to be transferred to Buyer by Seller upon
termination of the Transaction. Buyer shall not be obligated to take any action
pursuant to the preceding sentence to the extent that such action would result
in the creation of a Margin Deficit, unless prior thereto of simultaneously
therewith Seller transfers to Buyer cash or Additional Purchased Securities
sufficient to eliminate such Margin Deficit.
6. Security Interest
Although the parties intend that all Transactions hereunder be sales and
purchases and not loans, in the event any such Transactions are deemed to be
loans, Seller shall be deemed to have pledged by Buyer as security for the
performance by Seller of its obligations under each such Transaction, and shall
be deemed to have granted to Buyer a security interest in, all of the Purchased
Securities with respect to all Transactions hereunder and all proceeds thereof.
7. Payment and Transfer
Unless otherwise mutually agreed, all transfers of funds hereunder shall be in
immediately available funds. All Securities transferred by one party hereto to
the other party (i) shall be in suitable form for transfer or shall be
accompanied by duly executed instruments of transfer or assignment in blank and
such other documentation as the party receiving possession may reasonably
request, (ii) shall be transferred on the book-entry system of a Federal Reserve
Bank, or (iii) shall be transferred by any other method mutually acceptable to
Seller and Buyer. As used herein with respect to Securities, "transfer" is
intended to have the same meaning as when used in Section 8-313 of the New York
Uniform Commercial Code or, where applicable, in any federal regulation
governing transfers of the Securities.
8. Segregation of Purchased Securities
To the extent required by applicable law, all Purchased Securities in the
possession of Seller shall be segregated from other securities in its possession
and shall be identified as subject to this Agreement. Segregation may be
accomplished by appropriate identification on the books and records of the
holder, including a financial intermediary or a cleaning corporation. Title to
all Purchased Securities shall pass to Buyer and, unless otherwise agreed by
Buyer and Seller, nothing in this Agreement shall preclude Buyer from engaging
in repurchase transactions with the Purchased Securities or otherwise pledging
or hypothecating the Purchased Securities, but no such transaction shall relieve
Buyer of its obligations to
<PAGE>
transfer Purchased Securities to Seller pursuant to Paragraphs 3, 4 or 11
hereof, or of Buyer's obligation to credit or pay income to, or apply income to
the obligations of, Seller pursuant to Paragraph 5 hereof.
Required Disclosure for Transactions in Which the Seller Retains Custody of the
Purchase Securities
Seller is not permitted to substitute other securities for those subject to this
Agreement and therefore must keep Buyer's securities segregated at all times,
unless in this Agreement Buyer grants Seller the right to substitute other
securities. If Buyer grants the right to substitute, this means that Buyer's
securities will likely be commingled with Seller's own securities during the
trading day. Buyer is advised that, during any trading day that Buyer's
securities are commingled with Seller's securities, they [will]* [may]** be
subject to liens granted by Seller to [its clearing bank]* [third parties]** and
may be used by Seller for deliveries on other securities transactions. Whenever
the securities are commingled, Seller's ability to resegregate substitute
securities for Buyer will be subject to Seller's ability to satisfy [the
clearing]* [any]** lien or to obtain substitute securities.
Note: This Master Repurchase Agreement is the same as the model prepared by the
Public Securities Association.
* Language to be used under 17 CFR Section 403 4(e) if Seller is a government
securities broker or dealer other than a financial institution
** Language to be used under 17 CFR Section 403 5(d) if Seller is a financial
institution
<PAGE>
Annex I
Supplemental Terms and Conditions
of Master Repurchase Agreement
The following terms and conditions ("the Supplement") hereby are incorporated
into the Master Repurchase Agreement ("Agreement") dated as of April 19, 1993
between State Street Bank and Trust Company ("State Street"), in the capacity on
behalf of each respective account as set forth in Paragraph 1 below (State
Street, in each such capacity, hereinafter shall be referred to as the "Buyer")
and as the ("Seller"). To the extent of any conflict between the terms of the
Agreement and this Supplement, this Supplement shall govern. Unless otherwise
indicated, the definitions contained in Paragraph 2 of the Agreement apply to
this Supplement. This Supplement shall supersede any prior Supplement to the
Agreement.
1. Legal Capacity. Buyer enters this Agreement, and each Transaction hereunder,
not individually, but solely in its capacity as either:
(a) trustee of one of the following commingled investment funds qualified under
Revenue Ruling 81-100 as a group trust (each a "Qualified Fund"), to be
specified upon entering each Transaction:
Government Securities Short Term
Investment Fund ("GSTIF") Daily Mortgage Fund
Short Term Investment Fund ("STIF") Intermediate Bond Fund
Yield Enhanced Short Term Investment Fund Short Term Bond Fund
Quality A Short Term Investment Fund International Bond Fund
Quality D Short Term Investment Fund Yield Plus Fund
Quality P Short Term Investment Fund
Super Collateral Fund
Maturity Plus Fund
(b) trustee of one of the following Common Trust Funds (each a "CTF") maintained
by State Street, to be specified upon entering each transaction:
U.S. Bond Market Common Trust Fund
German Bond Market Common Trust Fund
Japanese Bond Market Common Trust Fund
United Kingdom Bond Market Common Trust Fund
Securities Lending Quality Trust
U.S. Libor Plus Common Trust Fund
Short Term Investment Common Trust Fund
(c) agent on behalf of one of the following clients (each a "Client"), to be
specified upon entering each Transaction:
Buyer may in writing amend the list of Qualified Funds, Common Trust Funds or
Clients governed by this Agreement from time to time, subject to approval by the
Seller. Buyer represents and warrants that it is duly authorized to execute
transactions on behalf of each such account.
<PAGE>
2. Confirmation. The Seller shall promptly issue to the Buyer a written
confirmation upon agreeing to each Transaction pursuant to Paragraph 3 of the
Agreement. In addition to the information required in said confirmation by
Paragraph 3, each confirmation also shall identify the Purchased Securities.
3. Segregation of Purchased Securities. All Purchased Securities shall be
delivered on the same day as the Transaction to the Buyer's designated custodian
or sub-custodian ("Custodian"), together with all rights relating thereto,
against the payment of the Purchase Price. Under no circumstances shall the
Seller directly or indirectly maintain possession of Purchased Securities or
Additional Purchased Securities.
4. Oral Commitment. An oral commitment between Seller and the Buyer to enter
into a Transaction shall be binding if made prior to 2:00 p.m. New York time on
the Purchase Date. If Seller fails to deliver the Purchased Securities pursuant
to such oral commitment to sell by the close of business on such Purchase Date,
the Buyer shall have no obligation to transmit funds and Seller shall pay the
difference (if any) between (i) the Repurchase Price minus the Purchase Price
and (ii) an amount equal to the interest the Buyer actually obtained on the
Purchase Price for the period during which the Seller fails to deliver such
Purchased Securities ending on but excluding the original Repurchase Date. If
Buyer fails to pay for the Purchased Securities pursuant to such oral commitment
to sell by the close of business on such Purchase Date, the Seller shall have no
obligation to transmit the Purchased Securities and Buyer shall pay to the
Seller the amount by which Seller's cost of funds exceeds the agreed upon
Pricing Rate on the Purchase Price for the period during which the Buyer fails
to deliver the Purchase Price ending on but excluding the original Repurchase
Date.
5. Limitation of Liability. Buyer's execution of this Agreement and each
Transaction hereunder relating to either a Qualified Fund or a Common Trust Fund
is made solely in its capacity as trustee of the relevant Qualified Fund or
Common Trust Fund, Buyer's execution of this Agreement and each Transaction
hereunder relating to a Client is made solely in its capacity as agent on behalf
of such Client. It is expressly acknowledged and agreed that the obligations of
State Street hereunder shall not be binding upon any of the shareholders,
directors, officers, employees or agents of State Street, personally, but shall
bind only the property of the Qualified Fund, Common Trust Fund or Client
account, as the case may be.
6. Qualified ERISA Trust. Pursuant to Paragraph 18 of the Agreement, Buyer
hereby notifies Seller that each Qualified Fund consists solely of assets of
employee benefit plans or other plans qualified under the terms of ERISA, and
State Street as a fiduciary and in its corporate capacity represents that each
Transaction made by Buyer pursuant to the Agreement does not constitute
prohibited transactions under ERISA and shall therefore be made pursuant to the
terms of ERISA. This representation shall be deemed made each day that any
transaction is outstanding hereunder.
By: By:
Title: Title:
Date: Date:
<PAGE>
ANNEX II
Names and Addresses for Communications Between Parties
<PAGE>
Schedule 7.3-C
APPROVED TIME DEPOSIT COUNTERPARTIES
Restricted Time Deposit Counterparties:
Bank of New York Cayman
Bank of America Cayman
Chase Bank Nassau
Chemical Bank NY Nassau
Chemical Bank NY London
CIBC NY Cayman
Credit Agricole Cayman
Credit Agricole London
Deutsche Bank Cayman
Dresdner Bank Cayman
Fifth Third Bank Cincinnati Cayman
First Union NC Nassau
Harris Trust & Savings Nassau
National Bank of Detroit Nassau
Republic National Bank Cayman
Societe Generale Cayman
Sun Trust Bank Cayman
Toronto Dominion Bank Cayman
Union Bank of Switzerland Cayman
<PAGE>
Schedule 7.4
This Schedule is attached to and made part of the Securities Lending
Authorization Agreement, dated the day of , 1996 between
SANFORD C. BERNSTEIN FUND, INC. on behalf of the International Value Portfolio
("Client") and STATE STREET BANK AND TRUST COMPANY ("State Street").
Schedule of Fees
1. Subject to Paragraph 2 below, all proceeds collected by the State Street on
investment of Cash Collateral or any fee income shall be allocated as follows:
- -Sixty percent (60%) payable to the Client, and
- -Forty percent (40%) payable to State Street.
2. All payments to be allocated under Paragraph 1 above shall be made after
deduction of such other amounts payable to State Street or to the Borrower under
the terms of the attached Securities Lending Authorization Agreement.
3. Any Rebate Shortfall shall also be allocated as follows:
- -Sixty percent (60%) payable by Client, and
- -Forty percent (40%) payable by State Street.
4. Administrative Fees:
On an annualized basis, the administrative fee for investing cash Collateral in
accordance with the provisions of Schedule 7.3 hereto is 1.75 basis points,
which shall be allocated as follows: Sixty Percent (60%) payable by the Client
and Forty Percent (40%) payable by State Street.
<PAGE>
SCHEDULE 10.1 PAGE
ENDATE:
ALL CURRENCY AMOUNTS IN USD SECURITIES LENDING ONLOAN POSITIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY DESCRIPTION
SETTLED CONTRACT MARK MARKET UNSETTLED CONTRACT MARK MARKET
UNITS ON LOAN AMOUNT AMOUNT VALUE UNITS ON LOAN AMOUNT AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
SETTLEMENT CODE:
TOTALS FOR SETTLEMENT CODE:
<PAGE>
SCHEDULE 10.1 PAGE
ENDATE:
STATE STREET BANK & TRUST CO
SECURITIES LENDING BROKER EXPOSURE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
BROKER SETTLED USD CONTRACT USD MARK USD MARKET UNSETTLED USD CONTRACT USD MARK USD MARKET
LOANS AMOUNT AMOUNT VALUE LOANS AMOUNT AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
TOTALS FOR FUND
<PAGE>
Schedule 10.2
This Schedule is attached to and made part of the Securities Lending
Authorization Agreement, dated the day of , 1996 between
SANFORD C. BERNSTEIN FUND, INC. on behalf of the International Value Portfolio
("Client") and STATE STREET BANK AND TRUST COMPANY ("State Street").
<PAGE>
<TABLE>
<CAPTION>
fund bus settle brokername loan date cusip shs cont cont amt mark tot amt loan mkt
act line code onloan prince amt rate rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
XX01 C AUD BT SEC 1995-06-01 615573003 48,929 $2.25 $110,090.25 $0.00 $103,375.22 5.45 5.69061
00:00:00.000
</TABLE>
<PAGE>
AMENDMENT TO SECURITIES LENDING AUTHORIZATION AGREEMENT BETWEEN SANFORD C.
BERNSTEIN FUND, INC. ON BEHALF OF THE INTERNATIONAL VALUE PORTFOLIO
AND
STATE STREET BANK AND TRUST COMPANY
WHEREAS, Sanford C. Bernstein Fund, Inc. on Behalf of the International Value
Portfolio (the "Client") and State Street Bank and Trust Company, a
Massachusetts trust company ("State Street"), entered into a Securities Lending
Authorization Agreement July 17, 1996 (the "Agreement");
WHEREAS, Section 20 of the Agreement allows the Agreement to be modified at any
time by a writing signed by the party against whom enforcement is sought; and
WHEREAS, the Client and State Street both desire to amend the Agreement.
NOW, THEREFORE, for the value received and in order to induce the parties to
enter into the transactions contemplated thereby, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties mutually agree to amend the Agreement in the following
respect:
1. Schedule 7.1 of the Agreement regarding Acceptable Forms of Collateral is
hereby amended by deleting the following:
"Short-term Securities issued of guaranteed by the United States government or
its agencies" and replacing it with:
"Securities issued or guaranteed by the United States government or its
agencies;"
2. Certain capitalized terms in this Amendment are defined in Section 13 of the
Agreement.
3. The Agreement shall remain the same in all other respects.
The Amendment is effective as of the 18th day of July, 1996.
IN WITNESS WHEREOF, the parties hereto agree to the execution of the above
Amendment by affixing their signature below.
<PAGE>
SANFORD C. BERNSTEIN FUND, INC. ON
BEHALF OF THE INTERNATIONAL
VALUE PORTFOLIO
By: Jean Margo Reid
Title: Secretary
STATE STREET BANK AND TRUST COMPANY
By: Donald Hodgman
Title: Senior Vice President
Date: September 30, 1996
<PAGE>
Exhibit (11)
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Regular and
Institutional Prospectuses and the Statement of Additional Information
constituting parts of this Post-Effective Amendment No. 15 to the registration
statement on Form N-1A (the "Registration Statement") of our reports dated
November 15, 1996, relating to the financial statements and financial highlights
of Bernstein International Value Portfolio, Bernstein Emerging Markets Value
Portfolio, Bernstein Intermediate Duration Portfolio, Bernstein Short Duration
Plus Portfolio, Bernstein Government Short Duration Portfolio, Bernstein
Diversified Municipal Portfolio, Bernstein California Municipal Portfolio,
Bernstein New York Municipal Portfolio, Bernstein Short Duration Diversified
Municipal Portfolio, Bernstein Short Duration California Municipal Portfolio,
Bernstein Short Duration New York Municipal Portfolio, constituting portfolios
of Sanford C. Bernstein Fund, Inc., appearing in the September 30, 1996 Annual
Reports to Shareholders of Sanford C. Bernstein Fund, Inc., which are also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Financial Highlights" and "Independent
Accountants and Legal Counsel" in such Prospectuses and under the heading
"Custodian, Transfer Agent, Independent Accountants and Financial Statements" in
the Statement of Additional Information.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
January 13, 1997
<PAGE>
Exhibit (16)(f)
SCHEDULE OF COMPUTATION OF PERFORMANCE QUOTATIONS
BERNSTEIN EMERGING MARKETS VALUE PORTFOLIO
AVERAGE ANNUAL TOTAL RETURN CALCULATION
AS OF SEPTEMBER 30, 1996
1/n
Average Annual Total Return = (ERV/P) - 1
P = a hypothetical initial investment of $1,000 on
beginning date less any charges deducted from
the amount invested;
ERV = ending redeemable value of the hypothetical account on the
date of the balance sheet; assuming a complete redemption and
deduction of all nonrecurring charges deducted at the end of
the period; and
n = number of years (1, 5, 10 or the life of the
Fund).
- -------------------------------------------------------------------------------
PERIOD
SINCE
INCEPTION
---------
P = $1,000.00
n = [0.7945]
ERV = [$1047.80]
ANNUALIZED RETURN = [6.053%]
==============================================================================
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Fund's
Annual Report for the 12 months ending September 30, 1996 and is qualified in
its entirety by reference to the Fund's Annual Report for the 12 months ending
September 30, 1996 for the Bernstein Government Short Duration Portfolio.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> BERNSTEIN GOVERNMENT SHORT DURATION
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 137,505,006
<INVESTMENTS-AT-VALUE> 137,665,458
<RECEIVABLES> 2,476,527
<ASSETS-OTHER> 2,297
<OTHER-ITEMS-ASSETS> 947
<TOTAL-ASSETS> 140,145,229
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 343,091
<TOTAL-LIABILITIES> 343,091
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 141,560,695
<SHARES-COMMON-STOCK> 11,198,989
<SHARES-COMMON-PRIOR> 11,447,945
<ACCUMULATED-NII-CURRENT> 55,344
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,985,552)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 160,452
<NET-ASSETS> 139,802,138
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,576,087
<OTHER-INCOME> 0
<EXPENSES-NET> 1,008,859
<NET-INVESTMENT-INCOME> 7,567,228
<REALIZED-GAINS-CURRENT> 161,742
<APPREC-INCREASE-CURRENT> (1,057,875)
<NET-CHANGE-FROM-OPS> 6,671,095
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,567,228
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,098,904
<NUMBER-OF-SHARES-REDEEMED> 4,646,753
<SHARES-REINVESTED> 298,893
<NET-CHANGE-IN-ASSETS> 3,920,430
<ACCUMULATED-NII-PRIOR> 55,344
<ACCUMULATED-GAINS-PRIOR> (2,147,294)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 726,395
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,008,859
<AVERAGE-NET-ASSETS> 145,062,687
<PER-SHARE-NAV-BEGIN> 12.55
<PER-SHARE-NII> 0.65
<PER-SHARE-GAIN-APPREC> (0.07)
<PER-SHARE-DIVIDEND> 0.65
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.48
<EXPENSE-RATIO> 0.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Fund's
Annual Report for the 12 months ending September 30, 1996 and is qualified in
its entirety by reference to the Fund's Annual Report for the 12 months ending
September 30, 1996 for the Bernstein Short Duration Plus Portfolio.
</LEGEND>
<SERIES>
<NUMBER> 02
<NAME> BERNSTEIN SHORT DURATION PLUS
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 557,843,036
<INVESTMENTS-AT-VALUE> 558,855,592
<RECEIVABLES> 28,723,324
<ASSETS-OTHER> 102,011
<OTHER-ITEMS-ASSETS> 1,132,133
<TOTAL-ASSETS> 588,813,060
<PAYABLE-FOR-SECURITIES> 48,440,601
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,124,719
<TOTAL-LIABILITIES> 50,565,320
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 542,706,349
<SHARES-COMMON-STOCK> 43,129,203
<SHARES-COMMON-PRIOR> 42,780,571
<ACCUMULATED-NII-CURRENT> 959,835
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,783,937)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,322,363
<NET-ASSETS> 538,247,740
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 32,575,806
<OTHER-INCOME> 0
<EXPENSES-NET> 3,453,161
<NET-INVESTMENT-INCOME> 29,122,645
<REALIZED-GAINS-CURRENT> 3,386,052
<APPREC-INCREASE-CURRENT> (3,910,584)
<NET-CHANGE-FROM-OPS> 28,598,113
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 29,116,334
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14,658,652
<NUMBER-OF-SHARES-REDEEMED> 15,212,925
<SHARES-REINVESTED> 902,905
<NET-CHANGE-IN-ASSETS> 3,785,948
<ACCUMULATED-NII-PRIOR> (842,312)
<ACCUMULATED-GAINS-PRIOR> (8,374,153)
<OVERDISTRIB-NII-PRIOR> 1,041,447
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,660,415
<INTEREST-EXPENSE> 11,523
<GROSS-EXPENSE> 3,453,161
<AVERAGE-NET-ASSETS> 533,432,170
<PER-SHARE-NAV-BEGIN> 12.49
<PER-SHARE-NII> 0.69
<PER-SHARE-GAIN-APPREC> (0.01)
<PER-SHARE-DIVIDEND> 0.69
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.48
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Fund's
Annual Report for the 12 months ending September 30, 1996 and is qualified in
its entirety by reference to the Fund's Annual Report for the 12 months ending
September 30, 1996 for the Bernstein New York Municipal Portfolio.
</LEGEND>
<SERIES>
<NUMBER> 03
<NAME> BERNSTEIN NEW YORK MUNICIPAL
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 520,890,011
<INVESTMENTS-AT-VALUE> 529,929,555
<RECEIVABLES> 11,010,306
<ASSETS-OTHER> 8,551
<OTHER-ITEMS-ASSETS> 31,667
<TOTAL-ASSETS> 540,980,079
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,763,341
<TOTAL-LIABILITIES> 1,763,341
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 531,377,090
<SHARES-COMMON-STOCK> 40,396,394
<SHARES-COMMON-PRIOR> 34,014,866
<ACCUMULATED-NII-CURRENT> 9,519
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,249,812)
<OVERDISTRIBUTION-GAINS> 1,256,955
<ACCUM-APPREC-OR-DEPREC> 9,039,544
<NET-ASSETS> 539,216,738
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 26,813,416
<OTHER-INCOME> 0
<EXPENSES-NET> 3,264,997
<NET-INVESTMENT-INCOME> 23,548,419
<REALIZED-GAINS-CURRENT> 13,310
<APPREC-INCREASE-CURRENT> (3,027,322)
<NET-CHANGE-FROM-OPS> 20,534,407
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 23,548,419
<DISTRIBUTIONS-OF-GAINS> 2,079,340
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,846,371
<NUMBER-OF-SHARES-REDEEMED> 7,209,521
<SHARES-REINVESTED> 744,678
<NET-CHANGE-IN-ASSETS> 80,673,934
<ACCUMULATED-NII-PRIOR> 16,632
<ACCUMULATED-GAINS-PRIOR> 809,075
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,485,735
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,264,997
<AVERAGE-NET-ASSETS> 497,866,591
<PER-SHARE-NAV-BEGIN> 13.48
<PER-SHARE-NII> 0.64
<PER-SHARE-GAIN-APPREC> (0.07)
<PER-SHARE-DIVIDEND> 0.64
<PER-SHARE-DISTRIBUTIONS> 0.06
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.35
<EXPENSE-RATIO> 0.66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Fund's
Annual Report for the 12 months ending September 30, 1996 and is qualified in
its entirety by reference to the Fund's Annual Report file for the 12 months
ending September 30, 1996 for the Bernstein Diversified Municipal Portfolio.
</LEGEND>
<SERIES>
<NUMBER> 04
<NAME> BERNSTEIN DIVERSIFIED MUNICIPAL
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 792,930,926
<INVESTMENTS-AT-VALUE> 806,160,008
<RECEIVABLES> 21,911,048
<ASSETS-OTHER> 12,885
<OTHER-ITEMS-ASSETS> 90,647
<TOTAL-ASSETS> 828,174,588
<PAYABLE-FOR-SECURITIES> 5,939,908
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,839,371
<TOTAL-LIABILITIES> 7,779,279
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 807,522,386
<SHARES-COMMON-STOCK> 61,061,135
<SHARES-COMMON-PRIOR> 48,937,336
<ACCUMULATED-NII-CURRENT> 52,427
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (469,648)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13,229,082
<NET-ASSETS> 820,395,309
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 39,239,526
<OTHER-INCOME> 0
<EXPENSES-NET> 4,918,244
<NET-INVESTMENT-INCOME> 34,321,282
<REALIZED-GAINS-CURRENT> 1,750,391
<APPREC-INCREASE-CURRENT> (5,364,065)
<NET-CHANGE-FROM-OPS> 30,707,608
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 34,321,282
<DISTRIBUTIONS-OF-GAINS> 776,140
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 21,871,096
<NUMBER-OF-SHARES-REDEEMED> 10,454,791
<SHARES-REINVESTED> 707,494
<NET-CHANGE-IN-ASSETS> 159,580,846
<ACCUMULATED-NII-PRIOR> 52,427
<ACCUMULATED-GAINS-PRIOR> (1,443,899)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,719,975
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,918,244
<AVERAGE-NET-ASSETS> 745,238,619
<PER-SHARE-NAV-BEGIN> 13.50
<PER-SHARE-NII> 0.63
<PER-SHARE-GAIN-APPREC> (0.04)
<PER-SHARE-DIVIDEND> 0.63
<PER-SHARE-DISTRIBUTIONS> 0.02
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.44
<EXPENSE-RATIO> 0.66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Fund's
Annual Report for the 12 months ending September 30, 1996 and is qualified in
its entirety by reference to the Fund's Annual Report for the 12 months ending
September 30, 1996 for the Bernstein Intermediate Duration Portfolio.
</LEGEND>
<SERIES>
<NUMBER> 05
<NAME> BERNSTEIN INTERMEDIATE DURATION
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 1,585,132,952
<INVESTMENTS-AT-VALUE> 1,587,584,276
<RECEIVABLES> 143,603,027
<ASSETS-OTHER> 415,959
<OTHER-ITEMS-ASSETS> 4,788,536
<TOTAL-ASSETS> 1,736,391,798
<PAYABLE-FOR-SECURITIES> 280,711,752
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,903,910
<TOTAL-LIABILITIES> 284,615,662
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,448,416,603
<SHARES-COMMON-STOCK> 111,005,316
<SHARES-COMMON-PRIOR> 85,912,620
<ACCUMULATED-NII-CURRENT> 6,044,673
<OVERDISTRIBUTION-NII> 69,275
<ACCUMULATED-NET-GAINS> (6,658,854)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,862,707
<NET-ASSETS> 1,451,776,136
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 86,788,110
<OTHER-INCOME> 0
<EXPENSES-NET> 8,301,643
<NET-INVESTMENT-INCOME> 78,486,467
<REALIZED-GAINS-CURRENT> 14,795,815
<APPREC-INCREASE-CURRENT> (30,393,947)
<NET-CHANGE-FROM-OPS> 62,888,335
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 78,555,742
<DISTRIBUTIONS-OF-GAINS> 7,269,310
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 44,452,465
<NUMBER-OF-SHARES-REDEEMED> 21,720,787
<SHARES-REINVESTED> 2,361,018
<NET-CHANGE-IN-ASSETS> 309,007,806
<ACCUMULATED-NII-PRIOR> (1,968,896)
<ACCUMULATED-GAINS-PRIOR> (6,102,515)
<OVERDISTRIB-NII-PRIOR> 2,020,410
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,391,939
<INTEREST-EXPENSE> 48,015
<GROSS-EXPENSE> 8,301,643
<AVERAGE-NET-ASSETS> 1,308,469,889
<PER-SHARE-NAV-BEGIN> 13.30
<PER-SHARE-NII> 0.80
<PER-SHARE-GAIN-APPREC> (0.14)
<PER-SHARE-DIVIDEND> 0.80
<PER-SHARE-DISTRIBUTIONS> 0.08
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.08
<EXPENSE-RATIO> 0.63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Fund's
Annual Report for the 12 months ending September 30, 1996 and is qualified in
its entirety by reference to the Fund's Annual Report for the 12 months ending
September 30, 1996 for the Bernstein California Municipal Portfolio.
</LEGEND>
<SERIES>
<NUMBER> 06
<NAME> BERNSTEIN CALIFORNIA MUNICIPAL
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 274,867,044
<INVESTMENTS-AT-VALUE> 279,685,557
<RECEIVABLES> 6,804,008
<ASSETS-OTHER> 4,476
<OTHER-ITEMS-ASSETS> 780
<TOTAL-ASSETS> 286,494,821
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 736,986
<TOTAL-LIABILITIES> 736,986
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 281,657,369
<SHARES-COMMON-STOCK> 21,046,745
<SHARES-COMMON-PRIOR> 15,757,372
<ACCUMULATED-NII-CURRENT> (31,860)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (707,234)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,818,513
<NET-ASSETS> 285,757,835
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 12,722,213
<OTHER-INCOME> 0
<EXPENSES-NET> 1,678,428
<NET-INVESTMENT-INCOME> 11,043,785
<REALIZED-GAINS-CURRENT> 135,416
<APPREC-INCREASE-CURRENT> (408,331)
<NET-CHANGE-FROM-OPS> 10,770,870
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11,043,785
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,712,613
<NUMBER-OF-SHARES-REDEEMED> 4,648,754
<SHARES-REINVESTED> 225,514
<NET-CHANGE-IN-ASSETS> 71,806,926
<ACCUMULATED-NII-PRIOR> (31,860)
<ACCUMULATED-GAINS-PRIOR> (842,650)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,231,045
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,678,428
<AVERAGE-NET-ASSETS> 246,826,843
<PER-SHARE-NAV-BEGIN> 13.58
<PER-SHARE-NII> 0.61
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.61
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.58
<EXPENSE-RATIO> 0.68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from theFund's
Annual Report for the 12 months ending September 30, 1996 and is qualified in
its entirety by reference to the Fund's Annual Report for the 12 months ending
September 30, 1996 for the Bernstein International Value Portfolio.
</LEGEND>
<SERIES>
<NUMBER> 07
<NAME> BERNSTEIN INTERNATIONAL VALUE
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 2,853,062,801
<INVESTMENTS-AT-VALUE> 3,066,867,859
<RECEIVABLES> 28,731,044
<ASSETS-OTHER> 648,190,194
<OTHER-ITEMS-ASSETS> 44,018,405
<TOTAL-ASSETS> 3,787,807,502
<PAYABLE-FOR-SECURITIES> 19,499,844
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 637,049,397
<TOTAL-LIABILITIES> 656,549,241
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,720,294,178
<SHARES-COMMON-STOCK> 172,644,553
<SHARES-COMMON-PRIOR> 124,120,488
<ACCUMULATED-NII-CURRENT> 145,202,508
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 31,991,896
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 233,597,034
<NET-ASSETS> 3,131,258,261
<DIVIDEND-INCOME> 66,892,931
<INTEREST-INCOME> 2,048,040
<OTHER-INCOME> 0
<EXPENSES-NET> 33,782,632
<NET-INVESTMENT-INCOME> 35,158,339
<REALIZED-GAINS-CURRENT> 180,893,809
<APPREC-INCREASE-CURRENT> 151,231,811
<NET-CHANGE-FROM-OPS> 367,283,959
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13,729,281
<DISTRIBUTIONS-OF-GAINS> 44,354,187
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 59,526,336
<NUMBER-OF-SHARES-REDEEMED> 14,461,352
<SHARES-REINVESTED> 3,459,081
<NET-CHANGE-IN-ASSETS> 1,135,146,356
<ACCUMULATED-NII-PRIOR> (13,279,827)
<ACCUMULATED-GAINS-PRIOR> 32,505,551
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25,099,825
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 33,782,632
<AVERAGE-NET-ASSETS> 2,565,998,773
<PER-SHARE-NAV-BEGIN> 16.08
<PER-SHARE-NII> 0.23
<PER-SHARE-GAIN-APPREC> 2.26
<PER-SHARE-DIVIDEND> 0.10
<PER-SHARE-DISTRIBUTIONS> 0.33
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 18.14
<EXPENSE-RATIO> 1.31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Fund's
Annual Report for the 12 months ending September 30, 1996 and is qualified in
its entirety by reference to the Fund's Annual Report for the 12 months ending
September 30, 1996 for the Bernstein Short Duration New York Municipal
Portfolio.
</LEGEND>
<SERIES>
<NUMBER> 08
<NAME> BERNSTEIN SHORT DURATION NEW YORK MUNICIPAL
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 57,546,033
<INVESTMENTS-AT-VALUE> 57,724,829
<RECEIVABLES> 1,310,699
<ASSETS-OTHER> 12,562
<OTHER-ITEMS-ASSETS> 68,396
<TOTAL-ASSETS> 59,116,486
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 366,252
<TOTAL-LIABILITIES> 366,252
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 58,372,474
<SHARES-COMMON-STOCK> 4,693,828
<SHARES-COMMON-PRIOR> 4,383,038
<ACCUMULATED-NII-CURRENT> 172
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 194,098
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 178,796
<NET-ASSETS> 58,750,234
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,576,975
<OTHER-INCOME> 0
<EXPENSES-NET> 400,776
<NET-INVESTMENT-INCOME> 2,176,199
<REALIZED-GAINS-CURRENT> 201,709
<APPREC-INCREASE-CURRENT> (495,760)
<NET-CHANGE-FROM-OPS> 1,882,148
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,176,199
<DISTRIBUTIONS-OF-GAINS> 43,798
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,783,281
<NUMBER-OF-SHARES-REDEEMED> 2,550,234
<SHARES-REINVESTED> 77,743
<NET-CHANGE-IN-ASSETS> 3,528,900
<ACCUMULATED-NII-PRIOR> 172
<ACCUMULATED-GAINS-PRIOR> 36,187
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 254,698
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 400,776
<AVERAGE-NET-ASSETS> 54,184,239
<PER-SHARE-NAV-BEGIN> 12.60
<PER-SHARE-NII> 0.51
<PER-SHARE-GAIN-APPREC> (0.07)
<PER-SHARE-DIVIDEND> 0.51
<PER-SHARE-DISTRIBUTIONS> 0.01
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.52
<EXPENSE-RATIO> 0.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Fund's
Annual Report for the 12 months ending September 30, 1996 and is qualified in
its entirety by reference to the Fund's Annual Report for the 12 months ending
September 30, 1996 for the Bernstein Short Duration Diversified Municipal
Portfolio.
</LEGEND>
<SERIES>
<NUMBER> 09
<NAME> BERNSTEIN SHORT DURATION DIVERSIFIED MUNICIPAL
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 115,905,975
<INVESTMENTS-AT-VALUE> 116,237,083
<RECEIVABLES> 3,137,137
<ASSETS-OTHER> 22,521
<OTHER-ITEMS-ASSETS> 83,813
<TOTAL-ASSETS> 119,480,554
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 384,592
<TOTAL-LIABILITIES> 384,592
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 118,654,301
<SHARES-COMMON-STOCK> 9,516,156
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (9,678)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 110,415
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 331,108
<NET-ASSETS> 119,095,962
<DIVIDEND-INCOME> 5,040,524
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 748,526
<NET-INVESTMENT-INCOME> 4,291,998
<REALIZED-GAINS-CURRENT> 110,414
<APPREC-INCREASE-CURRENT> (693,123)
<NET-CHANGE-FROM-OPS> 3,709,289
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,291,998
<DISTRIBUTIONS-OF-GAINS> 338,194
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,868,769
<NUMBER-OF-SHARES-REDEEMED> 4,512,344
<SHARES-REINVESTED> 139,065
<NET-CHANGE-IN-ASSETS> 17,770,610
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 378,517
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 459,702
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 748,526
<AVERAGE-NET-ASSETS> 106,002,745
<PER-SHARE-NAV-BEGIN> 12.63
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> (0.06)
<PER-SHARE-DIVIDEND> 0.52
<PER-SHARE-DISTRIBUTIONS> 0.05
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.52
<EXPENSE-RATIO> 0.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Fund's
Annual Report for the 12 months ending September 30, 1996 and is qualified in
its entirety by reference to the Fund's Annual Report for the 12 months ending
September 30, 1996 for the Bernstein Short Duration California Municipal
Portfolio.
</LEGEND>
<SERIES>
<NUMBER> 10
<NAME> BERNSTEIN SHORT DURATION CALIFORNIA MUNICIPAL
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 71,783,318
<INVESTMENTS-AT-VALUE> 71,953,257
<RECEIVABLES> 1,180,054
<ASSETS-OTHER> 9,338
<OTHER-ITEMS-ASSETS> 600
<TOTAL-ASSETS> 73,143,249
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 217,981
<TOTAL-LIABILITIES> 217,981
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 72,698,055
<SHARES-COMMON-STOCK> 5,819,554
<SHARES-COMMON-PRIOR> 5,022,977
<ACCUMULATED-NII-CURRENT> (20,838)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 72,292
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 169,939
<NET-ASSETS> 72,925,268
<DIVIDEND-INCOME> 3,188,181
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 492,923
<NET-INVESTMENT-INCOME> 2,695,258
<REALIZED-GAINS-CURRENT> 80,991
<APPREC-INCREASE-CURRENT> (443,925)
<NET-CHANGE-FROM-OPS> 2,332,324
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,695,258
<DISTRIBUTIONS-OF-GAINS> 254,565
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,924,117
<NUMBER-OF-SHARES-REDEEMED> 3,229,468
<SHARES-REINVESTED> 101,928
<NET-CHANGE-IN-ASSETS> 9,395,546
<ACCUMULATED-NII-PRIOR> 454
<ACCUMULATED-GAINS-PRIOR> 224,574
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 325,380
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 492,923
<AVERAGE-NET-ASSETS> 68,071,759
<PER-SHARE-NAV-BEGIN> 12.65
<PER-SHARE-NII> 0.50
<PER-SHARE-GAIN-APPREC> (0.07)
<PER-SHARE-DIVIDEND> 0.50
<PER-SHARE-DISTRIBUTIONS> 0.05
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.53
<EXPENSE-RATIO> 0.72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Fund's
Annual Report for the 12 months ending September 30, 1996 and is qualified in
its entirety by reference to the Fund's Annual Report for the 12 months ending
September 30, 1996 for the Bernstein Emerging Markets Value Portfolio.
</LEGEND>
<SERIES>
<NUMBER> 11
<NAME> BERNSTEIN EMERGING MARKETS VALUE
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 287,424,619
<INVESTMENTS-AT-VALUE> 269,170,690
<RECEIVABLES> 3,658,802
<ASSETS-OTHER> 80,125
<OTHER-ITEMS-ASSETS> 3,194,853
<TOTAL-ASSETS> 276,104,470
<PAYABLE-FOR-SECURITIES> 1,173,058
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,007,280
<TOTAL-LIABILITIES> 2,180,338
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 290,879,575
<SHARES-COMMON-STOCK> 12,554,385
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,009,720
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 282,239
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (18,259,956)
<NET-ASSETS> 273,924,132
<DIVIDEND-INCOME> 3,360,405
<INTEREST-INCOME> 439,076
<OTHER-INCOME> 0
<EXPENSES-NET> 2,491,699
<NET-INVESTMENT-INCOME> 1,307,782
<REALIZED-GAINS-CURRENT> (15,912)
<APPREC-INCREASE-CURRENT> (18,259,956)
<NET-CHANGE-FROM-OPS> 16,968,086
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,938,295
<NUMBER-OF-SHARES-REDEEMED> 383,910
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 273,924,132
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,388,877
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,491,699
<AVERAGE-NET-ASSETS> 152,993,052
<PER-SHARE-NAV-BEGIN> 20.00
<PER-SHARE-NII> 0.18
<PER-SHARE-GAIN-APPREC> 1.64
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 21.82
<EXPENSE-RATIO> 1.92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
