<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. 20
------------
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 22 /x/
------------
Sanford C. Bernstein Fund, Inc.
(Exact Name of Fund as Specified in Charter)
767 Fifth Avenue, New York, New York 10153-0185
(Address of Principal Executive Offices) (Zip Code)
Fund's Telephone Number, including Area Code: (212) 486-5800
Jean Margo Reid, Esq.
767 Fifth Avenue
New York, New York 10153-0185
(Name and Address of Agent for Service)
--------------------------------------------
Copies to:
Joel H. Goldberg, Esq.
Swidler Berlin Shereff Friedman 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)
X 60 days after filing pursuant to paragraph (a)(1)
- -----
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on (date) pursuant to paragraph (b)
_____ on (date) pursuant to paragraph (a)(1)
_____ on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following:
_____ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
This filing contains three (3) Prospectuses, a regular Prospectus (the "Regular
Prospectus") covering all twelve series of shares of the Sanford C. Bernstein
Fund, Inc. (see Cross-Reference Sheet Part A-1) and two Institutional Services
Prospectuses, one covering the Intermediate Duration and Short Duration Plus
Portfolios of the Sanford C. Bernstein Fund, Inc. (see Cross-Reference Sheet
Part A-2) (the Fixed-Income Institutional Services Prospectus") and the second
one covering the International Value Portfolio II of the Sanford C. Bernstein
Fund, Inc. (See Cross-Reference Sheet Part A-3) (the "International
Institutional Services Prospectus"), and together with the Fixed-Income
Institutional Services Prospectus known as the "Institutional Prospectuses" and
one Statement of Additional Information ("SAI") which is common to all three
Prospectuses.
2
<PAGE>
SANFORD C. BERNSTEIN FUND, INC.
CROSS-REFERENCE SHEET
(as required by Rule 481(a))
N-1A Item No.
- -------------
<TABLE>
<CAPTION>
Location in Regular
Part A-1 Prospectus
- -------- ----------
<S> <C>
Item 1. Front and Back Cover Pages Front and Back
Cover Pages
Item 2. Risk/Return Summary: Investment Investment Objectives, Strategies,
Risks and Performance Risks, Performance and Fees
Item 3. Risk/Return Summary: Fee Table Investment Objectives, Strategies,
Risks, Performance and Fees
Item 4. Investment Objectives, Principal Additional Investment Information, Special
Investment Strategies and Related Investment Techniques and Related Risks
Risks
Item 5. Management's Discussion of
Fund Performance Not Applicable
Item 6. Management, Organization and
Capital Structure Fund Management
Item 7. Shareholder Information Shareholder Information
Item 8. Distribution Agreements Not Applicable
Item 9. Financial Highlights Financial Highlights
</TABLE>
3
<PAGE>
February 1, 2000
PROSPECTUS
SANFORD C. BERNSTEIN FUND, INC.
BERNSTEIN FIXED-INCOME TAXABLE PORTFOLIOS
SHORT-DURATION PORTFOLIOS INTERMEDIATE-DURATION PORTFOLIO
Bernstein Government Short Duration Bernstein Intermediate Duration
Bernstein Short Duration Plus
BERNSTEIN FIXED-INCOME MUNICIPAL PORTFOLIOS
SHORT-DURATION PORTFOLIOS INTERMEDIATE-DURATION PORTFOLIOS
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 EQUITY PORTFOLIOS
Bernstein Tax-Managed International Value
Bernstein International Value II
Bernstein Emerging Markets Value
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
Investment Objectives, Strategies, Risks, Performance, and Fees
Bernstein Fixed-Income Portfolios
The Taxable Portfolios
o Bernstein Government Short Duration Portfolio....................___
o Bernstein Short Duration Plus Portfolio..........................___
o Bernstein Intermediate Duration Portfolio........................___
The Municipal Portfolios
o Bernstein New York Municipal.....................................___
o Bernstein Short Duration New York Municipal......................___
o Bernstein California Municipal...................................___
o Bernstein Short Duration California Municipal....................___
o Bernstein Diversified Municipal..................................___
o Bernstein Short Duration Diversified Municipal...................___
Bernstein International Equity Portfolios
o Bernstein Tax-Managed International Value........................___
o Bernstein International Value II.................................___
o Bernstein Emerging Markets Value.................................___
Making Investment Decisions for the Portfolios.............................___
Additional Investment Information, Special Investment Techniques,
and Related Risks........................................................___
The Bernstein Fixed-Income Portfolios
The Bernstein International Equity Portfolios
All Bernstein Fund Portfolios
Fund Management............................................................___
Shareholder Information....................................................___
Pricing of Portfolio Shares..............................................___
Purchasing Shares........................................................___
Selling Shares...........................................................___
Exchanging Shares........................................................___
Dividends, Distributions and Taxes.........................................___
Financial Highlights.......................................................___
2
<PAGE>
INTRODUCTION
------------
This Prospectus describes the 12 Portfolios of the Sanford C. Bernstein
Fund, Inc. (the "Fund"), each representing a separate portfolio of securities
and each having its own investment objectives. There are nine fixed-income
Portfolios and three international equity portfolios.
Sanford C. Bernstein & Co., Inc. is the investment manager of the Fund.
This prospectus refers to Sanford C. Bernstein & Co., Inc. as "Bernstein" or
"we" and shareholders of the Fund Portfolios as "you".
Before investing in any Portfolio of the Fund, you should consider the
risks. The share prices of the Portfolios will fluctuate and you may lose money
when you sell your shares. This risk is heightened in the case of the Bernstein
international equity Portfolios which can experience high volatility in share
prices. There is no guarantee that a Portfolio will achieve its investment
objective. In addition, the investments made by a Portfolio may underperform the
market generally or other mutual funds with a similar investment objective.
Also, the issuers in which the Portfolios invest may be affected by the year
2000 problem and the Portfolios' returns could be adversely affected as a result
(see discussion on page __).
These and other risks are discussed in more detail in the pages that
follow and in the Fund's Statement of Additional Information (SAI) which is
available without charge (see back cover).
3
<PAGE>
THE BERNSTEIN GOVERNMENT SHORT DURATION PORTFOLIO
INVESTMENT OBJECTIVE
To provide safety of principal and a moderate rate of income that is
generally exempt from state and local taxes.
INVESTMENT STRATEGIES
The Bernstein Government Short Duration Portfolio will invest primarily
in U.S. government and agency securities. The Portfolio may also invest in high
quality money-market securities, which are securities that have remaining
maturities of one year or less and are rated AA or better by Standard & Poor's
or Aa or better by Moody's. Additionally, up to 10% of the Portfolio's total
assets may be invested in other securities rated A or better by national rating
agencies and comparably rated commercial paper and notes.
Many types of securities may be purchased by the Portfolio, including
bills, notes, corporate bonds, inflation-protected securities, mortgage-backed
securities, asset-backed securities as well as others. The Portfolio may use
special investment techniques, including futures.
The income earned by the Portfolio is generally exempt from state and
local taxes.
In managing the Portfolio, we may use interest-rate forecasting to
determine the best level of interest-rate risk at a given time. We may
moderately shorten the average duration of the Portfolio when we expect interest
rates to rise and modestly lengthen average duration when we anticipate that
rates will fall.
Duration is a measure of interest-rate risk (described further below).
The duration of a bond is the effect on price of a rise or fall of 1% in
interest rates. Thus, if the Portfolio's duration is around 2 years, it will
lose about 2% in principal should interest rates rise 1% and gain about 2% in
principal should interest rates fall 1%.
The Portfolio seeks to maintain an effective duration of one to three
years under normal market conditions.
Since the Bernstein Government Short Duration Portfolio owns a high
percentage of securities that are U.S. government securities, its returns will
generally be lower than those of the Bernstein Short Duration Plus Portfolio.
INVESTMENT RISKS
General risks of investing in the Portfolio: The share prices of the
Portfolio will fluctuate and you may lose money when you sell your shares. There
is no guarantee that the Portfolio will achieve its investment objective.
4
<PAGE>
Interest-rate risk: Should there be a rise in the overall level of
interest rates, it is likely that the value of the Portfolio securities will
decline. Accordingly, it is likely that the Portfolio share price will fall.
Credit risk: In the event that the credit rating of a Portfolio
security is downgraded or the issuer defaults by failing to make scheduled
interest or principal payments, there is a risk that the Portfolio's income
level and/or share price will fall. The Portfolio may retain a security whose
credit quality is downgraded or for which the issuer defaults.
While securities issued by the U.S. Treasury and some U.S. agency
securities are backed by the United States government, other U.S. agency
securities are backed only by the credit of the issuing agency or
instrumentality. For example, securities issued by Government National Mortgage
Association (GNMA) are backed by the United States while securities issued by
Federal Home Loan Mortgage Corporation (FHLMC) are backed only by the credit of
FHLMC. However, some issuers of agency securities may have the right to borrow
from the United States Treasury to meet their obligations, such as the United
States Postal Service.
No government guarantee: Investments in the Portfolio are not insured
by the U.S. government.
Riskier than a money-market fund: Since the Portfolio is invested in
securities with longer maturities than the assets of the type of mutual fund
known as a money-market fund, the Portfolio's expected return is somewhat
higher. However, the risk of a decline in the market value of the Portfolio is
greater than for a money-market fund since the credit quality of the portfolio
securities may be lower and the effective duration of the Portfolio will be
longer.
Inflation-protected securities: The terms of inflation-protected
securities provide for the coupon and/or maturity value to be adjusted based on
changes in inflation. Decreases in the inflation rate or in investors'
expectations about inflation could cause these securities to underperform
non-inflation-adjusted securities on a total return basis. In addition, these
securities may have limited liquidity in the secondary market.
Futures risk: Futures contracts can be highly volatile and could
reduce a Portfolio's total returns. Each Portfolio's potential losses from the
use of futures could extend beyond its initial investment.
Mortgage-related securities: In the case of mortgage-related 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. In
addition, mortgage-related securities subject the Portfolio to the following
risks:
Prepayment risk: Because interest rates rise and fall, there
is no way to be certain of the actual rates of prepayment by the
borrowers on the underlying mortgages. Thus, actual prepayments on the
securities could differ from expected prepayments. As a result, the
value of a security could be lower than expected.
5
<PAGE>
Shortening risk: Shortening risk is the possibility that
falling interest rates may cause prepayments of principal to occur at a
faster-than-expected rate. This particular risk may effectively change
a security that was considered intermediate- or long-term into a
short-term security. The prices of short-term securities do not rise as
much in response to a fall in interest rates as do the prices of
intermediate or long-term securities.
Extension risk: Extension risk is the possibility that rising
interest rates may cause prepayments of principal to occur at a
slower-than-expected rate. This particular risk may effectively change
a security that was considered short or intermediate-term into a
long-term security. The prices of long-term securities generally fall
more in response to a rise in interest rates than do the prices of
short or intermediate-term securities.
INVESTMENT PERFORMANCE
The bar chart below shows the Portfolio's performance for the past 10
calendar years. The table below shows how the Fund's average annual returns
differ from those of a broad-based securities market index. Both the bar chart
and the table indicate the volatility of an investment in the Portfolio and give
some indication of the risk. The Portfolio's past performance is no guarantee of
how it will perform in the future.
Bar Chart
Calendar Year Total Returns
Bernstein Government Short Duration
Portfolio
'90 '91 '92 '93 '94 '95 '96 '97 '98
- ----- ------ ----- ----- ----- ------ ----- ----- -----
8.98% 11.22% 5.37% 4.60% 0.42% 10.11% 4.09% 5.65% 5.55%
Quarter Total
Ended Return
Best Quarter 6/30/89 4.02%
Worst Quarter 3/31/92 -0.61%
Returns for calendar year 1999 to be added by amendment in January 2000.
Average Annual Total Returns
[Table depicting average annual total returns for the most recently
ended 1, 5, and 10 calendar year periods compared to its index to be
added by amendment in January 2000.]
Fees and Expenses
The following table describes the fees and expenses you would
pay if you buy and hold shares of the Portfolio.
- --------------------------------------------------------------------------------
Bernstein
Government
Short Duration
Portfolio
- --------------------------------------------------------------------------------
Shareholder Fees
Sales Charge (Load) Imposed on Purchases None
Sales Charge (Load) Imposed on Reinvested Dividends None
Deferred Sales Charge (Load) None
Redemption Fees None
Exchange Fees None
Maximum Account Fee $100(1)
- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses that are deducted from Portfolio assets)
Management Fees 0.50%
Distribution (12b-1) Fees None
Other Expenses
Shareholder Servicing and Administrative Fees 0.10%
All Other Expenses 0.10%
-----
Total Other Expenses 0.20%
Total Annual Portfolio Operating Expenses 0.70%
- --------------------------------------------------------------------------------
(1) Certain shareholders may be charged an annual account maintenance fee of
$100 by Bernstein (not the Fund). The fee applies to any shareholder who has
Portfolio shares in an account at Bernstein that has assets of less than
$400,000. Bernstein does not charge this fee to accounts in discretionary
relationships commenced after October 1, 1998 or accounts that are in a group of
related accounts as defined by Bernstein with combined assets of $400,000 or
more. This fee is deducted from cash held in the account or, if insufficient
cash is maintained in that account, by selling securities. Shares of the Fund
purchased or redeemed through broker-dealers, banks and other financial
institutions may be subject to fees imposed by those institutions.
Example
This Example is intended to help you compare the cost of investing in
the Portfolio with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolio for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Portfolio's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
- --------------------------------------------------------------------------------
Bernstein
Government
Short Duration
Portfolio
- --------------------------------------------------------------------------------
1 Yr. 72
3 Yrs. (cum.) 224
5 Yrs. (cum.) 390
10 Yrs. (cum.) 871
- --------------------------------------------------------------------------------
6
<PAGE>
THE BERNSTEIN SHORT DURATION PLUS PORTFOLIO
INVESTMENT OBJECTIVE
To provide safety of principal and a moderate rate of income that is
subject to taxes.
INVESTMENT STRATEGIES
The Bernstein Short Duration Plus Portfolio will invest at least 80% of
its total assets in securities rated A or better by national rating agencies and
comparably rated commercial paper and notes. Many types of securities may be
purchased by the Portfolio, including corporate bonds, notes, U.S. government
and agency securities, asset-backed securities, mortgage-related securities,
interest only ("IOs") and principal only ("POs") securities and
inflation-protected securities as well as others. The Portfolio may also invest
up to 20% of its total assets in fixed-income foreign securities in developed or
emerging-market countries. The Portfolio may use special investment techniques,
including futures.
The Portfolio may invest up to 20% of its total assets in securities
that are not investment-grade. All securities purchased by the Portfolio will be
rated at least a B by national rating agencies.
In managing the Portfolio, we may use interest-rate forecasting to
determine the best level of interest-rate risk at a given time. We may
moderately shorten the average duration of the Portfolio when we expect interest
rates to rise and modestly lengthen average duration when we anticipate that
rates will fall.
Duration is a measure of interest-rate risk (described further below).
The duration of a bond is the effect on price of a rise or fall of 1% in
interest rates. Thus, if the Portfolio's duration is around 2 years, it will
lose about 2% in principal should interest rates rise 1% and gain about 2% in
principal should interest rates fall 1%.
The Portfolio seeks to maintain an effective duration of one to three
years under normal market conditions.
The Portfolio generally should produce higher pre-tax 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.
INVESTMENT RISKS
General risks of investing in the Portfolio: The share prices of the
Portfolio will fluctuate and you may lose money when you sell your shares. There
is no guarantee that the Portfolio will achieve its investment objective.
7
<PAGE>
Interest-rate risk: Should there be a rise in the overall level of
interest rates, it is likely that the value of the Portfolio securities will
decline. Accordingly, it is likely that the Portfolio share price will fall.
Credit risk: In the event that the credit rating of a Portfolio
security is downgraded or the issuer defaults by failing to make scheduled
interest or principal payments, there is a risk that the Portfolio's income
level and/or share price will fall. Securities that are not investment-grade
(including those that have been downgraded to below investment-grade) are
considered speculative as to the payment of interest and principal and could
experience more volatility in price. The Portfolio may retain a security whose
credit quality is downgraded or for which the issuer defaults.
Riskier than a money-market fund: Since the Portfolio is invested in
securities with longer maturities than the assets of the type of mutual fund
known as a money-market fund, their expected return is somewhat higher. However,
the risk of a decline in the market value of the Portfolio is greater than for a
money-market fund since the credit quality of the portfolio securities may be
lower and the effective duration of the Portfolio will be longer.
Inflation-protected securities: The terms of inflation-protected
securities provide for the coupon and/or maturity value to be adjusted based on
changes in inflation. Decreases in the inflation rate or in investors'
expectations about inflation could cause these securities to underperform
non-inflation-adjusted securities on a total return basis. In addition, these
securities may have limited liquidity in the secondary market.
Futures risk: Futures contracts can be highly volatile and could
reduce a Portfolio's total returns. Each Portfolio's potential losses from the
use of futures could extend beyond its initial investment.
Foreign securities: Investing in foreign securities entails special
risks, such as potential political and economic instability, greater volatility
and less liquidity. In addition, there is the possibility that changes in value
of a foreign currency will reduce the U.S. dollar value of securities
denominated in that currency.
Mortgage-related securities: Investments in mortgage-related securities
expose the Portfolio to the following risks:
Prepayment risk: Because interest rates rise and fall, there
is no way to be certain of the actual rates of prepayment by the
borrowers on the underlying mortgages. Thus, actual prepayments on the
securities could differ from expected prepayments. As a result, the
value of a security could be lower than expected.
Shortening risk: Shortening risk is the possibility that
falling interest rates may cause prepayments of principal to occur at a
faster-than-expected rate. This particular risk may effectively change
a security that was considered intermediate- or long-term into a
short-term security. The prices of short-term securities do not rise as
much in response to a fall in interest rates as do the prices of
intermediate or long-term securities.
8
<PAGE>
Extension risk: Extension risk is the possibility that rising
interest rates may cause prepayments of principal to occur at a
slower-than-expected rate. This particular risk may effectively change
a security that was considered short- or intermediate-term into a
long-term security. The prices of long-term securities generally fall
more in response to a rise in interest rates than do the prices of
short- or intermediate-term securities.
INVESTMENT PERFORMANCE
The bar chart below shows the Portfolio's performance for the past 10
calendar years. The table below shows how the Fund's average annual returns
differ from those of a broad-based securities market index. Both the bar chart
and the table indicate the volatility of an investment in the Portfolio and give
some indication of the risk. The Portfolio's past performance is no guarantee of
how it will perform in the future.
Bar Chart
Calendar Year Total Returns
Bernstein Short Duration Plus
Portfolio
'90 '91 '92 '93 '94 '95 '96 '97 '98
- ----- ------ ----- ----- ----- ------ ----- ----- -----
8.27% 12.39% 6.30% 5.42% 0.55% 10.10% 4.79% 5.54% 5.93%
Quarter Total
Ended Return
Best Quarter 6/30/89 3.92%
Worst Quarter 3/31/94 -0.31%
Returns for calendar year 1999 to be added by amendment in January 2000.
Average Annual Total Returns
[Table depicting average annual total returns for the most recently
ended 1, 5, and 10 calendar year periods compared to its index to be
added by amendment in January 2000.]
Fees and Expenses
The following table describes the fees and expenses you would pay if
you buy and hold shares of the Portfolio.
- --------------------------------------------------------------------------------
Bernstein
Short Duration
Plus
Portfolio
- --------------------------------------------------------------------------------
Shareholder Fees
Sales Charge (Load) Imposed on Purchases None
Sales Charge (Load) Imposed on Reinvested Dividends None
Deferred Sales Charge (Load) None
Redemption Fees None
Exchange Fees None
Maximum Account Fee $100(1)
- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses that are deducted from portfolio assets)
Management Fees 0.50%
Distribution (12b-1) Fees None
Other Expenses
Shareholder Servicing and Administrative Fees 0.10%
All Other Expenses 0.05%
-----
Total Other Expenses 0.15%
Total Annual Portfolio Operating Expenses 0.65%
- --------------------------------------------------------------------------------
(1) Certain shareholders may be charged an annual account maintenance
fee of $100 by Bernstein (not the Fund). The fee applies to any shareholder who
has Portfolio shares in an account at Bernstein that has assets of less than
$400,000. Bernstein does not charge this fee to accounts in discretionary
relationships commenced after October 1, 1998 or accounts that are in a group of
related accounts as defined by Bernstein with combined assets of $400,000 or
more. This fee is deducted from cash held in the account or, if insufficient
cash is maintained in that account, by selling securities. Shares of the Fund
purchased or redeemed through broker-dealers, banks and other financial
institutions may be subject to fees imposed by those institutions.
Example
This Example is intended to help you compare the cost of investing in
the Portfolio with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolio for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Portfolio's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
- --------------------------------------------------------------------------------
Bernstein
Short Duration
Plus
Portfolio
- --------------------------------------------------------------------------------
1 Yr. 66
3 Yrs. (cum.) 208
5 Yrs. (cum.) 362
10 Yrs. (cum.) 810
- --------------------------------------------------------------------------------
9
<PAGE>
THE BERNSTEIN INTERMEDIATE DURATION PORTFOLIO
INVESTMENT OBJECTIVE
To provide safety of principal and a moderate to high rate of current
income that is subject to taxes.
INVESTMENT STRATEGIES
The Bernstein Intermediate Duration Portfolio will invest at least 65%
of its total assets in securities rated AA or better by national rating agencies
and comparably rated commercial paper and notes. In addition, the Portfolio will
invest at least 80% of its total assets in securities rated A or better by
national rating agencies.
Many types of securities may be purchased by the Portfolio, including
corporate bonds, notes, U.S. government and agency securities, asset-backed
securities, mortgage-related securities, interest only ("IOs") and principal
only ("POs") securities and inflation-protected securities as well as others.
The Portfolio may also invest up to 20% of its total assets in fixed-income
foreign securities in developed or emerging-market countries. The Portfolio may
use special investment techniques, including futures.
The Portfolio may invest up to 20% of its total assets in securities
that are not investment-grade. All securities purchased by the Portfolio will be
rated at least a B by national rating agencies.
In managing the Portfolio, we may use interest-rate forecasting to
determine the best level of interest-rate risk at a given time. We may
moderately shorten the average duration of the Portfolio when we expect interest
rates to rise and modestly lengthen average duration when we anticipate that
rates will fall.
Duration is a measure of interest-rate risk (described further below).
The duration of a bond is the effect on price of a rise or fall of 1% in
interest rates. Thus, if the Portfolio's duration is around 5 years, it will
lose about 5% in principal should interest rates rise 1% and gain about 5% in
principal should interest rates fall 1%.
The Portfolio seeks to maintain an effective duration of three to six
years under normal market conditions.
INVESTMENT RISKS
General risks of investing in the Portfolio: The share prices of the
Portfolio will fluctuate and you may lose money when you sell your shares. There
is no guarantee that the Portfolio will achieve its investment objective.
10
<PAGE>
Interest-rate risk: Should there be a rise in the overall level of
interest rates, it is likely that the value of the Portfolio securities will
decline. Accordingly, it is likely that the Portfolio share price will fall.
Because prices of intermediate bonds are more sensitive to interest
rate changes than those of shorter duration, this Portfolio has greater
interest-rate risk than Bernstein's short-duration Portfolios.
Credit risk: In the event that the credit rating of a Portfolio
security is downgraded or the issuer defaults by failing to make scheduled
interest or principal payments, there is a risk that the Portfolio's income
level and/or share price will fall. Securities that are not investment-grade
(including those that have been downgraded to below investment-grade) are
considered speculative as to the payment of interest and principal and could
experience more volatility in price. The Portfolio may retain a security whose
credit quality is downgraded or for which the issuer defaults.
Inflation-protected securities: The terms of inflation-protected
securities provide for the coupon and/or maturity value to be adjusted based on
changes in inflation. Decreases in the inflation rate or in investors'
expectations about inflation could cause these securities to underperform
non-inflation-adjusted securities on a total return basis. In addition, these
securities may have limited liquidity in the secondary market.
Futures risk: Futures contracts can be highly volatile and could
reduce a Portfolio's total returns. Each Portfolio's potential losses from the
use of futures could extend beyond its initial investment.
Foreign securities: Investing in foreign securities entails special
risks, such as potential political and economic instability, greater volatility
and less liquidity. In addition, there is the possibility that changes in value
of a foreign currency will reduce the U.S. dollar value of securities
denominated in that currency.
Mortgage-related securities: Investments in mortgage-related securities
expose the Portfolio to the following risks:
Prepayment risk: Because interest rates rise and fall, there
is no way to be certain of the actual rates of prepayment by the
borrowers on the underlying mortgages. Thus, actual prepayments on the
securities could differ from expected prepayments. As a result, the
value of a security could be lower than expected.
Shortening risk: Shortening risk is the possibility that
falling interest rates may cause prepayments of principal to occur at a
faster-than-expected rate. This particular risk may effectively change
a security that was considered intermediate- or long-term into a
short-term security. The prices of short-term securities do not rise as
much in response to a fall in interest rates as do the prices of
intermediate or long-term securities.
Extension risk: Extension risk is the possibility that rising
interest rates may cause prepayments of principal to occur at a
slower-than-expected rate. This particular risk may effectively change
a security that was considered short- or
11
<PAGE>
intermediate-term into a long-term security. The prices of long-term
securities generally fall more in response to a rise in interest rates
than do the prices of short or intermediate-term securities.
INVESTMENT PERFORMANCE
The bar chart below shows the Portfolio's performance for the past 10
calendar years. The table below shows how the Fund's average annual returns
differ from those of a broad-based securities market index. Both the bar chart
and the table indicate the volatility of an investment in the Portfolio and give
some indication of the risk. The Portfolio's past performance is no guarantee of
how it will perform in the future.
Bar Chart
Calendar Year Total Returns
Bernstein Intermediate Duration
Portfolio
'90 '91 '92 '93 '94 '95 '96 '97 '98
- ----- ------ ----- ----- ------ ------ ----- ----- -----
7.35% 17.11% 7.67% 10.34% -3.15% 17.83% 3.58% 7.66% 6.87%
Quarter Total
Ended Return
Best Quarter 6/30/89 6.78%
Worst Quarter 3/31/94 -2.30%
Returns for calendar year 1999 to be added by amendment in January 2000.
Average Annual Total Returns
[Table depicting average annual total returns for the most recently
ended 1, 5, and 10 calendar year periods compared to its index to be
added by amendment in January 2000.]
Fees and Expenses
The following table describes the fees and expenses you would
pay if you buy and hold shares of the Portfolio.
- --------------------------------------------------------------------------------
Bernstein
Intermediate
Duration
Portfolio
- --------------------------------------------------------------------------------
Shareholder Fees
Sales Charge (Load) Imposed on Purchases None
Sales Charge (Load) Imposed on Reinvested Dividends None
Deferred Sales Charge (Load) None
Redemption Fees None
Exchange Fees None
Maximum Account Fee $100(1)
- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses that are deducted from Portfolio assets)
Management Fees 0.47%
Distribution (12b-1) Fees None
Other Expenses
Shareholder Servicing and Administrative Fees 0.10%
All Other Expenses 0.03%
-----
Total Other Expenses 0.13%
Total Annual Portfolio Operating Expenses 0.60%
- --------------------------------------------------------------------------------
(1) Certain shareholders may be charged an annual account maintenance fee of
$100 by Bernstein (not the Fund). The fee applies to any shareholder who has
Portfolio shares in an account at Bernstein that has assets of less than
$400,000. Bernstein does not charge this fee to accounts in discretionary
relationships commenced after October 1, 1998 or accounts that are in a group of
related accounts as defined by Bernstein with combined assets of $400,000 or
more. This fee is deducted from cash held in the account or, if insufficient
cash is maintained in that account, by selling securities. Shares of the Fund
purchased or redeemed through broker-dealers, banks and other financial
institutions may be subject to fees imposed by those institutions.
Example
This Example is intended to help you compare the cost of investing in
the Portfolio with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolio for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Portfolio's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
- --------------------------------------------------------------------------------
Bernstein
Intermediate
Duration
Portfolio
- --------------------------------------------------------------------------------
1 Yr. 61
3 Yrs. (cum.) 192
5 Yrs. (cum.) 335
10 Yrs. (cum.) 750
- --------------------------------------------------------------------------------
12
<PAGE>
THE BERNSTEIN NEW YORK MUNICIPAL PORTFOLIO
INVESTMENT OBJECTIVE
To provide safety of principal and maximize total return after taking
account of federal, state and local taxes for New York residents.
INVESTMENT STRATEGIES
The Bernstein New York Municipal Portfolio will invest at least 80% of
its total assets in municipal securities rated A or better by national rating
agencies and comparably rated securities. The Portfolio will invest at least 65%
of its total assets in New York municipal securities.
The municipal securities in which the Portfolio may invest are issued
to raise money for a variety of public or private purposes, including general
financing for state and local governments, the District of Columbia or
possessions and territories of the United States, or financing for specific
projects or public facilities. The interest paid on these securities is
generally exempt from federal and New York state and local personal income tax,
although in certain instances, it may be includable in income subject to
alternative minimum tax.
The Portfolio may invest up to 20% of its total assets in securities
that are not investment-grade. All securities purchased by the Portfolio will be
rated at least a B by national rating agencies.
The Portfolio may also invest up to 20% of its assets in securities of
U.S. issuers that are not municipal securities if, in our opinion, these
securities will enhance the after-tax return for New York investors.
The Portfolio may use special investment techniques, including futures.
In managing the Portfolio, we may use interest-rate forecasting to
determine the best level of interest-rate risk at a given time. We may
moderately shorten the average duration of the Portfolio when we expect interest
rates to rise and modestly lengthen average duration when we anticipate that
rates will fall.
Duration is a measure of interest-rate risk (described further below).
The duration of a bond is the effect on price of a rise or fall of 1% in
interest rates. Thus, if the Portfolio's duration is around 5 years, it will
lose about 5% in principal should interest rates rise 1% and gain about 5% in
principal should interest rates fall 1%.
The Portfolio seeks to maintain an effective duration of three and
one-half to seven years under normal market conditions.
The two main types of municipal securities in which the Portfolio will
invest are general obligation bonds and revenue bonds. The payment of principal
and interest on
13
<PAGE>
general obligation bonds is backed by the issuer's full taxing and revenue
raising power ("full faith and credit"), and is payable from the unrestricted
revenues of the issuer. In contrast, revenue bonds, also called "special
obligation bonds," usually rely exclusively on a specific or restricted revenue
source, such as revenue from a particular facility or the proceeds of a special
tax, to generate payment of principal and interest.
INVESTMENT RISKS
General risks of investing in the Portfolio: The share prices of the
Portfolio will fluctuate and you may lose money when you sell your shares. There
is no guarantee that the Portfolio will achieve its investment objective.
Interest-rate risk: Should there be a rise in the overall level of
interest rates, it is likely that the value of the Portfolio securities will
decline. Accordingly, it is likely that the Portfolio share price will fall.
Because prices of intermediate bonds are more sensitive to interest
rate changes than those of shorter duration, this Portfolio has greater
interest-rate risk than Bernstein's short-duration Portfolios.
Credit risk: In the event that the credit rating of a Portfolio
security is downgraded or the issuer defaults by failing to make scheduled
interest or principal payments, there is a risk that the Portfolio's income
level and/or share price will fall. Securities that are not investment-grade
(including those that have been downgraded to below investment-grade) are
considered speculative as to the payment of interest and principal and could
experience more volatility in price. The Portfolio may retain a security whose
credit quality is downgraded or for which the issuer defaults.
Geographic risk: Since the Portfolio is primarily invested in New York
securities, it is exposed to adverse economic and political changes within New
York. Significant political and economic developments within New York and the
financial condition of the state and its municipalities may impact virtually all
municipal bonds issued in the state.
Nondiversified risk: The Portfolio is nondiversified--allowing for
investment of its assets in a fewer number of issuers than diversified mutual
funds. As a result, any changes in the market's assessment or in the financial
condition of any one of those issuers could significantly impact performance and
the value of your investment. The Portfolio may experience greater losses than
mutual funds that invest in a broader and larger pool of issuers.
Political risk: Any significant restructuring of federal income tax
rates or even serious discussion on the topic in Congress may cause municipal
bond prices to fall. The demand for municipal securities is strongly influenced
by the value of tax-exempt income to investors. Substantially lower income tax
rates may reduce the advantage of owning municipal securities.
14
<PAGE>
Callable securities: The issuer of a callable security has the ability
to repay principal prior to the maturity date of the security. The issuer will
typically call a security when interest rates are lower than the original issue
yield of the security. The Portfolio may lose any premium it has paid for the
called security over its par value and the principal received by the Portfolio
when a security is called is usually reinvested at a lower yield.
Futures risk: Futures contracts can be highly volatile and could reduce
a Portfolio's total returns. Each Portfolio's potential losses from the use of
futures could extend beyond its initial investment.
Other risks: Bonds of certain sectors have special risks. For example,
the health care industry can be affected by federal or state legislation,
electric utilities are subject to governmental regulation, and private activity
bonds are not government backed.
Also, some municipal securities are municipal lease obligations. A
municipal lease obligation is not backed by the full faith and credit of the
issuing municipality, but is usually backed by the municipality's pledge to make
annual appropriations for lease payments. Thus, it is possible that a
municipality will not appropriate money for lease payments. Additionally, some
municipal lease obligations may allow for lease cancellation prior to the
maturity date of the security. Municipal lease obligations may be less readily
marketable than other municipal securities and some may be illiquid.
INVESTMENT PERFORMANCE
The bar chart below shows the Portfolio's performance for the past 10
calendar years. The table below shows how the Fund's average annual returns
differ from those of a broad-based securities market index. Both the bar chart
and the table indicate the volatility of an investment in the Portfolio and give
some indication of the risk. The Portfolio's past performance is no guarantee of
how it will perform in the future.
Bar Chart
Calendar Year Total Returns
Bernstein New York Municipal
Portfolio
'90 '91 '92 '93 '94 '95 '96 '97 '98
- ----- ------ ----- ----- ------ ------ ----- ----- -----
6.64% 10.41% 6.88% 8.56% -2.55% 12.97% 3.53% 6.54% 5.21%
Quarter Total
Ended Return
Best Quarter 6/30/89 4.89%
Worst Quarter 3/31/94 -2.90%
Returns for calendar year 1999 to be added by amendment in January 2000.
Average Annual Total Returns
[Table depicting average annual total returns for the most recently
ended 1, 5, and 10 calendar year periods compared to its index to be
added by amendment in January, 2000.]
15
<PAGE>
Fees and Expenses
The following table describes the fees and expenses you would
pay if you buy and hold shares of the Portfolio.
- --------------------------------------------------------------------------------
Bernstein
New York
Municipal
Portfolio
- --------------------------------------------------------------------------------
Shareholder Fees
Sales Charge (Load) Imposed on Purchases None
Sales Charge (Load) Imposed on Reinvested Dividends None
Deferred Sales Charge (Load) None
Redemption Fees None
Exchange Fees None
Maximum Account Fee $100(1)
- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses that are deducted from Portfolio assets)
Management Fees 0.50%
Distribution (12b-1) Fees None
Other Expenses
Shareholder Servicing and Administrative Fees 0.10%
All Other Expenses 0.04%
-----
Total Other Expenses 0.14%
Total Annual Portfolio Operating Expenses 0.64%
- --------------------------------------------------------------------------------
(1) Certain shareholders may be charged an annual account maintenance fee of
$100 by Bernstein (not the Fund). The fee applies to any shareholder who has
Portfolio shares in an account at Bernstein that has assets of less than
$400,000. Bernstein does not charge this fee to accounts in discretionary
relationships commenced after October 1, 1998 or accounts that are in a group of
related accounts as defined by Bernstein with combined assets of $400,000 or
more. This fee is deducted from cash held in the account or, if insufficient
cash is maintained in that account, by selling securities. Shares of the Fund
purchased or redeemed through broker-dealers, banks and other financial
institutions may be subject to fees imposed by those institutions.
Example
This Example is intended to help you compare the cost of investing in
the Portfolio with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolio for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Portfolio's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
- --------------------------------------------------------------------------------
Bernstein
New York
Municipal
Portfolio
- --------------------------------------------------------------------------------
1 Yr. 65
3 Yrs. (cum.) 205
5 Yrs. (cum.) 357
10 Yrs. (cum.) 798
- --------------------------------------------------------------------------------
16
<PAGE>
THE BERNSTEIN SHORT DURATION NEW YORK MUNICIPAL PORTFOLIO
INVESTMENT OBJECTIVE
To provide safety of principal and a moderate rate of return after
taking account of federal, state and local taxes for New York residents.
INVESTMENT STRATEGIES
The Bernstein Short Duration New York Municipal Portfolio will invest
at least 80% of its total assets in municipal securities rated A or better by
national rating agencies and comparably rated notes. The Portfolio will invest
at least 65% of its total assets in New York municipal securities.
The municipal securities in which the Portfolio may invest are issued
to raise money for a variety of public or private purposes, including general
financing for state and local governments, the District of Columbia or
possessions and territories of the United States, or financing for specific
projects or public facilities. The interest paid on these securities is
generally exempt from federal and New York state and local personal income tax,
although in certain instances, it may be includable in income subject to
alternative minimum tax.
The Portfolio may invest up to 20% of its total assets in securities
that are not investment-grade. All securities purchased by the Portfolio will be
rated at least a B by national rating agencies.
The Portfolio may also invest up to 20% of its assets in securities of
U.S. issuers that are not municipal securities if, in our opinion, these
securities will enhance the after-tax return for New York investors.
The Portfolio may use special investment techniques, including futures.
In managing the Portfolio, we may use interest-rate forecasting to
determine the best level of interest-rate risk at a given time. We may
moderately shorten the average duration of the Portfolio when we expect interest
rates to rise and modestly lengthen average duration when we anticipate that
rates will fall.
Duration is a measure of interest-rate risk (described further below).
The duration of a bond is the effect on price of a rise or fall of 1% in
interest rates. Thus, if the Portfolio's duration is around 2 years, it will
lose about 2% in principal should interest rates rise 1% and gain about 2% in
principal should interest rates fall 1%.
The Portfolio seeks to maintain an effective duration of one-half year
to two and one-half years under normal market conditions.
The two main types of municipal securities are general obligation bonds
and revenue bonds. The repayment of principal and interest on general obligation
bonds is backed by the issuer's full taxing and revenue raising power ("full
faith and credit"), and is
17
<PAGE>
payable from the unrestricted revenues of the issuer. In contrast, revenue
bonds, also called "special obligation bonds," usually rely exclusively on a
specific or restricted revenue source, such as revenue from a particular
facility or the proceeds of a special tax, to generate money for repayment of
principal and interest.
INVESTMENT RISKS
General risks of investing in the Portfolio: The share prices of the
Portfolio will fluctuate and you may lose money when you sell your shares. There
is no guarantee that the Portfolio will achieve its investment objective.
Interest-rate risk: Should there be a rise in the overall level of
interest rates, it is likely that the value of the Portfolio securities will
decline. Accordingly, it is likely that the Portfolio share price will fall.
Credit risk: In the event that the credit rating of a Portfolio
security is downgraded or the issuer defaults by failing to make scheduled
interest or principal payments, there is a risk that the Portfolio's income
level and/or share price will fall. Securities that are not investment-grade
(including those that have been downgraded to below investment-grade) are
considered speculative as to the payment of interest and principal and could
experience more volatility in price. The Portfolio may retain a security whose
credit quality is downgraded or for which the issuer defaults.
Riskier than a money-market fund: Since the Portfolio is invested in
securities with longer maturities than the assets of the type of mutual fund
known as a money-market fund, the Portfolio's expected return is somewhat
higher. However, the risk of a decline in the market value of the Portfolio is
greater than for a money-market fund since the credit quality of the portfolio
securities may be lower and the effective duration of the Portfolio will be
longer.
Geographic risk: Since the Portfolio is primarily invested in New York
securities, it is exposed to adverse economic and political changes within New
York. Significant political and economic developments within New York and the
financial condition of the state and its municipalities may impact virtually all
municipal bonds issued in the state.
Nondiversified risk: The Portfolio is nondiversified --allowing for
investment of its assets in a fewer number of issuers than diversified mutual
funds. As a result, any changes in the market's assessment or in the financial
condition of any of the issuers could significantly impact performance and the
value of your investment. The Portfolio may experience greater losses than
mutual funds which invest in a broader and larger pool of issuers.
Political risk: Any significant restructuring of federal income tax
rates or even serious discussion on the topic in Congress may cause municipal
bond prices to fall. The demand for municipal securities is strongly influenced
by the value of tax-exempt income to investors. Substantially lower income tax
rates may reduce the advantage of owning municipal securities.
Futures risk: Futures contracts can be highly volatile and could reduce
a Portfolio's total returns. Each Portfolio's potential losses from the use of
futures could extend beyond its initial investment.
Other risks: Bonds of certain sectors have special risks. For example,
the health care industry can be affected by federal or state legislation,
electric utilities are subject to governmental regulation, and private activity
bonds are not government backed.
18
<PAGE>
Also, some municipal securities are municipal lease obligations. A
municipal lease obligation is not backed by the full faith and credit of the
issuing municipality, but is usually backed by the municipality's pledge to make
annual appropriations for lease payments. Thus, it is possible that a
municipality will not appropriate money for lease payments. Additionally, some
municipal lease obligations may allow for lease cancellation prior to the
maturity date of the security. Municipal lease obligations may be less readily
marketable than other municipal securities and some may be illiquid.
INVESTMENT PERFORMANCE
The bar chart below shows the Portfolio's performance for each calendar
year since inception. The table below shows how the Fund's average annual
returns differ from those of a broad-based securities market index. Both the bar
chart and the table indicate the volatility of an investment in the Portfolio
and give some indication of the risk. The Portfolio's past performance is no
guarantee of how it will perform in the future.
Bar Chart
Calendar Year Total Returns
Bernstein Short Duration New York
Municipal Portfolio
'95 '96 '97 '98
----- ------ ----- -----
6.07% 3.52% 3.75% 3.77%
Quarter Total
Ended Return
Best Quarter 3/31/95 2.07%
Worst Quarter 6/30/99 0.17%
Returns for calendar year 1999 to be added by amendment in January 2000.
Average Annual Total Returns
[Table depicting average annual total returns for the most recently
ended 1 and 5 calendar year periods and since inception compared to its
index to be added by amendment in January, 2000.]
Fees and Expenses
The following table describes the fees and expenses you would
pay if you buy and hold shares of the Portfolio.
- --------------------------------------------------------------------------------
Bernstein
Short Duration
New York
Municipal
Portfolio
- --------------------------------------------------------------------------------
Shareholder Fees
Sales Charge (Load) Imposed on Purchases None
Sales Charge (Load) Imposed on Reinvested Dividends None
Deferred Sales Charge (Load) None
Redemption Fees None
Exchange Fees None
Maximum Account Fee $100(1)
- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses that are deducted from Portfolio assets)
Management Fees 0.50%
Distribution (12b-1) Fees None
Other Expenses
Shareholder Servicing and Administrative Fees 0.10%
All Other Expenses 0.14%
-----
Total Other Expenses 0.24%
Total Annual Portfolio Operating Expenses 0.74%
- --------------------------------------------------------------------------------
(1) Certain shareholders may be charged an annual account maintenance
fee of $100 by Bernstein (not the Fund). The fee applies to any shareholder who
has Portfolio shares in an account at Bernstein that has assets of less than
$400,000. Bernstein does not charge this fee to accounts in discretionary
relationships commenced after October 1, 1998 or accounts that are in a group of
related accounts as defined by Bernstein with combined assets of $400,000 or
more. This fee is deducted from cash held in the account or, if insufficient
cash is maintained in that account, by selling securities. Shares of the Fund
purchased or redeemed through broker-dealers, banks and other financial
institutions may be subject to fees imposed by those institutions.
Example
This Example is intended to help you compare the cost of
investing in the Portfolio with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolio
for the time periods indicated and then redeem all of your shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Portfolio's operating expenses remain the same. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
- --------------------------------------------------------------------------------
Bernstein
Short Duration
New York
Municipal
Portfolio
- --------------------------------------------------------------------------------
1 Yr. 76
3 Yrs. (cum.) 237
5 Yrs. (cum.) 411
10 Yrs. (cum.) 918
- --------------------------------------------------------------------------------
19
<PAGE>
THE BERNSTEIN CALIFORNIA MUNICIPAL PORTFOLIO
INVESTMENT OBJECTIVE
To provide safety of principal and maximize total return after taking
account of federal and state taxes for California residents.
INVESTMENT STRATEGIES
The Bernstein California Municipal Portfolio will invest at least 80%
of its total assets in municipal securities rated A or better by national rating
agencies and comparably rated notes. The Portfolio will invest at least 65% of
its total assets in California municipal securities.
The municipal securities in which the Portfolio may invest are issued
to raise money for a variety of public or private purposes, including general
financing for state and local governments, the District of Columbia or
possessions and territories of the United States, or financing for specific
projects or public facilities. The interest paid on these securities is
generally exempt from federal and California state personal income tax, although
in certain instances, it may be includable in income subject to alternative
minimum tax.
The Portfolio may invest up to 20% of its total assets in securities
that are not investment-grade. All securities purchased by the Portfolio will be
rated at least a B by national rating agencies.
The Portfolio may also invest up to 20% of its assets in securities of
U.S. issuers that are not municipal securities if, in our opinion, these
securities will enhance the after-tax return for California investors.
The Portfolio may use special investment techniques, including futures.
In managing the Portfolio, we may use interest-rate forecasting to
determine the best level of interest-rate risk at a given time. We may
moderately shorten the average duration of the Portfolio when we expect interest
rates to rise and modestly lengthen average duration when we anticipate that
rates will fall.
Duration is a measure of interest-rate risk (described further below).
The duration of a bond is the effect on price of a rise or fall of 1% in
interest rates. Thus, if the Portfolio's duration is around 5 years, it will
lose about 5% in principal should interest rates rise 1% and gain about 5% in
principal should interest rates fall 1%.
The Portfolio seeks to maintain an average effective duration of three
and one-half to seven years under normal market conditions.
The two main types of municipal securities are general obligation bonds
and revenue bonds. The payment of principal and interest on general obligation
bonds is
20
<PAGE>
backed by the issuer's full taxing and revenue raising power ("full faith and
credit"), and payable from the unrestricted revenues of the issuer. Revenue
bonds, also called "special obligation bonds," usually rely exclusively on a
specific or restricted revenue source, such as revenue from a particular
facility or the proceeds of a special tax, to generate money for payment of
principal and interest.
INVESTMENT RISKS
General risks of investing in the Portfolio: The share prices of the
Portfolio will fluctuate and you may lose money when you sell your shares. There
is no guarantee that the Portfolio will achieve its investment objective.
Interest-rate risk: Should there be a rise in the overall level of
interest rates, it is likely that the value of the Portfolio securities will
decline. Accordingly, it is likely that the Portfolio share price will fall.
Because prices of intermediate bonds are more sensitive to interest
rate changes than those of shorter duration, this Portfolio has greater
interest-rate risk than Bernstein's short-duration Portfolios.
Credit risk: In the event that the credit rating of a Portfolio
security is downgraded or the issuer defaults by failing to make scheduled
interest or principal payments, there is a risk that the Portfolio's income
level and/or share price will fall. Securities that are not investment-grade
(including those that have been downgraded to below investment-grade) are
considered speculative as to the payment of interest and principal and could
experience more volatility in price. The Portfolio may retain a security whose
credit quality is downgraded or for which the issuer defaults.
Geographic risk: Since the Portfolio is primarily invested in
California securities, it is exposed to adverse economic and political changes
within California. Significant political and economic developments within
California and the financial condition of the state and its municipalities may
impact virtually all municipal bonds issued in the state.
Nondiversified risk: The Portfolio is nondiversified--allowing for
investment of its assets in a fewer number of issuers than diversified mutual
funds. As a result, any changes in the market's assessment or in the financial
condition of any one of those issuers could significantly impact performance and
the value of your investment. The Portfolio may experience greater losses than
mutual funds which invest in a broader and larger pool of issuers.
Political risk: Any significant restructuring of federal income tax
rates or even serious discussion on the topic in Congress may cause municipal
bond prices to fall. The demand for municipal securities is strongly influenced
by the value of tax-exempt income to investors. Substantially lower income tax
rates may reduce the advantage of owning municipal securities.
21
<PAGE>
Callable securities: The issuer of a callable security has the ability
to repay principal prior to the maturity date of the security. The issuer will
typically call a security when interest rates are lower than the original issue
yield of the security. The Portfolio may lose any premium it has paid for the
called security over its par value and the principal received by the Portfolio
when a security is called is usually reinvested at a lower yield.
Futures risk: Futures contracts can be highly volatile and could reduce
a Portfolio's total returns. Each Portfolio's potential losses from the use of
futures could extend beyond its initial investment.
Other risks: Bonds of certain sectors have special risks. For example,
the health care industry can be affected by federal or state legislation,
electric utilities are subject to governmental regulation, and private activity
bonds are not government backed.
Also, some municipal securities are municipal lease obligations. A
municipal lease obligation is not backed by the full faith and credit of the
issuing municipality, but is usually backed by the municipality's pledge to make
annual appropriations for lease payments. Thus, it is possible that a
municipality will not appropriate money for lease payments. Additionally, some
municipal lease obligations may allow for lease cancellation prior to the
maturity date of the security. Municipal lease obligations may be less readily
marketable than other municipal securities and some may be illiquid.
INVESTMENT PERFORMANCE
The bar chart below shows the Portfolio's performance for the past 10
calendar years. The table below shows how the Fund's average annual returns
differ from those of a broad-based securities market index. Both the bar chart
and the table indicate the volatility of an investment in the Portfolio and give
some indication of the risk. The Portfolio's past performance is no guarantee of
how it will perform in the future.
Bar Chart
Calendar Year Total Returns
Bernstein California Municipal Portfolio
'91 '92 '93 '94 '95 '96 '97 '98
- ------ ----- ----- ------- ------ ----- ----- -----
9.53% 6.80% 8.25% -3.15% 13.72% 3.72% 6.34% 5.12%
Quarter Total
Ended Return
Best Quarter 3/31/95 5.48%
Worst Quarter 3/31/94 -2.88%
Returns for calendar year 1999 to be added by amendment in January 2000.
Average Annual Total Returns
[Table depicting average annual total returns for the most recently
ended 1 and 5 calendar year periods and since inception compared to its
index to be added by amendment in January, 2000.]
22
<PAGE>
Fees and Expenses
The following table describes the fees and expenses you would pay if
you buy and hold shares of the Portfolio.
- --------------------------------------------------------------------------------
Bernstein
California
Municipal
Portfolio
- --------------------------------------------------------------------------------
Shareholder Fees
Sales Charge (Load) Imposed on Purchases None
Sales Charge (Load) Imposed on Reinvested Dividends None
Deferred Sales Charge (Load) None
Redemption Fees None
Exchange Fees None
Maximum Account Fee $100(1)
- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses that are deducted from Portfolio assets)
Management Fees 0.50%
Distribution (12b-1) Fees None
Other Expenses
Shareholder Servicing and Administrative Fees 0.10%
All Other Expenses 0.04%
-----
Total Other Expenses 0.14%
Total Annual Portfolio Operating Expenses 0.64%
- --------------------------------------------------------------------------------
(1) Certain shareholders may be charged an annual account maintenance
fee of $100 by Bernstein (not the Fund). The fee applies to any shareholder who
has Portfolio shares in an account at Bernstein that has assets of less than
$400,000. Bernstein does not charge this fee to accounts in discretionary
relationships commenced after October 1, 1998 or accounts that are in a group of
related accounts as defined by Bernstein with combined assets of $400,000 or
more. This fee is deducted from cash held in the account or, if insufficient
cash is maintained in that account, by selling securities. Shares of the Fund
purchased or redeemed through broker-dealers, banks and other financial
institutions may be subject to fees imposed by those institutions.
Example
This Example is intended to help you compare the cost of investing in
the Portfolio with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolio for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Portfolio's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
- --------------------------------------------------------------------------------
Bernstein
California
Municipal
Portfolio
- --------------------------------------------------------------------------------
1 Yr. 65
3 Yrs. (cum.) 205
5 Yrs. (cum.) 357
10 Yrs. (cum.) 798
- --------------------------------------------------------------------------------
23
<PAGE>
THE BERNSTEIN SHORT DURATION CALIFORNIA MUNICIPAL PORTFOLIO
INVESTMENT OBJECTIVE
To provide safety of principal and a moderate rate of return after
taking account of federal and state taxes for California residents.
INVESTMENT STRATEGIES
The Bernstein Short Duration California Municipal Portfolio will invest
at least 80% of its total assets in municipal securities rated A or better by
national rating agencies and comparably rated notes. The Portfolio will invest
at least 65% of its total assets in California municipal securities.
The municipal securities in which the Portfolio may invest are issued
to raise money for a variety of public or private purposes, including general
financing for state and local governments, the District of Columbia or
possessions and territories of the United States, or financing for specific
projects or public facilities. The interest paid on these securities is
generally exempt from federal and California state and local personal income
tax, although in certain instances, it may be includable in income subject to
alternative minimum tax.
The Portfolio may invest up to 20% of its total assets in securities
that are not investment-grade. All securities purchased by the Portfolio will be
rated at least a B by national rating agencies.
The Portfolio may also invest up to 20% of its assets in securities of
U.S. issuers that are not municipal securities if, in our opinion, these
securities will enhance the after-tax return for California investors.
The Portfolio may use special investment techniques, including futures.
In managing the Portfolio, we may use interest rate forecasting to
determine the best level of interest-rate risk at a given time. We may
moderately shorten the average duration of the Portfolio when we expect interest
rates to rise and modestly lengthen average duration when we anticipate that
rates will fall.
Duration is a measure of interest-rate risk (described further below).
The duration of a bond is the effect on price of a rise or fall of 1% in
interest rates. Thus, if the Portfolio's duration is around 2 years, it will
lose about 2% in principal should interest rates rise 1% and gain about 2% in
principal should interest rates fall 1%.
The Portfolio seeks to maintain an effective duration of one-half year
to two and one-half years under normal market conditions.
The two main types of municipal securities are general obligation bonds
and revenue bonds. The payment of principal and interest on general obligation
bonds is
24
<PAGE>
backed by the issuer's full taxing and revenue raising power ("full faith and
credit"), and payable from the unrestricted revenues of the issuer. Revenue
bonds, also called "special obligation bonds," usually rely exclusively on a
specific or restricted revenue source, such as revenue from a particular
facility or the proceeds of a special tax, to generate money for payment of
principal and interest.
INVESTMENT RISKS
General risks of investing in the Portfolio: The share prices of the
Portfolio will fluctuate and you may lose money when you sell your shares. There
is no guarantee that the Portfolio will achieve its investment objective.
Interest-rate risk: Should there be a rise in the overall level of
interest rates, it is likely that the value of the Portfolio securities will
decline. Accordingly, it is likely that the Portfolio share price will fall.
Credit risk: In the event that the credit rating of a Portfolio
security is downgraded or the issuer defaults by failing to make scheduled
interest or principal payments, there is a risk that the Portfolio's income
level and/or share price will fall. Securities that are not investment-grade
(including those that have been downgraded to below investment-grade) are
considered speculative as to the payment of interest and principal and could
experience more volatility in price. The Portfolio may retain a security whose
credit quality is downgraded or for which the issuer defaults.
Riskier than a money-market fund: Since the Portfolio is invested in
securities with longer maturities than the assets of the type of mutual fund
known as a money-market fund, the Portfolio's expected return is somewhat
higher. However, the risk of a decline in the market value of the Portfolio is
greater than for a money-market fund since the credit quality of the portfolio
securities may be lower and the effective duration of the Portfolio will be
longer.
Geographic risk: Since the Portfolio is primarily invested in
California securities, it is exposed to adverse economic and political changes
within California. Significant political and economic developments within
California and the financial condition of the state and its municipalities may
impact virtually all municipal bonds issued in the state.
Nondiversified risk: The Portfolio is nondiversified--allowing for
investment of its assets in a fewer number of issuers than diversified funds. As
a result, any changes in the market's assessment or in the financial condition
of any one of those issuers could significantly impact performance and the value
of your investment. The Portfolio may experience greater losses than mutual
funds which invest in a broader and larger pool of issuers.
Political risk: Any significant restructuring of federal income tax
rates or even serious discussion on the topic in Congress may cause municipal
bond prices to fall. The demand for municipal securities is strongly influenced
by the value of tax-exempt income to investors. Substantially lower income tax
rates may reduce the advantage of owning municipal securities.
Futures risk: Futures contracts can be highly volatile and could reduce
a Portfolio's total returns. Each Portfolio's potential losses from the use of
futures could extend beyond its initial investment.
25
<PAGE>
Other risks: Bonds of certain sectors have special risks. For example,
the health care industry can be affected by federal or state legislation,
electric utilities are subject to governmental regulation, and private activity
bonds are not government backed.
Also, some municipal securities are municipal lease obligations. A
municipal lease obligation is not backed by the full faith and credit of the
issuing municipality, but is usually backed by the municipality's pledge to make
annual appropriations for lease payments. Thus, it is possible that a
municipality will not appropriate money for lease payments. Additionally, some
municipal lease obligations may allow for lease cancellation prior to the
maturity date of the security. Municipal lease obligations may be less readily
marketable than other municipal securities and some may be illiquid.
INVESTMENT PERFORMANCE
The bar chart below shows the Portfolio's performance for each calendar
year since inception. The table below shows how the Fund's average annual
returns differ from those of a broad-based securities market index. Both the bar
chart and the table indicate the volatility of an investment in the Portfolio
and give some indication of the risk. The Portfolio's past performance is no
guarantee of how it will perform in the future.
Bar Chart
Calendar Year Total Returns
Bernstein Short Duration California Municipal
Portfolio
'95 '96 '97 '98
------ ----- ----- -----
6.29% 3.55% 3.60% 3.90%
Quarter Total
Ended Return
Best Quarter 3/31/95 2.04%
Worst Quarter 6/30/99 0.28%
Returns for calendar year 1999 to be added by amendment in January 2000.
Average Annual Total Returns
[Table depicting average annual total returns for the most recently
ended 1 and 5 calendar year periods and since inception compared to its
index to be added by amendment in January, 2000.]
Fees and Expenses
The following table describes the fees and expenses you would
pay if you buy and hold shares of the Portfolio.
- --------------------------------------------------------------------------------
Bernstein
Short Duration
California
Municipal
Portfolio
- --------------------------------------------------------------------------------
Shareholder Fees
Sales Charge (Load) Imposed on Purchases None
Sales Charge (Load) Imposed on Reinvested Dividends None
Deferred Sales Charge (Load) None
Redemption Fees None
Exchange Fees None
Maximum Account Fee $100(1)
- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses that are deducted from Portfolio assets)
Management Fees 0.50%
Distribution (12b-1) Fees None
Other Expenses
Shareholder Servicing and Administrative Fees 0.10%
All Other Expenses 0.13%
-----
Total Other Expenses 0.23%
Total Annual Portfolio Operating Expenses 0.73%
- --------------------------------------------------------------------------------
(1) Certain shareholders may be charged an annual account maintenance
fee of $100 by Bernstein (not the Fund). The fee applies to any shareholder who
has Portfolio shares in an account at Bernstein that has assets of less than
$400,000. Bernstein does not charge this fee to accounts in discretionary
relationships commenced after October 1, 1998 or accounts that are in a group of
related accounts as defined by Bernstein with combined assets of $400,000 or
more. This fee is deducted from cash held in the account or, if insufficient
cash is maintained in that account, by selling securities. Shares of the Fund
purchased or redeemed through broker-dealers, banks and other financial
institutions may be subject to fees imposed by those institutions.
Example
This Example is intended to help you compare the cost of investing in
the Portfolio with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolio for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Portfolio's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
- --------------------------------------------------------------------------------
Bernstein
Short Duration
California
Municipal
Portfolio
- --------------------------------------------------------------------------------
1 Yr. 75
3 Yrs. (cum.) 233
5 Yrs. (cum.) 406
10 Yrs. (cum.) 906
- --------------------------------------------------------------------------------
26
<PAGE>
THE BERNSTEIN DIVERSIFIED MUNICIPAL PORTFOLIO
INVESTMENT OBJECTIVE
To provide safety of principal and maximize total return after taking
account of federal taxes.
INVESTMENT STRATEGIES
The Bernstein Diversified Municipal Portfolio will invest at least 80%
of its total assets in municipal securities rated A or better by national rating
agencies and comparably rated notes. The Portfolio will invest no more than 25%
of its total assets in municipal securities of issuers located in any one state.
The municipal securities in which the Portfolio may invest are issued
to raise money for a variety of public or private purposes, including general
financing for state and local governments, the District of Columbia or
possessions and territories of the United States, or financing for specific
projects or public facilities. The interest paid on these securities is
generally exempt from federal personal income tax, although in certain
instances, it may be includable in income subject to alternative minimum tax.
The Portfolio may invest up to 20% of its total assets in securities
that are not investment-grade. All securities purchased by the Portfolio will be
rated at least a B by national rating agencies.
The Portfolio may also invest up to 20% of its assets in securities of
U.S. issuers that are not municipal securities if, in our opinion, these
securities will enhance the after-tax return for Portfolio investors.
The Portfolio may use special investment techniques, including futures.
In managing the Portfolio, we may use interest-rate forecasting to
determine the best level of interest-rate risk at a given time. We may
moderately shorten the average duration of the Portfolio when we expect interest
rates to rise and modestly lengthen average duration when we anticipate that
rates will fall.
Duration is a measure of interest-rate risk (described further below).
The duration of a bond is the effect on price of a rise or fall of 1% in
interest rates. Thus, if the Portfolio's duration is around 5 years, it will
lose about 5% in principal should interest rates rise 1% and gain about 5% in
principal should interest rates fall 1%.
The Portfolio seeks to maintain an effective duration of three and
one-half to seven years under normal market conditions.
The two main types of municipal securities are general obligation bonds
and revenue bonds. The payment of principal and interest on general obligation
bonds is backed by the issuer's full taxing and revenue raising power ("full
faith and credit"), and
27
<PAGE>
payable from the unrestricted revenues of the issuer. Revenue bonds, also called
"special obligation bonds," usually rely exclusively on a specific or restricted
revenue source, such as revenue from a particular facility or the proceeds of a
special tax, to generate money for payment of principal and interest.
INVESTMENT RISKS
General risks of investing in the Portfolio: The share prices of the
Portfolio will fluctuate and you may lose money when you sell your shares. There
is no guarantee that the Portfolio will achieve its investment objective.
Interest-rate risk: Should there be a rise in the overall level of
interest rates, it is likely that the value of the Portfolio securities will
decline. Accordingly, it is likely that the Portfolio share price will fall.
Because prices of intermediate bonds are more sensitive to interest
rate changes than those of shorter duration, this Portfolio has a greater
interest-rate risk than Bernstein's short-duration Portfolios.
Credit risk: In the event that the credit rating of a Portfolio
security is downgraded or the issuer defaults by failing to make scheduled
interest or principal payments, there is a risk that the Portfolio's income
level and/or share price will fall. Securities that are not investment-grade
(including those that have been downgraded to below investment-grade) are
considered speculative as to the payment of interest and principal and could
experience more volatility in price. The Portfolio may retain a security whose
credit quality is downgraded or for which the issuer defaults.
Political risk: Any significant restructuring of federal income tax
rates, or even serious discussion on the topic in Congress may cause municipal
bond prices to fall. The demand for municipal securities is strongly influenced
by the value of tax-exempt income to investors. Substantially lower income tax
rates may reduce the advantage of owning municipal securities.
Callable securities: The issuer of a callable security has the ability
to repay principal prior to the maturity date of the security. The issuer will
typically call a security when interest rates are lower than the original issue
yield of the security. The Portfolio may lose any premium it has paid for the
called security over its par value and the principal received by the Portfolio
when a security is called is usually reinvested at a lower yield.
Futures risk: Futures contracts can be highly volatile and could reduce
a Portfolio's total returns. Each Portfolio's potential losses from the use of
futures could extend beyond its initial investment.
Other risks: Bonds of certain sectors have special risks. For example,
the health care industry can be affected by federal or state legislation,
electric utilities are subject to governmental regulation, and private activity
bonds are not government backed.
28
<PAGE>
Also, some municipal securities are municipal lease obligations.
Municipal lease obligations may not be backed by the municipalities' pledged
taxing power, may be subject to non-appropriation clauses which allow
municipalities to determine on an annual basis whether to appropriate funds for
lease payments and may allow for lease cancellation prior to the maturity date
of the security.
INVESTMENT PERFORMANCE
The bar chart below shows the Portfolio's performance for the past 10
calendar years. The table below shows how the Fund's average annual returns
differ from those of a broad-based securities market index. Both the bar chart
and the table indicate the volatility of an investment in the Portfolio and give
some indication of the risk. The Portfolio's past performance is no guarantee of
how it will perform in the future.
Bar Chart
Calendar Year Total Returns
Bernstein Diversified Municipal
Portfolio
'90 '91 '92 '93 '94 '95 '96 '97 '98
- ----- ------ ----- ----- ----- ------ ----- ----- -----
6.80% 10.18% 6.54% 8.44% -2.52% 12.97% 3.64% 6.68% 4.62%
Quarter Total
Ended Return
Best Quarter 3/31/95 5.03%
Worst Quarter 3/31/94 -2.82%
Returns for calendar year 1999 to be added by amendment in January 2000.
Average Annual Total Returns
[Table depicting average annual total returns for the most recently
ended 1, 5, and 10 calendar year periods compared to its index to be
added by amendment in January, 2000.]
Fees and Expenses
The following table describes the fees and expenses you would pay if
you buy and hold shares of the Portfolio.
- --------------------------------------------------------------------------------
Bernstein
Diversified
Municipal
Portfolio
- --------------------------------------------------------------------------------
Shareholder Fees
Sales Charge (Load) Imposed on Purchases None
Sales Charge (Load) Imposed on Reinvested Dividends None
Deferred Sales Charge (Load) None
Redemption Fees None
Exchange Fees None
Maximum Account Fee $100(1)
- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses that are deducted from Portfolio assets)
Management Fees .48%
Distribution (12b-1) Fees None
Other Expenses
Shareholder Servicing and Administrative Fees 0.10%
All Other Expenses 0.05%
-----
Total Other Expenses 0.15%
Total Annual Portfolio Operating Expenses 0.63%
- --------------------------------------------------------------------------------
(1) Certain shareholders may be charged an annual account maintenance
fee of $100 by Bernstein (not the Fund). The fee applies to any shareholder who
has Portfolio shares in an account at Bernstein that has assets of less than
$400,000. Bernstein does not charge this fee to accounts in discretionary
relationships commenced after October 1, 1998 or accounts that are in a group of
related accounts as defined by Bernstein with combined assets of $400,000 or
more. This fee is deducted from cash held in the account or, if insufficient
cash is maintained in that account, by selling securities. Shares of the Fund
purchased or redeemed through broker-dealers, banks and other financial
institutions may be subject to fees imposed by those institutions.
Example
This Example is intended to help you compare the cost of investing in
the Portfolio with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolio for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Portfolio's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
- --------------------------------------------------------------------------------
Bernstein
Diversified
Municipal
Portfolio
- --------------------------------------------------------------------------------
1 Yr. 64
3 Yrs. (cum.) 202
5 Yrs. (cum.) 351
10 Yrs. (cum.) 786
- --------------------------------------------------------------------------------
29
<PAGE>
THE BERNSTEIN SHORT DURATION DIVERSIFIED MUNICIPAL PORTFOLIO
INVESTMENT OBJECTIVE
To provide safety of principal and a moderate rate of return after
taking account of federal taxes.
INVESTMENT STRATEGIES
The Bernstein Short Duration Diversified Municipal Portfolio will
invest at least 80% of its total assets in municipal securities rated A or
better by national rating agencies and comparably rated notes. The Portfolio
will invest no more than 25% of its total assets in municipal securities of
issuers located in any one state.
The municipal securities in which the Portfolio may invest are issued
to raise money for a variety of public or private purposes, including general
financing for state and local governments, the District of Columbia or
possessions and territories of the United States, or financing for specific
projects or public facilities. The interest paid on these securities is
generally exempt from federal personal income tax, although in certain
instances, it may be includable in income subject to alternative minimum tax.
The Portfolio may invest up to 20% of its total assets in securities
that are not investment-grade. All securities purchased by the Portfolio will be
rated at least a B by national rating agencies.
The Portfolio may also invest up to 20% of its assets in securities of
U.S. issuers that are not municipal securities if, in our opinion, these
securities will enhance the after-tax return for Portfolio investors.
The Portfolio may use special investment techniques, including futures.
In managing the Portfolio, we may use interest-rate forecasting to
determine the best level of interest-rate risk at a given time. We may
moderately shorten the average duration of the Portfolio when we expect interest
rates to rise and modestly lengthen average duration when we anticipate that
rates will fall.
Duration is a measure of interest-rate risk (described further below).
The duration of a bond is the effect on price of a rise or fall of 1% in
interest rates. Thus, if the Portfolio's duration is around 2 years, it will
lose about 2% in principal should interest rates rise 1% and gain about 2% in
principal should interest rates fall 1%.
The Portfolio seeks to maintain an effective duration of one-half year
to two and one-half years under normal market conditions.
The two main types of municipal securities are general obligation bonds
and revenue bonds. The payment of principal and interest under general
obligation bonds is
30
<PAGE>
backed by the issuer's full taxing and revenue raising power ("full faith and
credit"), and payable from the unrestricted revenues of the issuer. Revenue
bonds, also called "special obligation bonds," usually rely exclusively on a
specific or restricted revenue source, such as revenue from a particular
facility or the proceeds of a special tax, to generate money for payment of
principal and interest.
INVESTMENT RISKS
General risks of investing in the Portfolio: The share prices of the
Portfolio will fluctuate and you may lose money when you sell your shares. There
is no guarantee that the Portfolio will achieve its investment objective.
Interest-rate risk: Should there be a rise in the overall level of
interest rates, it is likely that the value of the Portfolio securities will
decline. Accordingly, it is likely that the Portfolio share price will fall.
Credit risk: In the event that the credit rating of a Portfolio
security is downgraded or the issuer defaults by failing to make scheduled
interest or principal payments, there is a risk that the Portfolio's income
level and/or share price will fall. Securities that are not investment-grade
(including those that have been downgraded to below investment-grade) are
considered speculative as to the payment of interest and principal and could
experience more volatility in price. The Portfolio may retain a security whose
credit quality is downgraded or for which the issuer defaults.
Riskier than a money-market fund: Since the Portfolio is invested in
securities with longer maturities than the assets of the type of mutual fund
known as a money-market fund, the Portfolio's expected return is somewhat
higher. However, the risk of a decline in the market value of the Portfolio is
greater than for a money-market fund since the credit quality of the portfolio
securities may be lower and the effective duration of the Portfolio will be
longer.
Political risk: Any significant restructuring of federal income tax
rates or even serious discussion on the topic in Congress may cause municipal
bond prices to fall. The demand for municipal securities is strongly influenced
by the value of tax-exempt income to investors. Substantially lower income tax
rates may reduce the advantage of owning municipal securities.
Futures risk: Futures contracts can be highly volatile and could reduce
a Portfolio's total returns. Each Portfolio's potential losses from the use of
futures could extend beyond its initial investment.
Other risks: Bonds of certain sectors have special risks. For example,
the health care industry can be affected by federal or state legislation,
electric utilities are subject to governmental regulation, and private activity
bonds are not government backed.
Also, some municipal securities are municipal lease obligations.
A municipal lease obligation is not backed by the full faith and credit of the
issuing municipality, but is usually backed by the municipality's pledge to make
annual appropriations for lease payments. Thus, it is possible that a
municipality will not appropriate money for lease payments. Additionally, some
municipal lease obligations may allow for lease cancellation prior to the
maturity date of the security. Municipal lease obligations may be less readily
marketable than other municipal securities and some may be illiquid.
INVESTMENT PERFORMANCE
The bar chart below shows the Portfolio's performance for each calendar
year since inception. The table below shows how the Fund's average annual
returns differ from those of a broad-based securities market index. Both the bar
chart and the table indicate the
31
<PAGE>
volatility of an investment in the Portfolio and give some indication of the
risk. The Portfolio's past performance is no guarantee of how it will perform in
the future.
Bar Chart
Calendar Year Total Returns
Bernstein Short Duration Diversified
Municipal Portfolio
'95 '96 '97 '98
------ ----- ----- -----
6.36% 3.55% 3.96% 3.94%
Quarter Total
Ended Return
Best Quarter 3/31/95 2.01%
Worst Quarter 6/30/99 0.34%
Returns for calendar year 1999 to be added by amendment in January 2000.
Average Annual Total Returns
[Table depicting average annual total returns for the most recently
ended 1 and 5 calendar year periods and since inception compared to its
index to be added by amendment in January, 2000.]
Fees and Expenses
The following table describes the fees and expenses you would
pay if you buy and hold shares of the Portfolio.
- --------------------------------------------------------------------------------
Bernstein
Short Duration
Diversified Municipal
Portfolio
- --------------------------------------------------------------------------------
Shareholder Fees
Sales Charge (Load) Imposed on Purchases None
Sales Charge (Load) Imposed on Reinvested Dividends None
Deferred Sales Charge (Load) None
Redemption Fees None
Exchange Fees None
Maximum Account Fee $100(1)
- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses that are deducted from Portfolio assets)
Management Fees 0.50%
Distribution (12b-1) Fees None
Other Expenses
Shareholder Servicing and Administrative Fees 0.10%
All Other Expenses 0.11%
-----
Total Other Expenses 0.21%
Total Annual Portfolio Operating Expenses 0.71%
- --------------------------------------------------------------------------------
(1) Certain shareholders may be charged an annual account maintenance
fee of $100 by Bernstein (not the Fund). The fee applies to any shareholder who
has Portfolio shares in an account at Bernstein that has assets of less than
$400,000. Bernstein does not charge this fee to accounts in discretionary
relationships commenced after October 1, 1998 or accounts that are in a group of
related accounts as defined by Bernstein with combined assets of $400,000 or
more. This fee is deducted from cash held in the account or, if insufficient
cash is maintained in that account, by selling securities. Shares of the Fund
purchased or redeemed through broker-dealers, banks and other financial
institutions may be subject to fees imposed by those institutions.
Example
This Example is intended to help you compare the cost of investing in
the Portfolio with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolio for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Portfolio's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
- --------------------------------------------------------------------------------
Bernstein
Short Duration
Diversified Municipal
Portfolio
- --------------------------------------------------------------------------------
1 Yr. 73
3 Yrs. (cum.) 227
5 Yrs. (cum.) 395
10 Yrs. (cum.) 883
- --------------------------------------------------------------------------------
32
<PAGE>
THE BERNSTEIN INTERNATIONAL EQUITY PORTFOLIOS
INVESTMENT OBJECTIVES
Bernstein Tax-Managed International Value Portfolio
To provide long-term capital growth through investments in equity
securities of established foreign companies comprising the EAFE index, plus
Canada. The Portfolio seeks to minimize the impact of taxes on shareholders'
returns.
Bernstein International Value Portfolio II
To provide long-term capital growth through investments in equity
securities of established foreign companies comprising the EAFE index, plus
Canada. The Portfolio is managed without regard to tax considerations.
INVESTMENT STRATEGIES
Each of the Bernstein Tax-Managed International Value Portfolio and the
Bernstein International Value Portfolio II will invest primarily in equity
securities 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, the Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United
Kingdom.
The Portfolios will invest primarily in common stocks but may also
invest in preferred stocks, warrants and convertible securities of foreign
issuers, including sponsored or unsponsored American Depositary Receipts (ADRs)
and Global Depositary
Receipts (GDRs).
In order to hedge a portion of the currency risk, the Portfolios will
generally invest in forward foreign currency contracts with terms of up to one
year. The Portfolios will also purchase foreign currency for immediate
settlement in order to purchase foreign securities.
In addition, the Portfolios will generally invest a portion of their
uncommitted cash balances in futures contracts to expose that portion of the
Portfolio to the equity markets.
The Portfolios may also make investments in less-developed or emerging
equity markets.
The Bernstein Tax-Managed International Value Portfolio seeks to
minimize capital-gains distributions by considering the tax impact that buy and
sell investment decisions will have on its shareholders. For example, Bernstein
may sell certain securities in order to realize capital losses. Capital losses
may be used to offset realized
33
<PAGE>
capital gains. To minimize capital-gains distributions, Bernstein may sell
securities in the Portfolio with the highest cost basis. Bernstein may monitor
the length of time the Portfolio has held an investment to evaluate whether the
investment should be sold at a short-term gain or held for a longer period so
that the gain on the investment will be taxed at the lower long-term rate. In
making this decision, Bernstein will consider whether, in its judgment, the risk
of continued exposure to the investment is worth the tax savings of a lower
capital-gains rate.
The Portfolio will periodically make capital-gains distributions and
distribute ordinary income dividends. Shareholders may also be required to pay
taxes on capital gains realized, if any, upon redemption of their shares of this
Portfolio.
The tax-management strategies discussed above were implemented in May
of 1999 following a division of what was previously known as the Bernstein
International Value Portfolio. Prior to this portfolio division, there were both
taxable and tax-exempt shareholders in the Bernstein International Value
Portfolio. The Fund obtained an order from the SEC that permitted tax-exempt
shareholders to redeem their shares of the Bernstein International Value
Portfolio in-kind and invest these assets in a new Portfolio, the Bernstein
International Value Portfolio II. The taxable shareholders remained in the
Bernstein International Value Portfolio, which is now known as the Bernstein
Tax-Managed International Value Portfolio.
The Bernstein International Value Portfolio II is managed without
regard to potential tax consequences to the shareholder. It is particularly
appropriate for investors, such as pension plans and IRAs, not subject to
current federal income taxation.
INVESTMENT RISKS
General risks of investing in the Portfolios: The share prices of the
Portfolios will fluctuate and you may lose money when you sell your shares.
There is no guarantee that the Portfolios will achieve its investment objective.
Risks of Investing in Foreign Securities: Investments in foreign
securities entail significant risks in addition to those customarily associated
with investing in U.S. equities. These risks are heightened with respect to
investments in emerging-market countries where there is an even greater amount
of economic, political and social instability.
Market risk: Each Portfolio is subject to market risk, which is the
risk that stock prices in general will decline over short or even extended
periods. In foreign markets there is often a lower degree of market volume and
liquidity than in U.S. markets, and this may result in greater price volatility.
Furthermore, since the composition of each Portfolio will differ from that of
market indexes, its performance generally will not mirror the returns provided
by a specific market index.
34
<PAGE>
Some foreign securities may be listed on exchanges that are open on
days (such as U.S. holidays and Saturdays) when the Portfolios do not calculate
a net asset value. As a result, the net asset values of the Portfolios may be
significantly affected by trading on days when shareholders cannot make
transactions.
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 long periods of time. When a foreign currency rises against the
U.S. dollar, your return on foreign stocks will rise. When a foreign currency
declines in value in relation to the U.S. dollar, your return on foreign stocks
will decline.
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. Foreign governments may also intervene in currency
markets or interpose registration/approval processes, which may adversely affect
the Portfolios and your investment.
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 risk: Futures contracts can be highly volatile and could reduce
a Portfolio's total returns. Each Portfolio's potential losses from the use of
futures could extend beyond its initial investment.
Other foreign investment risks: Other risks include:
o the availability of less public information on issuers of securities
o less governmental supervision of brokers and issuers of securities
o lack of uniform accounting, auditing and financial reporting
standards
o settlement practices that differ from those in the U.S. and may
result in delays or may not fully protect the Portfolios against
loss or theft of assets
o the possibility of nationalization of a company or industry and
expropriation or confiscatory taxation
o the imposition of foreign taxes
o high inflation and rapid fluctuations in inflation rates
o less-developed legal structures governing private or foreign
investment
Higher Costs Associated With Foreign Investing: Investments in foreign
securities will also result in generally higher expenses due to:
o the costs of currency exchange
o higher brokerage commissions in certain foreign markets
35
<PAGE>
o the expense of maintaining securities with foreign custodians
Additional risks of investing in emerging-market countries: Investing
in emerging market countries entails greater economic, political and social
instability. In addition, there is heightened volatility because the securities
markets in these countries are substantially smaller, less-developed, less
liquid and more volatile than the securities markets of developed countries.
INVESTMENT PERFORMANCE
Effective April 30, 1999, the Bernstein International Value Portfolio
II was split from the Bernstein International Value Portfolio, now called the
Bernstein Tax-Managed International Value Portfolio. The returns of the
Bernstein Tax-Managed International Value Portfolio show the performance history
of the Bernstein International Value Portfolio prior to the portfolio division.
Although the performance history of the Bernstein International Value Portfolio
II begins on the date of the portfolio division, the returns of the Bernstein
International Value Portfolio prior to the portfolio division is relevant to any
Bernstein International Value Portfolio II investor.
The bar chart below shows the Bernstein Tax-Managed International Value
Portfolio's performance for each calendar year since inception. The table below
shows how the Fund's average annual returns differ from those of a broad-based
securities market index. Both the bar chart and the table indicate the
volatility of an investment in the Portfolio and give some indication of the
risk. The Portfolio's past performance is no guarantee of how it will perform in
the future.
Bar Chart
Calendar Year Total Returns
Bernstein Tax-Managed International Value
Portfolio
'93 '94 '95 '96 '97 '98
------ ----- ----- ------ ----- ------
34.52% 3.83% 8.07% 17.46% 9.27% 10.95%
Quarter Total
Ended Return
Best Quarter 3/31/98 18.62%
Worst Quarter 9/30/98 -17.72%
Returns for calendar year 1999 to be added by amendment in January 2000.
Average Annual Total Returns
[Table depicting average annual total returns for the most recently
ended 1 and 5 calendar year periods and since inception compared to its
index to be added by amendment in January, 2000.]
Fees and Expenses
The following table describes the fees and expenses you would pay if
you buy and hold shares of the Portfolio.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Bernstein
Tax-Managed Bernstein
International Value International Value
Portfolio Portfolio II*
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Shareholder Fees
Sales Charge (Load) Imposed on Purchases None None
Sales Charge (Load) Imposed on Reinvested Dividends None None
Deferred Sales Charge (Load) None None
Redemption Fees None None
Exchange Fees None None
Maximum Account Fee $100(1) $100(1)
- ------------------------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses that are deducted from Portfolio assets)
Management Fees 0.93% 0.94%
Distribution (12b-1) Fees None None
Other Expenses
Shareholder Servicing and Administrative Fees 0.25% 0.25%
All Other Expenses 0.06% 0.07%
----- -----
Total Other Expenses(2) 0.31% 0.32%
Total Annual Portfolio Operating Expenses 1.24% 1.26%
- ------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
(1) Certain shareholders may be charged an annual account maintenance
fee of $100 by Bernstein (not the Fund). The fee applies to any shareholder who
has Portfolio shares in an account at Bernstein that has assets of less than
$400,000. Bernstein does not charge this fee to accounts in discretionary
relationships commenced after October 1, 1998 or accounts that are in a group of
related accounts as defined by Bernstein with combined assets of $400,000 or
more. This fee is deducted from cash held in the account or, if insufficient
cash is maintained in that account, by selling securities. 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) Other expenses for the Bernstein International Value Portfolio II
are based on estimated amounts for the current fiscal year.
Example
This Example is intended to help you compare the cost of investing in
the Portfolios with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolio for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Portfolio's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
- --------------------------------------------------------------------------------
Bernstein
Tax-Managed Bernstein
International Value International Value
Portfolio Portfolio II
- --------------------------------------------------------------------------------
1 Yr. 126 128
3 Yrs. (cum.) 393 400
5 Yrs. (cum.) 681 N/A
10 Yrs. (cum.) 1,500 N/A
- --------------------------------------------------------------------------------
36
<PAGE>
THE BERNSTEIN EMERGING MARKETS VALUE PORTFOLIO
INVESTMENT OBJECTIVE
To provide long-term capital growth through investments in equity
securities of companies in emerging-market countries.
INVESTMENT STRATEGIES
The Bernstein Emerging Markets Value Portfolio will invest primarily in
equity securities in emerging-market countries. Issuers of these securities may
be large or relatively small companies.
Bernstein will determine which countries are emerging-market countries.
In general, these will be the countries 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) to have an "emerging stock market." Examples of emerging-market countries
are Argentina, Brazil, Chile, Egypt, Greece, India, Indonesia, Israel, Malaysia,
Mexico, the People's Republic of China, Peru, the Philippines, Poland, Portugal,
South Africa, South Korea, Taiwan, Thailand and Turkey.
The Portfolio will primarily invest in common stocks but may also
invest in preferred stocks, warrants and convertible securities of foreign
issuers, including sponsored or unsponsored American Depositary Receipts (ADRs)
and Global Depositary
Receipts (GDRs).
Under most conditions, the Bernstein Emerging Markets Value Portfolio
intends to have its assets diversified among emerging-market countries, although
this Portfolio may also invest in more developed country markets. 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 various key economic characteristics of the
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.
Although we will hedge currency risk opportunistically when we believe
there is potential to enhance risk-adjusted returns, the currency exposures of
this Portfolio will generally be unhedged because currency hedging in emerging
market countries is often either subject to legal and regulatory controls or
prohibitively expensive.
The Portfolio may also make investments in developed foreign
securities that comprise the EAFE index.
37
<PAGE>
INVESTMENT RISKS
Inability to redeem shares in the Portfolio: Trading in emerging
markets can be more difficult; thus, there is a risk that you may not be able
to readily redeem your shares in the Portfolio.
Risks of Investing in Emerging-Markets Securities: Investments in
foreign securities entail significant risks in addition to those customarily
associated with investing in U.S. equities. These risks are heightened with
respect to investments in emerging-market countries where there is an even
greater amount of economic, political and social instability. Economic,
political and social instability could disrupt the financial markets in which
the Portfolio invests and adversely affect the value of the Portfolio's assets.
In addition, national policies may restrict investment opportunities.
For example, there may be restrictions on investment in issuers or industries
deemed sensitive to national interests.
Market risk: The Portfolio is subject to market risk, which is the risk
that stock prices in general will decline over short or even extended periods.
In foreign markets there is often a lower degree of market volume and liquidity
than in U.S. markets, and this may result in greater price volatility. 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. Furthermore, since the composition of the Portfolio will
differ from that of market indexes, its performance will generally not mirror
the returns provided by a specific market index.
Some foreign securities may be listed on exchanges that are open on
days (such as U.S. holidays and Saturdays) when the Portfolio does not calculate
a net asset value. As a result, the net asset value of the Portfolio may be
significantly affected by trading on days when shareholders cannot make
transactions.
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 long periods of time. When a foreign currency rises against the
U.S. dollar, your return on foreign stocks will also rise. When a foreign
currency declines in value in relation to the U.S. dollar, your returns on
foreign stocks will also fall.
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. Foreign governments may also intervene in currency
markets or interpose registration/approval processes, which could adversely
affect the Portfolio.
Other foreign investing risks: Other risks include:
o the availability of less public information on issuers of securities
38
<PAGE>
o less governmental supervision of brokers and issuers of securities
o lack of uniform accounting, auditing and financial reporting standards
o settlement practices that differ from those in the U.S. and may result in
delays or may not fully protect the Portfolio against loss or theft of
assets
o the possibility of nationalization of a company or industry and
expropriation or confiscatory taxation
o the imposition of foreign taxes
o high inflation and rapid fluctuations in inflation rates
o less-developed legal structures governing private or foreign investment
Higher costs associated with foreign investing: Investments in foreign
securities will also result in generally higher expenses due to:
o the costs of currency exchange
o higher brokerage commissions in certain foreign markets
o the expense of maintaining securities with foreign custodians
Investments in small companies: The Portfolio invests in securities of
smaller companies which 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.
Actions by a few major investors: 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 Portfolios.
INVESTMENT PERFORMANCE
The bar chart below shows the Portfolio's performance for each calendar
year since inception. The table below shows how the Fund's average annual
returns differ from those of a broad-based securities market index. Both the bar
chart and the table indicate the volatility of an investment in the Portfolio
and give some indication of the risk. The Portfolio's past performance is no
guarantee of how it will perform in the future.
Bar Chart
The returns in the bar chart below do not reflect the portfolio
transaction fee of 2.00% that is payable to the Portfolio when shares of the
Portfolio are purchased and sold. If these fees were reflected below, the
returns would be less than those shown.
Calendar Year Total Returns
Bernstein Emerging Markets Value
Portfolio
'96 '97 '98
------ ------- -------
7.05% -23.92% -21.09%
Quarter Total
Ended Return
Best Quarter 6/30/99 35.18%
Worst Quarter 12/31/97 -26.32%
Returns for calendar year 1999 to be added by amendment in January 2000.
39
<PAGE>
Average Annual Total Returns
[Table depicting average annual total returns for the most recently
ended calendar year period and since inception compared to its index to
be added by amendment in January, 2000.]
The returns in the table above reflect the return to a shareholder who
purchased shares of the Portfolio at the beginning of the period and redeemed
them at the end of the period, paying, in each case, the 2.00% portfolio
transaction fee. Average annual total return to a shareholder for the most
recently ended calendar year period without taking account of these transaction
fees would have been _____% and since inception would have been ______%.
Fees and Expenses
The following table describes the fees and expenses you would pay if
you buy and hold shares of the Portfolio.
- --------------------------------------------------------------------------------
Bernstein
Emerging
Markets
Value
Portfolio
- --------------------------------------------------------------------------------
Shareholder Fees
- --------------------------------------------------------------------------------
None
Sales Charge (Load) Imposed on Purchases
None
Sales Charge (Load) Imposed on Reinvested Dividends
None
Deferred Sales Charge (Load)
Maximum Account Fee $100(1)
- --------------------------------------------------------------------------------
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
(expenses that are deducted from Portfolio assets)
- --------------------------------------------------------------------------------
Management Fees 1.25%
Distribution (12b-1) Fees None
Other Expenses
Shareholder Servicing and Administrative Fees 0.25%
All Other Expenses 0.24%
-----
Total Other Expenses 0.49%
Total Annual Portfolio Operating Expenses 1.74%
- --------------------------------------------------------------------------------
* 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.
(1) Certain shareholders may be charged an annual account maintenance
fee of $100 by Bernstein (not the Fund). The fee applies to any shareholder who
has Portfolio shares in an account at Bernstein that has assets of less than
$400,000. Bernstein does not charge this fee to accounts in discretionary
relationships commenced after October 1, 1998 or accounts that are in a group of
related accounts as defined by Bernstein with combined assets of $400,000 or
more. This fee is deducted from cash held in the account or, if insufficient
cash is maintained in that account, by selling securities. Shares of the Fund
purchased or redeemed through broker-dealers, banks and other financial
institutions may be subject to fees imposed by those institutions.
Example
This Example is intended to help you compare the cost of investing in
the Portfolios with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in each Portfolio for the
time periods indicated and then redeem all of your shares at the end of those
periods.* The Example also assumes that your investment has a 5% return each
year and that the Portfolio's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
- --------------------------------------------------------------------------
Bernstein
Emerging Markets
Value
Portfolio
- --------------------------------------------------------------------------
1 Yr. 576
3 Yrs. (cum.) 953
5 Yrs. (cum.) 1,355
10 Yrs. (cum.) 2,481
- --------------------------------------------------------------------------
* The expenses include the portfolio transaction fee on purchases and
redemptions.
You would pay the following expenses if you did not redeem your shares:
- --------------------------------------------------------------------------
Bernstein
Emerging Markets
Value
Portfolio
- --------------------------------------------------------------------------
1 Year 373
3 Years 737
5 Years 1,125
10 Years 2,211
- --------------------------------------------------------------------------
The example reflects the portfolio transaction on purchases but does not reflect
the portfolio transaction fee on redemptions. If this fee were included, your
costs would be higher.
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. 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 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 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.
40
<PAGE>
Making Investment Decisions for the Portfolios
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. 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.
To minimize the emotional aspects of decision-making under uncertainty,
we strive to apply our valuation tools in a consistent and disciplined fashion.
Bernstein research is applied within a value-oriented framework. Investment
decision-making is disciplined, centralized and highly systematic.
The Fixed-Income Portfolios: To identify attractive bonds for the
Bernstein Fixed-Income Portfolios, we evaluate securities and sectors to
identify the most attractive securities in the market at a given time--those
offering the highest expected return in relation to their risks. In addition, we
may analyze the yield-curve to determine the optimum combination of duration for
given degrees of interest-rate risk. Finally, we may use interest-rate
forecasting to determine the best level of interest-rate risk at a given time,
within specified limits for each Portfolio.
The International Value and Emerging Markets Value Portfolios: 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 invests in underpriced stocks--those with
low price/earnings ratios, low price/book-value ratios and high dividend yields.
Investment decision-making for these Portfolios is systematic and centralized,
pursued by an investment policy group working in concert, and guided by the
findings of our global equity research staff.
41
<PAGE>
Additional Investment Information, Special Investment Techniques and Related
Risks
This section of the prospectus contains detailed information about the
instruments in which the Portfolios may invest, special investment techniques
that Bernstein may employ and information about the related risks. The
limitations and restrictions discussed below supplement those discussed earlier
in this prospectus.
Portfolio holdings are detailed in the Fund's financial statements,
which are sent to Fund shareholders twice a year.
Additional Investments, Strategies and Practices Permitted; Details in
Fund's SAI: Each Portfolio may invest in other securities, use other strategies
and engage in other investment practices. Detailed information about these
securities, strategies and practices are contained in the Fund's Statement of
Additional Information (SAI), which is available upon request at no cost (see
the back cover of this prospectus).
Investment Policies and Limitations Apply at Time of Purchase Only:
Unless otherwise specified, the policies and limitations discussed in this
prospectus apply at the time an instrument is purchased. Thus, a change of
circumstances will not require the sale of an investment if it was otherwise
properly purchased.
Changing the Investment Objectives by the Portfolios; When Shareholder
Approval is Required: A fundamental investment objective cannot be changed
without shareholder approval. As a fundamental investment objective, each
Bernstein Municipal Portfolio will invest no less than 80% of its assets in
municipal securities. All other investment objectives of the Portfolios are not
fundamental and thus may be changed without shareholder approval. Bernstein will
provide shareholders with prior written notice before implementing any change to
the investment objectives of any Portfolio.
Portfolio Turnover: The Portfolios of the Fund generally buy portfolio
securities with the intention of holding them for investment. However, when
market conditions or other circumstances warrant, securities may be purchased
and sold without regard to the length of time held. A high turnover ratio may
increase transaction costs and may affect taxes paid by shareholders to the
extent short-term or long-term gains are distributed.
The Fixed Income Portfolios
Obligations of Supranational Agencies
The Portfolios may invest in the obligations of supranational agencies.
Supranational agencies rely on participating countries (which may include the
United States) for funds. 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
42
<PAGE>
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 associated with investments in
foreign securities (see discussion on pages _____).
Interest Only/Principal Only Securities
The Portfolios may invest in a type of a mortgage-related securities
where 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. Most IOs and POs are considered to be illiquid securities (see
discussion below).
Asset-Backed Securities
Each of the Fixed-Income Portfolios may invest in asset-backed
securities, which are bonds secured by pools of assets such as 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 debts is used to pay interest and
principal to the asset-backed noteholders. It is possible that the collateral
may not be available to support payments on the securities.
Illiquid Securities
Securities that are not readily marketable may be illiquid securities.
Each of the Bernstein Government Short Duration, Bernstein Short Duration Plus,
Bernstein Intermediate Duration, Bernstein New York Municipal, Bernstein
California Municipal and Bernstein Diversified Municipal Portfolios may invest
as much as 10% of its net assets in illiquid securities. Each of the Short
Duration New York Municipal, Short Duration California Municipal and Short
Duration Diversified Municipal Portfolios may invest as much as 15% of its net
assets in illiquid securities.
Examples of illiquid securities include guaranteed investment contracts
("GICs"), bank investment contracts ("BICs") and private placement securities. A
GIC is a contract issued by an insurance company that guarantees payment of
interest and repayment of principal. A BIC is a contract issued by a bank that
guarantees payment of interest and repayment of principal. Private placement
securities are securities that are exempt from registration with the Securities
and Exchange Commission and may be sold only in privately negotiated
transactions.
43
<PAGE>
The Bernstein International Equity Portfolios
Investments in common and preferred stocks, warrants and convertible
securities of foreign issuers are part of the principal investment strategy of
each of the Bernstein Tax-Managed International Value Portfolio and the
Bernstein International Value Portfolio II (referred to together as the
"International Value Portfolios") and the Bernstein Emerging Markets Value
Portfolio.
Illiquid Securities: Securities that are not readily marketable may be
illiquid securities. Each of the International Value Portfolios and Emerging
Markets Value Portfolio may invest as much as 15% of its net assets in illiquid
securities.
Private placement securities are usually illiquid securities. These
securities are exempt from registration with the Securities and Exchange
Commission and may be sold only in privately negotiated transactions.
Temporary defensive positions: Under exceptional conditions abroad or
when Bernstein believes that economic or market conditions warrant, any of the
Bernstein international equity portfolios 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. When a Portfolio is
investing for temporary defensive purposes, it is not pursuing its investment
goal.
44
<PAGE>
ALL BERNSTEIN PORTFOLIOS
Special Investment Techniques
In seeking to achieve its investment objectives, each of the Portfolios
may invest in higher risk securities or use special investment techniques. These
techniques may be used:
o to hedge various market risks (such as interest rates, currency
exchange rates and broad or security-specific changes in the prices
of securities),
o to manage the effective maturity or duration of fixed-income
securities,
o to exploit mispricings in the securities markets, or
o as an alternative to activities in the underlying cash markets.
Below is a description of some of these special investment techniques. For
additional information on special investment techniques, see the Fund's SAI (see
the back cover of this prospectus).
Foreign Currency Transactions
The Bernstein Short Duration Plus Portfolio, Bernstein Intermediate
Duration Portfolio, Bernstein Tax-Managed International Value Portfolio,
Bernstein International Value Portfolio II and Bernstein Emerging Markets Value
Portfolio may enter into foreign currency exchange contracts on either a spot
(i.e., cash) or forward basis. Spot contracts are entered into at the rate then
prevailing in the currency exchange market. Forward contracts 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.
Although forward contracts will be used primarily to protect the
Portfolios from adverse currency movements, they involve the risk that Bernstein
will not accurately predict currency movements. As a result, the Portfolios'
total return could be adversely affected.
Under certain circumstances, the Bernstein International Value
Portfolios 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. Bernstein 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.
Futures Contracts and Options
The Portfolios may also enter into contracts involving the right or
obligation to deliver or receive assets or money depending on the performance of
one or more assets or an economic index. These include futures contracts with
respect to bonds, Eurodeposits,
45
<PAGE>
securities indices, currencies, options or other derivatives or financial
instruments.
In addition, the Portfolios may each purchase and sell put and call
options on securities, securities indexes, foreign currencies, futures
contracts. The Portfolios will write only covered options or other derivatives
or financial instruments.
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.
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. Attempts by Bernstein to use these investments for
hedging or other purposes may not be successful. Each Portfolio's potential
losses from the use of futures and options 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. These 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. They may also be debt
instruments with interest or principal payments determined by reference to
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
a 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 obligate one party to make payments to the other party
based on the change in the market value of an index or asset. In return, the
other party agrees to make payments to the first party based on the return of
another index or asset. Swap agreements entail the risk that a party will
default on its payment obligations to the Portfolio. Swap agreements also bear
the risk that the Portfolio will not be able to meet its obligation to the
counterparty.
46
<PAGE>
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 for a variety of reasons. A Portfolio may attempt 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. A Portfolio may
also enter these transactions as a duration management technique or to protect
against any increase in the price of securities that the Portfolio anticipates
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.
Lending Portfolio Securities
Each Portfolio may lend portfolio securities. Each of the Fixed-Income
Portfolios may lend up to 30% of its total assets; each of the Short Duration
Municipal Portfolios may lend up to one-third of its total assets. Each of the
Bernstein International Value Portfolios and the Bernstein Emerging Markets
Value Portfolio may also lend up to one-third of its total assets. Loans may be
made 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 fees charged in connection with the loan and,
when cash collateral is given to secure the loan, income from investment of the
cash collateral in time deposits and repurchase agreements. Loans of portfolio
securities are marked to the market daily and secured by collateral consisting
of certificates of deposit and other cash instruments or U.S. government and
agency securities worth no less than the securities loaned.
Bernstein 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. 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.
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When-Issued and Delayed-Delivery Transactions
The Portfolios may purchase securities on a "when-issued" or
"delayed-delivery" basis, where a security purchased by a Portfolio is delivered
at a later date, usually within three months.
The market value of the security at delivery may be more or less than
the purchase price. The Portfolio must segregate liquid assets in an amount at
least equal to its purchase commitments; the Portfolio must also segregate
securities sold on a delayed-delivery basis.
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 Bernstein 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
restrictions and legally permissible for that Portfolio, we may utilize the
strategies. These opportunities may involve risks that differ from those
described above.
ADDITIONAL RISKS
Year 2000 Risks
Like other mutual funds and financial and business operations around
the world, the Fund could be adversely affected if the computer software, and to
a lesser extent, hardware used by Bernstein and other service providers are not
able to process and calculate date-related information and data before, during,
and after January 1, 2000. This is commonly known as the "Year 2000 Issue." We
are taking steps that we believe are reasonably designed to address the Year
2000 Issue with respect to the computer software and hardware that we use and to
obtain satisfactory assurances that comparable steps are being taken by the
Fund's other major service providers. However, there can be no assurance that
these steps will be sufficient to avoid any adverse impact on the Fund. In
addition, companies or governmental entities in which the Fund Portfolios invest
could be affected by the Year 2000 Issue, but at this time the Fund cannot
predict the degree of impact. To the extent the impact on a Portfolio holding is
negative, a Portfolio's returns could be adversely affected.
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<PAGE>
FUND MANAGEMENT
The investment manager of the 12 Portfolios of the Fund is Sanford C.
Bernstein & Co., Inc., a New York corporation with principal offices at 767
Fifth Avenue, New York, New York 10153. Bernstein, a registered investment
advisor, manages, as of September 30, 1999, some $85 billion in assets 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.
Bernstein provides the Portfolios of the Fund with investment
management, shareholder servicing and administration and distribution services.
Bernstein's Investment Policy Groups are comprised of Bernstein
employees and make all investment decisions for the Portfolios. No one person is
primarily responsible for making recommendations to the Investment Policy
Groups.
Investment Management Fees
The aggregate fees paid to Bernstein for services rendered to each
Portfolio with respect to investment management for the period ending September
30, 1999 was .50% Bernstein Government Short Duration, .50% Bernstein Short
Duration Plus, .47% Bernstein Intermediate Duration, .50% Bernstein New York
Municipal, .50% Bernstein Short Duration New York Municipal, .50% Bernstein
California Municipal, .50% Bernstein Short Duration California Municipal, .48%
Bernstein Diversified Municipal, .50% Bernstein Short Duration Diversified
Municipal, .93% Bernstein Tax-Managed International Value, .94% Bernstein
International Value II, 1.25% Bernstein Emerging Market Value.
Effective April 30, 1999, the Bernstein International Value Portfolio
was divided into two portfolios, Bernstein Tax-Managed International Value
Portfolio and Bernstein International Value Portfolio II. Prior to this
portfolio division, Bernstein charged the Bernstein International Value
Portfolio a management fee at an annual rate of 1.00% of the Portfolio's average
daily net assets up to but not exceeding $2 billion and an annual rate of 0.90
of 1% of average daily net assets that exceeded $2 billion. Following this
portfolio division, Bernstein charged each of the resulting International Value
Portfolios a management fee at an annual rate of 1.00% of each Portfolio's
average daily net assets up to but not exceeding $1 billion and an annual rate
of 0.90 of 1% of average daily net assets that exceeded $1 billion.
Bernstein acts as the Distributor of each Portfolio's shares free of
charge. Bernstein also acts as the Fund's Shareholder Servicing Agent. For these
services, Bernstein charges each Fixed-Income Portfolio an annual fee of 0.10%
of that Portfolio's average daily assets, and each of the International Value
Portfolios and the Emerging Market Portfolios an annual fee of 0.25% of each
Portfolio's average daily net assets.
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SHAREHOLDER INFORMATION
Pricing of Portfolio Shares
The share price for each Portfolio is based on the Portfolio's net
asset value ("NAV"). To calculate the NAV, a Portfolio's net worth (assets less
liabilities) is divided by the number of outstanding shares.
Regarding Portfolio securities for which readily available market
quotations exist, the value is based on the most recent sale price, 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 Bernstein.
Debt instruments with remaining maturities of 60 days or less may be valued at
amortized cost. The Fund may use an independent pricing service to value the
Portfolios' assets at such times and to such extent as Bernstein deems
appropriate.
If quotations are not readily available or if the values have been
materially affected by events occurring after the closing of a foreign market,
securities or other assets may be valued by appraisal at their fair value as
determined in good faith under procedures established by the Fund's Board of
Directors. In the latter situation, prices used by the Fund to calculate its net
asset value may differ from quoted or published prices for the underlying
securities.
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 Bernstein 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 Bernstein becomes aware of
them, whichever is later.
A Portfolio's NAV is determined as of the close of regular trading of
the New York Stock Exchange (normally 4:00 p.m. New York time) 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, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day.
To the extent that the assets of a Portfolio are traded in other
markets (such as a foreign market) on days when the New York Stock Exchange is
closed, the net asset value of a Portfolio may be affected on days when you will
not be able to purchase or redeem the Portfolio's shares.
Your purchase price for shares of a Portfolio will be the NAV next
determined after receipt of a purchase order in good form. When you sell shares
of a Portfolio, you will receive the NAV next determined after receipt of the
order to sell in proper form.
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Purchase of Shares
Minimum Investments
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. 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 $5,000. For Uniform Gifts to Minors
Act/Uniform Transfers to Minors Act accounts, the minimum initial investment is
$20,000. 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. There is no minimum amount for
reinvestment of dividends and distributions declared by a Portfolio in the
shares of that Portfolio.
With respect to any account that is invested solely in a single Fund
Portfolio (including accounts of Bernstein investment-management clients),
Bernstein will, in January and June of each year, automatically invest the cash
balances in any such account in the same Fund Portfolio without regard to the
minimum investment requirement.
For clients of Bernstein's investment-management services, Bernstein
may, at a client's request, maintain a specified percentage of assets in one or
more of the Portfolios of the Fund or vary the percentage based on Bernstein's
opinion of the relative allocation of fixed-income investments versus
international investments or domestic stock. In keeping with these client
mandates or for tax considerations, Bernstein may, without additional
instructions from the client, purchase shares of any Portfolio from time to
time.
These purchases and sales by Bernstein will be subject to the following
minimum investment requirements:
o initial purchases of shares of the Portfolios (other than the Bernstein
Emerging Markets Value Portfolio) will be subject to the initial minimum
investment requirements specified above, but the subsequent minimum
investment requirements may be waived;
o 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
o Bernstein may, in its discretion, waive initial and subsequent minimum
investment requirements for any participant-directed defined contribution
plan.
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 ___.
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Procedures
To purchase shares, you must submit to Bernstein a completed
application (unless you currently have an account with us) and payment for the
requested shares. Payment may be made by wire transfer or check. Unless waived
by Bernstein, bank or certified checks are required if you are not a Bernstein
investment-management client. All checks should be made payable to the
particular Portfolio in which you are purchasing shares. Payment must be made in
U.S. dollars. If you have a Bernstein investment advisory account, your purchase
order will be carried out after confirmation that your account has a balance at
least equal to the amount of your purchase. All purchase orders will be
confirmed 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.
The share price you pay will depend on when Bernstein receives your
order in proper form. Orders received at or prior to the close of regular
trading of the New York Stock Exchange (normally 4:00 p.m. New York time) on any
business day will receive the offering price determined as of the closing time
that day. Orders received after the close of regular trading will receive the
next business day's price.
Transaction Fees: If you purchase shares of the Bernstein Emerging
Markets Value Portfolio you will pay to this Portfolio a transaction fee of
2.00% of the amount invested. This transaction fee is payable only by investors
in this Portfolio and is charged because of the additional costs involved in the
purchase and sale of these shares. For more information, see _____________at
Page __.
The Fund may, at its sole option, accept securities as payment for
shares of any Fixed-Income Portfolio if Bernstein believes that the securities
are appropriate investments for the Portfolio. The securities are valued by the
method described under "Pricing of Portfolio Shares" as of the date the
Portfolio receives the securities and corresponding documentation necessary to
transfer the securities to the Portfolio. This is a taxable transaction to the
shareholder.
If you purchase shares through broker-dealers, banks or other financial
institutions, they may impose fees and conditions on you that are not
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 order will
be priced at the Fund's net asset value computed after acceptance by these
entities. The entity is responsible for transmitting the order to the Fund.
The Fund reserves the right to reject any purchase order and may stop
selling shares of any of the Portfolios at any time. Share certificates are
issued only upon written
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<PAGE>
request, but no certificates are issued for fractional shares. Shares of the
Fund will not be offered in any state where the Fund or a Portfolio of the Fund
has not made a notice filing required by state law.
Selling Shares
Procedures
You may sell your shares of the Fund by sending Bernstein a request,
along with duly endorsed share certificates, if issued. Orders for redemption
given to a bank, broker-dealer or financial institution authorized by the Fund
are considered received when such third party 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.
Your signature must appear on your written redemption order and must be
guaranteed by a financial institution that meets the Fund's requirements (such
as 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). An authorized person at the guarantor institution must sign
the guarantee and "Signature Guaranteed" must appear with the signature.
Signature guarantees by notaries or institutions that do not provide
reimbursement in the case of fraud are not acceptable. 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.
We will normally make payment to you of your sales proceeds by check
within seven days of receipt of your sell order in proper form and any issued
share certificates. The check will be sent to you at your address on record with
the Fund unless prior other instructions are on file. If you are a Bernstein
advisory client, the sales proceeds will be held in your Bernstein account
unless you have previously provided us with alternative written instructions. If
you redeem shares through an authorized bank, broker-dealer or other financial
institution, unless otherwise instructed, the proceeds will be sent to your
brokerage account within seven days. Your broker may charge a separate or
additional fee for sales of Portfolio shares. The cost of wire transfers will be
borne by the shareholder. No interest will accumulate on amounts represented by
uncashed distribution or sales proceeds checks.
The price you will receive when you sell your shares will depend on
when Bernstein or the authorized third party bank, brokerage-dealer or other
financial institution receives your sell order in proper form. Orders received
at or prior to the close of regular trading of the New York Stock Exchange
(normally 4:00 p.m. New York time) on any business day will receive the offering
price determined as of the closing time that day. Orders received after the
close of regular trading will receive the next business day's price.
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<PAGE>
When you sell your shares, you may receive more or less than what you
paid for them. Any capital gain or loss realized on any sale of Portfolio shares
is subject to federal income taxes. For additional information, see
Distributions and Taxes on page __.
If you are selling shares recently purchased with a check, we may
delay sending you the proceeds for up to 15 days until your check clears. This
delay may be avoided if the shares were originally purchased by certified or
bank check or by wire transfer.
Transaction Fees Upon Redemption: You will be charged a 2% redemption
fee upon the sale of shares of the Bernstein Emerging Markets Value Portfolio
that will be deducted from the proceeds of the sale and paid to the Portfolio.
This transaction fee is payable only by investors in this Portfolio and is
charged because of the additional costs involved in the purchase and sale of
these shares. For more information, see page__.
Restrictions on Sales: There may be times during which you may not be
able to sell your shares or we may delay payment of the proceeds for longer than
seven days such as when the New York Stock Exchange is closed (other than for
customary weekend or holiday closings), or if trading in the markets that the
Portfolio normally uses is closed or restricted or an emergency situation exists
when it is not reasonably practicable for a Portfolio to determine its net asset
value or to sell its investments. Investors in the Emerging Markets Value
Portfolio run a greater risk that they may not be able to readily sell their
Portfolio shares.
Sale in Kind: The Fund normally pays proceeds of a sale of Portfolio
shares in cash. However, the Fund has reserved the right to pay the sale price
in part by a distribution in kind of securities in lieu of cash. If payment is
made in kind, you may incur brokerage commissions if you elect to sell the
securities for cash. For more information, see the SAI.
Automatic Sale of Your Shares: Under certain circumstances, the Fund
may redeem your shares without your consent. Maintaining small shareholder
accounts is costly. Accordingly, if you make a sale that reduces the value of
your account to less than $1,000, we may, on at least 60 days prior written
notice, sell your remaining shares in that Portfolio and close your account. We
will not close your account if you increase your account balance to $1,000
during the 60-day notice period.
Systematic Withdrawal Plan: A systematic withdrawal plan enables
shareholders to sell shares automatically at regular monthly intervals. In
general, a systematic withdrawal plan is available only to shareholders who own
book-entry shares worth $25,000 or more. The proceeds of these sales will be
sent directly to you or your designee. The use of this service is at the Fund's
discretion. For further information, call Bernstein at (212) 756-4097.
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Exchanges of Shares
You may exchange your shares in a Portfolio for shares in any other
Portfolio 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. Exchanges are subject to the minimum
investment requirements of the Portfolio into which the exchange is being made.
The Fund reserves the right, on behalf of any of the Portfolios, to reject any
exchange of shares. Shares purchased through broker-dealers, banks or other
financial institutions may be exchanged through such entities.
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
_____ for additional information.
The exchange privilege is available only in states where the exchange
may legally be made. While the Fund plans to maintain this exchange policy,
changes to this policy may be made upon 90 days prior written notice to
shareholders.
For shareholders subject to federal income taxes, an exchange
constitutes a taxable transaction upon which a gain or loss may be realized. See
"Dividends, Distributions and Taxes" on pages ____-____.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio will distribute substantially all of its net investment
income (interest and dividends less expenses) and realized net capital gains
from the sale of its securities, if any, to its shareholders.
The Bernstein Fixed-Income Portfolios intend to declare dividends daily
and pay them monthly. The Bernstein International Value Portfolios and the
Bernstein Emerging Markets Value Portfolio intend to declare and pay dividends
at least annually, generally in December. All Portfolios distribute
capital-gains distributions at least annually, generally in December. You will
be taxed on dividends and distributions generally in the year you receive them
except that dividends declared in October, November and December and paid prior
to February 1 of the following year are taxable to you in the year they are
declared.
If you purchase shares shortly before the record date of a dividend of
the Bernstein International Value Portfolios or the Bernstein Emerging Markets
Value Portfolio or a capital gains distribution of any of the Portfolios, the
share price will include the amount of the distribution. On the record date of
the distribution, the net asset value of Portfolio shares will drop by the
amount of the distribution.
Your dividends and capital gains distributions, if any, will be
automatically reinvested in shares of the same Portfolio on which they were
paid. The number of shares you receive is based upon the net asset value of the
Portfolio on the record date. Such
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reinvestments automatically occur on the payment date of such dividends and
capital gains distributions. In the alternative, you may elect in writing
received by us not less than 5 business days prior to the record date to receive
dividends and/or capital gains distributions in cash. You will not receive
interest on uncashed dividend, distribution or redemption checks.
As a result of investment objectives and strategies, Bernstein expects
that, in general, the Bernstein Fixed-Income Portfolios will distribute
primarily ordinary income dividends and in general the Bernstein Tax-Managed
International Value and the Bernstein Emerging Markets Value Portfolios will
distribute primarily capital-gains dividends. The Bernstein International Value
Portfolio II may distribute ordinary income dividends or capital-gains
dividends, but since the shareholders of this Portfolio are tax-exempt, the type
of dividends distributed is not relevant to shareholders.
If you are subject to taxes, you may pay taxes on income dividends
(unless, as described below, they are derived from the interest earned on
municipal securities) and capital gains distributions from the Portfolios
whether they are received in cash or additional shares. Regardless of how long
you have owned your shares in the Portfolio, distributions of long-term capital
gains are taxed as such and distributions of net investment income, short-term
capital gains and certain foreign currency gains are taxed as ordinary income.
For individual taxpayers, ordinary income is taxed at a higher rate than
long-term capital gains. Income dividends that are exempt from federal tax may
be subject to state and local taxes.
Generally, it is intended that dividends of both Bernstein New York
Municipal Portfolios, both Bernstein California Municipal Portfolios and both
Bernstein Diversified Municipal Portfolios will be exempt from federal income
taxes. However, any of these Portfolios may invest a portion of its assets in
securities that generate income that is not exempt from federal or state income
tax. In addition, you may pay taxes on any capital gains distributions from
these Portfolios.
The New York Municipal Portfolios provide income that is generally
tax-free for New York State and local personal 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. Similarly, the California
Municipal Portfolios provide income that is generally tax-free for California
personal income tax purposes to the extent that the income is derived from
California Municipal Securities or securities issued by possessions of the
United States. A portion of income of the other Portfolios may also be exempt
from state and local income taxes in certain states to the extent that the
Portfolio derives income from securities on which the interest is exempt from
taxes in that state.
Interest on certain "private activity bonds" issued after August 7,
1986 are items of tax preference for the corporate and individual alternative
minimum tax. If you hold shares in a Portfolio that invests in private activity
bonds, you may be subject to the alternative minimum tax on that portion of the
Portfolio's distributions derived from interest income on those bonds.
Additionally, tax-exempt income constitutes "adjusted current earnings"
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("ACE") for purposes of calculating the ACE adjustment for the corporate
alternative minimum tax.
If, for any taxable year, a Portfolio distributes income from dividends
from domestic corporations and complies with certain requirements, corporate
shareholders may be entitled to take a dividends-received deduction for some or
all of the dividends they receive. In general, dividends of the Bernstein
International Value Portfolios 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.
Dividends and interest received by the Fixed-Income Portfolios that
invest in foreign securities, the Bernstein International Value Portfolios and
the Bernstein Emerging Markets Portfolio may be subject to foreign tax and
withholding. Some emerging markets countries may impose taxes on capital gains
earned by a Portfolio in that country. However, tax conventions between certain
countries and the United States may reduce or eliminate such taxes. You may be
entitled to claim foreign tax credits or deductions on your federal income tax
returns with respect to such taxes paid by a Portfolio.
If you redeem shares of a Portfolio or exchange them for shares of
another Portfolio, you generally will recognize a capital gain or loss on the
transaction. Any such gain or loss will be a long-term capital gain or loss if
you held your shares for more than 12 months. Losses realized on a sale and
repurchase are disallowed to the extent that the shares disposed of replaced
within a 61 day period beginning 30 days before and ending 30 days after the
transaction date. However, if you experience a loss and have only held your
shares for 6 months or less, such loss will be treated as a long-term capital
loss to the extent that you treat any dividends as long-term capital gains.
Additionally, such loss will be disallowed to the extent you receive any
tax-exempt dividends.
Under certain circumstances, the Bernstein International Value
Portfolios and the Bernstein Emerging Markets Value Portfolio may elect for U.S.
income tax purposes to treat foreign income taxes paid by the Portfolio as paid
by its shareholders. If this election is made, you will be required to include
your pro rata portion of such foreign taxes in computing your taxable
income--treating an amount equal to these foreign taxes as a U.S. federal income
tax deduction or foreign tax credit against your U.S. federal income taxes. You
will not be entitled to claim a deduction for foreign taxes if you do not
itemize your deductions on your returns. Other limitations may apply regarding
the extent to which the credit and deduction may be claimed. To the extent that
these Portfolios may hold securities of corporations which are considered to be
passive foreign investment companies, capital gains on these securities may be
treated as ordinary income and the Portfolios may be subject to corporate income
taxes and interest charges on certain dividends and capital gains earned by
these investments.
This Prospectus only summarizes some of the tax implications you should
consider when investing in our Fund. You are urged to consult you own tax
adviser regarding specific questions as to federal, state, local and foreign
taxes.
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Statements as to the tax status of dividends and distributions of each
Portfolio are mailed annually.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
financial performance of the Portfolios of the Fund for the past 5 years or
since inception, if shorter. Certain information reflects financial results for
a single Portfolio share. The total returns in the table represent the rate that
an investor would have earned (or lost) on an investment in the Portfolio
(assuming reinvestment of all dividends and distributions). This information has
been audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, are included in the annual report, which is available upon
request.
<TABLE>
<CAPTION>
BERNSTEIN TAX-MANAGED INTERNATIONAL VALUE PORTFOLIO
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $17.63 $20.92 $18.14 $16.08 $16.57
------ ------ ------ ------ ------
Income from investment operations:
Investment income, net 0.15 0.20 0.26 0.23 0.18
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies 4.04 (1.67) 3.73 2.26 0.07
------ ------ ------ ------ ------
Total from investment operations 4.19 (1.47) 3.99 2.49 0.25
------ ------ ------ ------ ------
Less distributions:
Dividends from taxable net investment income (0.93) (1.11) (0.99) (0.10) (0.11)
Dividends from tax-exempt net
investment income 0 0 0 0 0
Distributions from net realized gains (0.87) (0.71) (0.22) (0.33) (0.63)
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 (1.80) (1.82) (1.21) (0.43) (0.74)
------ ------ ------ ------ ------
Portfolio transaction fee 0 0 0 0 0
------ ------ ------ ------ ------
Net asset value, end of period $20.02 $17.63 $20.92 $18.14 $16.08
====== ====== ====== ====== ======
Total return 25.35% (7.19)% 23.25% 15.83% 1.84%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $3,654,579 $4,912,583 $4,965,998 $3,131,258 $1,996,112
Average net assets (000 omitted) $4,618,500 $5,309,076 $3,977,823 $2,569,586 $1,591,703
Ratio of expenses to average net assets 1.24% 1.26% 1.27% 1.31% 1.35%
Ratio of net investment income to average
net assets 0.80% 0.98% 1.37% 1.37% 1.17%
Portfolio turnover rate 31.99% 30.34% 26.24% 21.89% 29.53%
<CAPTION>
BERNSTEIN
INTERNATIONAL BERNSTEIN EMERGING MARKETS VALUE PORTFOLIO
VALUE PORTFOLIO II
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/99 (a) 9/30/99 9/30/98 9/30/97 9/30/96 (b)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $19.43 $10.11 $22.54 $21.82 $20.00
------ ------ ------ ------ ------
Income from investment operations:
Investment income, net 0.19 0.16 0.20 0.14 0.18
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies 0.49 7.39 (12.17) 0.44 0.83
------ ------ ------ ------ ------
Total from investment operations 0.68 7.55 (11.97) 0.58 1.01
------ ------ ------ ------ ------
Less distributions:
Dividends from taxable net investment income 0 (0.12) (0.11) (0.08) 0
Dividends from tax-exempt net
investment income 0 0 0 0 0
Distributions from net realized gains 0 0 (0.61) (0.02) 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 (0.02) 0 0 0
------ ------ ------ ------ ------
Total distributions 0 (0.14) (0.72) (0.10) 0
------ ------ ------ ------ ------
Portfolio transaction fee 0 0.15 0.26 0.24 0.81
------ ------ ------ ------ ------
Net asset value, end of period $20.11 $17.67 $10.11 $22.54 $21.82
====== ====== ====== ====== ======
Total return 3.50% 69.88%+ (55.09)%+ (0.32)%+ 4.80%+
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $2,459,123 $720,444 $362,686 $438,305 $273,924
Average net assets (000 omitted) $2,397,807 $581,638 $417,615 $379,351 $165,362
Ratio of expenses to average net assets 1.26%* 1.74% 1.77% 1.75% 1.92%*
Ratio of net investment income to average
net assets 2.23%* 1.04% 1.29% 0.58% 1.01%*
Portfolio turnover rate 9.34% 28.54% 19.56% 32.45% 9.81%
<CAPTION>
BERNSTEIN INTERMEDIATE
DURATION PORTFOLIO
YEAR ENDED YEAR ENDED
9/30/99 9/30/98
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $13.49 $13.38
------ ------
Income from investment operations:
Investment income, net 0.77 0.73
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies (0.63) 0.37
------ ------
Total from investment operations 0.14 1.10
------ ------
Less distributions:
Dividends from taxable net investment income (0.76) (0.80)
Dividends from tax-exempt net
investment income 0 0
Distributions from net realized gains (0.10) (0.17)
Distributions in excess of net investment
income due to timing differences (0.03) (0.02)
Distributions in excess of net realized
gains due to timing differences (0.07) 0
------ ------
Total distributions (0.96) (0.99)
------ ------
Portfolio transaction fee 0 0
------ ------
Net asset value, end of period $12.67 $13.49
====== ======
Total return 1.04% 8.59%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $2,674,408 $2,541,549
Average net assets (000 omitted) $2,601,959 $2,303,250
Ratio of expenses to average net assets 0.60% 0.60%
Ratio of net investment income to average
net assets 5.89% 5.41%
Portfolio turnover rate 229.75% 233.08%
</TABLE>
+ This reflects the return to a shareholder who purchased shares of the
Portfolio at the beginning of the period and redeemed them at the end of the
period, paying, in each case, the 2.00% portfolio transaction fee. Total
return to a shareholder for the periods ending September 30, 1999, September
30, 1998, September 30, 1997, and September 30, 1996, without taking into
account these transaction fees would have been 76.88%, (53.24)%, 3.79% and
9.10%, respectively.
* Annualized
(a) Commenced operations April 30, 1999
(b) Commenced operations December 15, 1995
- --------------------------------------------------------------------------------
58
<PAGE>
<TABLE>
<CAPTION>
BERNSTEIN INTERMEDIATE
DURATION PORTFOLIO
YEAR ENDED YEAR ENDED YEAR ENDED
9/30/97 9/30/96 9/30/95
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $13.08 $13.30 $12.54
------ ------ ------
Income from investment operations:
Investment income, net 0.75 0.80 0.78
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies 0.35 (0.14) 0.77
------ ------ ------
Total from investment operations 1.10 0.66 1.55
------ ------ ------
Less distributions:
Dividends from taxable net investment income (0.80) (0.80) (0.76)
Dividends from tax-exempt net
investment income 0 0 0
Distributions from net realized gains 0 (0.08) 0
Distributions in excess of net investment
income due to timing differences 0 0 (0.03)
Distributions in excess of net realized
gains due to timing differences 0 0 0
------ ------ ------
Total distributions (0.80) (0.88) (0.79)
------ ------ ------
Portfolio transaction fee 0 0 0
------ ------ ------
Net asset value, end of period $13.38 $13.08 $13.30
====== ====== ======
Total return 8.66% 5.05% 12.82%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $2,058,220 $1,451,776 $1,142,768
Average net assets (000 omitted) $1,745,554 $1,310,208 $957,247
Ratio of expenses to average net assets 0.62% 0.63% 0.64%
Ratio of net investment income to average
net assets 5.61% 5.99% 6.11%
Portfolio turnover rate 238.04% 141.04% 212.40%
<CAPTION>
BERNSTEIN SHORT DURATION PLUS PORTFOLIO
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.53 $12.53 $12.48 $12.49 $12.32
------ ------ ------ ------ ------
Income from investment operations:
Investment income, net 0.67 0.65 0.67 0.69 0.70
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies (0.20) 0.09 0.08 (0.01) 0.18
------ ------ ------ ------ ------
Total from investment operations 0.47 0.74 0.75 0.68 0.88
------ ------ ------ ------ ------
Less distributions:
Dividends from taxable net investment income (0.67) (0.72) (0.70) (0.69) (0.69)
Dividends from tax-exempt net
investment income 0 0 0 0 0
Distributions from net realized gains 0 0 0 0 0
Distributions in excess of net investment
income due to timing differences 0 (0.02) 0 0 (0.02)
Distributions in excess of net realized
gains due to timing differences 0 0 0 0 0
------ ------ ------ ------ ------
Total distributions (0.67) (0.74) (0.70) (0.69) (0.71)
------ ------ ------ ------ ------
Portfolio transaction fee 0 0 0 0 0
------ ------ ------ ------ ------
Net asset value, end of period $12.33 $12.53 $12.53 $12.48 $12.49
====== ====== ====== ====== ======
Total return 3.82% 6.10% 6.21% 5.54% 7.36%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $557,016 $595,087 $612,744 $538,248 $534,462
Average net assets (000 omitted) $569,298 $591,866 $583,003 $532,094 $536,042
Ratio of expenses to average net assets 0.65% 0.64% 0.65% 0.65% 0.65%
Ratio of net investment income to average
net assets 5.36% 5.24% 5.38% 5.47% 5.69%
Portfolio turnover rate 95.60% 71.40% 118.58% 169.96% 61.03%
<CAPTION>
BERNSTEIN GOVERNMENT
SHORT DURATION PORTFOLIO
YEAR ENDED YEAR ENDED YEAR ENDED
9/30/99 9/30/98 9/30/97
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $12.66 $12.53 $12.48
------ ------ ------
Income from investment operations:
Investment income, net 0.58 0.64 0.67
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies (0.20) 0.13 0.05
------ ------ ------
Total from investment operations 0.38 0.77 0.72
------ ------ ------
Less distributions:
Dividends from taxable net investment income (0.58) (0.64) (0.67)
Dividends from tax-exempt net
investment income 0 0 0
Distributions from net realized gains 0 0 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 (0.58) (0.64) (0.67)
------ ------ ------
Portfolio transaction fee 0 0 0
------ ------ ------
Net asset value, end of period $12.46 $12.66 $12.53
====== ====== ======
Total return 3.07% 6.35% 5.88%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $127,598 $138,037 $142,081
Average net assets (000 omitted) $132,741 $139,410 $136,888
Ratio of expenses to average net assets 0.70% 0.70% 0.69%
Ratio of net investment income to average
net assets 4.61% 5.13% 5.32%
Portfolio turnover rate 82.16% 56.93% 80.11%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BERNSTEIN GOVERNMENT
SHORT DURATION PORTFOLIO
YEAR ENDED YEAR ENDED
9/30/96 9/30/95
- ------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $12.55 $12.34
------ ------
Income from investment operations:
Investment income, net 0.65 0.69
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies (0.07) 0.21
------ ------
Total from investment operations 0.58 0.90
------ ------
Less distributions:
Dividends from taxable net investment income (0.65) (0.69)
Dividends from tax-exempt net
investment income 0 0
Distributions from net realized gains 0 0
Distributions in excess of net investment
income due to timing differences 0 0
Distributions in excess of net realized
gains due to timing differences 0 0
------ ------
Total distributions (0.65) (0.69)
------ ------
Portfolio transaction fee 0 0
------ ------
Net asset value, end of period $12.48 $12.55
====== ======
Total return 4.76% 7.55%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $139,802 $143,723
Average net assets (000 omitted) $145,268 $145,710
Ratio of expenses to average net assets 0.69% 0.69%
Ratio of net investment income to average
net assets 5.21% 5.58%
Portfolio turnover rate 155.29% 49.34%
<CAPTION>
BERNSTEIN DIVERSIFIED MUNICIPAL PORTFOLIO
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.96 $13.74 $13.44 $13.50 $12.99
------ ------ ------ ------ ------
Income from investment operations:
Investment income, net 0.56 0.58 0.60 0.63 0.65
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies (0.46) 0.23 0.31 (0.04) 0.51
------ ------ ------ ------ ------
Total from investment operations 0.10 0.81 0.91 0.59 1.16
------ ------ ------ ------ ------
Less distributions:
Dividends from taxable net investment income (0.02) (0.02) (0.02) (0.01) (0.02)
Dividends from tax-exempt net
investment income (0.54) (0.56) (0.58) (0.62) (0.63)
Distributions from net realized gains (0.03) (0.01) (0.01) (0.02) 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 (0.59) (0.59) (0.61) (0.65) (0.65)
------ ------ ------ ------ ------
Portfolio transaction fee 0 0 0 0 0
------ ------ ------ ------ ------
Net asset value, end of period $13.47 $13.96 $13.74 $13.44 $13.50
====== ====== ====== ====== ======
Total return 0.77% 5.98% 6.95% 4.38% 9.16%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $1,517,233 $1,385,785 $1,114,374 $820,395 $660,814
Average net assets (000 omitted) $1,458,118 $1,250,621 $965,455 $744,452 $572,769
Ratio of expenses to average net assets 0.63% 0.63% 0.65% 0.66% 0.66%
Ratio of net investment income to average
net assets 4.08% 4.17% 4.43% 4.61% 4.89%
Portfolio turnover rate 44.69% 22.00% 24.65% 25.22% 42.55%
<CAPTION>
BERNSTEIN CALIFORNIA
MUNICIPAL PORTFOLIO
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.19 $13.90 $13.58 $13.58 $13.06
------ ------ ------ ------ ------
Income from investment operations:
Investment income, net 0.54 0.57 0.59 0.61 0.64
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies (0.46) 0.30 0.32 0 0.52
------ ------ ------ ------ ------
Total from investment operations 0.08 0.87 0.91 0.61 1.16
------ ------ ------ ------ ------
Less distributions:
Dividends from taxable net investment income (0.02) (0.02) (0.03) (0.03) (0.05)
Dividends from tax-exempt net
investment income (0.52) (0.55) (0.56) (0.58) (0.59)
Distributions from net realized gains (0.04) (0.01) 0 0 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 (0.58) (0.58) (0.59) (0.61) (0.64)
------ ------ ------ ------ ------
Portfolio transaction fee 0 0 0 0 0
------ ------ ------ ------ ------
Net asset value, end of period $13.69 $14.19 $13.90 $13.58 $13.58
====== ====== ====== ====== ======
Total return 0.60% 6.37% 6.82% 4.60% 9.11%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $605,962 $549,757 $411,384 $285,758 $213,951
Average net assets (000 omitted) $586,510 $473,077 $339,514 $246,410 $185,990
Ratio of expenses to average net assets 0.64% 0.65% 0.67% 0.68% 0.69%
Ratio of net investment income to average
net assets 3.88% 4.04% 4.26% 4.48% 4.78%
Portfolio turnover rate 38.44% 25.33% 41.32% 23.87% 63.89%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BERNSTEIN NEW YORK MUNICIPAL PORTFOLIO
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.87 $13.62 $13.35 $13.48 $12.98
------ ------ ------ ------ ------
Income from investment operations:
Investment income, net 0.56 0.58 0.61 0.64 0.65
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies (0.46) 0.26 0.27 (0.07) 0.50
------ ------ ------ ------ ------
Total from investment operations 0.10 0.84 0.88 0.57 1.15
------ ------ ------ ------ ------
Less distributions:
Dividends from taxable net investment income (0.01) (0.01) (0.01) (0.02) (0.02)
Dividends from tax-exempt net
investment income (0.55) (0.57) (0.60) (0.62) (0.63)
Distributions from net realized gains (0.05) (0.01) 0 (0.06) 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 (0.61) (0.59) (0.61) (0.70) (0.65)
------ ------ ------ ------ ------
Portfolio transaction fee 0 0 0 0 0
------ ------ ------ ------ ------
Net asset value, end of period $13.36 $13.87 $13.62 $13.35 $13.48
====== ====== ====== ====== ======
Total return 0.74% 6.32% 6.73% 4.31% 9.14%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $845,970 $816,082 $671,700 $539,217 $458,543
Average net assets (000 omitted) $843,755 $746,257 $603,119 $497,391 $413,892
Ratio of expenses to average net assets 0.64% 0.64% 0.65% 0.66% 0.66%
Ratio of net investment income to average
net assets 4.09% 4.25% 4.51% 4.73% 4.95%
Portfolio turnover rate 35.13% 27.20% 25.94% 26.19% 44.84%
<CAPTION>
BERNSTEIN
SHORT DURATION
DIVERSIFIED MUNICIPAL
PORTFOLIO
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95 (c)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.57 $12.56 $12.52 $12.63 $12.50
------ ------ ------ ------ ------
Income from investment operations:
Investment income, net 0.42 0.45 0.46 0.52 0.55
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies (0.05) 0.04 0.05 (0.06) 0.13
------ ------ ------ ------ ------
Total from investment operations 0.37 0.49 0.51 0.46 0.68
------ ------ ------ ------ ------
Less distributions:
Dividends from taxable net investment income (0.01) (0.01) (0.02) (0.02) (0.04)
Dividends from tax-exempt net
investment income (0.41) (0.44) (0.44) (0.50) (0.51)
Distributions from net realized gains (0.03) (0.03) (0.01) (0.05) 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 (0.45) (0.48) (0.47) (0.57) (0.55)
------ ------ ------ ------ ------
Portfolio transaction fee 0 0 0 0 0
------ ------ ------ ------ ------
Net asset value, end of period $12.49 $12.57 $12.56 $12.52 $12.63
====== ====== ====== ====== ======
Total return 2.91% 4.02% 4.17% 3.68% 5.55%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $170,722 $158,553 $151,821 $119,096 $101,325
Average net assets (000 omitted) $167,918 $150,699 $135,288 $105,467 $85,893
Ratio of expenses to average net assets 0.71% 0.71% 0.72% 0.71% 0.72%*
Ratio of net investment income to average
net assets 3.29% 3.58% 3.66% 4.07% 4.32%*
Portfolio turnover rate 95.33% 99.93% 68.25% 63.40% 73.50%
</TABLE>
*Annualized
(c) Commenced operations October 3, 1994
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
BERNSTEIN SHORT DURATION
CALIFORNIA MUNICIPAL PORTFOLIO
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95 (c)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.61 $12.55 $12.53 $12.65 $12.50
------ ------ ------ ------ ------
Income from investment operations:
Investment income, net 0.40 0.42 0.45 0.50 0.53
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies (0.04) 0.07 0.03 (0.07) 0.15
------ ------ ------ ------ ------
Total from investment operations 0.36 0.49 0.48 0.43 0.68
------ ------ ------ ------ ------
Less distributions:
Dividends from taxable net investment income (0.02) (0.02) (0.04) (0.05) (0.06)
Dividends from tax-exempt net
investment income (0.38) (0.40) (0.41) (0.45) (0.47)
Distributions from net realized gains (0.04) (0.01) (0.01) (0.05) 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 (0.44) (0.43) (0.46) (0.55) (0.53)
------ ------ ------ ------ ------
Portfolio transaction fee 0 0 0 0 0
------ ------ ------ ------ ------
Net asset value, end of period $12.53 $12.61 $12.55 $12.53 $12.65
====== ====== ====== ====== ======
Total return 2.90% 3.98% 3.89% 3.50% 5.58%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $108,511 $99,050 $86,311 $72,925 $63,530
Average net assets (000 omitted) $97,808 $88,338 $76,339 $68,060 $49,944
Ratio of expenses to average net assets 0.73% 0.73% 0.74% 0.72% 0.73%*
Ratio of net investment income to average
net assets 3.18% 3.34% 3.56% 3.96% 4.12%*
Portfolio turnover rate 126.65% 77.01% 75.36% 60.76% 89.33%
<CAPTION>
BERNSTEIN SHORT DURATION
NEW YORK MUNICIPAL PORTFOLIO
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95 (c)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.47 $12.47 $12.52 $12.60 $12.50
------ ------ ------ ------ ------
Income from investment operations:
Investment income, net 0.44 0.46 0.50 0.51 0.54
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies (0.12) 0.01 (0.01) (0.07) 0.10
------ ------ ------ ------ ------
Total from investment operations 0.32 0.47 0.49 0.44 0.64
------ ------ ------ ------ ------
Less distributions:
Dividends from taxable net investment income (0.02) (0.01) (0.08) (0.02) (0.05)
Dividends from tax-exempt net
investment income (0.42) (0.45) (0.42) (0.49) (0.49)
Distributions from net realized gains 0 (0.01) (0.04) (0.01) 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 (0.44) (0.47) (0.54) (0.52) (0.54)
------ ------ ------ ------ ------
Portfolio transaction fee 0 0 0 0 0
------ ------ ------ ------ ------
Net asset value, end of period $12.35 $12.47 $12.47 $12.52 $12.60
====== ====== ====== ====== ======
Total return 2.64% 3.86% 3.99% 3.53% 5.24%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $101,901 $78,652 $76,142 $58,750 $55,221
Average net assets (000 omitted) $92,014 $77,989 $69,567 $54,087 $50,642
Ratio of expenses to average net assets 0.74% 0.74% 0.76% 0.74% 0.73%*
Ratio of net investment income to average
net assets 3.57% 3.66% 3.97% 4.02% 4.23%*
Portfolio turnover rate 77.64% 52.93% 98.01% 55.81% 112.15%
</TABLE>
*Annualized
(c) Commenced operations October 3, 1994
- --------------------------------------------------------------------------------
<PAGE>
Sanford C. Bernstein Fund, Inc.
A Statement of Additional Information (SAI) includes further information
about the Fund and its investment policies. The SAI has been filed with the
Securities and Exchange Commission (SEC) and is incorporated by reference into
this prospectus. This means that the SAI is legally considered a part of this
prospectus even though it is not physically contained within this prospectus.
Further information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. To
obtain free copies of any of these documents or make inquiries about the Fund,
call (212) 756-4097 collect or write to us at: 767 Fifth Avenue, New York, NY
10538-0185.
You can also obtain copies from the SEC's internet site at http://www.sec.gov,
by visiting the SEC's Public Reference Room in Washington, D.C. or by sending
your request and a duplicating fee to the SEC's Public Reference Section,
Washington, D.C. 20549-6009. You can call 1-800-SEC-0330 for information on the
operation of the Public Reference Room.
Sanford C. Bernstein Fund, Inc., SEC file number: 811 - 5555
59
<PAGE>
SANFORD C. BERNSTEIN FUND, INC.
CROSS-REFERENCE SHEET
(as required by Rule 481(a))
N-1A Item No.
- -------------
<TABLE>
<CAPTION>
Location in Fixed-Income
Institutional Services
Part A-2 Prospectus
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Item 1. Front and Back Cover Pages Front and Back
Cover Pages
Item 2. Risk/Return Summary: Investment Investment Objectives, Strategies,
Risks and Performance Risks, Performance and Fees
Item 3. Risk/Return Summary: Fee Table Investment Objectives, Strategies,
Risks, Performance and Fees
Item 4. Investment Objectives, Principal Additional Investment Information, Special
Investment Strategies and Related Investment Techniques and Related Risks
Risks
Item 5. Management's Discussion of
Fund Performance Not Applicable
Item 6. Management, Organization and
Capital Structure Fund Management
Item 7. Shareholder Information Shareholder Information
Item 8. Distribution Agreements Not Applicable
Item 9. Financial Highlights Financial Highlights
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4
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PROSPECTUS
SANFORD C. BERNSTEIN FUND, INC.
o BERNSTEIN SHORT DURATION PLUS PORTFOLIO
o BERNSTEIN INTERMEDIATE DURATION PORTFOLIO
February 1, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
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TABLE OF CONTENTS
Investment Objectives, Strategies, Risks, Performance and Fees...............___
Making Investment Decisions for the Portfolios...............................___
Additional Investment Information, Special Investment Techniques
and Related Risks......................................................___
Fund Management..............................................................___
Shareholder Information......................................................___
Participating in Your Plan.............................................___
Dividends, Distributions and Taxes...........................................___
Financial Highlights.........................................................___
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<PAGE>
INTRODUCTION
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 two
(2) of the twelve (12) Portfolios of the Sanford C. Bernstein Fund, Inc. (the
"Fund")--the Bernstein Short Duration Plus Portfolio and the Bernstein
Intermediate Duration Portfolio. A prospectus containing information on the 12
Fund Portfolios and on how to open a personal account is available for
individual investors, and may be obtained by writing to the address or calling
the telephone number on the back cover of this prospectus.
Sanford C. Bernstein & Co., Inc. is the investment manager of the Fund.
This prospectus refers to Sanford C. Bernstein & Co., Inc. as "Bernstein" or
"we" and shareholders of the Portfolio as "you."
Before investing in any Portfolio, you should consider the risks. The
share prices of the Portfolios will fluctuate and you may lose money when you
sell your shares. There is no guarantee that the Portfolios will achieve their
investment objective. In addition, the investments made by the Portfolios may
underperform the market generally or other mutual funds with a similar
investment objective. Also, the issuers in which the Portfolios invest may be
affected by the year 2000 problem and the Portfolios' returns could be adversely
affected as a result (see discussion on page __).
These and other risks are discussed in more detail in the pages that
follow and in the Fund's Statement of Additional Information (SAI) which is
available without charge (see back cover).
3
<PAGE>
THE BERNSTEIN SHORT DURATION PLUS PORTFOLIO
INVESTMENT OBJECTIVE
To provide safety of principal and a moderate rate of income that is
subject to taxes.
INVESTMENT STRATEGIES
The Bernstein Short Duration Plus Portfolio will invest at least 80% of
its total assets in securities rated A or better by national rating agencies and
comparably rated commercial paper and notes. Many types of securities may be
purchased by the Portfolio, including corporate bonds, notes, U.S. government
and agency securities, asset-backed securities, mortgage-related securities,
interest only ("IOs") and principal only ("POs") securities and
inflation-protected securities as well as others. The Portfolio may also invest
up to 20% of its total assets in fixed-income foreign securities in developed or
emerging-market countries.
The Portfolio may invest up to 20% of its total assets in securities that
are not investment-grade. All securities purchased by the Portfolio will be
rated at least a B by national rating agencies.
The Portfolio may use special investment techniques, including futures.
In managing the Portfolio, we may use interest-rate forecasting to
determine the best level of interest-rate risk at a given time. We may
moderately shorten the average duration of the Portfolio when we expect interest
rates to rise and modestly lengthen average duration when we anticipate that
rates will fall.
Duration is a measure of interest-rate risk (described further below). The
duration of a bond is the effect on price of a rise or fall of 1% in interest
rates. Thus, if the Portfolio's duration is around 2 years, it will lose about
2% in principal should interest rates rise 1% and gain about 2% in principal
should interest rates fall 1%.
The Portfolio seeks to maintain an effective duration of one to three
years under normal market conditions.
INVESTMENT RISKS
General risks of investing in the Portfolio: The share prices of the
Portfolio will fluctuate and you may lose money when you sell your shares. There
is no guarantee that the Portfolio will achieve its investment objective.
Interest-rate risk: Should there be a rise in the overall level of
interest rates, it is likely that the value of the Portfolio securities will
decline. Accordingly, it is likely that the Portfolio share price will fall.
Credit risk: In the event that the credit rating of a Portfolio security
is downgraded or the issuer defaults by failing to make scheduled interest or
principal payments, there is a risk that the Portfolio's income level and/or
share price will fall. Securities that are not investment-grade
4
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(including those that have been downgraded to below investment-grade) are
considered speculative as to the payment of interest and principal and could
experience more volatility in price. The Portfolio may retain a security whose
credit quality is downgraded or for which the issuer defaults.
Riskier than a money-market fund: Since the Portfolio is invested in
securities with longer maturities than the assets of the type of mutual fund
known as a money-market fund, their expected return is somewhat higher. However,
the risk of a decline in the market value of the Portfolio is greater than for a
money-market fund since the credit quality of the portfolio securities may be
lower and the effective duration of the Portfolio will be longer.
Inflation-protected securities: The terms of inflation-protected
securities provide for the coupon and/or maturity value to be adjusted based on
changes in inflation. Decreases in the inflation rate or in investors'
expectations about inflation could cause these securities to underperform
non-inflation-adjusted securities on a total return basis. In addition, these
securities may have limited liquidity in the secondary market.
Foreign securities: Investing in foreign securities entails special risks,
such as potential political and economic instability, greater volatility and
less liquidity. In addition, there is the possibility that changes in value of a
foreign currency will reduce the U.S. dollar value of securities denominated in
that currency.
Futures risk: Futures contracts can be highly volatile and could reduce a
Portfolio's total returns. Each Portfolio's potential losses from the use of
futures could extend beyond its initial investment.
Mortgage-related securities: Investments in mortgage-related securities
expose the Portfolio to the following risks:
Prepayment risk: Because interest rates rise and fall, there is no
way to be certain of the actual rates of prepayment by the borrowers on
the underlying mortgages. Thus, actual prepayments on the securities could
differ from expected prepayments. As a result, the value of a security
could be lower than expected.
Shortening risk: Shortening risk is the possibility that falling
interest rates may cause prepayments of principal to occur at a
faster-than-expected rate. This particular risk may effectively change a
security that was considered intermediate- or long-term into a short-term
security. The prices of short-term securities do not rise as much in
response to a fall in interest rates as do the prices of intermediate- or
long-term securities.
Extension risk: Extension risk is the possibility that rising
interest rates may cause prepayments of principal to occur at a
slower-than-expected rate. This particular risk may effectively change a
security that was considered short- or intermediate-term into a long-term
security. The prices of long-term securities generally fall more in
response to a rise in interest rates than do the prices of short- or
intermediate-term securities.
INVESTMENT PERFORMANCE
The bar chart below shows the Portfolio's performance for the past 10
calendar years. The
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table below shows how the Fund's average annual returns differ from those of a
broad-based securities market index. Both the bar chart and the table indicate
the volatility of an investment in the Portfolio and give some indication of the
risk. The Portfolio's past performance is no guarantee of how it will perform in
the future.
Bar Chart
[Returns for calendar year 1999 to be added by amendment in January,
2000.]
Calendar Year Total Returns
Bernstein Short Duration Plus Portfolio
'90 8.27
'91 12.39
'92 6.30
'93 5.42
'94 0.55
'95 10.10
'96 4.79
'97 5.54
'98 5.93
Quarter Total
Ended Return
Best Quarter 6/30/89 3.92%
Worst Quarter 3/31/94 -0.31%
Average Annual Total Returns
[Table depicting average annual total returns for the most recently ended
1, 5, and 10 calendar year periods compared to its index to be added by
amendment in January 2000.]
Fees and Expenses
The following table describes the fees and expenses you would pay if you
buy and hold shares of the Portfolio.
----------------------------------------------------
Bernstein
Short Duration
Plus
Portfolio
----------------------------------------------------
Shareholder Fees
Sales Charge (Load) Imposed on
Purchases None
Sales Charge (Load) Imposed on
Reinvested Dividends None
Deferred Sales Charge (Load) None
Redemption Fees None
Exchange Fees None
Maximum Account Fee $100 (1)
----------------------------------------------------
Annual Portfolio Operating Expenses
(expenses that are deducted from
Portfolio assets)
Management Fees 0.50%
Distribution (12b-1) Fees None
Other Expenses
Shareholder Servicing and
Administrative Fees 0.10%
All Other Expenses 0.05%
-----
Total Other Expenses 0.15%
Total Annual Portfolio Operating
Expenses 0.65%
----------------------------------------------------
(1) Certain shareholders may be charged an annual account maintenance fee
of $100 by Bernstein (not the Fund). The fee applies to any shareholder who has
Portfolio shares in an account at Bernstein that has assets of less than
$400,000. Bernstein does not charge this fee to accounts in discretionary
relationships commenced after October 1, 1998 or accounts that are in a group of
related accounts as defined by Bernstein with combined assets of $400,000 or
more. This fee is deducted from cash held in the account or, if insufficient
cash is maintained in that account, by selling securities. Shares of the Fund
purchased or redeemed through broker-dealers, banks and other financial
institutions may be subject to fees imposed by those institutions.
Example
This Example is intended to help you compare the cost of investing
in the Portfolio with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolio for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Portfolio's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
---------------------------------------------------
Bernstein
Short
Duration
Plus
Portfolio
---------------------------------------------------
1 Yr. 66
3 Yrs. (cum.) 208
5 Yrs. (cum.) 362
10 Yrs. (cum.) 810
---------------------------------------------------
6
<PAGE>
THE BERNSTEIN INTERMEDIATE DURATION PORTFOLIO
INVESTMENT OBJECTIVE
To provide safety of principal and a moderate to high rate of current
income that is subject to taxes.
INVESTMENT STRATEGIES
The Bernstein Intermediate Duration Portfolio will invest at least 65% of
its total assets in securities rated AA or better by national rating agencies
and comparably rated commercial paper and notes. In addition, the Portfolio will
invest at least 80% of its total assets in securities rated A or better by
national rating agencies.
Many types of securities may be purchased by the Portfolio, including
corporate bonds, notes, U.S. government and agency securities, asset-backed
securities, mortgage-related securities, interest only ("IOs") and principal
only ("POs") securities and inflation-protected securities as well as others.
The Portfolio may also invest up to 20% of its total assets in fixed-income
foreign securities in developed or emerging-market countries.
The Portfolio may invest up to 20% of its total assets in securities that
are not investment-grade. All securities purchased by the Portfolio will be
rated at least a B by national rating agencies.
The Portfolio may use special investment techniques, including futures.
In managing the Portfolio, we may use interest-rate forecasting to
determine the best level of interest-rate risk at a given time. We may
moderately shorten the average duration of the Portfolio when we expect interest
rates to rise and modestly lengthen average duration when we anticipate that
rates will fall.
Duration is a measure of interest-rate risk (described further below). The
duration of a bond is the effect on price of a rise or fall of 1% in interest
rates. Thus, if the Portfolio's duration is around 5 years, it will lose about
5% in principal should interest rates rise 1% and gain about 5% in principal
should interest rates fall 1%.
The Portfolio seeks to maintain an effective duration of three to six
years under normal market conditions.
INVESTMENT RISKS
General risks of investing in the Portfolio: The share prices of the
Portfolio will fluctuate and you may lose money when you sell your shares. There
is no guarantee that the Portfolio will achieve its investment objective.
Interest-rate risk: Should there be a rise in the overall level of
interest rates, it is likely that the value of the Portfolio securities will
decline. Accordingly, it is likely that the Portfolio share price will fall.
7
<PAGE>
Because prices of intermediate bonds are more sensitive to interest rate
changes than those of shorter duration, this Portfolio has greater interest-rate
risk than Bernstein's Short Duration Plus Portfolio.
Credit risk: In the event that the credit rating of a Portfolio security
is downgraded or the issuer defaults by failing to make scheduled interest or
principal payments, there is a risk that the Portfolio's income level and/or
share price will fall. Securities that are not investment-grade (including those
that have been downgraded to below investment-grade) are considered speculative
as to the payment of interest and principal and could experience more volatility
in price. The Portfolio may retain a security whose credit quality is downgraded
or for which the issuer defaults.
Inflation-protected securities: The terms of inflation-protected
securities provide for the coupon and/or maturity value to be adjusted based on
changes in inflation. Decreases in the inflation rate or in investors'
expectations about inflation could cause these securities to underperform
non-inflation-adjusted securities on a total return basis. In addition, these
securities may have limited liquidity in the secondary market.
Foreign securities: Investing in foreign securities entails special risks,
such as potential political and economic instability, greater volatility and
less liquidity. In addition, there is the possibility that changes in value of a
foreign currency will reduce the U.S. dollar value of securities denominated in
that currency.
Futures risk: Futures contracts can be highly volatile and could reduce a
Portfolio's total returns. Each Portfolio's potential losses from the use of
futures could extend beyond its initial investment.
Mortgage-related securities: Investments in mortgage-related securities
expose the Portfolio to the following risks:
Prepayment risk: Because interest rates rise and fall, there is no
way to be certain of the actual rates of prepayment by the borrowers on
the underlying mortgages. Thus, actual prepayments on the securities could
differ from expected prepayments. As a result, the value of a security
could be lower than expected.
Shortening risk: Shortening risk is the possibility that falling
interest rates may cause prepayments of principal to occur at a
faster-than-expected rate. This particular risk may effectively change a
security that was considered intermediate- or long-term into a short-term
security. The prices of short-term securities do not rise as much in
response to a fall in interest rates as do the prices of intermediate- or
long-term securities.
Extension risk: Extension risk is the possibility that rising
interest rates may cause prepayments of principal to occur at a
slower-than-expected rate. This particular risk may effectively change a
security that was considered short- or intermediate-term into a long-term
security. The prices of long-term securities generally fall more in
response to a rise in interest rates than do the prices of short- or
intermediate-term securities.
8
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INVESTMENT PERFORMANCE
The bar chart below shows the Portfolio's performance for the past 10
calendar years. The table below shows how the Fund's average annual returns
differ from those of a broad-based securities market index. Both the bar chart
and the table indicate the volatility of an investment in the Portfolio and give
some indication of the risk. The Portfolio's past performance is no guarantee of
how it will perform in the future.
Bar Chart
[Returns for calendar year 1999 to be added by amendment in January,
2000.]
Calendar Year Total Returns
Bernstein Intermediate Duration
Portfolio
'90 7.35
'91 17.11
'92 7.67
'93 10.34
'94 -3.15
'95 17.83
'96 3.58
'97 7.66
'98 6.87
Quarter Total
Ended Return
Best Quarter 6/30/89 6.78%
Worst Quarter 3/31/94 -2.30%
Average Annual Total Returns
[Table depicting average annual total returns for the most recently ended
1, 5, and 10 calendar year periods compared to its index to be added by
amendment in January, 2000.]
Fees and Expenses
The following table describes the fees and expenses you would pay if
you buy and hold shares of the Portfolio.
----------------------------------------------------
Bernstein
Intermediate
Duration
Portfolio
----------------------------------------------------
Shareholder Fees
Sales Charge (Load) Imposed on
Purchases None
Sales Charge (Load) Imposed on
Reinvested Dividends None
Deferred Sales Charge (Load) None
Redemption Fees None
Exchange Fees None
Maximum Account Fee $100 (1)
----------------------------------------------------
Annual Portfolio Operating Expenses
(expenses that are deducted from
Portfolio assets)
Management Fees 0.47%
Distribution (12b-1) Fees None
Other Expenses
Shareholder Servicing and
Administrative Fees 0.10%
All Other Expenses 0.03%
-----
Total Other Expenses 0.13%
Total Annual Portfolio Operating
Expenses 0.60%
----------------------------------------------------
(1) Certain shareholders may be charged an annual account maintenance fee
of $100 by Bernstein (not the Fund). The fee applies to any shareholder who has
Portfolio shares in an account at Bernstein that has assets of less than
$400,000. Bernstein does not charge this fee to accounts in discretionary
relationships commenced after October 1, 1998 or accounts that are in a group of
related accounts as defined by Bernstein with combined assets of $400,000 or
more. This fee is deducted from cash held in the account or, if insufficient
cash is maintained in that account, by selling securities. Shares of the Fund
purchased or redeemed through broker-dealers, banks and other financial
institutions may be subject to fees imposed by those institutions.
Example
This Example is intended to help you compare the cost of investing
in the Portfolio with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolio for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Portfolio's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
---------------------------------------------------
Bernstein
Intermediate
Duration
Portfolio
---------------------------------------------------
1 Yr. 61
3 Yrs. (cum.) 192
5 Yrs. (cum.) 335
10 Yrs. (cum.) 750
---------------------------------------------------
9
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MAKING INVESTMENT DECISIONS FOR THE PORTFOLIOS
We believe opportunity in the fixed-income market is primarily the result
of complexity and emotion.
To solve the complex problems of bond valuation, we devote considerable
resources to research. 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.
To minimize the emotional aspects of decision-making under uncertainty, we
strive to apply our valuation tools in a consistent and disciplined fashion.
Bernstein research is applied within a value-oriented framework. Investment
decision-making is disciplined, centralized and highly systematic.
To identify attractive bonds for the Portfolios, we evaluate securities
and sectors to identify the most attractive securities in the market at a given
time--those offering the highest expected return in optimum combination of
duration for given degrees of interest-rate risk. Finally, we may use
interest-rate forecasting to determine the best level of interest-rate risk at a
given time, within the limits for each Portfolio.
Additional Investment Information, Special Investment Techniques and Related
Risks
This section of the prospectus contains detailed information about the
instruments in which the Portfolios may invest, special investment techniques
that Bernstein may employ and information about the related risks. The
limitations and restrictions discussed below supplement those discussed earlier
in this prospectus.
Each Portfolio's holdings are detailed in the Fund's financial statements,
which are sent to Fund shareholders twice a year.
Additional Investments, Strategies and Practices Permitted; Details in
Fund's SAI: The Portfolios may invest in other securities, use other strategies
and engage in other investment practices. Detailed information about these
securities, strategies and practices is contained in the Fund's Statement of
Additional Information (SAI), which is available upon request at no cost (see
the back cover of this prospectus).
Investment Policies and Limitations Apply at Time of Purchase Only: Unless
otherwise specified, the policies and limitations discussed in this prospectus
apply at the time an instrument is purchased. Thus, a change of circumstances
will not require the sale of an investment if it was otherwise properly
purchased.
Changing the Investment Objectives by the Portfolio: The investment
objectives of the Portfolios are not fundamental and thus may be changed without
shareholder approval. Bernstein will provide shareholders with prior written
notice before implementing any change to the investment objectives of these
Portfolios.
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Portfolio Turnover: These Portfolios generally buy portfolio securities
with the intention of holding them for investment. However, when market
conditions or other circumstances warrant, securities may be purchased and sold
without regard to the length of time held. A high turnover ratio may increase
transaction costs and may affect taxes paid by shareholders to the extent
short-term or long-term gains are distributed.
Additional Investments
Obligations of Supranational Agencies
The Portfolios may invest in the obligations of supranational agencies.
Supranational agencies rely on participating countries (which may include the
United States) for funds. 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 associated with
investments in foreign securities (see discussion on pages _____).
Interest Only/Principal Only Securities
The Portfolios may invest in a type of a mortgage-related securities where
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. Most IOs
and POs are considered to be illiquid securities (see discussion below).
Asset-Backed Securities
The Portfolios may invest in asset-backed securities, which are bonds
secured by pools of assets such as 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 debts is used to pay interest and principal to the
asset-backed noteholders. It is possible that the collateral may not be
available to support payments on the securities.
Illiquid Securities
Securities that are not readily marketable may be illiquid securities.
Each of the Bernstein Government Short Duration, Bernstein Short Duration Plus,
Bernstein Intermediate Duration, Bernstein New York Municipal, Bernstein
California Municipal and Bernstein Diversified Municipal Portfolios may invest
as much as 10% of its net assets in illiquid securities. Each of the Short
Duration New York Municipal, Short Duration California Municipal and Short
Duration Diversified Municipal Portfolios may invest as much as 15% of its net
assets in illiquid
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securities.
Examples of illiquid securities include guaranteed investment contracts
("GICs"), bank investment contracts ("BICs") and private placement securities. A
GIC is a contract issued by an insurance company that guarantees payment of
interest and repayment of principal. A BIC is a contract issued by a bank that
guarantees payment of interest and repayment of principal. Private placement
securities are securities that are exempt from registration with the Securities
and Exchange Commission and may be sold only in privately negotiated
transactions.
Special Investment Techniques
In seeking to achieve its investment objectives, each of the Portfolios
may invest in higher risk securities or use special investment techniques. These
techniques may be used:
o to hedge various market risks (such as interest rates, currency
exchange rates and broad or security-specific changes in the prices
of securities),
o to manage the effective maturity or duration of fixed-income
securities,
o to exploit mispricings in the securities markets, or
o as an alternative to activities in the underlying cash markets.
Below is a description of some of these special investment techniques. For
additional information on special investment techniques, see the Fund's SAI (see
the back cover of this prospectus).
Foreign Currency Transactions
The Bernstein Short Duration Plus Portfolio and the Bernstein Intermediate
Duration Portfolio may enter into foreign currency exchange contracts on either
a spot (i.e., cash) or forward basis. Spot contracts are entered into at the
rate then prevailing in the currency exchange market. Forward contracts 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.
Although forward contracts will be used primarily to protect the
Portfolios from adverse currency movements, they involve the risk that Bernstein
will not accurately predict currency movements. As a result, the Portfolios'
total return could be adversely affected.
Futures Contracts and Options
The Portfolios may also enter into contracts involving the right or
obligation to deliver or receive assets or money depending on the performance of
one or more assets or an economic index. These include futures contracts with
respect to bonds, Eurodeposits, securities indexes, currencies, options or other
derivatives or financial instruments.
In addition, the Portfolios may each purchase and sell put and call
options on securities, securities indexes, foreign currencies, futures
contracts. The Portfolios will write only covered options or other derivatives
or financial instruments.
The Portfolios may also enter into options on the yield "spread" or yield
differential
12
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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.
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. Attempts by Bernstein to use these investments for
hedging or other purposes may not be successful. Each Portfolio's potential
losses from the use of futures and options 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, the
Portfolios may invest in hybrid instruments (a type of potentially high risk
derivative) that have the characteristics of futures, options, currencies and
securities. These 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. They may also be debt
instruments with interest or principal payments determined by reference to
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 Portfolios may not be successful. The risk of these investments can be
substantial; possibly all of the principal is at risk. Neither Portfolio will
invest more than 20% of its total assets in these investments.
Swap agreements obligate one party to make payments to the other party
based on the change in the market value of an index or asset. In return, the
other party agrees to make payments to the first party based on the return of
another index or asset. Swap agreements entail the risk that a party will
default on its payment obligations to the Portfolios. Swap agreements also bear
the risk that the Portfolios will not be able to meet its obligation to the
counterparty.
The Portfolios 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 for a variety of reasons. A Portfolio may attempt 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. A Portfolio may
also enter these transactions as a duration management technique or to protect
against any increase in the price of securities that the Portfolio anticipates
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
Portfolios to alter their exposure to interest-rate
13
<PAGE>
market risk without changing the composition of the Portfolios. 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.
Lending Portfolio Securities
Each Portfolio may lend up to 30% of its total assets. Loans may be made
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 fees charged in connection with the loan and, when
cash collateral is given to secure the loan, income from investment of the cash
collateral in time deposits and repurchase agreements. Loans of portfolio
securities are marked to the market daily and secured by collateral consisting
of certificates of deposit and other cash instruments or U.S. government and
agency securities worth no less than the securities loaned.
Bernstein 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. 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, where a security purchased by a Portfolio is delivered
at a later date, usually within three months.
The market value of the security at delivery may be more or less than the
purchase price. The Portfolio must segregate liquid assets in accounts in an
amount at least equal to its purchase commitments; the Portfolio must also
segregate securities sold on a delayed-delivery basis.
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 Bernstein 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
restrictions and legally permissible for that Portfolio, we may utilize the
strategies. These opportunities may involve risks that differ from those
described above.
ADDITIONAL RISKS
Year 2000 Risks
14
<PAGE>
Like other mutual funds and financial and business operations around the
world, the Fund could be adversely affected if the computer software, and to a
lesser extent, hardware used by Bernstein and other service providers are not
able to process and calculate date-related information and data before, during,
and after January 1, 2000. This is commonly known as the "Year 2000 Issue." We
are taking steps that we believe are reasonably designed to address the Year
2000 Issue with respect to the computer software and hardware that we use and to
obtain satisfactory assurances that comparable steps are being taken by the
Fund's other major service providers. However, there can be no assurance that
these steps will be sufficient to avoid any adverse impact on the Fund. In
addition, companies or governmental entities in which the Fund Portfolios invest
could be affected by the Year 2000 Issue, but at this time the Fund cannot
predict the degree of impact. To the extent the impact on a Portfolio holding is
negative, the Portfolio's returns could be adversely affected.
FUND MANAGEMENT
The investment manager of the Fund is Sanford C. Bernstein & Co., Inc., a
New York corporation with principal offices at 767 Fifth Avenue, New York, New
York 10153. Bernstein, a registered investment advisor, manages as of September
30, 1999, some $85 billion in assets 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.
Bernstein provides the Portfolios of the Fund with investment management,
shareholder servicing and administration and distribution services.
Bernstein's Investment Policy Groups are comprised of Bernstein employees
and make all investment decisions for the Portfolios. No one person is primarily
responsible for making recommendations to the Investment Policy Groups.
Investment Management Fees
The aggregate fees paid to Bernstein for services rendered to each
Portfolio with respect to investment management for the period ending September
30, 1999 were 0.50% for the Bernstein Short Duration Plus Portfolio and 0.47%
for the Bernstein Intermediate Duration Portfolio.
Bernstein acts as the Distributor of the Portfolio's shares free of
charge. Bernstein also acts as the Fund's Shareholder Servicing Agent. For these
services, Bernstein charges each of the Bernstein Short Duration Plus and the
Bernstein Intermediate Duration Portfolios an annual fee of 0.10% of the
Portfolio's average daily net assets.
SHAREHOLDER INFORMATION
Pricing of Portfolio Shares
The share price for the Portfolios is based on the Portfolios' net asset
value ("NAV"). To calculate the NAV, a Portfolio's net worth (assets less
liabilities) is divided by the number of outstanding shares.
15
<PAGE>
Regarding Portfolio securities for which readily available market
quotations exist, the value is based on the most recent sale price, 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 Bernstein.
Debt instruments with remaining maturities of 60 days or less may be valued at
amortized cost. The Fund may use an independent pricing service to value the
Portfolios' assets at such times and to such extent as Bernstein deems
appropriate.
If quotations are not readily available or if the values have been
materially affected by events occurring after the closing of a foreign market,
securities or other assets may be valued by appraisal at their fair value as
determined in good faith under procedures established by the Fund's Board of
Directors. In the latter situation, prices used by the Fund to calculate the
Portfolios' net asset value may differ from quoted or published prices for the
underlying securities.
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 Bernstein 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 Bernstein becomes aware of them, whichever is
later.
Each Portfolio's NAV is determined as of the close of regular trading of
the New York Stock Exchange (normally 4:00 p.m. New York time) 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, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day.
To the extent that the assets of either of the Portfolios are traded in
other markets (such as a foreign market) on days when the New York Stock
Exchange is closed, the net asset value of the respective Portfolio may be
affected on days when you will not be able to purchase or redeem the Portfolio's
shares.
Your purchase price for shares of the Portfolios will be the NAV next
determined after receipt of a purchase order in good form. When you sell shares
of the Portfolios, you will receive the NAV next determined after receipt of the
order to sell in proper form.
Participating in your Plan
The Portfolios are 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 any of the Portfolios 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 Portfolio shares are
effective when received in "good form" by Bernstein or its agents. "Good form"
means that complete information on the
16
<PAGE>
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.
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 back 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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Portfolios intend to declare dividends daily and to pay them monthly.
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.
If you utilize any Portfolio as an investment option in an
employer-sponsored retirement or savings plan, dividend and capital-gains
distributions from any Portfolio 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 adviser regarding the
tax consequences of your participation in the plan and of any plan contributions
or withdrawals.
Your dividends and capital-gains distributions, if any, will be
automatically reinvested in shares of the Portfolios. The number of shares you
receive is based upon the net asset value of the Portfolios on the record date.
Such reinvestments automatically occur on the payment date of such dividends and
capital-gains distributions. In the alternative, you may elect in writing
received by us not less than 5 business days prior to the record date to receive
dividends and/or capital-gains distributions in cash. You will not receive
interest on uncashed dividend, distribution or redemption checks.
Dividends and interest received by the Portfolios 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 a Portfolio.
17
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
financial performance of the Portfolios of the Fund for the past 5 years.
Certain information reflects financial results for a single Portfolio share. The
total returns in the table represent the rate that an investor would have earned
(or lost) on an investment in the Portfolio (assuming reinvestment of all
dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the Fund's financial
statements, is included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
BERNSTEIN INTERMEDIATE DURATION PORTFOLIO
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.49 $13.38 $13.08 $13.30 $12.54
------ ------ ------ ------ ------
Income from investment operations:
Investment income, net 0.77 0.73 0.75 0.80 0.78
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies (0.63) 0.37 0.35 (0.14) 0.77
------ ------ ------ ------ ------
Total from investment operations 0.14 1.10 1.10 0.66 1.55
------ ------ ------ ------ ------
Less distributions:
Dividends from taxable net investment income (0.76) (0.80) (0.80) (0.80) (0.76)
Dividends from tax-exempt net
investment income 0 0 0 0 0
Distributions from net realized gains (0.10) (0.17) 0 (0.08) 0
Distributions in excess of net investment
income due to timing differences (0.03) (0.02) 0 0 (0.03)
Distributions in excess of net realized
gains due to timing differences (0.07) 0 0 0 0
------ ------ ------ ------ ------
Total distributions (0.96) (0.99) (0.80) (0.88) (0.79)
------ ------ ------ ------ ------
Portfolio transaction fee 0 0 0 0 0
------ ------ ------ ------ ------
Net asset value, end of period $12.67 $13.49 $13.38 $13.08 $13.30
====== ====== ====== ====== ======
Total return 1.04% 8.59% 8.66% 5.05% 12.82%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $2,674,408 $2,541,549 $2,058,220 $1,451,776 $1,142,768
Average net assets (000 omitted) $2,601,959 $2,303,250 $1,745,554 $1,310,208 $957,247
Ratio of expenses to average net assets 0.60% 0.60% 0.62% 0.63% 0.64%
Ratio of net investment income to average
net assets 5.89% 5.41% 5.61% 5.99% 6.11%
Portfolio turnover rate 229.75% 233.08% 238.04% 141.04% 212.40%
<CAPTION>
BERNSTEIN SHORT DURATION PLUS PORTFOLIO
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.53 $12.53 $12.48 $12.49 $12.32
------ ------ ------ ------ ------
Income from investment operations:
Investment income, net 0.67 0.65 0.67 0.69 0.70
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies (0.20) 0.09 0.08 (0.01) 0.18
------ ------ ------ ------ ------
Total from investment operations 0.47 0.74 0.75 0.68 0.88
------ ------ ------ ------ ------
Less distributions:
Dividends from taxable net investment income (0.67) (0.72) (0.70) (0.69) (0.69)
Dividends from tax-exempt net
investment income 0 0 0 0 0
Distributions from net realized gains 0 0 0 0 0
Distributions in excess of net investment
income due to timing differences 0 (0.02) 0 0 (0.02)
Distributions in excess of net realized
gains due to timing differences 0 0 0 0 0
------ ------ ------ ------ ------
Total distributions (0.67) (0.74) (0.70) (0.69) (0.71)
------ ------ ------ ------ ------
Portfolio transaction fee 0 0 0 0 0
------ ------ ------ ------ ------
Net asset value, end of period $12.33 $12.53 $12.53 $12.48 $12.49
====== ====== ====== ====== ======
Total return 3.82% 6.10% 6.21% 5.54% 7.36%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $557,016 $595,087 $612,744 $538,248 $534,462
Average net assets (000 omitted) $569,298 $591,866 $583,003 $532,094 $536,042
Ratio of expenses to average net assets 0.65% 0.64% 0.65% 0.65% 0.65%
Ratio of net investment income to average
net assets 5.36% 5.24% 5.38% 5.47% 5.69%
Portfolio turnover rate 95.60% 71.40% 118.58% 169.96% 61.03%
</TABLE>
18
<PAGE>
Sanford C. Bernstein Fund, Inc.
Bernstein Short Duration Plus Portfolio
Bernstein Intermediate Duration Portfolio
Important: 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 two
(2) of the twelve (12) Portfolios of the Sanford C. Bernstein Fund, Inc. (the
"Fund")--the Bernstein Short Duration Plus Portfolio and the Bernstein
Intermediate Duration Portfolio. A Prospectus containing information on the 12
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 below.
A Statement of Additional Information (SAI) includes further information
about the Fund and its investment policies. The SAI has been filed with the
Securities and Exchange Commission (SEC) and is incorporated by reference into
this prospectus. This means that the SAI is legally considered a part of this
prospectus even though it is not physically contained within this prospectus.
Further information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. To
obtain free copies of any of these documents or make inquiries about the Fund,
call (212) 756-4097 collect or write to us at: 767 Fifth Avenue, New York, NY
10153-0185.
You can also obtain copies from the SEC's internet site at http://www.sec.gov,
by visiting the SEC's Public Reference Room in Washington, D.C. or by sending
your request and a duplicating fee to the SEC's Public Reference Section,
Washington, D.C. 20549-6009. You can call 1-800-SEC-0330 for information on the
operation of the Public Reference Room.
Sanford C. Bernstein Fund, Inc., SEC file number: 811 - 5555
19
<PAGE>
SANFORD C. BERNSTEIN FUND, INC.
CROSS-REFERENCE SHEET
(as required by Rule 481(a))
N-1A Item No.
- -------------
<TABLE>
<CAPTION>
Location in International
Institutional Services
Part A-3 Prospectus
- -------- ----------
<S> <C>
Item 1. Front and Back Cover Pages Front and Back
Cover Pages
Item 2. Risk/Return Summary: Investment Investment Objectives, Strategies,
Risks and Performance Risks, Performance and Fees
Item 3. Risk/Return Summary: Fee Table Investment Objectives, Strategies,
Risks, Performance and Fees
Item 4. Investment Objectives, Principal Additional Investment Information, Special
Investment Strategies and Related Investment Techniques and Related Risks
Risks
Item 5. Management's Discussion of
Fund Performance Not Applicable
Item 6. Management, Organization and
Capital Structure Fund Management
Item 7. Shareholder Information Shareholder Information
Item 8. Distribution Agreements Not Applicable
Item 9. Financial Highlights Information Financial Highlights
</TABLE>
5
<PAGE>
PROSPECTUS
SANFORD C. BERNSTEIN FUND, INC.
BERNSTEIN INTERNATIONAL VALUE PORTFOLIO II
February 1, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
2
<PAGE>
TABLE OF CONTENTS
Investment Objective, Strategies, Risks, Performance and Fees................___
Making Investment Decisions for the Portfolio................................___
Additional Investment Information, Special Investment Techniques
and Related Risks......................................................___
Fund Management..............................................................___
Shareholder Information......................................................___
Pricing of Portfolio Shares............................................___
Participating in Your Plan...................................................
Dividends, Distributions and Taxes...........................................___
Financial Highlights.........................................................___
3
<PAGE>
INTRODUCTION
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 one
(1) of the twelve (12) Portfolios of the Sanford C. Bernstein Fund, Inc. (the
"Fund")--the Bernstein International Value Portfolio II. A prospectus containing
information on the 12 Fund Portfolios and on how to open a personal account is
available for individual investors, and may be obtained by writing to the
address or calling (collect) the telephone number on the back cover of this
prospectus.
Sanford C. Bernstein & Co., Inc. is the investment manager of the Fund.
This prospectus refers to Sanford C. Bernstein & Co., Inc. as "Bernstein" or
"we" and shareholders of the Portfolio as "you."
Before investing in the Portfolio, you should consider the risks. The
share prices of the Portfolio will fluctuate and you may lose money when you
sell your shares. This risk is heightened because investments in international
equities can experience high volatility in share prices. There is no guarantee
that the Portfolio will achieve its investment objective. In addition, the
investments made by a Portfolio may underperform the market generally or other
mutual funds with a similar investment objective. Also, the issuers in which the
Portfolio invests may be affected by the year 2000 problem and the Portfolio's
returns could be adversely affected as a result (see discussion on page __).
These and other risks are discussed in more detail in the pages that
follow and in the Fund's Statement of Additional Information (SAI) which is
available without charge (see back cover).
INVESTMENT OBJECTIVE
The Bernstein International Value Portfolio II seeks to provide long-term
capital growth through investments in equity securities of established foreign
companies comprising the EAFE index, plus Canada. The Portfolio is managed
without regard to tax considerations.
INVESTMENT STRATEGIES
The Portfolio will invest primarily in equity securities 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, the Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom.
The Portfolio will invest primarily in common stocks but may also invest
in preferred stocks, warrants and convertible securities of foreign issuers,
including sponsored or unsponsored American Depositary Receipts (ADRs) and
Global Depositary Receipts (GDRs).
4
<PAGE>
In order to hedge a portion of the currency risk, the Portfolio will
generally invest in forward foreign currency contracts with terms of up to one
year. The Portfolio will also purchase foreign currency for immediate settlement
in order to purchase foreign securities.
In addition, the Portfolio will generally invest a portion of its
uncommitted cash balances in futures contracts to expose that portion of the
Portfolio to the equity markets.
The Portfolio may also make investments in less-developed or emerging
equity markets.
The Portfolio is managed without regard to potential tax consequences to
the shareholder. It is particularly appropriate for investors, such as pension
plans and IRAs, not subject to current federal income taxation.
INVESTMENT RISKS
General Risks of Investing in the Portfolio: The share prices of the
Portfolio will fluctuate and you may lose money when you sell your shares. There
is no guarantee that the Portfolio will achieve its investment objective.
Risks of Investing in Foreign Securities: Investments in foreign
securities entail significant risks in addition to those customarily associated
with investing in U.S. equities. These risks are heightened with respect to
investments in emerging-market countries where there is an even greater amount
of economic, political and social instability.
Market risk: The Portfolio is subject to market risk, which is the risk
that stock prices in general will decline over short or even extended periods.
In foreign markets there is often a lower degree of market volume and liquidity
than in U.S. markets, and this may result in greater price volatility.
Furthermore, since the composition of the Portfolio will differ from that of
market indexes, its performance generally will not mirror the returns provided
by a specific market index.
Some foreign securities may be listed on exchanges that are open on days
(such as U.S. holidays and Saturdays) when the Portfolio does not calculate a
net asset value. As a result, the net asset value of the Portfolio may be
significantly affected by trading on days when shareholders cannot make
transactions.
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 long periods of time. When a foreign currency rises against the
U.S. dollar, your return on foreign stocks will rise. When a foreign currency
declines in value in relation to the U.S. dollar, your return on foreign stocks
will decline.
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. Foreign governments may also intervene in currency
markets or interpose registration/approval processes, which may adversely affect
the Portfolio and your investment.
5
<PAGE>
Although forward contracts will be used primarily to protect the Portfolio
from adverse currency movements, they involve the risk that anticipated currency
movements will not be accurately predicted and the Portfolio's total return
could be adversely affected as a result.
Futures risk: Futures contracts can be highly volatile and could reduce
the Portfolio's total returns. The Portfolio's potential losses from the use of
futures could extend beyond its initial investment.
Other foreign investment risks: Other risks include:
o the availability of less public information on issuers of securities
o less governmental supervision of brokers and issuers of securities
o lack of uniform accounting, auditing and financial reporting standards
o settlement practices that differ from those in the U.S. and may result in
delays or may not fully protect the Portfolios against loss or theft of
assets
o the possibility of nationalization of a company or industry and
expropriation or confiscatory taxation
o the imposition of foreign taxes
o high inflation and rapid fluctuations in inflation rates
o less-developed legal structures governing private or foreign investment
Higher Costs Associated With Foreign Investing. Investments in foreign
securities will also result in generally higher expenses due to:
o the costs of currency exchange
o higher brokerage commissions in certain foreign markets
o the expense of maintaining securities with foreign custodians
Additional risks of investing in emerging-market countries. Investing in
emerging-market countries entails greater economic, political and social
instability. In addition, there is heightened volatility because the securities
markets in these countries are substantially smaller, less-developed, less
liquid and more volatile than the securities markets of developed countries.
INVESTMENT PERFORMANCE
Effective April 30, 1999, the Bernstein International Value Portfolio II
was split from the Bernstein International Value Portfolio, now called the
Bernstein Tax-Managed International Value Portfolio. The Fund obtained an order
from the SEC that permitted tax-exempt shareholders to redeem their shares of
the Bernstein International Value Portfolio in-kind and invest these assets in a
new Portfolio, the Bernstein International Value Portfolio II. The taxable
shareholders remained in the Bernstein International Value Portfolio, which is
now known as the Bernstein Tax-Managed International Value Portfolio. The
returns of the Bernstein Tax-Managed International Value Portfolio show the
performance history of the Bernstein International Value Portfolio prior to the
portfolio division. Although the performance history of the Bernstein
International Value Portfolio II begins on the date of the portfolio division,
the returns of the Bernstein International Value Portfolio prior to the
portfolio division are relevant to any Bernstein International Value Portfolio
II investor.
6
<PAGE>
Per the above discussion, the bar chart below shows the Bernstein
Tax-Managed International Value Portfolio's performance for each calendar year
since inception. The table below shows how the Fund's average annual returns
differ from those of a broad-based securities market index. Both the bar chart
and the table indicate the volatility of an investment in the Portfolio and give
some indication of the risk. The Portfolio's past performance is no guarantee of
how it will perform in the future.
Bar Chart
[Returns for calendar year 1999 to be added by amendment in January,
2000.]
Calendar Year Total Returns
Tax-Managed International Value
Portfolio
'93 34.52
'94 3.83
'95 8.07
'96 17.46
'97 9.27
'98 10.95
Quarter Total
Ended Return
Best Quarter 3/31/98 18.62%
Worst Quarter 9/30/98 -17.72%
Average Annual Total Returns
[Table depicting average annual total returns for the most recently ended
1 and 5 calendar year periods and since inception compared to its index to
be added by amendment in January 2000.]
Fees and Expenses
The following table describes the fees and expenses you would pay if
you buy and hold shares of the Portfolio.
-------------------------------------------------------------------
Bernstein
International
Value
Portfolio II*
-------------------------------------------------------------------
Shareholder Fees
Sales Charge (Load) Imposed on
Purchases None
Sales Charge (Load) Imposed on
Reinvested Dividends None
Deferred Sales Charge (Load) None
Redemption Fees None
Exchange Fees None
Maximum Account Fee $100 (1)
-------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses that are deducted from
Portfolio assets)
Management Fees 0.94%
Distribution (12b-1) Fees None
Other Expenses
Shareholder Servicing and
Administrative Fees 0.25%
All Other Expenses 0.07%
-----
Total Other Expenses (2) 0.32%
Total Annual Portfolio Operating
Expenses 1.26%
-------------------------------------------------------------------
* Annualized
(1) Certain shareholders may be charged an annual account maintenance fee
of $100 by Bernstein (not the Fund). The fee applies to any shareholder who has
Portfolio shares in an account at Bernstein that has assets of less than
$400,000. Bernstein does not charge this fee to accounts in discretionary
relationships commenced after October 1, 1998 or accounts that are in a group of
related accounts as defined by Bernstein with combined assets of $400,000 or
more. This fee is deducted from cash held in the account or, if insufficient
cash is maintained in that account, by selling securities. 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) Other expenses for the Bernstein International Value Portfolio II are
based on estimated amounts for the current fiscal year.
Example
This Example is intended to help you compare the cost of investing
in the Portfolios with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolio for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Portfolio's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
- --------------------------------------------------------------------------
Bernstein
International Value
Portfolio II
- --------------------------------------------------------------------------
1 Yr. 128
3 Yrs. (cum.) 400
5 Yrs. (cum.) N/A
10 Yrs. (cum.) N/A
- --------------------------------------------------------------------------
MAKING INVESTMENT DECISIONS FOR THE PORTFOLIO
We believe opportunity in the 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. 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.
To minimize the emotional aspects of decision-making under uncertainty, we
strive to apply our valuation tools in a consistent and disciplined fashion.
Bernstein research is applied within a value-oriented framework. Investment
decision-making is disciplined, centralized and highly systematic.
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 invests in underpriced stocks--those
with low price/earnings ratios, low price/book-value ratios and high dividend
yields. Investment decision-making for the Bernstein International Value
7
<PAGE>
Portfolio II is systematic and centralized, pursued by an investment policy
group working in concert, and guided by the findings of our global equity
research staff.
ADDITIONAL INVESTMENT INFORMATION, SPECIAL INVESTMENT
TECHNIQUES AND RELATED RISKS
This section of the prospectus contains detailed information about the
instruments in which the Bernstein International Value Portfolio II may invest,
special investment techniques that Bernstein may employ and information about
the related risks. The limitations and restrictions discussed below supplement
those discussed earlier in this prospectus.
Portfolio holdings are detailed in the Fund's financial statements, which
are sent to Fund shareholders twice a year.
Additional Investments, Strategies and Practices Permitted; Details in
Fund's SAI: The Portfolio may invest in other securities, use other strategies
and engage in other investment practices. Detailed information about these
securities, strategies and practices is contained in the Fund's Statement of
Additional Information (SAI), which is available upon request at no cost (see
the back cover of this prospectus).
Investment Policies and Limitations Apply at Time of Purchase Only: Unless
otherwise specified, the policies and limitations discussed in this prospectus
apply at the time an instrument is purchased. Thus, a change of circumstances
will not require the sale of an investment if it was otherwise properly
purchased.
Changing the Investment Objectives by the Portfolio: All investment
objectives of the International Value Portfolio II are not fundamental and thus
may be changed without shareholder approval. Bernstein will provide shareholders
with prior written notice before implementing any change to the investment
objectives of this Portfolio.
Portfolio Turnover: This Portfolio generally buys portfolio securities
with the intention of holding them for investment. However, when market
conditions or other circumstances warrant, securities may be purchased and sold
without regard to the length of time held. A high turnover ratio may increase
transaction costs and may affect taxes paid by shareholders to the extent
short-term or long-term gains are distributed.
Illiquid Securities: Securities that are not readily marketable may be
illiquid securities. The International Value Portfolio II may invest as much as
15% of its net assets in illiquid securities.
Private placement securities are usually illiquid securities. These
securities are exempt from registration with the Securities and Exchange
Commission and may be sold only in privately negotiated transactions.
Temporary defensive positions: Under exceptional conditions abroad or when
Bernstein believes that economic or market conditions warrant, this Portfolio
may temporarily, for defensive purposes, invest part or all of its portfolio of
assets in U.S. government obligations or
8
<PAGE>
investment-grade debt or equity securities of U.S. issuers. When a Portfolio is
investing for temporary defensive purposes, it is not pursuing its investment
goal.
Special Investment Techniques
In seeking to achieve its investment objectives, the Portfolio may invest
in higher risk securities or use special investment techniques. These techniques
may be used:
o to hedge various market risks (such as interest rates, currency
exchange rates and broad or security-specific changes in the prices
of securities),
o to manage the effective maturity or duration of fixed-income
securities,
o to exploit mispricings in the securities markets, or
o as an alternative to activities in the underlying cash markets.
Below is a description of some of these special investment techniques. For
additional information on special investment techniques, see the Fund's SAI (see
the back cover of this prospectus).
Foreign Currency Transactions
The Bernstein International Value Portfolio II may enter into foreign
currency exchange contracts on either a spot (i.e., cash) or forward basis. Spot
contracts are entered into at the rate then prevailing in the currency exchange
market. Forward contracts obligate the contracting parties to purchase or sell a
specific currency at a specified future date at a specified price. The Portfolio
will generally not enter into a forward contract with a term greater than one
year.
Although forward contracts will be used primarily to protect the Portfolio
from adverse currency movements, they involve the risk that Bernstein will not
accurately predict currency movements. As a result, the Portfolio's total return
could be adversely affected.
Under certain circumstances, the Bernstein International Value Portfolio
II may commit a substantial portion or the entire value of its portfolio to the
consummation of these contracts. Bernstein will consider the effect that a
substantial commitment of assets to forward contracts would have on the
investment program of this Portfolio and the flexibility of this Portfolio to
purchase additional securities.
Futures Contracts and Options
The Portfolio may also enter into contracts involving the right or
obligation to deliver or receive assets or money depending on the performance of
one or more assets or an economic index. These include futures contracts with
respect to bonds, Eurodeposits, securities indexes, currencies, options or other
derivatives or financial instruments.
In addition, the Portfolio may purchase and sell put and call options on
securities, securities indexes, foreign currencies, futures contracts or other
derivatives or financial instruments. The Portfolio will write only covered
options.
The Portfolio 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
9
<PAGE>
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.
The Portfolio will not 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 the
Portfolio's total returns. Attempts by Bernstein to use these investments for
hedging or other purposes may not be successful. The Portfolio's potential
losses from the use of futures and options extends beyond its initial investment
in such contracts and are potentially unlimited. Also, losses from futures and
options could be significant if the 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, the
Portfolio may invest in hybrid instruments (a type of potentially high risk
derivative) that have the characteristics of futures, options, currencies and
securities. These 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. They may also be debt
instruments with interest or principal payments determined by reference to
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. The Bernstein
International Value Portfolio II will not invest more than 20% of its total
assets in these investments.
Swap agreements obligate one party to make payments to the other party
based on the change in the market value of an index or asset. In return, the
other party agrees to make payments to the first party based on the return of
another index or asset. Swap agreements entail the risk that a party will
default on its payment obligations to the Portfolio. Swap agreements also bear
the risk that the Portfolio will not be able to meet its obligation to the
counterparty.
The Portfolio may enter into interest-rate or foreign currency swaps and
purchase and sell interest-rate caps and floors. The Portfolio will not use
swaps to leverage the Portfolio. The 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 Portfolio
expects to enter into these transactions for a variety of reasons. The Portfolio
may attempt 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. The Portfolio may also enter these transactions as a duration
management technique or to protect against any increase in the price of
securities that the Portfolio anticipates purchasing at a later date.
10
<PAGE>
Interest-rate swaps involve the exchange by the 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 Portfolio will enter
interest-rate swaps only on a net basis (i.e., the two payment streams are
netted out) with the Portfolio receiving or paying, as the case may be, only the
net amount of the two payments.
Lending Portfolio Securities
The Portfolio may lend portfolio securities. The Bernstein International
Value Portfolio II may lend up to one-third of its total assets. Loans may be
made to qualified broker-dealers, banks or other financial institutions.
By lending its portfolio securities, the Portfolio attempts to increase
its income through the receipt of fees charged in connection with the loan and,
when cash collateral is given to secure the loan, income from investment of the
cash collateral in time deposits and repurchase agreements. Loans of portfolio
securities are marked to the market daily and secured by collateral consisting
of certificates of deposit and other cash instruments or U.S. government and
agency securities worth no less than the securities loaned.
We believe 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 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 Portfolio may purchase securities on a "when-issued" or
"delayed-delivery" basis, where a security purchased by the Portfolio is
delivered at a later date, usually within three months.
The market value of the security at delivery may be more or less than the
purchase price. The Portfolio must segregate liquid assets in accounts in an
amount at least equal to its purchase commitments; the Portfolio must also
segregate securities sold on a delayed-delivery basis.
Future Developments
The Portfolio expects 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 we develop 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
restrictions and legally permissible for the Portfolio, the Manager may utilize
the strategies. These opportunities may involve risks that differ from those
described above.
11
<PAGE>
ADDITIONAL RISKS
Year 2000 Risks
Like other mutual funds and financial and business operations around the
world, the Portfolio could be adversely affected if the computer software, and
to a lesser extent, hardware used by Bernstein and other service providers are
not able to process and calculate date-related information and data before,
during, and after January 1, 2000. This is commonly known as the "Year 2000
Issue." We are taking steps that we believe are reasonably designed to address
the Year 2000 Issue with respect to the computer software and hardware that we
use and to obtain satisfactory assurances that comparable steps are being taken
by the Fund's other major service providers. However, there can be no assurance
that these steps will be sufficient to avoid any adverse impact on the
Portfolio. In addition, companies or governmental entities in which the
Portfolio invests could be affected by the Year 2000 Issue, but at this time the
Fund cannot predict the degree of impact. To the extent the impact on the
Portfolio holding is negative, the Portfolio's returns could be adversely
affected.
FUND MANAGEMENT
The investment manager of the Fund is Sanford C. Bernstein & Co., Inc., a
New York corporation with principal offices at 767 Fifth Avenue, New York, New
York 10153. Bernstein, a registered investment advisor, manages as of September
30, 1999 some $85 billion in assets 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.
Bernstein provides the Portfolios of the Fund with investment management,
shareholder servicing and administration and distribution services.
Bernstein's Investment Policy Groups are comprised of Bernstein employees
and make all investment decisions for the Portfolios. No one person is primarily
responsible for making recommendations to the Investment Policy Groups.
Investment Management Fees
Bernstein charges the Portfolio a management fee at an annual rate of
1.00% of the Portfolio's average daily net assets up to but not exceeding $1
billion and an annual rate of 0.90 of 1% of average daily net assets that exceed
$1 billion.
Bernstein acts as the Distributor of the Portfolio's shares free of
charge. Bernstein also acts as the Fund's Shareholder Servicing Agent. For these
services, Bernstein charges the Portfolio an annual fee of 0.25% of the
Portfolio's average daily net assets.
SHAREHOLDER INFORMATION
12
<PAGE>
Pricing of Portfolio Shares
The share price for the Portfolio is based on the Portfolio's net asset
value ("NAV"). To calculate the NAV, a Portfolio's net worth (assets less
liabilities) is divided by the number of outstanding shares.
Regarding Portfolio securities for which readily available market
quotations exist, the value is based on the most recent sale price, 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 Bernstein.
Debt instruments with remaining maturities of 60 days or less may be valued at
amortized cost. The Fund may use an independent pricing service to value the
Portfolio's assets at such times and to such extent as Bernstein deems
appropriate.
If quotations are not readily available or if the values have been
materially affected by events occurring after the closing of a foreign market,
securities or other assets may be valued by appraisal at their fair value as
determined in good faith under procedures established by the Fund's Board of
Directors. In the latter situation, prices used by the Fund to calculate the
Portfolio's net asset value may differ from quoted or published prices for the
underlying securities.
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 Bernstein 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 Bernstein becomes aware of them, whichever is
later.
The Portfolio's NAV is determined as of the close of regular trading of
the New York Stock Exchange (normally 4:00 p.m. New York time) 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, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day.
To the extent that the assets of the Portfolio are traded in other markets
(such as a foreign market) on days when the New York Stock Exchange is closed,
the net asset value of the Portfolio may be affected on days when you will not
be able to purchase or redeem the Portfolio's shares.
Your purchase price for shares of the Portfolio will be the NAV next
determined after receipt of a purchase order in good form. When you sell shares
of the Portfolio, you will receive the NAV next determined after receipt of the
order to sell in proper form.
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.
13
<PAGE>
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 form" by Bernstein or its agents. "Good form"
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.
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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Portfolio will distribute substantially all of its net investment
income (interest and dividends less expenses) and realized net capital gains
from the sale of its securities, if any, to its shareholders.
The Portfolio intends to declare and pay dividends at least annually,
generally in December. Capital-gains distributions are made at least annually,
generally in December. The Portfolio's distribution and dividends are paid in
additional shares of the Portfolio based on the Portfolio's net asset value at
the close of business on the record date. You will be taxed on dividends and
distributions generally in the year you receive them except that dividends
declared in October, November and December and paid prior to February 1 of the
following year are taxable to you in the year they are declared.
If you purchase shares shortly before the record date of a dividend or a
capital-gains distribution of the Portfolio, the share price will include the
amount of the distribution. On the record date of the distribution, the net
asset value of the Portfolios shares will drop by the amount of the
distribution.
If you utilize the Portfolio as an investment option in an
employer-sponsored retirement or savings plan, dividend and capital-gains
distributions from the Portfolio will generally not be subject to current
taxation, but will accumulate on a tax-deferred basis. In general,
employer-
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<PAGE>
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 adviser regarding the tax
consequences of your participation in the plan and of any plan contributions or
withdrawals.
Dividends and interest received by the Portfolio may be subject to foreign
tax and withholding. Some emerging-market countries may impose taxes on capital
gains earned by a Portfolio in that country. However, tax conventions between
certain countries and the United States may reduce or eliminate such taxes. You
may be entitled to claim foreign tax credits or deductions on your federal
income tax returns with respect to such taxes paid by the Portfolio.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
financial performance of the Portfolios of the Fund since inception. Certain
information reflects financial results for a single Portfolio share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Portfolio (assuming reinvestment of all dividends
and distributions). This information has been audited by PricewaterhouseCoopers
LLP, whose report, along with the Fund's financial statements, is included in
the annual report, which is available upon request.
BERNSTEIN INTERNATIONAL VALUE PORTFOLIO II
YEAR ENDED
9/30/99 (a)
- ---------------------------------------------------------------------
Net asset value, beginning of period $19.43
------
Income from investment operations:
Investment income, net 0.19
Net realized and unrealized gain (loss) on
investments, futures and foreign currencies 0.49
------
Total from investment operations 0.68
------
Less distributions:
Dividends from taxable net investment income 0
Dividends from tax-exempt net
investment income 0
Distributions from net realized gains 0
Distributions in excess of net investment
income due to timing differences 0
Distributions in excess of net realized
gains due to timing differences 0
------
Total distributions 0
------
Portfolio transaction fee 0
------
Net asset value, end of period $20.11
======
Total return 3.50%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $2,459,123
Average net assets (000 omitted) $2,397,807
Ratio of expenses to average net assets 1.26%*
Ratio of net investment income to average
net assets 2.23%*
Portfolio turnover rate 9.34%
*Annualized
(a) Commenced operations April 30, 1999
15
<PAGE>
Sanford C. Bernstein Fund, Inc.
International Value Portfolio II
Important: 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 one
(1) of the twelve (12) Portfolios of the Sanford C. Bernstein Fund, Inc. (the
"Fund")--the Bernstein International Value Portfolio II. A Prospectus containing
information on the 12 Fund Portfolios and on how to open a personal account is
available for individual investors, and may be obtained by writing to the
address or calling the telephone number below.
The Statement of Additional Information (SAI) includes further information
about the Bernstein International Value Portfolio II and its investment
policies. The SAI has been filed with the Securities and Exchange Commission
(SEC) and is incorporated by reference into this prospectus. This means that the
SAI is legally considered a part of this prospectus even though it is not
physically contained within this prospectus. Further information about the
Fund's investments is available in the Fund's annual and semi-annual reports to
shareholders. In the Fund's annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year. To obtain free copies of any of
these documents or make inquiries about the Fund, call (212) 756-4097 collect or
write to us at: 767 Fifth Avenue, New York, NY 10153-0185.
You can also obtain copies from the SEC's internet site at http://www.sec.gov,
by visiting the SEC's Public Reference Room in Washington, D.C. or by sending
your request and a duplicating fee to the SEC's Public Reference Section,
Washington, D.C. 20549-6009. You can call 1-800-SEC-0330 for information on the
operation of the Public Reference Room.
Sanford C. Bernstein Fund, Inc., SEC file number: 811 - 5555
16
<PAGE>
Location in Statement of
of Additional Information
-------------------------
Part B
- ------
Item 10. Cover Page and Table Cover Page and Table
Of Contents Of Contents
Item 11. Fund History Fund History
Item 12. Description of the Fund Investment Strategies
Its Investments and Risks and Related Risks
Item 13. Management of the Fund Manager and Distributor
Item 14. Control Persons and Directors and Officers
Principal Holders of and Principal Holders of
Securities Securities
Item 15. Investment Advisory and Manager and Distributor
Other Services
Item 16. Brokerage Allocation and Portfolio Transactions
Other Practices and Brokerage
Item 17. Capital Stock and Other Not Applicable
Practices
Item 18. Purchase, Redemption, and Purchase and Redemption
Pricing of Shares of Shares
Item 19. Taxation of the Fund. Taxes
Item 20. Underwriters Manager and Distributor
Item 21. Calculation of Performance Performance
Data
Item 22. Financial Statements Custodian, Transfer
Agent, Independent
Accountants and
Financial Statements
6
<PAGE>
SANFORD C. BERNSTEIN FUND, INC.
767 Fifth Avenue
New York, New York 10153
(212) 756-4097
Statement of Additional Information
February 1, 2000
This Statement of Additional Information ("SAI") relates to the
following 12 series of shares of the Sanford C. Bernstein Fund, Inc. (the
"Fund"). Each series is referred to as a "Portfolio" in this SAI.
BERNSTEIN FIXED-INCOME PORTFOLIOS
Bernstein Government Short Duration Bernstein Intermediate Duration Portfolio
Bernstein Short Duration Plus
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 EQUITY PORTFOLIOS
Berrnstein Tax-Managed International Value Bernstein Emerging Markets Value
Bernstein International Value II
This SAI is not a prospectus, and should be read in conjunction with
the Fund's Prospectus, dated February 1, 2000, which may be obtained by writing
to or telephoning (collect) the Fund at the above address or telephone number.
Certain financial statements from the Fund's annual report dated
September 30, 1999 are incorporated by reference into this SAI.
<PAGE>
B-2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Cross Reference Cross Reference Cross Reference
to Page in to Page in the to Page in the
Prospectus Prospectus Prospectus
Page Relating to all 12 Relating only to Relating only to
Fund Portfolios the International the Intermediate
Value Portfolio II Duration and
Short Duration
Plus Portfolios
<S> <C> <C> <C> <C>
Fund History
Investment Strategies and
Related Risks
Fixed-Income Portfolios
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
Description of Shares
Appendix
</TABLE>
<PAGE>
B-3
FUND HISTORY
The Fund was incorporated under the laws of the state of Maryland on
May 4, 1988 as an open-end management investment company. Each Portfolio of the
Fund is diversified except for the Bernstein New York Municipal Portfolio,
Bernstein Short Duration New York Municipal Portfolio, Bernstein California
Municipal Portfolio and the Bernstein Short Duration California Municipal
Portfolio.
INVESTMENT STRATEGIES AND RELATED RISKS
For a summary description of the objectives, principal investment
strategies and policies of each Portfolio, see the section of the Fund's
Prospectus entitled "Investment Objectives, Strategies, Risks, Performance and
Fees." The following information is provided for those investors desiring
information in addition to that contained in the Prospectus.
FIXED-INCOME PORTFOLIOS
General Investment Policies --- All Fixed-Income Portfolios
Each Fixed-Income Portfolio evaluates a wide variety of instruments and
issuers, utilizing a variety of internally developed, quantitatively based
valuation techniques. Except as otherwise specified, each of the Fixed-Income
Portfolios may invest in any of the securities described in the Prospectus and
this SAI. In addition, each of the Fixed-Income Portfolios may use any of the
special investment techniques, some of which are commonly called derivatives,
described in the Prospectus and this SAI 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 IBCA, 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
<PAGE>
B-4
rated by other ratings agencies or are not rated but in either case 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 rated by other ratings
agencies or not rated but in either case 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.
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 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.
Specific Investment Policies of Each Fixed-Income Portfolio
The Short Duration Taxable Portfolios
<PAGE>
B-5
The Bernstein Government Short Duration Portfolio. 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. Most 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-1 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.
The Bernstein Intermediate Duration Portfolio. 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.
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 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") invests 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
<PAGE>
B-6
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 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 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 August 24, 1999. The Annual Information Statement is
furnished by the State of New York and includes official information regarding
the State for investors, bondholders and other market participants.
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. 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.
In the calendar years 1987 through 1998, 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; since then it has been higher. On an average annual
basis, the employment growth rate is expected to be somewhat lower than in 1998.
<PAGE>
B-7
According to data published by the US Bureau of Economic Analysis, personal
income in the State has risen more slowly than the national average since 1988.
Wage growth is expected to be slower than in the previous year as the recent
robust growth in bonus payments moderates.
Despite recent budgetary surpluses recorded by the State, actions
affecting the level of receipts and disbursements, the relative strength of the
State and regional economy, and actions by the federal government could impact
projected structural budget gaps for the State. These gaps would result from a
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 Division of the Budget (DOB) believes that its projections of
receipts and disbursements relating to the current State Financial Plan, and the
assumptions on which they are based, are reasonable. Actual results, however,
could differ materially and adversely from these projections.
The State Financial Plan is based upon forecasts of national and State
economic activity developed through both internal analysis and review of State
and national economic forecasts prepared by commercial forecasting services and
other public and private forecasters. Economic forecasts have frequently failed
to predict accurately the timing and magnitude of changes in the national and
the State economies. Many uncertainties exist in forecasts of both the national
and State economies, including consumer attitudes toward spending, the extent of
corporate and governmental restructuring, the condition of the financial sector,
federal fiscal and monetary policies, the level of interest rates, and the
condition of the world economy, which could have an adverse effect on the State.
There can be no assurance that the State economy will not experience results in
the current fiscal year that are worse than predicted, with corresponding
material and adverse effects on the State's projections of receipts and
disbursements.
An additional risk to the State Financial Plan arises from the
potential impact of certain litigation and of federal disallowances now pending
against the State, which could adversely affect the State's projections of
receipts and disbursements.
Additional risks to the Financial Plan arise out of potential actions
at the federal level. Potential changes to federal tax law currently under
discussion as part of the federal government's efforts to enact a multi-year tax
reduction package could alter the definitions of income on which certain State
taxes rely. Certain proposals, if enacted, could have a significant impact on
State revenues in the future.
The State adopted the debt service component of the State budget for
the 1999-2000 fiscal year on March 31, 1999 and the remainder of the budget on
August 4, 1999. In 1999-2000, General Fund disbursements, including transfers
to support capital projects, debt service and other funds, are estimated
<PAGE>
B-8
at $37.36 billion, an increase of $868 million or 2.38 percent over 1998-99.
Projected spending under the 1999-2000 enacted budget is $215 million above the
Governor's Executive Budget recommendations. The increase in General Fund
spending is comprised of $1.1 billion in legislative additions to the Executive
Budget (primarily in education).
State law requires the Governor to propose a balanced budget each year.
Preliminary analysis by DOB indicates that the State will have a 2000-1 budget
gap of approximately $1.9 billion, or about $300 million above the 1999-2000
Executive Budget estimate. This estimate includes an assumption for the
projected costs of new collective bargaining agreements, $500 million in assumed
operating efficiencies, as well as the planned application of approximately $615
million of the $1.82 billion tax reduction reserve.
The 1999-2000 Financial Plan has reserved $100 million for possible
collective bargaining agreements, and reserves are contained in the preliminary
outyear projection for 2000-1 to cover the recurring costs of any new
agreements. To the extent these reserves are inadequate to finance such
agreements, the costs of new labor contracts could increase the size of future
budget gaps.
The forecast for continued growth, and any resultant impact on the
State's 1999-2000 Financial Plan, contains some uncertainties. Inventory
investment due to the Year 2000 Problem may be significantly stronger than
expected towards the end of this year possibly followed by significant weakness
early next year. Also, improvements in foreign economies may be weaker than
expected and therefore, may have unanticipated effects on the domestic economy.
The inflation rate may differ significantly from expectations due to the
conflicting impact of a tight labor market and improved productivity growth as
well as to the future direction and magnitude of fluctuations of oil prices. In
addition, the State economic forecast could over- or underestimate the level of
future bonus payments, financial sector profits or inflation growth, resulting
in unexpected economic impacts. Similarly, the State forecast could fail to
correctly estimate the amount of employment change in the banking, financial and
other business service sectors as well as the direction of employment change
that is likely to accompany telecommunications and energy deregulation.
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 and
adversely affected, if any of its public authorities were to default on their
respective obligations. As of December 31, 1998, there were 17 public
authorities that had outstanding debt of $100 million or more, and the aggregate
outstanding debt, including refunding bonds, of these State public authorities
was $94 billion.
The State has numerous public authorities with various
responsibilities, including those which finance, construct and/or operate
revenue producing public facilities. Public authorities generally pay
<PAGE>
B-9
their operating expenses and debt service costs from revenues generated by the
projects they finance or operate, such as tolls charged for the use of highways,
bridges or tunnels, charges for public power, electric and gas utility services,
rentals charged for housing units, and charges for occupancy at medical care
facilities.
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, the
affected localities may seek additional State assistance if local assistance
payments are diverted.
The fiscal health of the State may also be affected by the fiscal
health of New York City (the "City"), which requires significant financial
assistance from the State. State aid contributes to the City's ability to
balance its budget and to meet its cash requirements. The State may also be
affected by the ability of the City and certain entities issuing debt for the
benefit of the City to market their securities successfully in the public credit
markets. 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 entities issuing debt for the benefit of the City 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. In City fiscal year 1997-98, the State constitutional debt
limit would have prevented the City from entering into new capital contracts. In
response, in 1997, the State created the New York City Transitional Finance
Authority ("TFA") to finance a portion of the City's capital program. Despite
this additional financing mechanism, the City currently projects that, if no
further action is taken, it will reach its debt limit in City fiscal year
1999-2000. To continue its capital plan without interruption, the City is
proposing an amendment to the State Constitution to change the methodology used
to calculate the debt limit. Since an amendment to the Constitution to raise the
debt limit could not take effect until City fiscal year 2001-02 at the earliest,
the City has decided to securitize a portion of its share of the proceeds from
the settlement with the nation's tobacco companies. However, a number of
potential developments may affect both the availability and level of funding
that the City will receive from the tobacco settlement. City officials have
indicated that, should their efforts to securitize a portion of City tobacco
settlement proceeds fail or not be accomplished in a timely manner, the City
will request that the State increase the borrowing authority of the TFA.
Although several sectors of the City's economy have expanded over the
last several years, especially tourism and business and professional services,
City tax revenues remain heavily dependent on the continued profitability of the
securities industries and the performance of the national economy. In addition,
the size of recent tax reductions has increased to over $2 billion in City
fiscal year 1999-2000 through the expiration of a personal income tax surcharge,
the repeal of the non-resident earnings tax and
<PAGE>
B-10
the elimination of the sales tax on clothing items costing less than $110. Staff
reports have indicated that recent City budgets have been balanced in part
through the use of non-recurring resources and that the City's Financial Plan
relies in part on actions outside its direct control. These reports have also
indicated 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 gaps between forecast revenues and expenditures in
future years 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 oversight or financial assistance is not
included in the projections of the State's receipts and disbursements for the
State's 1999-2000 fiscal year.
Like the State, local governments must respond to changing political,
economic and financial influences over which they have little or no control.
Such changes may adversely affect the financial condition of certain local
governments. For example, the federal government may reduce (or in some cases
eliminate) federal funding of some local programs which, in turn, may require
local governments to fund these expenditures from their own resources. It is
also possible that the State, New York City, or any of their respective public
authorities may suffer serious financial difficulties that could jeopardize
local access to the public credit markets, which may adversely affect the
marketabilty of notes and bonds issued by localities within the State.
Localities may also face unanticipated problems resulting from certain pending
litigation, judicial decisions and long-range economic trends. Other large-scale
potential problems, such as declining urban populations, increasing
expenditures, and the loss of skilled manufacturing of jobs, may also adversely
affect localities and necessitate State assistance.
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
<PAGE>
B-11
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 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
September 14, 1999 which was issued in connection with the sale of $400,000,000
of California 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, 1998 population of 33.4 million
represented over 12 percent of the total United States population.
State Finances
The Budget Process. The annual budget is proposed by the Governor by
January 10 of each year for the next fiscal year (the "Governor's Budget").
Under State law, the annual proposed Governor's Budget cannot provide for
projected expenditures in excess of projected revenues and balances available
from prior fiscal years. Following the submission of the Governor's Budget, the
Legislature takes up the proposal. Under the State Constitution, money may be
drawn from the Treasury only through an appropriation made by law. The primary
source of the annual expenditure authorizations is the Budget Act as approved by
the Legislature and signed by the Governor.
The General Fund. The General Fund is the principal operating fund for
the majority of governmental activities and is the depository of most of the
major revenue sources of the State. The General Fund may be expended as a
consequence of appropriation measures enacted by the Legislature
<PAGE>
B-12
and approved by the Governor, as well as appropriations pursuant to various
constitutional authorizations and initiative statutes.
The Special Fund for Economic Uncertainties ("SFEU"). The SFEU is
funded with General Fund revenues and was established to protect the State from
unforeseen revenue reductions and/or unanticipated expenditure increases.
Amounts in the SFEU may be transferred by the State Controller as necessary to
meet cash needs of the General Fund. The State Controller is required to return
moneys so transferred without payment of interest as soon as there are
sufficient moneys in the General Fund.
Inter-Fund Borrowings. Inter-fund borrowing has been used for many
years to meet temporary imbalances of receipts and disbursements in the General
Fund.
Local Governments. The primary units of local government in California
are the counties, which are responsible for the provision of many basic
services, including indigent health care, welfare, jails and public safety in
unincorporated areas. The fiscal condition of local governments has been
constrained since the enactment of "Proposition 13" in 1978, which reduced and
limited the future growth of property taxes, and limited the ability of local
governments to impose "special taxes" (those devoted to a specific purpose)
without two-thirds voter approval. Counties, in particular, have had fewer
options to raise revenues than many other local government entities, and have
been required to maintain many services.
In the aftermath of Proposition 13, the State provided aid from the
General Fund to make up some of the loss of property tax moneys, including
taking over the principal responsibility for funding local K-12 schools and
community colleges. During the recession, the Legislature eliminated most of
the remaining components of post-Proposition 13 aid to local government
entities other than K-14 education districts by requiring cities and counties
to transfer some of the property tax revenues to school districts. However, the
Legislature also provided additional funding sources (such as sales taxes) and
reduced mandates for local services. Since then the State has also provided
additional funding to counties and cities through such programs as health and
welfare realignment, welfare reform, trial court restructuring, the COPs
program supporting local public safety departments, and various other measures.
The 1999 Budget Act includes a $150 million one-time subvention from
the General Fund to local agencies for relief from the 1992 and 1993 property
tax shifts. Legislation has been passed, subject to voter approval at the
election in November, 2000, to provide a more permanent payment to local
governments to offset the property tax shift. In addition, legislation was
enacted in 1999 to provide annually up to $50 million relief to cities based on
1997-98 costs of jail booking and processing fees paid to counties.
In 1996, voters approved Proposition 218, entitled the "Right to Vote
on Taxes Act," which limits the ability of local government agencies to impose
or raise various taxes, fees, charges and assessments without voter approval.
Certain "general taxes" imposed after January 1, 1995 must be approved by
voters in order to remain in effect and local voters have the right to reduce
taxes, fees, assessments or charges through local initiatives. There are a
number of ambiguities concerning the Proposition and its
<PAGE>
B-13
impact on local governments and their bonded debt which will require
interpretation by the courts or the Legislature.
State Appropriations Limit. The State is subject to an annual
appropriations limit imposed by Article XIII B of the State Constitution (the
"Appropriations Limit"). Article XIII B prohibits the State from spending
"appropriations subject to limitation" in excess of the Appropriations Limit. No
limit is imposed on appropriations of funds which are not "proceeds of taxes,"
such as reasonable user charges or fees and certain other non-tax funds. Not
included in the 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.
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
1999-2000 Fiscal Year
On January 8, 1999, Governor Davis released his proposed budget for
Fiscal Year 1999-00 (the "January Governor's Budget"). The January Governor's
Budget generally reported that general fund revenues for FY 1998-99 and FY
1999-00 would be lower than earlier projections (primarily due to weaker
overseas economic conditions perceived in late 1998), while some caseloads
would be higher than
<PAGE>
B-14
earlier projections. The January Governor's Budget proposed $60.5 billion of
general fund expenditures in FY 1999-00, with a $415 million SFEU reserve at
June 30, 2000.
The 1999 May Revision of the Budget showed an additional $4.3 billion
of revenues for combined fiscal year 1998-99 and 1999-00. The completion of the
1999 Budget Act occurred in a timely fashion. The final Budget Bill was adopted
by the Legislature on June 16, 1999, and was signed by the Governor on June 29,
1999 (the "1999 Budget Act"), meeting the Constitutional deadline for budget
enactment for only the second time in the 1990's. The May Revision projected
that the California economy will show strong growth in 1999, but slow down in
2000. The Asian economic crisis, which began in 1997, has tended to dampen the
State's economic growth, particularly in high technology manufacturing.
The final 1999 Budget Act estimated General Fund revenues and transfers
of $63.0 billion, and contained expenditures totaling $63.7 billion after the
Governor used his line-item veto to reduce the legislative Budget Bill
Expenditures by $581 million (both General Fund and Special Fund). The 1999
Budget Act also contained expenditures of $16.1 billion from special funds and
$1.5 billion from bond funds. The Administration estimated that the SFEU would
have a balance at June 30, 2000 of about $880 million. Not included in this
amount was an additional $300 million which (after the Governor's vetoes) was
"set aside" to provide funds for employee salary increases (to be negotiated in
bargaining with employee unions), and for litigation reserves. The 1999 Budget
Act anticipates normal cash flow borrowing during the fiscal year.
The principal features of the 1999 Budget Act include the following:
1. Proposition 98 funding for K-12 schools was increased by $1.6
billion in General Fund moneys over revised 1998-99 levels, $108.6
million higher than the minimum Proposition 98 guarantee. The
Budget also includes $310 million as repayment of prior years'
loans to schools, as part for the settlement of the CTA v. Gould
lawsuit.
2. Funding for higher education increased substantially above the
actual 1998-99 level. General Fund support was increased by $184
million (7.3 percent) for the University of California and $126
million (5.9 percent) for the California State University system.
In addition, Community Colleges funding increased by $324.3
million (6.6 percent).
3. The Budget included increased funding of nearly $600 million for
health and human services.
4. About $800 million from the General Fund will be directed toward
infrastructure costs.
5. The Legislature enacted a one-year additional reduction of 10
percent of the Vehicle License Fee (VLF) for calendar year 2000,
at a General Fund cost of about $250 million in each of FY 1999-00
and 2000-01 to make up lost funding to local governments.
<PAGE>
B-15
6. A one-time appropriation of $150 million, to be split between
cities and counties, was made to offset property tax shifts during
the early 1990's. Additionally, an ongoing $50 million was
appropriated as a subvention to cities for jail booking or
processing fees charged by counties when an individual arrested by
city personnel is taken to a county detention facility.
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. 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.
TAX-MANAGED INTERNATIONAL VALUE PORTFOLIO, THE INTERNATIONAL
VALUE PORTFOLIO II AND THE EMERGING MARKETS VALUE PORTFOLIO
The Bernstein Tax-Managed International Value Portfolio, the Bernstein
International Value Portfolio II (collectively referred to as the "Bernstein
International Value Portfolios") 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). The Bernstein
International Value Portfolios will invest primarily in equity securities of
established foreign companies. 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.
Bernstein Emerging Markets Value Portfolio. 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 ("IFC"), a subsidiary of the World Bank, to have an
"emerging stock market." The Portfolio may also make investments in developed
foreign countries that comprise the EAFE index.
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 significant fluctuations in the value of
their investment. The Portfolio should be considered as a vehicle for
diversification and not as a balanced investment program.
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Under normal market conditions, at least 65% of the total assets of
each of the Bernstein International Value Portfolios will be invested in at
least three foreign countries and at least 65% of the total assets of the
Bernstein Emerging Markets Value Portfolio 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, any of the
Bernstein International Value Portfolios or the Bernstein Emerging Markets Value
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. Any of these Portfolios 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.
The Bernstein International Value Portfolios 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 Portfolios,
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). 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, both Portfolios may temporarily, for defensive purposes, invest all of
their portfolios 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; and 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). The
Portfolio will generally invest less than 35% of its total
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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 predominantly
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 International Value and Emerging Markets Value
Portfolios
Market Risk. Since the Bernstein International Value Portfolios and the
Bernstein Emerging Markets Value Portfolio invest 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
suited to investors who are willing to hold their investment over a long
horizon.
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 and developed market securities may be listed on foreign exchanges
that are open on days (such as U.S. holidays and Saturdays) when the Portfolio
does not calculate net asset value. As a result, the net asset value of the
Portfolio 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 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
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regulations, such as the currency exchange controls imposed by Malaysia in 1998,
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.
Additional Risks of Investing in Emerging Markets
Investing in securities of companies in emerging markets countries
entails greater risks than investing in equity securities in developed markets.
The risks include but are not limited to 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
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B-19
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 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, issuers 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
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B-20
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.
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.
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 contries; (v) ethnic, religious and
racial disaffection; and (vi) changes in trading status.
Certain emerging-markets countries have histories of instability and
upheaval with respect to their internal policies that could cause their
governments to act in a detrimental or hostile manner toward
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B-21
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 economic development 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 in some countries could disrupt the financial markets in which the
Portfolio invests and adversely affect the value of the Portfolio's assets.
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.
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;
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
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B-22
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% 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.
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B-23
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.
5) Invest in a reverse repurchase agreement if the amount received by
the Portfolio through such an agreement, together with all other borrowings,
will exceed 5% of the Portfolio's total assets.
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:
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;
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B-24
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;
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;
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B-25
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 received by the Portfolio through
such an agreement, together with all other borrowings, will exceed 5% of the
Portfolio's total assets.
Investment Restrictions of the Tax-Managed International Value Portfolio and the
International Value Portfolio II
Neither the Tax-Managed International Value Portfolio or the
International Value Portfolio II may, except as otherwise provided herein:
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B-26
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;
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
<PAGE>
B-27
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. Each of the Tax-Managed International
Value Portfolio and the International Value Portfolio II 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 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.
Investment Restrictions of the Bernstein Emerging Markets Value Portfolios
The Bernstein Emerging Markets Value Portfolio may not, except as
otherwise provided herein:
<PAGE>
B-28
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;
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,
<PAGE>
B-29
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 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.
With respect to any Portfolio of the Fund, for purposes of determining the
amount of portfolio securities that may be lent by the Portfolio to other
parties in accordance with the investment restrictions set forth above, "total
assets" of the Portfolio shall be determined in accordance with SEC
interpretations issued from time to time.
<PAGE>
B-30
INVESTMENTS
Subject to each Fixed-Income Portfolio's investment policies, each
Portfolio will primarily be invested in debt securities, including, 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; (iv) loan participations; (v) commercial paper; (vi)
obligations (including certificates of deposit, time deposits and bankers'
acceptances) of thrifts and 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) in the case of the Bernstein Intermediate Duration
and Short Duration Plus Portfolios, 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 Portfolios and the
Bernstein Emerging Markets Value Portfolio will invest primarily in foreign
equity securities, but may, under some circumstances 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. Some information regarding some
of these types of investments is provided below.
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.
<PAGE>
B-31
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
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
<PAGE>
B-32
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.
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.
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
the 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 the 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
<PAGE>
B-33
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 muncipal 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.
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 ledge 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 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 taxing power is pledged, although the lease
obligation is ordinarily backed by the municipality's covenant to budget for,
appropriate and make payments in future years unless money is appropriated for
such purpose on a yearly basis. Pursuant to procedures established by the Fund
Board, the Manager will be responsible for determining the credit quality of
unrated municipal lease obligations on an ongoing basis, including 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 Muncipal Securities are covered by insurance or
other credit enhancements procured by the issuer or underwriter guaranteeing
timely payment of principal and interest.
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.
Where registration of restricted securities 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
<PAGE>
B-34
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.
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.
Illiquid Securities
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 7 days, time deposits maturing in more than 7 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 subject to more 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 Bernstein Short Duration Plus Portfolio and the Bernstein
Intermediate Duration Portfolio generally invest in domestic securities, each
Portfolio may also invest up to 20% of its total assets in
<PAGE>
B-35
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 ____.
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.
Bank Obligations
The Portfolios may invest in fixed-income obligations (including, but
not limited to, certificates of deposit, time deposits and bankers'
acceptances) of thrift institutions and commercial 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 Intermediate
<PAGE>
B-36
Duration and Short Duration Plus 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 the Manager to be of comparable quality.
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.
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-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.
Equity Securities
The equity securities in which the Bernstein International Value
Portfolios 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), Global Depositary Receipts
(GDRs), 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. GDRs are
receipts typically issued by a non-U.S. bank or trust company 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 Portfolios
and the Bernstein Emerging Markets Value Portfolio, in compliance with
provisions of the Investment Company Act of 1940, as
<PAGE>
B-37
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. 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.
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
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
The Bernstein Short Duration Plus Portfolio, Bernstein Intermediate
Duration Portfolio, Bernstein Tax-Managed International Value Portfolio,
Bernstein International Value Portfolio II and Bernstein Emerging Markets Value
Portfolio may employ certain risk management techniques to attempt to protect
against some or all effects of adverse changes in foreign currency exchange
rates, including entering into a foreign currency exchange contract on either a
spot (i.e. cash) basis at the rate then prevailing in the currency exchange
market or by entering into 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. The Portfolios will
generally not enter into a forward contract with a term greater than one year.
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.
<PAGE>
B-38
Each Portfolio may enter into forward contracts for any lawful and
appropriate purpose in light of its activities. For example, when a Portfolio
purchases or sells 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.
Under certain circumstances, each of the Bernstein International Value
Portfolios and the Bernstein Emerging Markets Value Portfolio may commit
substantial portions or the entire value of their assets to the consummation of
these contracts. The Manager will consider the effect a substantial commitment
of its assets to forward contracts would have on the investment program of the
Portfolio and the flexibility of the Portfolio to purchase additional
securities.
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. Alternatively, a
Portfolio may enter into a forward contract which provides for settlement by one
party making a single one-way payment to the other party in the amount of the
difference between the contracted forward rate and the current spot reference
rate. The currency used for settlement may be one of the transaction currencies
or a base currency, such as U.S. dollars.
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
<PAGE>
B-39
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.
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.
There is no assurance that a forward contract counterparty will be
able to meet its obligations under the forward contract or that, in the event
of default by the counterparty a Portfolio will succeed in pursuing contractual
remedies. The Portfolios assume the risk that they may be delayed in or
prevented from obtaining payments owed to them pursuant to the contractual
agreements entered into in connection with a forward contract.
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 futures commission
merchant ("FCM") or its Custodian in a segregated account 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
<PAGE>
B-40
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; provided
however, in the case of an option that is in the money (see discussion below) 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.
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 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.
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
<PAGE>
B-41
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 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.
<PAGE>
B-42
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, however, must post an initial
margin and are subject to additional margin calls which could be substantial in
the event of adverse price movements.
(7) Each Portfolio's potential losses from the use of futures extend
beyond its initial investment in such contracts and are potentially unlimited.
(8) 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.
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
<PAGE>
B-43
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.
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
<PAGE>
B-44
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 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 permitted to invest in foreign securities 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
<PAGE>
B-45
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:
(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
<PAGE>
B-46
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.
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 simultaneously 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 the purchase price and 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.
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 liquid assets in a segregated
account with its Custodian 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 Portfolios,
Bernstein Emerging Markets Value Portfolio and the Short Duration Municipal
Portfolios, having a market value of
<PAGE>
B-47
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 fees charged in
connection with the loan and, when cash collateral is given to secure the loan,
income from investment of the cash collateral in time deposits and repurchase
agreements. Any such loan of portfolio securities will be marked to the market
daily and secured by collateral consisting of certificates of deposit and other
cash instruments or U.S. government and agency 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. 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 liquid assets in segregated accounts
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.
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.
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
<PAGE>
B-48
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 Morgan Stanley Capital International ("MSCI") industry classification.
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, POSITION(S) PRINCIPAL OCCUPATION
ADDRESS, AND AGE WITH THE FUND DURING PAST FIVE YEARS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- -Roger Hertog* President, President, Chief Operating Officer and
767 Fifth Avenue Treasurer, Director-Bernstein
New York, NY 10153 Director
DOB: 11/4/44
- -----------------------------------------------------------------------------------------------------------------------------------
Andrew S. Adelson* Senior Vice Senior Vice President, Chief Investment Officer-
767 Fifth Avenue President Director International Equities and Director-Bernstein
New York, NY 10153
DOB: 5/31/55
- -----------------------------------------------------------------------------------------------------------------------------------
Arthur Aeder Director 1987-Present: Consultant;
516 Fifth Avenue Formerly Senior Partner of Oppenheim, Appel,
New York, NY 10036 Dixon & Co.
DOB: 12/31/25 (subsequently Spicer & Oppenheim) Certified
Public Accountants, and Chairman of Spicer &
Oppenheim International
- -----------------------------------------------------------------------------------------------------------------------------------
Peter L. Bernstein** Director President and Chief Executive Officer of Peter L.
575 Madison Avenue Bernstein, Inc.,
Suite 1006 Economic Consultants
New York, NY 10022
DOB: 1/22/19
</TABLE>
<PAGE>
B-49
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
William Kristol Director 6/95-Present: Editor and Publisher, The Weekly
1150 17th Street, N.W. Standard
5th Floor 7/95 - Present: Consultant, ABC News
Washington, D.C. 11/93-5/95: Chairman, Project for the Republican
20036 Future
DOB: 12/23/52
- -----------------------------------------------------------------------------------------------------------------------------------
Theodore Levitt Director Professor Emeritus of Business Administration,
Harvard Business School Harvard University
Cummock 300 1985-1989: Editor, Harvard Business Review
Boston, MA 02163
DOB: 3/1/25
- -----------------------------------------------------------------------------------------------------------------------------------
Francis H. Trainer, Jr. Senior Vice Senior Vice President, Chief Investment Officer-
767 Fifth Avenue President Fixed Income and Director-Bernstein
New York, NY 10153
DOB: 11/15/46
- -----------------------------------------------------------------------------------------------------------------------------------
Jean Margo Reid Secretary 1999: Senior Vice President, General Counsel and
767 Fifth Avenue Director - Bernstein
New York, NY 10153 1997-1998: Vice President and General Counsel-Bernstein
DOB: 8/31/45 Previously: Vice President and Associate General
Counsel-Bernstein
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
* An "interested person" of the Fund, as defined in the 1940 Act.
** Not related to any person formerly or currently associated with Bernstein.
</FN>
</TABLE>
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 also perform various duties
imposed on directors of investment companies by the 1940 Act and by the State
of Maryland. 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
<PAGE>
B-50
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 $35,000 for the fiscal year ended September 30, 1999. 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.
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.
As of November 4, 1999, directors and officers of the Fund, as a
group, owned beneficially approximately 150,000 shares of the Bernstein
Government Short Duration Portfolio, being 1.5% of such Portfolio. As of
November 4, 1999, directors and officers of the Fund, as a group, owned less
than one percent of the outstanding shares of Bernstein Intermediate Duration
Portfolio, 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 International
Value Portfolios and Bernstein Emerging Markets Value Portfolio.
As of November 4, 1999, B. Shapiro of Los Angeles, CA owned at least
5% of the Bernstein Short Duration California Municipal Portfolio and the New
Mexico State Investment Council of Sante Fe, New Mexico owned at least 5% of
the Bernstein Emerging Markets Value Portfolio.
MANAGER AND DISTRIBUTOR
Manager. Sanford C. Bernstein & Co., Inc. ("Bernstein" or the
"Manager"), 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 wholly-owned by Sanford C. Bernstein Inc., a closely held Delaware holding
corporation. Sanford C. Bernstein Inc. is controlled by its Board of Directors
which consists of the following individuals: Andrew S. Adelson, Kevin R. Brine,
Charles C. Cahn, Jr., Marilyn Goldstein Fedak, Michael L. Goldstein, Roger
Hertog, Thomas S. Hexner, Gerald M. Lieberman, Marc O. Mayer, Jean Margo Reid,
Lewis A. Sanders, and Francis H. Trainer, Jr. The Board of Directors of
Bernstein is comprised of these same individuals.
<PAGE>
B-51
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 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 each of the Bernstein International Value Portfolios is at an
annual rate of 1.00% of that Portfolio's average daily net assets up to but not
exceeding $1 billion and at an annual rate of .90 of 1% of that Portfolio's
average daily net assets that exceed $1 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. The fee
is computed daily and paid monthly. For the fiscal years ended September 30,
1997, 1998, and 1999 the investment management fees accrued or paid to Bernstein
pursuant to the Management Agreements were, respectively, $65,345,690,
$83,314,803, and $91,558,133.
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 organizations might include, among
other things, proxy solicitations and providing information to
<PAGE>
B-52
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 Portfolios 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, 1997, 1998, and 1999 the
fees accrued or paid to Bernstein pursuant to the Shareholder Servicing and
Administrative Agreements were $15,530,342, $20,136,349, and $22,051,781,
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 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
<PAGE>
B-53
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.
Portfolio securities are valued by various methods depending on the
primary market or exchange on which they trade. Fixed-income securities and
other assets for which market quotations are readily available may be valued at
market values determined by such securities' most recent bid prices 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 (market
value will be determined by sales prices if the principal market is an exchange)
in the broadest and most representative market for that security as determined
by the Manager.
Fixed-income securities and convertible securities may also be valued
on the basis of information furnished by a pricing service that uses a valuation
matrix which incorporates both dealer-supplied valuations and electronic data
processing techniques. Use of pricing services has been approved by the Board of
Directors of the Fund. A number of pricing services are available, and the Fund
may use various pricing services or discontinue the use of any pricing service.
Futures contracts and options are valued on the basis of market
quotations, if available.
Most equity securities for which the primary market is outside the
United States are valued using the official closing price or the last sale price
in the principal market in which they are traded. If the last sale price (on the
local exchange) is unavailable, the last evaluated quote or last bid price
normally is used.
Because the investment securities of the Bernstein International Value
Portfolios, the Bernstein Emerging Markets Value Portfolio, the Intermediate
Duration Portfolio and the Short Duration Plus Portfolio may be traded on
foreign markets that may be open when the New York Stock Exchange is closed,
the value of the net assets of these Portfolios 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
<PAGE>
B-54
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. Foreign securities are valued
based on prices furnished by independent brokers or quotation services which
express the value of securities in their local currency.
If an extraordinary event that is expected to materially affect the
value of a portfolio security occurs after the close of an exchange on which
that security is traded, then that security may be valued as determined in good
faith under procedures adopted by the Board of Directors of the Fund.
Securities and other assets for which there is no readily available
market value may be valued in good faith pursuant to procedures adopted by the
Board of Directors of the Fund. The procedures set forth above need not be used
to determine the value of the securities owned by the Fund if, under procedures
adopted by the Board of Directors of the Fund, some other method would more
accurately reflect the fair market value of such securities.
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. The Bernstein International
Value Portfolios 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 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, 1999, the Fund paid total
brokerage commissions of $11,213,060, of which $90,581 or 0.8078% was paid to
Bernstein for effecting 0.6053% of the aggregate dollar amount of transactions
on which the Fund paid brokerage commissions. For the fiscal year ended
September 30, 1998, the Fund paid total brokerage commissions of $10,040,103,
of which $127,161 or 1.27% was paid to Bernstein for effecting 0.9527% of the
aggregate dollar amount of transactions on which the Fund paid brokerage
commissions. For the fiscal year ended September 30,
<PAGE>
B-55
1997, the Fund paid total brokerage commissions of $7,778,946, of which $83,553
or 1.0741% was paid to Bernstein for effecting 1.5781% of the aggregate dollar
amount of transactions on which the Fund paid brokerage commissions.
On September 30, 1999, the Bernstein Short Duration Plus Portfolio
owned approximately $5.7 million of securities issued by Merrill, Lynch, Pierce,
Fenner & Smith; approximately $9.9 million of securities issued by Morgan
Stanley; approximately $2.9 million of securities issued by Goldman, Sachs &
Co.; approximately $5.5 million of securities issued by Lehman Brothers; $6.7
million of securities issued by C.S. First Boston; approximately $2.8 million of
securities issued by Salomon Smith Barney; and approximately $3.5 million of
securities issued by J.P. Morgan.
On September 30, 1999, the Bernstein Intermediate Duration Portfolio
owned approximately $16.8 million of securities issued by Goldman, Sachs & Co.;
approximately $24.1 million of securities issued by Lehman Brothers;
approximately $31.6 million of securities issued by C.S. First Boston;
approximately $12.7 million of securities issued by Nomura Securities;
approximately $8.9 million of securities issued by Merrill, Lynch, Pierce,
Fenner & Smith; approximately $22.4 million of securities issued by J.P. Morgan;
and approximately $50.2 million of securities issued by Morgan Stanley.
Lehman Brothers, Inc. is a parent corporation of Lehman Government
Securities, Inc. Merrill, Lynch, Pierce, Fenner & Smith, Morgan Stanley,
Goldman, Sachs & Co., Lehman Government Securities, Inc., C.S. First Boston,
Salomon Smith Barney, J.P. Morgan and Nomura Securities, Inc. are regular
brokers or dealers of the Fund 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 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. From time to time, dealers
with whom the Fund conducts principal transactions may provide the Manager with
research at no cost.
Effecting Transactions for the Bernstein Tax-Managed International Value
Portfolio, the Bernstein International Value Portfolio II and the Bernstein
Emerging Markets Value Portfolio.
In effecting a security transaction for the Bernstein International
Value Portfolios 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,
<PAGE>
B-56
execution ability, facilities, clearing capabilities and financial services
offered, the value of the research provided, 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, financial news, historical and current
financial data, information regarding trading, proxy-voting information,
statistical information and analyses and reports regarding issuers, industries,
securities, economic factors and trends, with respect to a variety of financial
instruments including equity and fixed-income securities and currencies from
both a domestic and international perspective. Research services may be received
in the form of written reports, computer terminals on which we receive databases
and software, 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 any or all 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 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
<PAGE>
B-57
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. Brokerage allocations are reviewed on an ongoing basis
and reevaluated in light of services provided. 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. The
Manager continuously monitors and evaluates the performance and execution
capabilities of the brokers who transact orders to ensure consistently
satisfactory service.
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 Fund may enter into arrangements with the
broker-dealers, banks and other financial institutions permitted to accept
purchase and redemption orders to allow these entities to designate other
intermediaries to accept purchase and redemption orders. 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 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.
<PAGE>
B-58
TAXES
The Fund intends each Portfolio to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). If a Portfolio does not qualify, it is subject to federal income taxes
on net income and capital gains, if any, realized during any fiscal year and the
net income and capital gains distributed to shareholders will be lower.
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, as amended (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 the Bernstein
International Value Portfolios and the Bernstein Emerging Markets Value
Portfolio is to declare and pay investment income dividends and capital-gains
distributions at least 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 for
more than 12 months. 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"); and (ii)
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").
Currently, distributions of net investment income and net capital
gains are taxable to shareholders subject to federal income tax regardless of
whether the shareholder receives such distributions in
<PAGE>
B-59
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 advisor
about the status of distributions from the Portfolios in their individual states
or localities.
The Code includes special rules applicable to certain 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 (at the lower long-term capital-gains tax rate) to the extent of
60% thereof and short-term capital gain or loss to the extent of 40% thereof.
These contracts, 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
<PAGE>
B-60
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 which provided, among other things, 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) 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 to item (ii)
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
<PAGE>
B-61
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 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, futures contracts that are not "regulated futures contracts"
("Non-Regulated Futures Contracts"), and from unlisted options will generally be
treated as ordinary income or ordinary loss; however, any Portfolio of the Fund
may make an election pursuant to Section 988(a)(1)(B) to treat any foreign
currency gain or loss from forward contracts, Non-Regulated Futures Contracts
and unlisted options as a capital gain or loss. In general, in the event such
election is made with respect to forward contracts, Non-Regulated Futures
Contracts and unlisted options that are Section 1256 contracts, 60% of the gain
or loss will be treated as long-term and 40% will be treated as short-term (as
described above); in the event such election is made with respect to contracts
or options that are not Section 1256 contracts, treatment of a gain or loss as
long-term or short-term will depend upon the holding period thereof. 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. The gains or losses described above
that are treated as ordinary income or ordinary loss 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 ordinary 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 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 Portfolios 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
<PAGE>
B-62
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 Portfolios 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, the Portfolios holding
shares of marketable PFICs can elect to mark those shares to market at the close
of the Fund's taxable year and at October 31 for purposes of the excise tax
minimum distribution requirements. PFIC mark-to-market gains are treated as
ordinary income, as are any gains realized on the ultimate sale of the PFIC
stock. Mark-to-market losses and losses on the ultimate disposition of the stock
are ordinary losses to the extent of net mark-to-market gains included in
previous tax years with respect to that stock (but not other stocks).
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.
<PAGE>
B-63
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.
PricewaterhouseCoopers 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:
<TABLE>
<CAPTION>
Annual Report Page
------------------
<S> <C>
Statement of Assets and Liabilities, September 30, 1999
Statements of Operations for the Year Ended
September 30, 1999
Statements of Changes in Net Assets, Year Ended September
30, 1999 and Year Ended September 30, 1998
Financial Highlights for the periods ended September 30,
1999; September 30, 1998; September 30, 1997; September
30, 1996; and September 30, 1995 (or as applicable)
Notes to Financial Statements, September 30, 1999
Schedule of Investments-Taxable Bond Portfolios, dated Separate Insert to
September 30, 1999 and Report of Independent Accountants Annual Report
with respect to such Portfolios dated November 15, 1999
Schedule of Investments-Municipal Bond Portfolios, dated Separate Insert to
September
</TABLE>
<PAGE>
B-64
<TABLE>
<S> <C>
30, 1999 and Report of Independent Accountants Annual Report
with respect to such Portfolios dated November 15, 1999
Schedule of Investments - Stock Portfolios, dated September Separate Insert to
30, 1999 and Report of Independent Accountants with Annual Report
respect to such Portfolios dated November 15, 1999
</TABLE>
PERFORMANCE
Each of the Portfolios may, from time to time, advertise yield, average
annual total return and aggregate total return.
For the thirty-day period ending September 30, 1999, yields for the
Fixed-Income Portfolios were as follows: Government Short Duration Portfolio -
5.19%; Short Duration Plus Portfolio - 5.81%; Intermediate Duration Portfolio -
6.30%; New York Municipal Portfolio - 4.02%; California Municipal Portfolio -
3.83%; Diversified Municipal Portfolio - 4.04%; Short Duration California
Municipal - 3.24%; Short Duration Diversified Municipal Portfolio - 3.52%; Short
Duration New York Municipal Portfolio - 3.46%.
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
<PAGE>
B-65
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.
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, 1999, tax-equivalent
yield for the Government Short Duration Portfolio was ___%, assuming a combined
state and local tax of __% and reflecting that ____% 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, 1999 was ___%, assuming an investor was
subject to a combined federal, state and New York City tax rate of _____% and
reflecting that ___% of the income was estimated to be subject to federal taxes
and ___% to be subject to state and local taxes. Tax-equivalent yield for the
California Municipal Portfolio at September 30, 1999 was ___%, assuming an
investor was subject to a combined federal and state tax rate of _____% and
reflecting that ___% of the income was estimated to be subject to federal taxes
and ___% to be subject to state taxes. Tax-equivalent yield for the Diversified
Municipal Portfolio at September 30, 1999 was ___%, assuming an investor was
subject to a combined federal and state tax rate of ____% and reflecting that
___% of the income was estimated to be subject to federal taxes.
<PAGE>
B-66
Tax-equivalent yield for the Short Duration New York Municipal
Portfolio at September 30, 1999 was ___%, assuming an investor was subject to a
combined federal, state and New York City tax rate of ____% and reflecting that
__% of the income was estimated to be subject to federal taxes and __% to be
subject to state and local taxes. Tax-equivalent yield for the Short Duration
California Municipal Portfolio at September 30, 1999 was ___%, assuming an
investor was subject to a combined federal and state tax rate of ____% and
reflecting that __% of the income was estimated to be subject to federal taxes
and ___% to be subject to state taxes. Tax-equivalent yield for the Short
Duration Diversified Municipal Portfolio at September 30, 1999 was ___%,
assuming an investor was subject to federal tax rate of ____% and reflecting
that __% of the income was estimated to be subject to federal taxes.
[Tax-equivalent yield to be provided by amendment.]
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) neither New York State and local nor federal income
taxation; dividing each portion of the yield by 1 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
<PAGE>
B-67
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:
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
<PAGE>
B-68
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 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, 1999; (2) the Portfolios for the one year period
ended September 30, 1999; and (3) the Tax-Managed International Value Portfolio
and the Fixed-Income Portfolios (other than the Short Duration Municipal
Portfolios) for the five year period ended September 30, 1999, were as follows:
<TABLE>
<CAPTION>
Average Annual
Period Since Total Return One Year Five Year Ten Year
Portfolio Inception Since Inception Total Return Total Return Total Return
- ------------------- --------------- --------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
B-69
<TABLE>
<S> <C> <C> <C> <C> <C>
Government Short
Duration 10.74 6.27 3.07 5.51 6.05
Short Duration Plus 10.80 6.62 3.82 5.80 6.41
New York Municipal 10.72 6.09 0.74 5.41 6.03
California Municipal 9.15 5.87 0.60 5.46 N/A
Diversified Municipal 10.72 6.00 0.77 5.41 5.99
Intermediate Duration 10.70 7.99 1.04 7.16 7.72
Tax-Managed
International Value 7.27 12.09 25.34 11.08 N/A
International Value II 0.42 8.60 N/A N/A N/A
Short Duration
California Municipal 4.99 3.97 2.90 N/A N/A
Short Duration
Diversified Municipal 4.99 4.07 2.91 N/A N/A
Short Duration
New York Municipal 4.99 3.85 2.64 N/A N/A
Emerging Markets
Value Portfolio 3.79 (2.75) 69.88 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;
<PAGE>
B-70
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.
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,
1999 was as follows:
<TABLE>
<CAPTION>
Period Aggregate
Since Total
Portfolio Inception Return
- --------- --------- ---------
<S> <C> <C>
Government Short Duration Portfolio 10.75 years 92.18
Short Duration Plus Portfolio 10.81 years 99.84
Intermediate Duration Portfolio 10.71 years 127.71
New York Municipal Portfolio 10.75 years 88.61
California Municipal Portfolio 9.16 years 68.60
Diversified Municipal Portfolio 10.75 years 86.89
Tax-Managed International Value Portfolio 7.28 years 129.50
International Value II 0.42 years 3.50
Short Duration New York Municipal Portfolio 4.99 years 20.79
Short Duration California Municipal Portfolio 4.99 years 21.48
Short Duration Diversified Municipal Portfolio 4.99 years 22.03
Emerging Markets Value Portfolio 3.79 years (6.34)
</TABLE>
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.
<PAGE>
B-71
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., 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.
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. In order to avoid unnecessary expenses, the
Fund does not intend to hold annual meetings of shareholders.
<PAGE>
B-72
APPENDIX
Description of Corporate and Municipal Bond Ratings
The following descriptions of Standard & Poor's Corporation ("Standard
& Poor's"), Fitch IBCA, 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-74
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 IBCA, Inc.
<PAGE>
B-74
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-75
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-76
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 IBCA, Inc.
(6) Reprinted from Moody's Bond Record and Short Term Market Record
<PAGE>
B-77
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-78
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 IBCA, Inc.
<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>
PART C
OTHER INFORMATION
Item 23. Exhibits.
(a)(1) Articles of Incorporation of the Fund dated May 3, 1988
(supplied by Pre-Effective Amendment No. 1 and submitted
electronically by Post-Effective Amendment No. 15).
(a)(2) Articles Supplementary of the Fund dated October 14,
1988 (supplied by Pre-Effective Amendment No. 2 and
submitted electronically by Post-Effective Amendment No.
15).
(a)(3) Articles Supplementary of the Fund dated April 25, 1990
(supplied by Post-Effective Amendment No. 4 and
submitted electronically by Post-Effective Amendment No.
15).
(a)(4) Articles Supplementary of the Fund dated March 16, 1992
(supplied by Post-Effective Amendment No. 7 and
submitted electronically by Post-Effective Amendment No.
15).
(a)(5) Articles Supplementary of the Fund undated, filed with
State of Maryland May 11, 1994 (supplied by
Post-Effective Amendment No. 10 and submitted
electronically by Post-Effective Amendment No. 15).
(a)(6) Articles Supplementary of the Fund dated October 10,
1994 (supplied by Post-Effective Amendment No. 11 and
submitted electronically by Post-Effective Amendment No.
15).
(a)(7) Articles Supplementary of the Fund dated August 29, 1995
(supplied by Post-Effective Amendment No. 12 and
submitted electronically by Post-Effective Amendment No.
15).
(a)(8) Articles Supplementary of the Fund dated February 26,
1996 (submitted electronically by Post-Effective
Amendment No. 15).
(a)(9) Articles Supplementary of the Fund dated March 9, 1998
(submitted electronically by Post-Effective Amendment
No. 17).
8
<PAGE>
(a)(10) Articles Supplementary of the Fund dated November 5,
1998 (submitted electronically by Post-Effective
Amendment No. 17).
(a)(11) Articles of Amendment of the Fund dated April 20, 1999
(submitted electronically herewith).
(a)(12) Articles Supplementary of the Fund dated May 24, 1999
(submitted electronically herewith).
(b)(1) By-Laws of the Fund as Revised and Restated October 4,
1988 (supplied by Pre-Effective Amendment No. 2 and
submitted electronically by Post-Effective Amendment No.
16).
(b)(2) Amendment to Article I, Section 2 of the By-Laws of Fund
dated January 30, 1992 (supplied by Post-Effective
Amendment No. 7 and submitted electronically by
Post-Effective Amendment No. 16).
(c) Instruments Defining Rights of Security Holders -
supplied by Exhibit (a)(1) (see Article V - Common
Stock; Sections 1(b), 2(c), (2)(d), (2)(e), (2)(g), 4
and 5; Article VII - Miscellaneous; Sections 1(d), 2, 3,
5 and 6; Article VIII - Voting; Article IX - Amendments;
and supplied by Exhibit (b)(1) (see Article I -
Stockholders and Article IV - Capital Stock).
(d)(1) Investment Management Agreement dated October 12, 1988
between the Fund 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 and submitted
electronically by Post-Effective Amendment No. 16).
(d)(1)(a) Investment Management Agreement dated May 1, 1990
between the Fund on behalf of California Municipal
Portfolio and Bernstein (supplied by Post-Effective
Amendment No. 4 and submitted electronically by
Post-Effective Amendment No. 16).
9
<PAGE>
(d)(1)(b) Investment Management Agreement dated March 18, 1992
between the Fund on behalf of International Value
Portfolio and Bernstein (supplied by Post-Effective
Amendment No. 7 and submitted electronically by
Post-Effective Amendment No. 16).
(d)(1)(c) Investment Management Agreement dated May 2, 1994
between the Fund 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 and submitted
electronically by Post-Effective Amendment No. 16).
(d)(1)(d) Amendment to Investment Management Agreement dated
October 5, 1994 between the Fund 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 and submitted electronically by
Post-Effective Amendment No. 16).
(d)(1)(e) Amendment to Investment Management Agreement dated
October 5, 1994 between the Fund on behalf of the
California Municipal Portfolio and Bernstein (supplied
by Post-Effective Amendment No. 11 and submitted
electronically by Post-Effective Amendment No. 16).
(d)(1)(f) Investment Management Agreement dated October 11, 1995
between the Fund on behalf of the Emerging Markets Value
Portfolio and Bernstein (supplied by Post-Effective
Amendment No. 12 and submitted electronically by
Post-Effective Amendment No. 15).
(d)(1)(g) Amendment No. 1 to Investment Management Agreement dated
October 11, 1995 between the Fund on behalf of the
International Value Portfolio and Bernstein (submitted
electronically by Post-Effective Amendment No. 13).
(d)(1)(h) Investment Management Agreement dated February 22, 1999
between Fund on behalf of the International Value
Portfolio II (submitted electronically herewith).
10
<PAGE>
(d)(1)(i) Amendment No. 2 to Investment Management Agreement dated
February 22, 1999 between the Fund on behalf of the
International Value Portfolio and Bernstein (submitted
electronically herewith).
(d)(1)(j) Amendment No. 3 to Investment Management Agreement dated
April 30, 1999 between the Fund on behalf of the
International Value Portfolio and Bernstein (submitted
electronically herewith).
(d)(2) Shareholder Servicing and Administrative Agreement dated
October 12, 1988 between the Fund 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 and submitted electronically by Post-Effective
Amendment No. 16).
(d)(2)(a) Shareholder Servicing and Administrative Agreement dated
May 1, 1990 between the Fund on behalf of California
Municipal Portfolio and Bernstein (supplied by
Post-Effective Amendment No. 4 and submitted
electronically by Post-Effective Amendment No. 16)
(d)(2)(b) Shareholder Servicing and Administrative Agreement dated
March 18, 1992 between the Fund on behalf of
International Value Portfolio and Bernstein (supplied by
Post-Effective Amendment No. 7 and submitted
electronically by Post-Effective Amendment No. 16).
(d)(2)(c) Shareholder Servicing and Administrative Agreement dated
May 2, 1994 between the Fund 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 and submitted
electronically by Post-Effective Amendment No. 16).
(d)(2)(d) Shareholder Servicing and Administrative Agreement dated
October 11, 1995 between the Fund on behalf of the
Emerging Markets Value Portfolio and Bernstein (supplied
by Post-Effective Amendment No. 12 and submitted
electronically by Post-Effective Amendment No. 15).
11
<PAGE>
(d)(2)(e) Shareholder Servicing and Administrative Agreement dated
February 22, 1999 between the Fund on behalf of the
International Value Portfolio II and Bernstein
(submitted electronically herewith.)
(d)(2)(f) Amendment No. 1 dated April 30, 1999 to Shareholder
Servicing and Administrative Agreement between the Fund
on behalf of the International Value Portfolio and
Bernstein (submitted electronically herewith).
(e)(1) Distribution Agreement dated October 12, 1988 between
the Fund 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 and submitted
electronically by Post-Effective Amendment No. 16).
(e)(2) Distribution Agreement dated May 1, 1990 between the
Fund on behalf of California Municipal Portfolio and
Bernstein (supplied by Post-Effective Amendment No. 4
and submitted electronically by Post-Effective Amendment
No. 16).
(e)(3) Distribution Agreement dated March 18, 1992 between the
Fund on behalf of International Value Portfolio and
Bernstein (supplied by Post-Effective Amendment No. 7
and submitted electronically by Post-Effective Amendment
No. 16).
(e)(4) Distribution Agreement dated May 2, 1994 between the
Fund 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 and submitted electronically by
Post-Effective Amendment No. 16).
12
<PAGE>
(e)(5) Distribution Agreement dated October 11, 1995 between
the Fund on behalf of the Emerging Markets Value
Portfolio and Bernstein (supplied by Post-Effective
Amendment No. 12 and submitted electronically by
Post-Effective Amendment No. 15).
(e)(6) Distribution Agreement dated February 22, 1999 between
the Fund on behalf of the International Value Portfolio
II and Bernstein (submitted electronically herewith).
(e)(7) Amendment No. 1 dated April 30, 1999 to the Distribution
Agreement between the Fund on behalf of the
International Value Portfolio and Bernstein (submitted
electronically herewith).
(f) Bonus or Profit Sharing Contracts - Not applicable.
(g)(1) Custodian Contract dated October 12, 1988 between the
Fund and State Street Bank and Trust Company (supplied
by Pre-Effective Amendment No. 2 and submitted
electronically by Post-Effective Amendment No. 16).
(g)(2) Amendment to the Custodian Contract dated May 8, 1989
(supplied by Post-Effective Amendment No. 2 and
submitted electronically by Post-Effective Amendment No.
16).
(g)(3) Second Amendment to the Custodian Contract dated July
24, 1989 (supplied by Post-Effective Amendment No. 3 and
submitted electronically by Post-Effective Amendment No.
16).
13
<PAGE>
(g)(4) Third Amendment to the Custodian Contract dated April
30, 1990 (supplied by Post-Effective Amendment No. 4 and
submitted electronically by Post-Effective Amendment No.
16).
(g)(5) Fourth Amendment to the Custodian Contract dated March
18, 1992 (supplied by Post-Effective Amendment No. 7 and
submitted electronically by Post-Effective Amendment No.
16).
(g)(6) Fifth Amendment to the Custodian Contract dated April
19, 1994 (supplied by Post-Effective Amendment No. 10
and submitted electronically by Post-Effective Amendment
No. 16).
(g)(7) Sixth Amendment to the Custodian Contract dated August
21, 1995 (supplied by Post-Effective Amendment No. 12
and submitted electronically by Post-Effective Amendment
No. 16).
(g)(8) Seventh Amendment to the Custodian Contract dated May 6,
1996 (submitted electronically by Post-Effective
Amendment No. 15).
(g)(9) Eighth Amendment to the Custodian Contract dated
September 25, 1996 (submitted electronically by
Post-Effective Amendment No. 15).
(g)(10) Custodian Fee Schedule dated June 12, 1998 - Government
Short Duration, Short Duration Plus, New York Municipal,
Diversified Municipal, Intermediate Duration, California
Municipal; Short Duration California Municipal, Short
Duration Diversified Municipal, and Short Duration New
York Municipal Portfolios (submitted electronically by
Post-Effective Amendment No. 17).
(g)(11) Ninth Amendment to the Custodian Contract dated February
22, 1999 (submitted electronically herewith).
(g)(12) Tenth Amendment to the Custodian Contract dated May 3,
1999 (submitted electronically herewith).
14
<PAGE>
(g)(13) Custodian Fee Schedule dated October 27, 1999 -
Tax-Managed International Value, International Value II
and Emerging Markets Value Portfolios (submitted
electronically herewith).
(h)(1) Transfer Agency Agreement dated October 12, 1988 between
the Fund and State Street Bank and Trust Company
(supplied by Pre-Effective Amendment No. 2 and submitted
electronically by Post-Effective Amendment No. 16).
(h)(2) Amendment to the Transfer Agency Agreement dated April
30, 1990 (supplied by Post-Effective Amendment No. 4 and
submitted electronically by Post-Effective Amendment No.
16).
(h)(3) Second Amendment to the Transfer Agency Agreement dated
March 18, 1992 (supplied by Post-Effective Amendment No.
7 and submitted electronically by Post-Effective
Amendment No. 16).
(h)(4) Third Amendment to the Transfer Agency Agreement dated
April 19, 1994 (supplied by Post-Effective Amendment No.
10 and submitted electronically by Post-Effective
Amendment No. 16).
(h)(5) Fourth Amendment to Transfer Agency Agreement dated
August 21, 1995 (supplied by Post-Effective Amendment
No. 12 and submitted electronically by Post-Effective
Amendment No. 16).
(h)(6) Fifth Amendment to Transfer Agency Agreement dated July
18, 1996 (submitted electronically by Post-Effective
Amendment No. 15).
(h)(7) Sixth Amendment to Transfer Agency Agreement dated
February 22, 1999 (submitted electronically herewith).
(h)(8) Seventh Amendment to Transfer Agency Agreement dated May
3, 1999 (submitted electronically herewith).
15
<PAGE>
(h)(9) Transfer Agency Fee Schedule dated July 21, 1999 -
Government Short Duration, Short Duration Plus,
Diversified Municipal, Intermediate Duration, New York
Municipal, California Municipal, Tax-Managed
International Value, Short Duration California
Municipal, Short Duration Diversified Municipal, Short
Duration New York Municipal, Emerging Markets Value and
International Value II Portfolios (submitted
electronically herewith).
(h)(10) Securities Lending Agreement dated July 17, 1996 between
the Fund, on behalf of the International Value Portfolio
and State Street Bank and Trust Company and Amendment
dated September 30, 1996 (submitted electronically by
Post-Effective Amendment No. 15).
(h)(10)(a) Second Amendment to Securities Lending Agreement dated
May 29, 1997 (submitted electronically by Post-Effective
Amendment No. 16).
(h)(10)(b) Third Amendment to Securities Lending Agreement dated
May 11, 1998 (submitted electronically by Post-Effective
Amendment No. 17).
(h)(10)(c) Fourth Amendment to Securities Lending Agreement dated
August 10, 1998 (submitted electronically by
Post-Effective Amendment No. 17).
(h)(10)(d) Fifth Amendment to Securities Lending Agreement dated
April 21, 1999 (submitted electronically herewith).
(h)(10)(e) Securities Lending Agreement dated April 30, 1999
between the Fund, on behalf of the International Value
Portfolio II and State Street Bank and Trust Company
(submitted electronically herewith).
(i)(1) 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
and submitted electronically by Post-Effective Amendment
No. 16).
16
<PAGE>
(i)(2) Opinion of Counsel dated May 2, 1990 - California
Municipal Portfolio (supplied Post-Effective Amendment
No. 4 and submitted electronically by Post-Effective
Amendment No. 16).
(i)(3) Opinion of Counsel dated March 30, 1992 - International
Value Portfolio (supplied by Post-Effective Amendment
No. 7 and submitted electronically by Post-Effective
Amendment No. 16).
(i)(4) 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 and submitted electronically by
Post-Effective Amendment No. 16).
(i)(5) Opinion of Counsel dated September 25, 1995 - Emerging
Markets Value Portfolio (supplied by Post-Effective
Amendment No. 12 and submitted electronically by
Post-Effective Amendment No. 16).
(i)(6) Opinion of Counsel dated November 16, 1998 -
International Value Portfolio II (submitted
electronically by Post-Effective Amendment No. 17).
(j) Consent of Independent Accountants (submitted
electronically herewith).
(k) Omitted Financial Statements - Not applicable.
(l) Purchase Agreement dated October 12, 1988 (supplied by
Pre-Effective Amendment No. 2 and submitted
electronically by Post-Effective Amendment No. 16).
(m) Rule 12b-1 Plan - Not applicable.
(n) Rule 18f-3 Plan - Not applicable.
Item 24. Persons Controlled By or Under Common Control with
Fund. None.
17
<PAGE>
Item 25. 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 (b) 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, 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 Fund 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 Fund pursuant to the foregoing provisions, or otherwise, the Fund
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as
18
<PAGE>
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 Fund
of expenses incurred or paid by a director, officer or controlling person of the
Fund in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person, the Fund 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 Fund 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 Fund against the cost of
indemnification payments to officers and directors under certain circumstances.
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 Fund 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
19
<PAGE>
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 26. Business and Other Connections of Investment Adviser.
See "Management of the Fund" in the Statement of Additional
Information constituting Part B of this Registration Statement and incorporated
herein by reference and "Management, Organization and Capital Structure" in the
Regular and Institutional Services Prospectuses constituting Parts A-1, A-2 and
A-3 of this Registration Statement, respectively, and incorporated herein by
reference.
Item 27. Principal Underwriters
(a) Sanford C. Bernstein & Co., Inc. is the Distributor for no
investment company other than the Fund.
(b)
Name and Positions and Positions and
Principal Business Offices with Offices with
Address Underwriter Fund
- ------------------ ------------- -------------
Lewis A. Sanders* Chairman of the
Board, Chief Executive
Officer
Roger Hertog* President and Chief President,
Operating Officer Treasurer and
Director
Andrew S. Adelson* Senior Vice President, Senior Vice
Chief Investment President &
Officer - International Director
Equities
Kevin R. Brine* Senior Vice President -
Global Asset Management
Services
Charles C. Cahn, Jr.* Senior Vice President,
Director of Global Fixed
Income
Marilyn Goldstein Fedak* Senior Vice President,
Chief Investment
Officer - U.S. Equities
20
<PAGE>
Name and Positions and Positions and
Principal Business Offices with Offices with
Address Underwriter Fund
- ------------------ ------------- -------------
Arthur W. Fried Director
1 Rue Pedro-Meylan
1208 Geneva
Switzerland
Michael L. Goldstein* Senior Vice President -
Chief Investment Strategist
Thomas S. Hexner* Senior Vice President -
Private Client Services
Gerald M. Lieberman* Senior Vice President -
Finance and Administration
Jean Margo Reid* Senior Vice President, Secretary
General Counsel
Francis H. Trainer, Jr.* Senior Vice President, Senior Vice
Chief Investment President
Officer - Fixed Income
- -------------------
* Business Address is 767 Fifth Avenue
New York, New York 10153
(c) The Fund has no principal underwriter who is not an affiliated
person of the Fund.
Item 28. 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 North Lexington Avenue, White Plains, NY 10601
and 767 Fifth Avenue, New York, New York 10153, except that some records
pursuant to Rule 31a-1(b)are maintained at the offices of State Street Bank and
Trust Company, 1776 Heritage Drive and 2 Heritage Drive, North Quincy,
Massachusetts 02171, the Fund's Transfer Agent, and some records pursuant to
Rule 31a-1(b)(4) are maintained at the offices of Swidler Berlin Shereff
Friedman LLP, 919 Third Avenue, New York, New York 10022, counsel to the Fund.
Item 29. Management Services - Not applicable.
Item 30. Undertakings - Not Applicable.
21
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act and the Investment
Company Act, the Fund 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 26th day of November, 1999.
Sanford C. Bernstein Fund, Inc.
By: s/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
- --------- ----- ----
s/Roger Hertog President November 26, 1999
(Principal
Executive
Officer),
Treasurer,
(Principal
Financial and
Accounting
Officer) and
Director
s/Andrew S. Adelson Senior Vice November 26, 1999
President
and Director
s/Arthur Aeder Director November 26, 1999
s/Peter L. Bernstein Director November 26, 1999
s/Theodore Levitt Director November 26, 1999
s/William Kristol Director November 26, 1999
<PAGE>
Index to Exhibits
Exhibit No. Description
- ----------- -----------
(a)(11) Articles of Amendment of the Fund dated April 20, 1999.
(a)(12) Articles Supplementary of the Fund dated May 24, 1999.
(d)(1)(h) Investment Management Agreement dated February 22, 1999 between
the Fund, on behalf of the International Value Portfolio II.
(d)(1)(i) Amendment No. 2 to Investment Management Agreement dated February
22, 1999 between the Fund, on behalf of the International Value
Portfolio and Bernstein.
(d)(1)(j) Amendment No. 3 to Investment Management Agreement dated April
30, 1999 between the Fund, on behalf of the International Value
Portfolio and Bernstein.
(d)(2)(e) Shareholder Servicing and Administrative Agreement dated February
22, 1999 between the Fund on behalf of the International Value
Portfolio II and Bernstein.
(d)(2)(f) Amendment No. 1 to Shareholder Servicing and Administrative
Agreement dated April 30, 1999 Between the Fund, on behalf of the
International Value Portfolio and Bernstein.
(e)(6) Distribution Agreement dated February 22, 1999 between the Fund
on behalf of the International Value Portfolio II and Bernstein.
(e)(7) Amendment No. 1 to Distribution Agreement dated April 30, 1999
between the Fund, on behalf of International Value Portfolio and
Bernstein.
(g)(11) Ninth Amendment to the Custodian Contract dated February 22,
1999.
(g)(12) Tenth Amendment to the Custodian Contract dated February 22,
1999.
(g)(13) Custodian Fee Schedule dated October 27, 1999 - Tax-Managed
International Value, Emerging Markets Value and International
Value Portfolio II.
<PAGE>
Exhibit No. Description
- ----------- -----------
(h)(7) Sixth Amendment to Transfer Agency Agreement dated February 22,
1999
(h)(8) Seventh Amendment to Transfer Agency Agreement dated May 3, 1999.
(h)(9) Transfer Agency Fee Schedule dated July 21, 1999 - Government
Short Duration, Short Duration Plus, Diversified Municipal,
Intermediate Duration, New York Municipal, California Municipal,
Tax-Managed International Value, Short Duration California
Municipal, Short Duration Diversified Municipal, Short Duration
California Municipal, Short Duration New York Municipal, Emerging
Markets Value and International Value II Portfolios.
(h)(10)(d) Fifth Amendment to Securities Lending Agreement dated April 21,
1999.
(h)(10)(e) Securities Lending Agreement dated April 30, 1999 between the
Fund, on behalf of the International Value Portfolio II and State
Street Bank and Trust Company.
(j) Consent of Independent Accountants.
<PAGE>
SANFORD C. BERNSTEIN FUND, INC.
ARTICLES OF AMENDMENT
THIS IS TO CERTIFY THAT:
FIRST: The Charter, as supplemented by Articles Supplementary, of
Sanford C. Bernstein Fund, Inc., a Maryland corporation, having its principal
office c/o Prentice-Hall Corporation Maryland, 11 East Chase Street, Baltimore,
Maryland 21202 (the "Corporation"), is hereby amended, effective May 3, 1999, by
changing the name of the class of shares previously established and designated
as the Bernstein International Value Portfolio to the Bernstein Tax-Managed
International Value Portfolio.
SECOND: The amendment to the Charter as set forth above was approved by
a majority of the entire Board of Directors and is limited to a change expressly
permitted by Section 2-605 of the Maryland General Corporation Law to be made
without action by the stockholders.
THIRD: 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 of Amendment in the Corporation's name and on its behalf
and acknowledges that these Articles of Amendment 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 of Amendment are true in all material respects and that this
statement is made under the penalties of perjury.
IN WITNESS WHEREOF, these Articles of Amendment have been executed on
behalf of Sanford C. Bernstein Fund, Inc. this 20th day of April, 1999.
SANFORD C. BERNSTEIN FUND, INC.
By:
------------------------
Roger Hertog, President
Attest:
[Seal]
- --------------------------
Jean Margo Reid, Secretary
<PAGE>
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, 11 East
Chase Street, Baltimore, Maryland 21202 (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 150,000,000 shares
Bernstein Intermediate Duration 250,000,000 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 400,000,000 shares
Bernstein Emerging Markets Value 100,000,000 shares
<PAGE>
Bernstein International Value II 300,000,000 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 and par value 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 24th day of May, 1999.
SANFORD C. BERNSTEIN FUND, INC.
By:
----------------------------
Roger Hertog, President
Attest:
[Seal]
- -------------------------
Jean Margo Reid, Secretary
<PAGE>
SANFORD C. BERNSTEIN FUND, INC.
INVESTMENT MANAGEMENT AGREEMENT
BERNSTEIN INTERNATIONAL VALUE PORTFOLIO II
INVESTMENT MANAGEMENT AGREEMENT, dated as of February 22, 1999 between
SANFORD C. BERNSTEIN FUND, INC., a Maryland Corporation, (the "Fund"), on behalf
of the Bernstein International Value Portfolio II (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 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
<PAGE>
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. 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
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 the Adviser, promptly
after the end of each month:
2
<PAGE>
(a) A fee assessed at an annual rate of 1% of the Portfolio's average
daily net assets that is up to, but not exceeding, $1,000,000,000; and
(b) A fee assessed at an annual rate of .90 of 1% of the amount of the
Portfolio's average daily net assets that exceeds $1,000,000,000.
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).
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.
3
<PAGE>
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 99.(d)(1)(i)
SANFORD C. BERNSTEIN FUND, INC.
AMENDMENT NO. 2 TO INVESTMENT MANAGEMENT AGREEMENT
AMENDMENT NO. 2, dated as of February 22, 1999, between SANFORD C.
BERNSTEIN FUND, INC., a Maryland Corporation (the "Fund"), on behalf of the
Bernstein International Value Portfolio (the "Portfolio"); and SANFORD C.
BERNSTEIN & CO., INC., a New York corporation (the "Adviser" or "Bernstein").
Pursuant to the Investment Management Agreement dated as of March 18,
1992 (as amended from time to time, the "Investment Management Agreement")
between the Fund, on behalf of the Portfolio, and the Adviser, the Fund, on
behalf of the Portfolio, has agreed to compensate the Adviser for the services
it performs for, and the facilities and personnel it provides to, the Portfolio.
The Adviser and the Fund, on behalf of the Portfolio, wish to amend the
Investment Management Agreement to modify such compensation. Accordingly, the
parties hereto hereby agree as follows:
1. Section 5 of the Investment Management Agreement is hereby amended
to read in its entirety as follows:
"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 the
Adviser, promptly after the end of each month:
a) Prior to the transfer of tax-exempt shareholders to the new
International Value Portfolio II pursuant to the Portfolio Division
described in the Fund's Prospectus dated February 1, 1999 (the
"Portfolio Division"):
i) A fee assessed at annual rate of 1% of the Portfolio's average
daily net assets that is up to but not exceeding $2,000,000,000;
and
ii) A fee assesed at an annual rate of .90 of 1% of the amount of the
Portfolio's average daily net assets that exceeds $2,000,000,000.
b) Following the Portfolio Division:
i) A fee assessed at annual rate of 1% of the Portfolio's average
daily net assets that is up to but not exceeding $1,000,000,000;
and
ii) A fee assessed at an annual rate of .90 of 1% of the amount of
the Portfolio's average daily net assets that exceeds
$1,000,000,000.
<PAGE>
If the Adviser shall serve hereunder for less than the whole of any
month, the fee hereunder shall be prorated."
2. Except as herein provided, the Investment Management Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the Fund, on behalf of the Portfolio, and the
Adviser have caused this Amendment No. 2 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
<PAGE>
Exhibit 99.(d)(i)(j)
SANFORD C. BERNSTEIN FUND, INC.
AMENDMENT NO. 3 TO INVESTMENT MANAGEMENT AGREEMENT
AMENDMENT NO. 3, dated as of April 30, 1999, between SANFORD C.
BERNSTEIN FUND, INC., a Maryland Corporation (the "Fund"), on behalf of the
Bernstein International Value Portfolio (the "Portfolio"); and SANFORD C.
BERNSTEIN & CO., INC., a New York corporation (the "Adviser") to the Investment
Management Agreement dated as of March 18, 1992 (as amended from time to time,
the "Investment Management Agreement") between the Fund, on behalf of the
Portfolio, and the Adviser.
Effective May 3, 1999, the name of the Bernstein International Value
Portfolio will be changed to the Bernstein Tax-Managed International Value
Portfolio.
Accordingly, the parties hereto agree as follows:
1. Effective May 3, 1999, all references in the Investment Management
Agreement to the "Bernstein International Value Portfolio " shall be changed to
the "Bernstein Tax-Managed International Value Portfolio."
2. Except as herein provided, the Investment Management Agreement shall
remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the Fund, on behalf of the Portfolio, and the
Adviser have caused this Amendment No. 3 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
<PAGE>
Exhibit 99.(d)(2)(e)
SANFORD C. BERNSTEIN FUND, INC.
SHAREHOLDER SERVICING AND ADMINISTRATIVE AGREEMENT
BERNSTEIN INTERNATIONAL VALUE PORTFOLIO II
SHAREHOLDER SERVICING AND ADMINISTRATIVE AGREEMENT, dated as of
February 22, 1999, between SANFORD C. BERNSTEIN FUND, INC., a Maryland
Corporation (the "Fund"), on behalf of the Bernstein International Value
Portfolio II (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 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
<PAGE>
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 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; (1)
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 0.25 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, 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
2
<PAGE>
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:
-----------------------------
Jean Margo Reid, Secretary
3
<PAGE>
Exhibit 99.(d)(2)(f)
SANFORD C. BERNSTEIN FUND, INC.
AMENDMENT NO. 1 TO SHAREHOLDER SERVICING
AND ADMINISTRATIVE AGREEMENT
AMENDMENT NO. 1, dated as of April 30, 1999, between SANFORD C.
BERNSTEIN FUND, INC., a Maryland Corporation (the "Fund"), on behalf of the
Bernstein International Value Portfolio (the "Portfolio"); and SANFORD C.
BERNSTEIN & CO., INC., a New York corporation (the "Adviser") to the Shareholder
Servicing and Administrative Agreement dated as of March 18, 1992 (as amended
from time to time, the "Agreement") between the Fund, on behalf of the
Portfolio, and the Adviser.
Effective May 3, 1999, the name of the Bernstein International Value
Portfolio will be changed to the Bernstein Tax-Managed International Value
Portfolio.
Accordingly, the parties hereto agree as follows:
1. Effective May 3, 1999, all references in the Agreement to the
"Bernstein International Value Portfolio" shall be changed to the "Bernstein
Tax-Managed International Value Portfolio."
2. Except as herein provided, the Agreement shall remain unchanged and
in full force and effect.
IN WITNESS WHEREOF, the Fund, on behalf of the Portfolio, and the
Adviser have caused this Amendment No. 1 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
<PAGE>
Exhibit 99.(e)(6)
SANFORD C. BERNSTEIN FUND, INC.
DISTRIBUTION AGREEMENT
BERNSTEIN INTERNATIONAL VALUE PORTFOLIO II
AGREEMENT made as of the 22nd day of February, 1999 , between SANFORD
C. BERNSTEIN FUND, INC., a Maryland corporation (the "Fund"), on behalf of the
Bernstein International Value Portfolio II (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 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
<PAGE>
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.
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
2
<PAGE>
Administrative Agreement; (b) the fees and expenses of Directors 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; (1) 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. 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
3
<PAGE>
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 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:
---------------------------------
Jean Margo Reid, Secretary
4
<PAGE>
Exhibit 99.(e)(7)
SANFORD C. BERNSTEIN FUND, INC.
AMENDMENT NO. 1 TO DISTRIBUTION AGREEMENT
AMENDMENT NO. 1, dated as of April 30, 1999, between SANFORD C.
BERNSTEIN FUND, INC., a Maryland Corporation (the "Fund"), on behalf of the
Bernstein International Value Portfolio (the "Portfolio"); and SANFORD C.
BERNSTEIN & CO., INC., a New York corporation (the "Adviser") to the
Distribution Agreement dated as of March 18, 1992 (as amended from time to time,
the "Agreement") between the Fund, on behalf of the Portfolio, and the Adviser.
Effective May 3, 1999, the name of the Bernstein International Value
Portfolio will be changed to the Bernstein Tax-Managed International Value
Portfolio.
Accordingly, the parties hereto agree as follows:
1. Effective May 3, 1999, all references in the Agreement to the
"Bernstein International Value Portfolio" shall be changed to the "Bernstein
Tax-Managed International Value Portfolio."
2. Except as herein provided, the Agreement shall remain unchanged and
in full force and effect.
IN WITNESS WHEREOF, the Fund, on behalf of the Portfolio, and the
Adviser have caused this Amendment No. 1 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
<PAGE>
Exhibit 99.(g)(11)
NINTH AMENDMENT TO THE CUSTODIAN CONTRACT
AGREEMENT made by and between State Street Bank and Trust Company (the
"Custodian") and the Sanford C. Bernstein Fund, Inc. (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated October 12, 1988, as amended May 8, 1989, July 24, 1989, April 30, 1990,
March 18, 1992, and April 19, 1994, August 21, 1995, May 6, 1996 and September
25, 1996 (the "Custodian Contract, as amended"); and
WHEREAS, the Custodian and the Fund desire to further amend the
Custodian Contract by adding the Bernstein International Value Portfolio II (the
"Portfolio") to the list of Portfolios on whose behalf the Custodian Contract,
as amended, applies and to make certain other amendments;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, the Custodian and the Fund hereby agree as follows:
1. In accordance with Paragraph 12 of the Custodian Contract, it is
mutually agreed that the Custodian shall render services under the Custodian
Contract, as amended, to an additional series of the Fund, the Bernstein
International Value Portfolio II.
2. With respect to the securities and other assets of the Bernstein
International Value Portfolio II which are maintained outside the United States,
the Fund hereby authorizes the Custodian to employ as subcustodians the foreign
banking institutions and foreign securities depositories designated on Schedule
A hereto in accordance with the terms and provisions of the Custodian Contract.
3. Henceforth, the Fund shall use the Custodian's "Schedule A 17f-5
Approval" form to authorize Custodian to employ foreign banking institutions and
foreign securities depositories as subcustodians for the Fund and shall cease
making such authorizations on its own form of Schedule A and B.
4. Except as specifically superseded or modified herein, the terms and
provisions of the Custodian Contract shall continue to apply with full force and
effect.
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 22nd day of February, 1999.
SANFORD C. BERNSTEIN FUND, INC.
By:
-----------------------------------
Jean Margo Reid, Secretary
ATTEST:
- ---------------------------
<PAGE>
2
STATE STREET BANK AND TRUST
COMPANY
By:
-----------------------------------
Name:
Title:
ATTEST:
- ---------------------------
<PAGE>
3
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
BERNSTEIN INTERNATIONAL VALUE PORTFOLIO II
<TABLE>
<CAPTION>
Country Subcustodian(s)
- ------- ---------------
<S> <C> <C>
Australia Bank: Westpac Banking Corporation
Depository: Austraclear Limited
Reserve Bank Information and Transfer System (RITS)
Austria Bank: Erste Bank de Osterreichischen
Sparkassen AG
Depository: Oesterreichische Kontrollbank AG
(Wertpapiersammelbank Division)
Belgium Bank: Generale Bank
Depository: Caisse Interprofessionelle de
Depots et de Virements de
Titres S.A. (CIK)
Banque Nationale de Belgique
Canada Bank: State Street Company Canada
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 Finnish Central Securities
Depository (CSD)
</TABLE>
<PAGE>
4
<TABLE>
<CAPTION>
Country Subcustodian(s)
- ------- ---------------
<S> <C> <C>
France Bank: Banque Paribas
Depository: Societe Interprofessionnelle pour la
Compensation des Valeurs
Mobilieres (SICOVAM)
Germany Bank: Dresdner Bank AG
Depository: Deutsche Borse Clearing AG
(DBC)
Hong Kong Bank: Standard Chartered Bank
Depository: The Central Clearing and
Settlement System (CCASS)
The Central Money Markets Unit
(CMU)
Ireland Bank: Bank of Ireland
Depository: The Central Bank of Ireland
Securities Settlement Office
(CBISSO)
Italy Bank: Banque Paribas
Depository: Monte Titoli S.p.A.
Banca d'Italia
Japan Banks: The Daiwa Bank, Limited
The Fuji Bank, Limited
Depository: Japan Securities Depository
Center (JASDEC)
Bank of Japan Net System
Malaysia Bank: Standard Chartered Bank
Malaysia Berhad
Depository: Malaysian Central Depository
Sdn. Bhd. (MCD)
Bank Negara Malaysia,
Scripless Securities Trading and
Safekeeping Systems (SSTS)
</TABLE>
<PAGE>
5
<TABLE>
<CAPTION>
Country Subcustodian(s)
- ------- ---------------
<S> <C> <C>
Netherlands Bank: MeesPierson N.V.
Depository: Nederlands Centraal Instituut
voor Giraal Effectenverkeer B.V.
(NECIGEF)
De Nederlandsche Bank N.V.
New Zealand Bank: ANZ Banking Group (New
Zealand) Limited
Depository: New Zealand Central Securities
Depository Limited (NZCSD)
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)
Banco de Espana,
Central De Anotaciones en Cuenta (CAC)
Sweden Bank: Skandinaviska Enskilda Banken
Depository: Vardepapperscentralen VPC AB,
The Swedish Central Securities
Depository
Switzerland Bank: UBS AG
Depository: Schweizerische Effekten-Giro AG
(SEGA)
</TABLE>
<PAGE>
6
<TABLE>
<CAPTION>
Country Subcustodian(s)
- ------- ---------------
<S> <C> <C>
United
Kingdom Bank: State Street Bank and Trust
Company
Depositories: The Bank of England
The Central Gilts Office (CGO)
The Central Moneymarkets Office
(CMO)
General Depositories: The Euroclear System (Euroclear)
State Street London Limited
Cedel Bank societe anonyme
(Cedel)
State Street London Limited
</TABLE>
<PAGE>
Exhibit 99.(g)(12)
TENTH AMENDMENT TO THE CUSTODIAN CONTRACT
AGREEMENT made by and between State Street Bank and Trust Company (the
"Custodian") and the Sanford C. Bernstein Fund, Inc. (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated October 12, 1988, as amended May 8, 1989, July 24, 1989, April 30, 1990,
March 18, 1992, and April 19, 1994, August 21, 1995, May 6, 1996, September 25,
1996 and February 22, 1999 (the "Custodian Contract, as amended"); and
WHEREAS, effective May 3, 1999, the name of the Bernstein International
Value Portfolio of the Fund will be changed to the Bernstein Tax-Managed
International Portfolio;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, the Custodian and the Fund hereby agree that all references in the
Custodian Contract to the "Bernstein International Value Portfolio" are hereby
changed to the "Bernstein Tax-Managed International Value Portfolio."
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 3rd day of May, 1999.
SANFORD C. BERNSTEIN FUND, INC.
By: __________________________________
Jean Margo Reid, Secretary
ATTEST:
- --------------------------
STATE STREET BANK AND TRUST
COMPANY
By: __________________________________
Name:
Title:
ATTEST:
- ---------------------------
<PAGE>
Exhibit 99.(g)(13)
STATE STREET BANK AND TRUST COMPANY
Custodian Fee Schedule
Sanford Bernstein International Value Portfolio II
Sanford Bernstein Emerging Markets Fund
Sanford Bernstein Tax Managed International Value Portfolio
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. Holding Fees (basis points per portfolio per annum)
Group I Group II Group III Group IV Group V
- ------- -------- --------- -------- -------
Canada Denmark Australia Austria Finland
U.K. Euroclear Belgium Malaysia Thailand
Germany France Mexico Hong Kong
Japan Ireland Singapore
Netherlands Italy S. Africa
New Zealand Sweden
Norway
Switzerland
Spain
Group VI Group VII Group VIII Group IX
- -------- --------- ---------- --------
Indonesia Argentina Greece Chile
Philippines Brazil Taiwan China
S. Korea Portugal Greece
Turkey Poland
Sri Lanka
India
Israel
Venezuela
Group X
- ----------
Bangladesh
Columbia
India
Israel
Pakistan
Peru
Uruguay
Venezuela
Group I Group II Group III Group IV Group V Group VI
- ------- -------- --------- -------- ------- --------
2.0 3.0 5.0 8.0 10.0 15.0
Group VII Group VIII Group IX Group X
- --------- ---------- -------- --------
20.0 25.0 30.0 40.0
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
<PAGE>
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
*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 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
<PAGE>
Interest Rate Futures - no security movement $ 8.00
Monitoring for calls and processing coupons -
for each coupon issue held - monthly charge $ 5.00
Principal reduction payments per paydown $10.00
Dividend charges (for items held at the
request of traders over record date in
street form) $50.00
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, Adjustable Rate
Preferred Stocks via IDSI $ 6.00
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.
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
<PAGE>
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 31st) will not be carried
forward.
SANFORD C. BERNSTEIN & CO., INC.
By: Michael T. Borgia, Senior Vice President
Date: 10/27/99
STATE STREET BANK AND TRUST CO.
By: Jeff D. Conway, Vice President
Date: 10/22/99
<PAGE>
Exhibit 99.(h)(7)
SIXTH AMENDMENT TO THE TRANSFER AGENCY AGREEMENT
AGREEMENT made by and between State Street Bank and Trust Company (the
"Transfer Agent") and the Sanford C. Bernstein Fund, Inc. (the "Fund").
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, August 21, 1995 and July 16, 1996 (the "Transfer Agency
Agreement"); and
WHEREAS, the Transfer Agent and the Fund desire to amend the Transfer
Agency Agreement by adding the Bernstein International Value Portfolio II (the
"Portfolio") to the list of Portfolios on whose behalf the Transfer Agency
Agreement applies;
NOW, THEREFORE, in consideration of the premises and covenants contained herein,
the Transfer Agent and the Fund hereby agree as follows:
In accordance with Article 8 of the Transfer Agency Agreement, it is
mutually agreed that the Transfer Agent shall render services under the Transfer
Agency Agreement to an additional series of the Fund, the Bernstein
International Value Portfolio II.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 22nd day of February, 1999.
SANFORD C. BERNSTEIN FUND, INC.
By:
----------------------------------
Jean Margo Reid, Secretary
ATTEST:
- ----------------------
STATE STREET BANK AND TRUST COMPANY
By:
----------------------------------
Name:
Title:
ATTEST:
- ----------------------
Print Name
<PAGE>
Exhibit 99.(h)(8)
SEVENTH AMENDMENT TO THE TRANSFER AGENCY AGREEMENT
AGREEMENT made by and between State Street Bank and Trust Company (the
"Transfer Agent") and the Sanford C. Bernstein Fund, Inc. (the "Fund").
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, August 21, 1995, July 16, 1996 and February 22, 1999 (the
"Transfer Agency Agreement"); and
WHEREAS, effective May 3, 1999, the name of the Bernstein International
Value Portfolio of the Fund will be changed to the Bernstein Tax-Managed
International Value Portfolio;
NOW, THEREFORE, in consideration of the premises and covenants
contained herein, the Transfer Agent and the Fund hereby agree that in
accordance with Paragraph 10 of the Transfer Agency Agreement, all references in
the Transfer Agency Agreement to the "Bernstein International Value Portfolio"
are hereby changed to the "Bernstein Tax-Managed International Value Portfolio."
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 3rd day of May, 1999.
SANFORD C. BERNSTEIN FUND, INC.
By:
-------------------------------
Jean Margo Reid, Secretary
ATTEST:
- ---------------------
STATE STREET BANK AND TRUST COMPANY
By:
-------------------------------
Name:
Title:
ATTEST:
- ----------------------
Print Name
<PAGE>
Exhibit (h)(9)
State Street Bank and Trust Company
Fee Schedule for Services under Transfer Agency Agreement
Sanford C. Bernstein Fund, Inc.
General: Fees for all services under the Transfer Agency Agreement are based on
an annual per shareholder account charge for account maintenance plus
out-of-pocket expenses. Annual maintenance charges are given below provided that
the minimum maintenance charge per portfolio is $1,800/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 that an
account opens or closes.
Daily Dividend Fund
Basic annual per account fee $10.00
This includes the processing of 8 share
transaction per account
Any manual share transfer 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 Account Record Maintenance per
Closed 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 for mass
mailings is due seven days in advance of the mailing date.
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 office.
Sanford C. Bernstein Fund, Inc.
By: Michael Borgia
Title: Senior Vice President
Date: July 21, 1999
State Street Bank and Trust Co.
By: Ronald E. Logue
Title: Vice Chairman
Date: July 16, 1999
<PAGE>
Exhibit 99.(h)(10)(d)
FIFTH AMENDMENT TO
SECURITIES LENDING AUTHORIZATION AGREEMENT
FIFTH AMENDMENT dated as of April 21, 1999 between STATE
STREET BANK AND TRUST COMPANY ("State Street") and SANFORD C. BERNSTEIN FUND,
INC., on behalf of the International Value Portfolio (in such capacity, the
"Client").
WHEREAS, State Street and the Client are party to a Securities
Lending Authorization Agreement dated as of the 17th day of July, 1996 (as
amended from time to time, 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;
WHEREAS, effective May 3, 1999 the name of the International
Value Portfolio of the Sanford C. Bernstein Fund, Inc. shall be changed to the
Tax-Managed International Value Portfolio;
WHEREAS, State Street and Client wish to amend Schedule 7.3-A
to the Agreement, which lists the Approved Repo Counterparties and identifies
which Approved Repo Counterparties are the Restricted Repo Counterparties;
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Portfolio Change of Name. Effective May 3, 1999:
(a) The definition of "Client" in the first paragraph of the
Agreement and in all Exhibits and Schedules thereto shall be amended in
its entirety to read "Sanford C. Bernstein Fund, Inc., on behalf of the
Tax-Managed International Value Portfolio".
(b) The definition of "Portfolio" contained in paragraph (k)
of Section 13 of the Agreement shall be amended in its entirety to read
as follows:
"'Portfolio' means the Tax-Managed International
Value Portfolio of the Sanford C. Bernstein Fund, Inc."
2. Change of Approved Repo Counterparties. Schedule 7.3-A to
the Agreement shall be amended in its entirety to read as set forth on
Exhibit A hereto.
3. Notices. The contacts for Client in Paragraph 15 of the
Agreement shall be amended in their entirety to read as follows:
<PAGE>
If to Client: Sanford C. Bernstein Fund Inc.
c/o Sanford C. Bernstein & Co., Inc.
1 North Lexington Avenue
White Plains, NY 10601
Attention: Mike Borgia, Senior Vice President
Telephone: (914) 933-2333
Facsimile: (914) 993-3201
Attention: Rich Goodman, Mutual Fund Accounting
Telephone: (914) 993-2310
Facsimile: (914) 993-2600
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
4. Miscellaneous. Capitalized terms used herein but not
defined herein shall have the meaning assigned thereto in the
Agreement. Except as herein provided, the Agreement shall remain
unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Fifth
Amendment to be duly executed and delivered as of the day and year first above
written.
SANFORD C. BERNSTEIN FUND, INC., on
behalf of the International Value Portfolio
By
-----------------------------------
Name: Jean Margo Reid
Title: Secretary
STATE STREET BANK AND TRUST COMPANY
By
-----------------------------------
Name:
Title:
2
<PAGE>
EXHIBIT A
Schedule 7.3-C
APPROVED REPO COUNTERPARTIES
ABN-AMRO Inc
Bear Stearns Securities Corp.
Chase Securities Inc.
CIBC Oppenheimer Corporation
Citibank, NA
Deutsche Bank Securities Inc.
Donaldson Lufkin & Jenrette Securities Corp.
First Chicago Capital Markets Inc.
Greenwich Capital Markets Inc.
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Lehman Brothers Inc.
Lehman Commercial Paper Inc.
Merrill Lynch Govt. Securities Inc.
Merrill Lynch Pierce Fenner & Smith Inc.
Morgan Stanley & Co.
NationsBanc Montgomery Securities LLC
Paine Webber Inc.
Prudential Securities Inc.
Salomon Brothers Inc.
Restricted Repo Counterparties:
Credit Suisse First Boston Corporation
Dresdner Kleinwort Benson
SG Cowen Securities Corporation
Societe Generale
Warburg Dillon Reed LLC
<PAGE>
Exhibit 99.(h)(10)(e)
SECURITIES LENDING AUTHORIZATION AGREEMENT
Between
SANFORD C. BERNSTEIN FUND, INC. ON
BEHALF OF THE INTERNATIONAL VALUE PORTFOLIO II
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS PAGE
1. APPOINTMENT OF STATE STREET 1
2. SECURITIES TO BE LOANED 1
3. BORROWERS 1
4. SECURITIES LENDING AGREEMENTS 3
5. LOANS OF AVAILABLE SECURITIES 3
6. DISTRIBUTIONS ON AND VOTING RIGHTS WITH
RESPECT TO LOANED SECURITIES 4
7. COLLATERAL 4
8. COMPENSATION FOR THE CLIENT AND STATE
STREET 6
9 ADMINISTRATIVE FEE DISCLOSURE 7
10. RECORDKEEPING AND REPORTS 7
11. STANDARD OF CARE 7
12. REPRESENTATIONS AND WARRANTIES 8
13. DEFINITIONS 9
14. CONTINUING AGREEMENT; TERMINATION;
REMEDIES 10
15. NOTICES 10
16. MISCELLANEOUS 11
17. SECURITIES INVESTORS PROTECTION ACT 12
18. LIMITED RECOURSE 12
19. INDEMNIFICATION 12
20. MODIFICATION 14
EXHIBITS AND SCHEDULES
EXHIBIT 3.1
SCHEDULE 3.1
SCHEDULE 7.1
SCHEDULE 7.2
SCHEDULE 7.3
SCHEDULE 7.3-A
SCHEDULE 7.3-C
SCHEDULE 7.4
SCHEDULE 10.1
SCHEDULE 10.2
<PAGE>
SECURITIES LENDING AUTHORIZATION AGREEMENT
Agreement dated the 30th day of April, 1999 between SANFORD C. BERNSTEIN FUND,
INC., organized and existing under the laws of the State of Maryland, on behalf
of the International Value Portfolio II (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 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
Financial Markets Group of State Street; provided, however, if Available
Securities are loaned to the Financial
1
<PAGE>
Markets Group of State Street, 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 Financial Markets Group 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 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 Financial Markets Group, 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
Financial Markets Group.
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.
2
<PAGE>
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.
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 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.
3
<PAGE>
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 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
4
<PAGE>
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 securities issued or guaranteed by the United States government or its
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 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.
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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
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.
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.
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<PAGE>
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.
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
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<PAGE>
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 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:
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<PAGE>
(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.
(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 II 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 Numbers" 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 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:
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If to Client:
Sanford C. Bernstein Fund, Inc.
c/o Sanford C. Bernstein & Co., Inc.
One North Lexington Avenue
White Plains, New York 10601
Attention: Mike Borgia
Telephone: (914) 993-2333
Facsimile: (914) 993-3201
Attention: Rich Goodman, Mutual Fund Accounting
Telephone: (914) 993-2310
Facsimile: (914) 993-2600
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
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, 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
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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.
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
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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.
(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.
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 II
By: Jean Margo Reid
Title: Secretary
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STATE STREET BANK AND TRUST COMPANY
By: J.L. Carty
Title: Senior Vice President
14
<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 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.
<PAGE>
SECURITIES LOAN AGREEMENT
Between
STATE STREET BANK AND TRUST AND COMPANY,
as Lender's Agent
And
STATE STREET BANK AND TRUST COMPANY, as Borrower
TABLE OF CONTENTS PAGE
1. TERMS OF LOAN 1
2. DELIVERIES AND TREATMENT OF
BORROWED SECURITIES 3
3. DELIVERIES AND TREATMENT OF
COLLATERAL 4
4. MARKS TO MARKET; MAINTENANCE
OF COLLATERAL 5
5. FEES 6
6. REPRESENTATIONS OF THE PARTIES 8
7. COVENANTS 8
8. TERMINATION OF LOAN WITHOUT DEFAULT 9
9. EVENTS OF DEFAULT 10
10. LENDER'S REMEDIES ON BORROWER'S
DEFAULT 11
11. BORROWER'S REMEDIES ON LENDER'S
DEFAULT 12
12. DEFINITIONS 12
13. INDEMNIFICATION 14
14. WAIVERS, GENERAL 14
15. STANDARD OF CARE 14
16. CONTINUING AGREEMENT; TERMINATION;
REMEDIES 14
17. NOTICES 15
18. TIME 15
19. SECURITIES CONTRACTS 15
20. DECLARATION OF TRUST 16
21. MISCELLANEOUS 16
22. MODIFICATION 16
<PAGE>
SECURITIES LOAN AGREEMENT
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 Financial Markets Group, 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 Securities (as
defined herein), against the receipt of collateral as specified herein.
Capitalized terms not otherwise defined shall have the meanings ascribed to them
in Section 12.
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 (hereinafter the
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 (as defined herein) delivered by
Borrower.
NOW, THEREFORE, Lender's Agent and Borrower agree as follows:
1. Terms of Loan.
1.1 Upon request of Borrower, Lender's Agent may, from time to time, in its
discretion and on behalf of the Lenders, lend Securities to Borrower against the
receipt of Collateral delivered by Borrower. Lender's Agent and Borrower shall
agree on the terms of each Loan, including the identity and amount of the
securities to be loaned, the basis of compensation, and the type 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
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<PAGE>
misconduct. Lender's Agent will send Borrower monthly statements of outstanding
Loans showing Loan activity which Borrower agrees to 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 Securities hereunder on behalf of the respective Lenders
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 (a) by delivering to borrower certificates representing
the Borrowed Securities together with such transfer documents as are customary
for such securities, if any, (b) by causing the Borrowed Securities to be
credited to Borrower's Account and debited from the Relevant Lender's Account at
a clearing organization agreed to by the Parties, 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, or (c) by another method customary for the delivery of such
Securities at the Securities Trading Location and as agreed to by the parties.
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
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<PAGE>
Borrower, including, without limitation, (a) all cash dividends, (b) all other
distributions of cash or property, (c) stock dividends and bonus issues, (d)
securities received as a result of split-ups of the Borrowed Securities and
distributions in respect thereof, (e) interest payments, (f) in the case of a
rights issue, the Borrowed Securities together with the securities allotted
thereon; (g) in the case of redemptions, a sum of money equivalent to the
proceeds of redemption; (h) any rights relating to conversion, sub-division,
consolidation, preemption, rights arising under a takeover offer or other
rights, including those requiring election by the holder for the time being of
such securities which become exercisable prior to the redelivery of Borrowed
Securities, in which event the Lender may, within a reasonable time before the
latest time for the exercise of the right or option give written notice to the
Borrower that on redelivery of securities it wishes to receive redelivered
Borrowed Securities in such form as if the right is exercised or, in the case of
a right which may be exercised in more than one manner, is specified in such
written notice; (i) in the case of a capitalized issue, the Borrowed Securities
together with the securities allotted by way of a bonus thereon; (j) in the case
of any event similar to any of the foregoing, the Borrowed Securities together
with or replaced by a sum of money or securities equivalent to that received in
respect of such Borrowed Securities resulting from such event; and (k) all
rights to purchase additional securities.
Cash dividends and other distributions shall be paid gross of any foreign
withholding taxes. Any cash distribution made on or in respect of the Borrowed
Securities which Lender's Agent is entitled to receive pursuant to this Section
shall be paid to Lender's Agent for the Account of the Relevant Lender by
Borrower on payable, maturity, or redemption date. Non-cash distributions other
than those in the nature of stock splits or stock dividends shall be paid to
Lender's Agent for the Account of the Relevant Lender as soon as possible under
the best efforts of Borrower. Accordingly, Borrower shall either (i) redeliver
the Borrowed Securities in time to allow the respective Relevant Lender to
participate in rights, fees or other benefits which attach to the Borrowed
Securities as described in this Section 2; or (ii) exercise such rights, fees or
other benefits as directed by Lender's Agent. Furthermore, in the event a
re-registration process is necessary in order to transfer such rights, fees or
other benefits, and a Loan is terminated prior to the applicable record/payable
date but not sufficiently prior to the record/payable date to enable Lender's
Agent to re-register the Borrowed Securities in its own name, Borrower is to
forward, and/or act on Lender's Agent's behalf in accordance with Lender Agent's
instructions with respect to, all rights, fees and other benefits on the
Borrowed Securities.
2.4 With respect to Section 2.3(k) above, Lender's Agent may, at its sole
option, (A) direct Borrower to purchase additional securities or (B) to
terminate the Loan of specified securities so that Lender's Agent may exercise
its purchase rights. In the case of option (A) under the next preceding
sentence, Borrower may elect either (i) to retain such additional securities as
part of its Loan, in which case Lender's Agent and Borrower shall make such
arrangements as are necessary to provide that Borrower has adequate funds to
purchase such additional securities and that the Loan of such additional
securities is collateralized as required herein; or (ii) to deliver such
additional securities
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to Lender's Agent (on the date specified by Lender's Agent). In the case of
option (B) under the second preceding sentence, the applicable provisions of
this Agreement regarding termination of Loans shall apply.
Non-cash distributions which are in the nature of stock splits or stock
dividends and which are received by Borrower shall be added to the Borrowed
Securities and shall be considered such for all purposes, except that (i) if the
Borrowed Securities have been returned to Lender's Agent or if Borrower is in
Default hereunder, Borrower shall forthwith deliver any such non-cash
distributions to Lender's Agent; and (ii) Lender's Agent may direct Borrower,
upon no less than six Business Days' notice prior to the date of such a non-cash
distribution, to deliver the same to Lender's Agent on the Business Day next
following the date of such non-cash distribution.
3. Deliveries and Treatment of Collateral.
3.1 Simultaneous to or prior 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 more of the following methods, as
agreed to by the parties pursuant to Section 1.1: (a) Borrower delivering
Securities to Lender's Agent, (b) Borrower delivering funds to the Lender's
Agent for the Account of the Relevant Lender, (c) Borrower transferring funds by
wire, (d) Borrower delivering to Lender Agent, or causing to be credited to
Lender Agent's account at a Clearing Organization, a certified or official bank
check representing New York Clearing House funds, (e) Borrower delivering to
Lender's Agent an irrevocable letter of credit issued by mutually acceptable
"bank" (as defined in Section 3(a)(6)(A)-(C) of Securities Exchange Act of 1934
) that is not Affiliate of Borrower, (f) Borrower delivering U.S. Securities
through the Federal Reserve book-entry system to the account of Lender's Act at
the Federal Reserve Bank of Boston, (g) Borrower delivering federal funds to the
Lender Agent's account at the Federal Reserve Bank of Boston or at a Clearing
Organization, (h) Borrower delivering non-cash Collateral through any Clearing
Organization agreed to by the parties, and/or (i) Borrower delivering to
Lender's Agent, one or more other types of Collateral as the Parties may agree.
As further security for the due and punctual performance by Borrower of any and
all of its obligations to Lender's Agent hereunder, Borrower hereby grants and
transfers to Lender's Agent a lien upon and a security interest in any and all
property (together with the proceeds thereof) in which the Borrower at any time
has rights and which at any time has been delivered, transferred, or deposited
in or credited to an account with, the Lender's Agent or otherwise at any time
is in the possession or under the control or recorded on the books of the
Lender's Agent, provided such property is delivered as collateral for a Loan
hereunder or under any other loan agreement with the Relevant Lender, including
(without limitation) any property which may be in transit by mail or carrier for
such purpose, or converted or affected by any documents in the Lender Agent's
possession for such purpose.
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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 and its proceeds. 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 maturity
of any U.S. Security (as defined in Section 12) 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; provided however that the amount, type or value of such distribution
which Borrower is entitled to receive hereunder shall not exceed the amount,
type and value received by State Street or its agents. Any distributions made on
or in respect of such Collateral which Borrower is entitled to receive under
this section shall be paid in the same currency as such distribution is paid by
the issuer 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
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committed a Default at the time of such receipt. Cash dividends and other
distributions shall be paid gross of any withholding taxes. Borrower
acknowledges that distributions on non-cash Collateral may be afforded different
treatment than Borrower would have been so entitled had it not delivered the
Collateral to Lender's Agent, and agrees not to claim Lender's Agent or any
Relevant Lender for any disparate treatment as a result of its receiving the
distribution from Lender's Agent (as opposed to a distribution from issuer
directly).
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 the Margin Percentage 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. Except as provided below, such delivery is to be made by the close of
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, or on the next Business Day if agreed
to between the parties. 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. If the transfer of Collateral is to occur outside the
United States, such delivery is to be made not later than the time on such day
that is customary in such location.
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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.
Except as provided below, 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 or on the next Business Day if agreed to between
the parties. 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. If the
transfer of Collateral is to occur outside the United States, such delivery is
to be made not later than the time on such day that is customary in such
location.
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. In the event Securities other than U.S. Securities are borrowed
hereunder, the amount of such loan rebate fee shall be computed (a) from the
first Business Day next following the day that cash Collateral is delivered to
Lender's Agent to the extent that such Loan is collateralized by cash through a
means other than Borrower's delivery of federal funds, and (b) from the first
Business Day that cash Collateral is delivered to Lender's Agent, to the extent
that the Loan is collateralized by Borrower's delivery of federal funds.
Computation of such loan rebate fee shall be made daily, through and including
the earliest of: (i) the date that such cash Collateral is returned to Borrower,
to the extent that such Loan is collateralized by cash through a means other
than Borrower's delivery of federal funds; (ii) the date next preceding the date
such cash Collateral is returned to Borrower, to the extent that such Loan is
collateralized by Borrower's delivery of federal funds; (iii) the date of a
Default by Borrower; and (iv) 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 after such notice is given (but in no event
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for a period beyond the earliest of the dates described in clauses (i), (ii),
and (iii) of this sentence). Such loan rebate fee shall be payable before the
tenth Business Day following the rendering of a correct invoice by Borrower. In
the event U.S. Government Securities are borrowed hereunder, 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
(I) the date next preceding the date that such cash Collateral is returned to
Borrower; (II) the date of a Default by Borrower; and (III) 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, and 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 necessary costs, including any and all taxes (such as, but not limited
to, transfer taxes), duties (including, without limitation, stamp duties) and
fees (if any), with respect to any transfers hereunder of the Borrowed
Securities or Collateral shall be paid by Borrower when the same becomes due.
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
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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 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 has not been disclosed in writing to
Lender's Agent. Lender's Agent represents that it has not been informed of any
material adverse change in Lender's financial condition. 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 the
Borrower is not aware of.
7. Covenants.
7.1 To the extent that Lender's Agent has provided Borrower with written
statements identifying any of the Lenders as employee benefit plans subject to
Title 1 of the Employee Retirement Income Security Act of 1974 ("ERISA"), each
request by Borrower for a Loan shall constitute a present representation that,
except as disclosed in writing by Borrower to Lender's Agent, neither borrower
nor any Affiliate of Borrower is a "fiduciary" (within the meaning of Section
3(21) of ERISA) with respect to the assets of the Lender so identified that may
be Borrowed Securities hereunder. 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,
upon request, any of the following statements received from each Lender,
promptly upon such receipt (i) the most recent available audited statement of
such Lender's financial condition, and (ii) the most
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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, upon request all such financial information that
is subsequently delivered to Lender's Agent and any other financial information
or 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.
7.4 The Borrower covenants that it shall ensure that this Agreement and all
instruments of transfer of any Securities provided or returned pursuant to the
terms of this Agreement have been duly stamped in accordance with all applicable
legislation.
7.5 the Borrower covenants that at all times it shall ensure compliance with
those provisions of applicable law concerning the taxation of securities lending
arrangements so that Lender does not incur any unnecessary tax or capital gains
tax (other than in respect of fees payable under this Agreement) arising out of
the provision of Borrowed Securities to the Borrower and the return to Lender's
Agent of Borrowed Securities.
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 (i) in the event U.S. Securities are loaned, no
later than the close of business on the next Business Day; or (ii) in the event
Securities other than U.S. Securities are loaned, no later than the earlier of
(a) the end of the customary delivery period for such Securities, or (b) the
third Business Day following the day on which Lender gives notice of termination
of such Loan Borrower.
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 to be credited to the
Account of the Relevant Lender at the applicable Clearing Organization, or, if
Lender's Agent consents, by physical delivery to Lender of certificates
representing the Borrowed Securities. Upon
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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 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
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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 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
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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.
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 either (i) a U.S. Security, and is delivered as a Loan hereunder,
until such security is credited through the Federal Reserve book-entry system,
to the Lender's account at the Federal Reserve Bank of Boston 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; or (ii) not a U.S. Security and
which is delivered as a Loan hereunder, until the Clearing Organization credits
the Lender's accounts or the certificate for such security is delivered or
otherwise accepted back hereunder or until the security is replaced by purchase,
13
<PAGE>
except that, if any new or different security shall be exchanged for any
Borrowed Security by recapitalization, merger, consolidation or other corporate
action, such new or different security shall, effective upon such exchange, be
deemed to become a Borrowed Security in substitution for the former Borrowed
Security for which such exchange was made. For purposes of the return of
Borrowed Securities by Borrower pursuant to Section 8 or the purchase of
securities pursuant to Sections 10 or 11 hereunder, such term shall include
securities of the same issuer, class and quantity as the Borrowed Securities, as
adjusted pursuant to the preceding sentence.
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 "Clearing Organization" means any clearing agent for the transfer of
securities, the use of which is agreed to by the parties.
12.8 "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.
12.9 "Default" shall have the meaning set forth in Section 9 hereof.
12.10 "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.
12.11 "Loaned Securities" shall mean securities subject to a Loan.
12.12 "Margin Percentage" shall mean one hundred and two percent (102%) in
respect of U.S. Securities or Sovereign Debt, one hundred and five (105%) in
respects of all other Securities or such other percentage as is agreed to by the
Lender's Agent and Borrower pursuant to Section 1.1.
12.13 "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.
12.14 "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.
14
<PAGE>
12.15 "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.
12.16 "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.
12.17 "Security" means any security (as defined in the Exchange Act) which is
delivered for Loan hereunder.
12.18 "State Street" shall mean State Street Bank and Trust Company.
12.19 "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 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
15
<PAGE>
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
If to Borrower:
State Street Bank and Trust Company
Financial Markets Group
225 Franklin Street
Boston, Massachusetts 02110
Attn: Money 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
16
<PAGE>
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 contracts" 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.
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
17
<PAGE>
LENDER'S AGENT: STATE STREET BANK AND TRUST COMPANY
Officer:
Title:
Signature:
18
<PAGE>
Schedule 7.1
This Schedule is attached to and made part of the Securities Lending
Authorization Agreement, dated the 30th day of April, 1999 between SANFORD C.
BERNSTEIN FUND, INC. on behalf of the International Value Portfolio II
("Client") and STATE STREET BANK AND TRUST COMPANY ("State Street").
Acceptable Forms of Collateral
- - Cash (U.S. Currency);
- - 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
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>
EQUITIES
EQUITY TOTALS
TOTALS
</TABLE>
<PAGE>
SCHEDULE 7.2
STATE STREET BANK & TRUST CO.
P.O. BOX 1992
BOSTON, MA 02105
SECURITIES LENDING DEPARTMENT
CORP CASH
TO: EARNINGS STATEMENT
PAGE 1
<TABLE>
<CAPTION>
BILLING DATE:
BILLING PERIOD:
- ----------------------------------------------------------------------------------------------------------------------------------
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> <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>
SCHEDULE 7.2
STATE STREET BANK & TRUST CO.
P.O. BOX 1992
BOSTON, MA 02105
SECURITIES LENDING DEPARTMENT
CORP EQUITY CASH
TO: SUMMARY OF TRANSACTIONS
PAGE 1
<TABLE>
<CAPTION>
BILLING DATE:
BILLING PERIOD:
- ------------------------------------------------------------------------------------------------------------------------------------
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>
EQUITIES
EQUITY TOTALS
TOTALS
</TABLE>
<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 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 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
ABN-AMRO Inc.
Bear Stearns Securities Corp.
Chase Securities Corp.
CIBC Oppenheimer Corporation
Citibank, N.A.
Deutsche Bank Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
First Chicago Capital Markets Inc.
Goldman, Sachs & Co.
Greenwich Capital Markets Inc.
J.P. Morgan Securities Inc.
Lehman Brothers Inc.
Lehman Commercial Paper Inc.
Merrill Lynch Government Securities Inc.
Merrill Lynch Pierce Fenner & Smith Inc.
Morgan Stanley & Co. Incorporated
NationsBanc Montgomery Securities LLC
Paine Webber Inc.
Prudential Securities Inc.
Salomon Brothers Inc.
Restricted Repo Counterparties:
Credit Suisse First Boston Corporation
Dresdner Kleinwort Benson
SG Cowen Securities Corporation
Societe Generale (NY Branch)
Warburg Dillon Reed LLC
<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.
<PAGE>
3. Initiation; Confirmation; Termination
(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.
<PAGE>
(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 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 or 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 clearing corporation. Title to
all Purchased Securities shall pass to
<PAGE>
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
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 i 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>
Schedule 7.3-C
APPROVED TIME DEPOSIT COUNTERPARTIES
Restricted Time Deposit Counterparties:
Cayman Branches:
ABN-AMRO Bank NV, Cayman Branch
Barclays Bank PLC, Cayman Branch
Bank of America National Trust & Savings Association, Cayman Branch
The Bank of New York, Cayman Branch
The Bank of Nova Scotia, Cayman Branch
The Chase Manhattan Bank, N.A., Cayman Branch
Commerzbank Aktiengesellschaft, Cayman Branch
CoreStates Bank, N.A., Cayman Branch
Deutsche Bank AG, Cayman Branch
The Northern Trust Company, Cayman Branch
Republic National Bank of New York, Cayman Branch
Royal Bank of Canada, Cayman
Branch
Union Bank of Switzerland, Cayman Branch
London Branches:
Commerzbank Aktiengeseltschaft, London Branch
Credit Agricole S.A. (Caisse Nationale de Credit Agricole), London Branch
Bahamas Branches:
Canadian Imperial Bank of Commerce, Bahamas Branch
The Chase Manhattan Bank, N.A., Bahamas Branch
Citibank, N.A., Bahamas Branch
Morgan Guaranty Trust Company of New York, Bahamas Branch
National City Bank, Bahamas Branch
NationsBank, N.A., Bahamas Branch
Norwest Bank Minnesota, N.A., Bahamas Branch
The Toronto-Dominion Bank, Bahamas Branch
<PAGE>
Schedule 7.4
This Schedule is attached to and made part of the Securities Lending
Authorization Agreement, dated the 30th day of April, 1999 between SANFORD C.
BERNSTEIN FUND, INC. on behalf of the International Value Portfolio II
("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>
SETTLEMENT CODE:
TOTALS FOR
SETTLEMENT CODE:
</TABLE>
<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>
TOTALS FOR FUND
</TABLE>
<PAGE>
SCHEDULE 10.2
<TABLE>
<CAPTION>
fund act bus line settle code brokername loan date cusip shs onloan cont prince cont amt
<S> <C> <C> <C> <C> <C> <C> <C> <C>
XX01 C AUD BT SEC 1995-06-01 00:00:00.000 615573003 48,929 $2.25 $110,090.25
</TABLE>
mark amt tot amt loan rate mkt rate
$0.00 $103,375.22 5.45 5.69061
<PAGE>
Exhibit 99.(j)
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Regular and
Institutional Services Prospectuses and the Statement of Additional Information
constituting parts of this Post-Effective Amendment No. 20 to the registration
statement on Form N-1A (the "Registration Statement") of our reports dated
November 15, 1999, relating to the financial statements and financial highlights
of Bernstein Tax-Managed International Value Portfolio (formerly, Bernstein
International Value Portfolio), Bernstein International Value Portfolio II,
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 the twelve portfolios of Sanford C. Bernstein
Fund, Inc.), appearing in the September 30, 1999 Annual Report 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" in the Prospectuses and under the heading
"Custodian, Transfer Agent, Independent Accountants and Financial Statements" in
the Statement of Additional Information.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
November 15, 1999
