UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-21034
SANFORD C. BERNSTEIN FUND II, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Mark R. Manley
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: September 30, 2006
Date of reporting period: September 30, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
2
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SANFORD C. BERNSTEIN FUND II, INC.
INTERMEDIATE DURATION INSTITUTIONAL PORTFOLIO
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ANNUAL REPORT
SEPTEMBER 30, 2006
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Table of Contents
Portfolio Manager Commentary ............................................... 1
Historical Performance ..................................................... 3
Mountain Chart ............................................................. 4
Fund Expenses .............................................................. 5
Portfolio Summary .......................................................... 6
Schedule of Investments .................................................... 7
Statement of Assets and Liabilities ........................................ 15
Statement of Operations .................................................... 16
Statement of Changes in Net Assets ......................................... 17
Financial Highlights ....................................................... 18
Notes to Financial Statements .............................................. 19
Report of Independent Registered Public Accounting Firm .................... 28
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Before investing in any portfolio of the Sanford C. Bernstein Fund II, Inc., a
prospective investor should consider carefully the portfolio's investment
objectives and policies, charges, expenses and risks. These and other matters of
importance to prospective investors are contained in the Fund's prospectus, an
additional copy of which may be obtained by visiting our website at
www.bernstein.com and clicking on "Prospectuses" at the bottom of any screen or
by calling your financial adviser or by calling Bernstein's mutual fund
shareholder help line at 212.756.4097. Please read the prospectus carefully
before investing.
For performance information current to the most recent month-end, please visit
our website at www.bernstein.com and click on "Updated Fund Performance" at the
bottom of any screen.
This shareholder report must be preceded or accompanied by the Sanford C.
Bernstein Fund II, Inc. prospectus for individuals who are not shareholders of
the Fund.
You may obtain information regarding how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30,
without charge. Simply visit www.alliancebernstein.com, or go to the Securities
and Exchange Commission's web site at www.sec.gov, or call AllianceBernstein at
800.227.4618.
The Fund will file its complete schedule of portfolio holdings with the
Commission for the first and third quarters of each fiscal year on Form N-Q. The
Fund's Form N-Q is available on the Commission's website at www.sec.gov. The
Fund's Form N-Q may also be reviewed and copied at the Commission's Public
Reference Room in Washington, D.C.; information on the operation of the Public
Reference Room may be obtained by calling 800.SEC.0330.
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Investment Products Offered: o Are Not FDIC Insured o May Lose Value
o Are Not Bank Guaranteed
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Portfolio Manager Commentary
To Our Shareholders-- November 6, 2006
This report provides management's discussion of fund performance for the one
portfolio of the Sanford C. Bernstein Fund II, Inc. for the annual reporting
period ended September 30, 2006.
Bernstein Intermediate Duration Institutional Portfolio
Investment Objective and Strategy
Bernstein Intermediate Duration Institutional Portfolio (the "Portfolio") seeks
to provide safety of principal and a moderate-to-high rate of current income.
Under normal circumstances, the Portfolio will seek to maintain an average
portfolio quality minimum of A, based on ratings given to the Portfolio's
securities by nationally recognized statistical rating organizations ("NRSROs").
The Portfolio may also invest up to 25% of its total assets in fixed-income,
non-U.S. dollar-denominated foreign securities, and may invest without limit in
fixed-income, U.S. dollar-denominated foreign securities, in each case in
developed or emerging-market countries. The Portfolio may also invest up to 25%
of its total assets in fixed-income securities rated below investment grade (BB
or below) by NRSROs (commonly known as "junk bonds") and may invest up to 5% of
its total assets in fixed-income securities rated CCC. The Portfolio seeks to
maintain an effective duration of three to six years under normal market
conditions.
Investment Results
The chart on page 4 shows performance for the Bernstein Intermediate Duration
Institutional Portfolio compared with its benchmark, the Lehman Brothers
Aggregate Bond Index, for the six- and 12-month periods ended September 30,
2006.
The Portfolio underperformed its benchmark for both the six- and 12-month
periods ended September 30, 2006. The Portfolio's defensive shorter duration
positioning detracted from performance during the latter half of the six-month
period, as U.S. interest rates fell sharply in the third quarter and bond market
returns rallied. During the six-month period, an underweight position in long
corporate securities contributed positively to performance.
The Portfolio's shorter-than-benchmark duration was a positive factor for the
annual period, as interest rates along the yield curve rose for most of the
year. Exposure to hedged non-U.S. government holdings was also a positive
contributor for the year, as was the modest exposure to high yield and emerging
market debt. Additionally, the Portfolio's overweight position in mortgages and
commercial mortgage-backed securities (CMBS) also contributed positively to
performance for both periods under review.
Market Review and Investment Strategy
U.S. fixed-income returns were generally weak in the first three quarters of the
annual period, buffeted by higher interest rates and continued Federal Reserve
("Fed") rate increases. The final three months of the period, however, saw a
broad-based rally in both the fixed-income and equity markets as the economy
slowed, oil prices declined and the Fed ended its interest rate hike cycle. The
Fed raised official rates 150 basis points in quarter point increments during
the year to end the period at 5.25%. Yields across the maturity spectrum rose as
the Fed raised rates with the 10-year yield gaining 30 basis points to end the
period at 4.63%. The Treasury yield curve remained flat with the yield spread
between the two- and 30-year at only 8 basis points.
By index sector, mortgages and asset-backed securities led with each posting
returns of 4.19% and 4.16%, respectively, according to Lehman Brothers.
Mortgages benefited from relatively low volatility and muted prepayment risk,
while asset-backed securities were underpinned by strong technical demand. CMBS
returned 4.06% for the period, helped by improving delinquency trends.
Investment-grade corporates posted the weakest returns among U.S. bond sectors,
returning 3.35%, as solid fundamentals were offset by increasing event risk.
Non-U.S. government bonds fared much better than U.S. Treasuries as most central
banks outside of the U.S. held off raising interest rates through much of the
period. Global Treasuries (ex-U.S.) hedged into U.S. dollars posted an average
return of 3.43%. Non-U.S. holdings included Japan, which returned 4.92%, Sweden
at 2.72%, Mexico at 7.92% and Poland at 3.19%, most of which substantially
outperformed U.S. Treasuries on a hedged basis, according to Lehman Brothers.
(Portfolio Manager Commentary continued on next page)
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2006 Annual Report 1
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Portfolio Manager Commentary (continued)
During the annual period, the Portfolio held a shorter-than-benchmark duration
and an underweight position in U.S. government bonds. The Portfolio was also
overweighted in both mortgages and CMBS as sources of high-quality incremental
yield. Additionally, corporate exposure was reduced to a below-benchmark
position due to historically tight spreads, a flat yield curve and increased
event risk. An underweight position in longer maturity corporates was also
maintained; these securities are inherently more vulnerable to event risk. As
U.S. interest rates trended higher, hedged non-U.S. government bonds were
employed which offered an attractive yield over domestic bonds. As such,
positions were held in several countries including Japan, Mexico, Poland, Sweden
and Norway.
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2 Sanford C. Bernstein Fund II, Inc.
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Historical Performance
An Important Note About the Value of Historical Performance
The performance shown on page 4 represents past performance and does not
guarantee future results. Performance information is as of the dates shown.
Current performance may be lower or higher than the performance information
shown. You may obtain performance information current to the most recent
month-end by visiting www.bernstein.com and clicking on "Updated Fund
Performance" at the bottom of any screen.
The investment return and principal value of an investment in the Portfolio will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Before investing in any portfolio of the Sanford C.
Bernstein Fund II, Inc., a prospective investor should consider carefully the
portfolio's investment objectives, policies, charges, expenses and risks. For a
copy of the Fund's prospectus, which contains this and other information, visit
our website at www.bernstein.com and click on "Prospectuses" at the bottom of
any screen. You should read the prospectus carefully before investing.
Returns do not reflect the deduction of taxes that a shareholder would pay on
portfolio distributions or the redemption of portfolio shares. All fees and
expenses related to the operation of the Portfolio have been deducted.
During the reporting period, the Adviser waived a portion of its advisory fee or
reimbursed Bernstein Intermediate Duration Institutional Portfolio for a portion
of its expenses to the extent necessary to limit the Portfolio's expenses to
0.45%. This waiver extends through the Portfolio's current fiscal year and may
be extended by the Adviser for additional one-year terms. Without the waiver,
the Fund's expenses would have been higher and its performance would have been
lower than that shown.
Benchmark Disclosures
Neither of the following indices or averages reflects fees and expenses
associated with the active management of a mutual fund portfolio. The Lehman
Brothers Aggregate Bond Index represents the U.S. investment-grade fixed-rate
bond market, including government and credit securities, agency mortgage
pass-through securities, asset-backed securities and commercial mortgage-backed
securities. The Lipper Intermediate Bond Composite is the equal-weighted average
returns of the funds in the relevant Lipper Analytical Services category; the
average fund in a category may differ in composition from the portfolio. An
investor cannot invest directly in an index or average, and their results are
not indicative of the performance for any specific investment, including the
Portfolio.
A Word About Risk
Bernstein Intermediate Duration Institutional Portfolio:
Price fluctuation may be caused by changes in the general level of interest
rates or changes in bond credit-quality ratings. Increases in interest rates may
cause the value of the Portfolio's investments to decline. Changes in interest
rates have a greater effect on bonds with longer maturities than on those with
shorter maturities. Investments in the Portfolios are not guaranteed because of
fluctuation in the net asset value of the underlying fixed-income-related
investments. Similar to direct bond ownership, bond funds have the same interest
rate, inflation and credit risks that are associated with the underlying bonds
owned by the fund. Portfolio purchasers should understand that, in contrast to
owning individual bonds, there are ongoing fees and expenses associated with
owning shares of bond funds. The Portfolio invests principally in bonds and
other fixed-income securities. High yield bonds involve a greater risk of
default and price volatility than other bonds. Investing in non-investment-grade
securities presents special risks, including credit risk.
The Portfolio can invest up to 25% of its assets in below-investment-grade (BB
or below) bonds ("junk bonds"), which are subject to greater risk of loss of
principal and interest, as well as the possibility of greater market risk, than
higher-rated bonds.
The Portfolio can invest in 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. 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.
In order to achieve its investment objectives, the Portfolio may at times use
certain types of investment derivatives, such as options, futures, forwards and
swaps. These instruments involve risks different from, and in certain cases,
greater than, the risks presented by more traditional investments. The
Portfolio's risks are fully discussed in its prospectus.
(Historical Performance continued on next page)
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2006 Annual Report 3
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Historical Performance (continued from previous page)
Sanford C. Bernstein Fund II Portfolio vs. Its Benchmark and Lipper Composite
TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
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PAST SIX PAST 12 PAST PAST SINCE INCEPTION
THROUGH SEPTEMBER 30, 2006 MONTHS MONTHS FIVE YEARS 10 YEARS INCEPTION DATE
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Intermediate Duration Institutional 3.43% 3.53% -- -- 4.98% May 17, 2002
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Lehman Brothers Aggregate Bond Index 3.72 3.66 4.81% 6.42%
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Intermediate Bond Lipper Composite 3.29 3.13 4.12 5.48
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Taxable Bond Portfolio
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Intermediate Duration Institutional
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Growth of $25,000
[The following table was represented as a line graph in the printed material.]
Intermediate Duration Lehman Brothers
Institutional Lipper Intermediate Aggregate Bond Index
Yr:Month (after all costs) Bond Composite (before all costs)
--------- --------------------- ------------------- --------------------
02:1
2
3
4
5 $25,000 $25,000 $25,000
6 $24,908 $25,060 $25,216
7 $25,077 $25,215 $25,520
8 $25,578 $25,639 $25,951
9 $25,878 $25,975 $26,372
10 $25,788 $25,837 $26,252
11 $25,923 $25,897 $26,245
12 $26,432 $26,414 $26,787
03:1 $26,474 $26,450 $26,809
2 $26,840 $26,813 $27,180
3 $26,816 $26,809 $27,160
4 $27,155 $27,077 $27,384
5 $27,624 $27,572 $27,894
6 $27,541 $27,538 $27,839
7 $26,623 $26,647 $26,903
8 $26,875 $26,811 $27,082
9 $27,545 $27,493 $27,798
10 $27,378 $27,276 $27,539
11 $27,498 $27,347 $27,605
12 $27,842 $27,607 $27,886
04:1 $28,034 $27,811 $28,110
2 $28,282 $28,063 $28,415
3 $28,480 $28,261 $28,627
4 $27,811 $27,593 $27,883
5 $27,664 $27,459 $27,771
6 $27,813 $27,583 $27,928
7 $28,054 $27,825 $28,205
8 $28,489 $28,300 $28,743
9 $28,581 $28,375 $28,821
10 $28,848 $28,591 $29,062
11 $28,685 $28,416 $28,831
12 $28,959 $28,652 $29,096
05:1 $29,150 $28,781 $29,279
2 $29,032 $28,652 $29,106
3 $28,849 $28,478 $28,956
4 $29,148 $28,804 $29,348
5 $29,456 $29,068 $29,666
6 $29,622 $29,220 $29,827
7 $29,460 $28,999 $29,556
8 $29,777 $29,325 $29,935
9 $29,555 $29,041 $29,626
10 $29,337 $28,814 $29,392
11 $29,476 $28,917 $29,522
12 $29,708 $29,153 $29,803
06:1 $29,742 $29,173 $29,804
2 $29,870 $29,258 $29,903
3 $29,583 $28,995 $29,610
4 $29,556 $28,953 $29,556
5 $29,474 $28,912 $29,524
6 $29,518 $28,940 $29,586
7 $29,933 $29,304 $29,985
8 $30,358 $29,711 $30,444
9 $30,598 $29,950 $30,712
The chart shows the growth of $25,000 since the Portfolio's inception on May 17,
2002 through September 30, 2006. Growth for the Portfolio is shown from the
first full month after its inception date.
* Portfolio, benchmark and Lipper returns are from the close of business on
May 31, 2002 through the close of business on September 30, 2006.
See Historical Performance and Benchmark Disclosures on page 3.
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4 Sanford C. Bernstein Fund II, Inc.
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Fund Expenses--September 30, 2006
Fund Expenses--As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, including sales charges (loads) on purchase payments,
contingent deferred sales charges on redemptions and (2) ongoing costs,
including management fees and other Fund expenses. This example is intended to
help you understand your ongoing costs (in dollars) of investing in the Fund and
to compare these costs with the ongoing costs of investing in other mutual
funds. The example is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period as indicated below.
Actual Expenses--The first line of the table below provides information about
actual account values and actual expenses. You may use the information in this
line, together with the amount you invested, to estimate the expenses that you
paid over the period. Simply divide your account value by $1,000 (for example,
an $8,600 account value divided by $1,000 = 8.6), then multiply the result by
the number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes--The second line of the table below
provides information about hypothetical account values and hypothetical expenses
based on the Fund's actual expense ratio and an assumed annual rate of return of
5% before expenses, which is not the Fund's actual return. The hypothetical
account values and expenses may not be used to estimate the actual ending
account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the Fund and other
funds by comparing this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of other funds. Please note that
the expenses shown in the table are meant to highlight your ongoing costs only
and do not reflect any transactional costs, such as sales charges (loads), or
contingent deferred sales charges on redemptions. Therefore, the second line of
the table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING EXPENSE
APRIL 1, 2006 SEPTEMBER 30, 2006 PERIOD* RATIO*
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Intermediate Duration Institutional Class Shares
Actual $1,000 $1,034.60 $2.30 0.45%
Hypothetical (5% return before expenses) $1,000 $1,022.81 $2.28 0.45%
* Expenses are equal to each Class's annualized expense ratio, shown in the
table above, multiplied by the average account value over the period,
multiplied by 183/365 (to reflect the one-half-year period).
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2006 Annual Report 5
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Portfolio Summary--September 30, 2006
Taxable Bond Portfolio
- ------------------------------------------
Intermediate Duration Institutional
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Security Type Breakdown(1)
[THE FOLLOWING TABLE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
Federal Home Loan Mortgage Corp 2.1%
Bank Loans 2.3%
Collateralized Mortgage Obligations 3.8%
Short-Term 18.1%
Asset-Backed Securities 2.7%
Commercial Mortgage-Backed Securities 7.3%
Sovereign Debt 15.5%
U.S. Treasury Securities 4.0%
Corporate Bonds 12.4%
Federal National Mortgage Association 30.3%
Government National Mortgage Association 1.5%
(1) All data are as of September 30, 2006. The Portfolio's security type
breakdown is expressed as a percentage of the Portfolio's total
investments and may vary over time.
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6 Sanford C. Bernstein Fund II, Inc.
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Schedule of Investments
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Sanford C. Bernstein Fund II, Inc.
Schedule of Investments
Intermediate Duration Institutional Portfolio
September 30, 2006
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Principal Amount (000) U.S. $ Value
================================================================================
U.S. GOVERNMENT & GOVERNMENT
SPONSORED AGENCY OBLIGATIONS-45.4%
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Federal Agency--Collateralized Mortgage Obligations-0.9%
Fannie Mae Grantor Trust
Series 2004-T5 Class AB4
5.78%, 5/28/35(a)(b) $ 1,149 $ 1,149,308
Federal Home Loan Mortgage Corp.
Series R007 Class AC
5.875%, 5/15/16(a) 5,812 5,840,096
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6,989,404
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Mortgage Pass Thru's-39.7%
Federal Home Loan Mortgage Corp.
4.50%, 8/01/35-1/01/36(a) 14,284 13,354,234
Federal National Mortgage Association
5.50%, 2/01/09-2/01/35(a) 56,768 56,340,065
5.00%, 4/01/19-2/01/21(a) 21,807 21,473,098
4.50%, 4/01/20-7/01/21(a) 21,197 20,459,156
4.412%, 8/01/34(a)(b) 3,343 3,342,817
4.238%, 9/01/34(a)(b) 3,059 3,056,685
4.132%, 10/01/34(a)(b) 1,626 1,617,467
4.122%, 12/01/34(a)(b) 2,528 2,519,294
4.759%, 4/01/35(a)(b) 1,209 1,202,691
6.50%, 1/01/36(a) 2,686 2,740,936
5.811%, 3/01/36(a)(b) 3,652 3,685,868
5.498%, 5/01/36(a)(b) 1,018 1,020,285
5.942%, 6/01/36(a)(b) 2,674 2,715,077
4.50%, TBA(c) 2,150 2,074,079
5.00%, TBA(c) 21,635 20,789,894
5.50%, TBA(c) 79,540 78,346,900
6.00%, TBA(c) 30,025 30,156,359
6.50%, TBA(c) 22,165 22,566,741
Government National Mortgage Association
6.00%, 2/15/36-4/15/36(a) 13,556 13,722,102
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301,183,748
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U.S. Treasury Bonds-3.6%
United States Treasury Bonds
7.25%, 5/15/16(a) 6,985 8,371,634
4.50%, 2/15/36(a) 19,415 18,603,511
------------
26,975,145
------------
U.S. Treasury Note-1.2%
United States Treasury Note
4.875%, 5/31/11(a) 8,785 8,885,887
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Total U.S. Government & Government
Sponsored Agency Obligations
(cost $342,683,814) 344,034,184
------------
CORPORATE DEBT OBLIGATIONS-14.8%
================================================================================
Financial Institutions-4.1%
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Banking-2.0%
Barclays Bank PLC
Callable 6/15/11 @ 100.00
8.55%, 9/29/49(a)(b)(d) 1,400 1,573,585
BOI Capital Funding Number 2
Callable 2/01/16 @ 100.00
5.571%, 2/01/49(a)(d) 300 289,376
Citigroup, Inc.
Subordinated Note
5.00%, 9/15/14(a) 3,671 3,576,567
Mitsubishi UFG Capital Finance 1, Ltd.
Callable 7/25/16 @ 100.00
6.346%, 7/29/49(a) 615 619,988
RBS Capital Trust III
Callable 9/30/14 @ 100.00
5.512%, 9/29/49(a)(b) 1,950 1,894,729
Resona Bank, Ltd.
5.85%, 9/29/49(a)(d) 240 234,634
Resona Preferred Global Securities
Callable 7/30/15 @ 100.00
7.191%, 12/29/49(a)(d) 450 465,750
Royal Bank of Scotland Group PLC
5.00%, 10/01/14(a) 145 141,272
Sanwa Bank, Ltd.
7.40%, 6/15/11(a) 280 302,483
Sumitomo Mitsui Banking Corp.
Callable 10/15/15 @ 100.00
5.625%, 7/29/49(a)(b)(d) 410 399,020
The Huntington National Bank
Senior Note
4.375%, 1/15/10(a) 980 953,450
UBS Preferred Funding Trust I
Callable 10/01/10 @ 100.00
8.622%, 10/29/49(a) 1,295 1,441,117
UFJ Finance Aruba AEC
6.75%, 7/15/13(a) 500 535,104
Wachovia Capital Trust III
Callable 3/15/11 @ 100.00
5.80%, 8/29/49(a) 1,230 1,233,338
Wells Fargo & Co.
Senior Note
4.20%, 1/15/10(a) 975 947,229
Zions Bancorporation
5.50%, 11/16/15(a) 820 810,174
------------
15,417,816
------------
Brokerage-0.2%
The Goldman Sachs Group, Inc.
4.75%, 7/15/13(a) 670 643,378
5.125%, 1/15/15(a) 800 775,598
------------
1,418,976
------------
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2006 Annual Report 7
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Schedule of Investments (continued)
================================================================================
Principal Amount (000) U.S. $ Value
================================================================================
Finance Companies-1.1%
American General Finance Corp.
Medium-Term Note
4.625%, 5/15/09(a) $ 2,200 $ 2,163,434
CIT Group, Inc.
Senior Note
7.75%, 4/02/12(a) 1,125 1,245,610
Countrywide Home Loans, Inc.
Medium-Term Note, Series L
4.00%, 3/22/11(a) 1,400 1,321,331
HSBC Finance Corp.
6.50%, 11/15/08(a) 1,915 1,963,068
7.00%, 5/15/12(a) 580 627,106
iStar Financial, Inc.
Senior Note
5.15%, 3/01/12(a) 600 585,365
------------
7,905,914
------------
Financial--Other-0.1%
Boeing Capital Corp.
Senior Note
4.75%, 8/25/08(a) 1,075 1,067,500
------------
Insurance-0.7%
Assurant, Inc.
5.625%, 2/15/14(a) 750 746,850
Humana, Inc.
Senior Note
6.30%, 8/01/18(a) 700 707,483
Liberty Mutual Group
5.75%, 3/15/14(a)(d) 855 840,814
MetLife, Inc.
5.00%, 11/24/13(a) 780 758,347
WellPoint, Inc.
3.75%, 12/14/07(a) 388 380,480
Zurich Capital Trust I
Callable 6/01/07 @104.19
8.376%, 6/01/37(a)(d) 1,740 1,831,021
------------
5,264,995
------------
31,075,201
------------
================================================================================
Industrial-8.5%
- --------------------------------------------------------------------------------
Basic Industry-0.8%
AK Steel Corp.
7.875%, 2/15/09(a) 455 453,294
Ineos Group Holdings PLC
Callable 2/15/11 @ 104.25
8.50%, 2/15/16(a)(d) 730 695,325
International Paper Co.
6.75%, 9/01/11(a) 5 5,309
5.30%, 4/01/15(a) 1,040 1,005,511
Ispat Inland ULC
Callable 4/01/09 @ 104.88
9.75%, 4/01/14(a) 600 675,750
Packaging Corp. of America
5.75%, 8/01/13(a) 790 775,312
Rhodia, SA
10.25%, 6/01/10(a) 505 565,600
Union Carbide Corp.
Debenture
7.75%, 10/01/96(a) 735 773,251
Westvaco Corp.
8.20%, 1/15/30(a) 390 438,787
Weyerhaeuser Co.
5.95%, 11/01/08(a) 845 854,414
------------
6,242,553
------------
Capital Goods-0.4%
Hutchison Whampoa International, Ltd.
7.45%, 11/24/33(a)(d) 1,170 1,326,096
Textron Financial Corp.
4.125%, 3/03/08(a) 945 929,020
Tyco International Group, SA
6.00%, 11/15/13(a) 1,045 1,081,397
------------
3,336,513
------------
Communications-4.7%
AT&T Broadband Corp.
9.455%, 11/15/22(a) 1,020 1,319,843
AT&T Corp.
7.30%, 11/15/11(a) 1,110 1,203,110
8.00%, 11/15/31(a) 345 421,678
AT&T Wireless Services, Inc.
Senior Note
8.75%, 3/01/31(a) 915 1,169,736
British Sky Broadcasting Group PLC
6.875%, 2/23/09(a) 455 470,141
British Telecommunications PLC
8.375%, 12/15/10(a) 1,960 2,196,460
BSKYB Finance United Kingdom PLC
5.625%, 10/15/15(a)(d) 1,200 1,174,417
Cablevision Systems Corp.
8.00%, 4/15/12(a) 730 739,125
CenturyTel, Inc.
Series G
6.875%, 1/15/28(a) 1,125 1,083,429
Cingular Wireless LLC
5.625%, 12/15/06(a) 1,250 1,250,029
Clear Channel Communications, Inc.
5.50%, 9/15/14(a) 1,575 1,463,317
Comcast Corp.
5.30%, 1/15/14(a) 1,040 1,012,802
Cox Enterprises, Inc.
4.375%, 5/01/08(a)(d) 1,155 1,133,296
DirecTV Holdings LLC
Callable 6/15/10 @ 103.19
6.375%, 6/15/15(a) 705 662,700
Embarq Corp.
6.738%, 6/01/13(a) 150 154,331
New Cingular Wireless Services, Inc.
7.875%, 3/01/11(a) 2,280 2,496,812
News America Holdings, Inc.
9.25%, 2/01/13(a) 890 1,052,181
- --------------------------------------------------------------------------------
8 Sanford C. Bernstein Fund II, Inc.
- --------------------------------------------------------------------------------
================================================================================
Principal Amount (000) U.S. $ Value
================================================================================
News America, Inc.
6.55%, 3/15/33(a) $ 665 $ 655,111
Qwest Communications
International, Inc.
Callable 2/15/09 @ 103.75
7.50%, 2/15/14(a) 665 666,663
Qwest Corp.
8.875%, 3/15/12(a)(d) 195 212,794
R.R. Donnelley & Sons Co.
4.95%, 4/01/14(a) 485 436,429
Sprint Capital Corp.
8.375%, 3/15/12(a) 4,085 4,578,399
Telecom Italia Capital
4.00%, 11/15/08-1/15/10(a) 3,165 3,013,509
6.375%, 11/15/33(a) 270 252,508
Time Warner Entertainment Co.
Senior Debenture
8.375%, 3/15/23(a) 1,735 2,003,705
Verizon Global Funding Corp.
4.90%, 9/15/15(a) 890 842,237
Verizon New Jersey, Inc.
Debenture
5.875%, 1/17/12(a) 1,195 1,207,075
Vodafone Group PLC
5.50%, 6/15/11(a) 1,650 1,653,978
WPP Finance Corp.
5.875%, 6/15/14(a) 750 752,068
------------
35,277,883
------------
Consumer Cyclical-0.7%
Centex Corp.
5.45%, 8/15/12(a) 1,023 998,774
DaimlerChrysler North America Corp.
4.875%, 6/15/10(a) 540 524,666
Ford Motor Credit Co.
6.50%, 1/25/07(a) 740 739,493
6.625%, 6/16/08(a) 1,040 1,024,275
MGM MIRAGE
8.375%, 2/01/11(a) 655 682,870
Riviera Holdings Corp.
Callable 11/27/06 @ 105.50
11.00%, 6/15/10(a) 220 232,100
Toll Brothers Finance Corp.
6.875%, 11/15/12(a) 715 723,479
------------
4,925,657
------------
Consumer Non Cyclical-0.9%
Altria Group, Inc.
7.75%, 1/15/27(a) 1,300 1,574,057
ConAgra Foods, Inc.
7.875%, 9/15/10(a) 235 255,585
6.75%, 9/15/11(a) 225 237,526
Fortune Brands, Inc.
2.875%, 12/01/06(a) 550 547,634
Kraft Foods, Inc.
5.25%, 10/01/13(a) 675 667,229
Safeway, Inc.
4.125%, 11/01/08(a) 548 533,364
6.50%, 3/01/11(a) 360 371,593
Tyson Foods, Inc.
8.25%, 10/01/11(a) 1,285 1,381,257
Wyeth
5.50%, 2/01/14(a) 1,036 1,037,962
------------
6,606,207
------------
Energy-0.4%
Amerada Hess Corp.
7.875%, 10/01/29(a) 1,225 1,447,621
Tengizchevroil Finance Co.
6.124%, 11/15/14(a)(d) 405 400,950
Valero Energy Corp.
6.875%, 4/15/12(a) 1,255 1,336,084
------------
3,184,655
------------
Technology-0.5%
Cisco Systems, Inc.
5.25%, 2/22/11(a) 630 632,652
International Business Machines Corp.
Medium-Term Note
4.375%, 6/01/09(a) 365 358,896
Motorola, Inc.
7.625%, 11/15/10(a) 115 124,983
Oracle Corp.
5.25%, 1/15/16(a) 2,885 2,839,036
------------
3,955,567
------------
Transportation-0.1%
Hertz Corp.
Callable 1/01/10 @ 104.44
8.875%, 1/01/14(a)(d) 610 638,975
------------
64,168,010
------------
================================================================================
Utilities-2.2%
- --------------------------------------------------------------------------------
Electric-1.8%
Carolina Power & Light Co.
6.50%, 7/15/12(a) 1,160 1,220,226
Consumers Energy Co.
Series C
4.25%, 4/15/08(a) 610 599,300
Duke Capital LLC
5.50%, 3/01/14(a) 660 648,889
Senior Note
8.00%, 10/01/19(a) 1,110 1,289,654
Exelon Corp.
6.75%, 5/01/11(a) 1,525 1,602,417
FirstEnergy Corp.
6.45%, 11/15/11(a) 1,440 1,502,173
7.375%, 11/15/31(a) 1,525 1,763,121
MidAmerican Energy Holdings Co.
Senior Note
5.875%, 10/01/12(a) 420 427,666
- --------------------------------------------------------------------------------
2006 Annual Report 9
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
================================================================================
Principal Amount (000) U.S. $ Value
================================================================================
NiSource Finance Corp.
7.875%, 11/15/10(a) $ 605 $ 652,626
NRG Energy, Inc.
7.25%, 2/01/14(a) 115 114,138
7.375%, 2/01/16(a) 615 611,156
Pacific Gas & Electric Co.
4.80%, 3/01/14(a) 985 947,921
Progress Energy, Inc.
7.10%, 3/01/11(a) 910 975,466
Public Service Co. of Colorado
7.875%, 10/01/12(a) 420 474,234
SPI Electricity & Gas Australia
Holdings Pty Ltd.
6.15%, 11/15/13(a)(d) 1,150 1,194,600
------------
14,023,587
------------
Natural Gas-0.4%
Duke Energy Field Services Corp.
7.875%, 8/16/10(a) 370 400,479
Enterprise Products Operating LP
Series B
5.60%, 10/15/14(a) 600 587,106
Kinder Morgan Finance Corp.
5.35%, 1/05/11(a) 1,166 1,134,021
The Williams Cos., Inc.
7.875%, 9/01/21(a) 650 679,250
------------
2,800,856
------------
16,824,443
------------
Total Corporate Debt Obligations
(cost $112,836,431) 112,067,654
------------
================================================================================
NON U.S. DOLLAR SOVEREIGN DEBT-14.3%
- --------------------------------------------------------------------------------
Japan (Government of)
0.70%, 6/20/10(a) JPY 5,056,300 42,418,729
0.80%, 9/10/15(a) 1,748,700 14,524,018
Norway (Kingdom of)
6.00%, 5/16/11(a) NOK 32,598 5,410,975
Poland (Government of)
6.00%, 11/24/10(a) PLN 11,350 3,707,867
6.25%, 10/24/15(a) 21,365 7,169,536
Sweden (Kingdom of)
5.00%, 1/28/09(a) SEK 54,450 7,684,367
5.25%, 3/15/11(a) 115,090 16,777,856
United Mexican States
8.00%, 12/24/08(a) MXN 82,690 7,577,786
9.00%, 12/20/12(a) 36,680 3,464,815
------------
Total Non U.S. Dollar Sovereign Debt
(cost $108,992,732) 108,735,949
------------
COMMERCIAL MORTGAGE-BACKED SECURITIES-8.8%
- --------------------------------------------------------------------------------
Banc America Commercial Mortgage, Inc.
Series 2001-PB1 Class A2
5.787%, 5/11/35(a) 1,728 1,767,289
Series 2004-4 Class A3
4.128%, 7/10/42(a) 1,925 1,871,094
Series 2004-6 Class A2
4.161%, 12/10/42(a) 2,590 2,514,847
Bear Stearns Commercial Mortgage
Securities, Inc.
Series 2005-T18 Class A4
4.933%, 2/13/42(a) 2,635 2,561,346
Credit Suisse Mortgage Capital
Certificates
Series 2006-C3 Class A3
6.022%, 6/15/38(a)(b) 2,385 2,477,037
CS First Boston Mortgage
Securities Corp.
Series 2003-CK2 Class A2
3.861%, 3/15/36(a) 1,695 1,654,337
Series 2004-C1 Class A4
4.75%, 1/15/37(a) 1,030 995,710
Series 2005-C1 Class A4
5.014%, 2/15/38(a) 2,175 2,128,549
GE Capital Commercial Mortgage Corp.
Series 2005-C3 Class A3FX
4.863%, 7/10/45(a) 2,395 2,371,361
Greenwich Capital Commercial
Funding Corp.
Series 2003-C1 Class A4
4.111%, 7/05/35(a) 2,035 1,906,944
Series 2003-C2 Class A3
4.533%, 1/05/36(a) 1,010 983,958
Series 2005-GG3 Class A2
4.305%, 8/10/42(a) 2,645 2,577,461
GS Mortgage Securities Corp. II
Series 2004-GG2 Class A6
5.396%, 8/10/38(a) 2,015 2,024,329
JPMorgan Chase Commercial
Mortgage Securities
Series 2004-C1 Class A2
4.302%, 1/15/38(a) 270 259,813
Series 2005-LDP3 Class A2
4.851%, 8/15/42(a) 2,085 2,058,719
Series 2005-LDP4 Class A2
4.79%, 10/15/42(a) 1,970 1,941,003
Series 2006-CB15 Class A4
5.814%, 6/12/43(a) 2,125 2,196,251
Series 2006-CB14 Class A4
5.481%, 12/12/44(a) 1,380 1,390,945
Series 2006-CB16 Class A4
5.552%, 5/12/45(a) 3,740 3,801,448
Series 2005-LDP1 Class A4
5.038%, 3/15/46(a) 2,665 2,610,581
- --------------------------------------------------------------------------------
10 Sanford C. Bernstein Fund II, Inc.
================================================================================
Principal Amount (000) U.S. $ Value
================================================================================
LB-UBS Commercial Mortgage Trust
Series 2004-C4 Class A4
5.304%, 6/15/29(a) $ 3,925 $ 3,959,344
Series 2004-C8 Class A2
4.201%, 12/15/29(a) 2,025 1,968,228
Series 2005-C1 Class A4
4.742%, 2/15/30(a) 1,850 1,779,260
Series 2005-C7 Class A4
5.197%, 11/15/30(a) 1,965 1,916,229
Series 2003-C3 Class A4
4.166%, 5/15/32(a) 3,380 3,176,828
Merrill Lynch Mortgage Trust
Series 2005-CKI1 Class A6
5.417%, 11/12/37(a)(b) 1,730 1,724,285
Series 2005-MKB2 Class A2
4.806%, 9/12/42(a) 3,210 3,172,223
Merrill Lynch/Countrywide Commercial
Mortgage Trust
Series 2006-2 Class A4
6.105%, 6/12/46(a) 2,095 2,193,004
Morgan Stanley Capital I
Series 2005-T17 Class A5
4.78%, 12/13/41(a) 2,960 2,851,844
Series 2005-HQ5 Class A4
5.168%, 1/14/42(a) 3,745 3,705,640
------------
Total Commercial Mortgage Backed Securities
(cost $66,950,566) 66,539,907
------------
================================================================================
COLLATERALIZED MORTGAGE OBLIGATIONS-4.6%
- --------------------------------------------------------------------------------
Bear Stearns Alt-A Trust
Series 2005-10 Class 24A1
5.957%, 1/25/36(a)(b) 2,698 2,724,176
Series 2006-1 Class 22A1
5.421%, 2/25/36(a)(b) 3,666 3,656,404
Series 2006-2 Class 23A1
5.99%, 3/25/36(a)(b) 2,975 3,000,658
Citigroup Mortgage Loan Trust, Inc.
Series 2005-2 Class 1A4
5.115%, 5/25/35(a)(b) 3,748 3,702,005
Countrywide Alternative Loan Trust
Series 2005-62 Class 2A1
5.563%, 12/25/35(a)(b) 2,308 2,310,183
IndyMac Index Mortgage Loan Trust
Series 2006-AR7 Class 4A1
6.265%, 5/25/36(a)(b) 2,033 2,060,859
JPMorgan Alternative Loan Trust
Series 2006-S1 Class 3A1
5.44%, 3/25/36(a)(b) 1,248 1,248,645
Merrill Lynch Mortgage Investors, Inc.
Series 2006-A1 Class 2A1
6.201%, 3/25/36(a)(b) 3,140 3,179,214
Residential Funding Mortgage
Securities I, Inc.
Series 2005-SA3 Class 3A
5.243%, 8/25/35(a)(b) 2,455 2,432,109
Structured Adjustable Rate Mortgage
Loan Trust
Series 2006-3 Class 2A1
6.013%, 4/25/36(a)(b) 2,608 2,632,210
Structured Asset Mortgage Investment, Inc.
Series 2004-AR5 Class 1A1
5.66%, 10/19/34(a)(b) 2,480 2,478,884
Washington Mutual, Inc.
Series 2005-AR2 Class 2A22
5.55%, 1/25/45(a)(b) 715 715,336
Wells Fargo Mortgage Backed
Securities Trust
Series 2006-AR11 Class A4
5.539%, 8/25/36(a)(b) 4,771 4,739,083
------------
Total Collateralized Mortgage Obligations
(cost $34,815,279) 34,879,766
------------
================================================================================
U.S. DOLLAR SOVEREIGN DEBT-4.2%
- --------------------------------------------------------------------------------
Brazil (Republic of)
8.25%, 1/20/34(a) 6,620 7,563,350
Peru (Republic of)
7.35%, 7/21/25(a) 1,897 2,022,202
Russian Federation
5.00%, 3/31/30(a)(d) 13,415 14,944,310
United Mexican States
5.625%, 1/15/17(a) 7,640 7,536,860
------------
Total U.S. Dollar Sovereign Debt
(cost $31,440,302) 32,066,722
------------
================================================================================
ASSET-BACKED SECURITIES-3.3%
- --------------------------------------------------------------------------------
Asset Backed Funding Certificates
Series 2003-WF1 Class A2
6.074%, 12/25/32(a)(b) 654 655,763
Bear Stearns Asset Backed Securities, Inc.
Series 2005-SD1 Class 1A1
5.48%, 4/25/22(a)(b) 617 617,575
Capital Auto Receivables Asset Trust
Series 2005-SN1A Class A3A
4.10%, 6/15/08(a) 2,325 2,314,465
Citifinancial Mortgage Securities, Inc.
Series 2003-1 Class AFPT
3.36%, 1/25/33(a) 594 538,275
Credit-Based Asset Servicing &
Securities Trust
Series 2005-CB7 Class AF2
5.146%, 11/25/35(a)(b) 1,490 1,479,524
DB Master Finance, LLC
Series 2006-1 Class A2
5.779%, 6/20/31(a)(d) 700 710,507
GE-WMC Mortgage Securities LLC
Series 2005-2 Class A2B
5.50%, 12/25/35(a)(b) 1,785 1,785,785
- --------------------------------------------------------------------------------
2006 Annual Report 11
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
================================================================================
Principal Amount (000) U.S. $ Value
================================================================================
Home Equity Mortgage Trust
Series 2005-2 Class A1
5.51%, 7/25/35(a)(b) $ 336 $ 335,697
Series 2005-4 Class A3
4.742%, 1/25/36(a) 1,655 1,635,405
Series 2006-1 Class A2
5.30%, 5/25/36(a) 840 838,018
Household Home Equity Loan Trust
Series 2005-3 Class A1
5.59%, 1/20/35(a)(b) 1,472 1,475,767
Master Asset Backed Securities Trust
Series 2004-HE1 Class A1
5.73%, 9/25/34(a)(b) 1,468 1,470,102
RAAC Series
Series 2006-SP3 Class A1
5.41%, 8/25/36(a)(b) 1,981 1,980,533
Residential Asset Mortgage Products, Inc.
Series 2005-RS3 Class AIA2
5.50%, 3/25/35(a)(b) 1,785 1,786,394
Series 2005-RZ1 Class A2
5.53%, 4/25/35(a)(b) 2,565 2,567,796
Residential Asset Securities Corp.
Series 2002-KS7 Class A2
5.70%, 11/25/32(a)(b) 336 336,413
Residential Funding Mortgage Securities II
Series 2005-HI2 Class A3
4.46%, 5/25/35(a) 1,100 1,084,532
Saxon Asset Securities Trust
Series 2005-4 Class A2B
5.51%, 11/25/37(a)(b) 1,825 1,826,712
Specialty Underwriting &
Residential Finance
Series 2006-BC1 Class A2A
5.41%, 12/25/36(a)(b) 1,367 1,367,651
------------
Total Asset-Backed Securities
(cost $24,887,819) 24,806,914
------------
================================================================================
BANK LOANS-2.7%
================================================================================
Financial Institutions-0.1%
- --------------------------------------------------------------------------------
Finance Company-0.1%
LPL Holdings, Inc.
7.88%-8.37%, 6/28/13 497 502,618
------------
================================================================================
Industrial-2.2%
- --------------------------------------------------------------------------------
Basic Industry-0.5%
Ferro Corp.
8.74%, 6/06/12+ 1,000 996,800
Hexion Specialty
7.37%-7.56%, 5/04/13 2,499 2,472,047
------------
3,468,847
------------
Communications-0.9%
Cablevision Systems Corp.
7.11%-7.26%, 3/29/13 746 743,116
Cebridge Connections
6.00%, 3/31/15 1,263 1,198,344
Charter Communications
8.125%, 4/28/13 1,000 1,003,700
Choice One Communications, Inc.
9.50%-11.75%, 6/28/12-6/30/12 2,000 2,016,700
Frontiervision
9.78%, 3/31/07 500 494,350
Level 3 Communications
8.40%, 12/01/11 1,000 1,008,100
------------
6,464,310
------------
Consumer Cyclical-0.4%
Jean Coutu Group, Inc.
8.00%, 7/30/11 745 745,502
Lear Corp.
7.87%-7.90%, 4/25/12 1,500 1,464,300
Six Flags, Inc.
7.73%-8.48%, 6/30/09 895 904,822
------------
3,114,624
------------
Consumer Non Cyclical-0.1%
FHC Health Systems
11.23%-14.40%, 6/26/08 1,000 1,010,000
------------
Energy-0.1%
CDX Gas LLC
10.62%, 3/31/13 1,000 1,015,000
------------
Technology-0.2%
Eastman Kodak Co.
7.64%-7.75%, 10/18/12 748 748,200
Sorenson Communications, Inc.
12.39%, 2/16/14 1,000 1,007,500
------------
1,755,700
------------
16,828,481
------------
================================================================================
Utilities-0.4%
- --------------------------------------------------------------------------------
Electric-0.3%
Plum Point
8.75%, 9/14/14 669 664,194
Reliant Energy, Inc.
7.71%,4/30/10 1,496 1,494,557
------------
2,158,751
------------
Utility--Other-0.1%
Boson Generating
8.75%, 10/11/10 598 605,837
- --------------------------------------------------------------------------------
12 Sanford C. Bernstein Fund II, Inc.
- -------------------------------------------------------------------------------
===============================================================================
Principal Amount (000) U.S. $ Value
===============================================================================
GBGH LLC
10.94%, 8/07/13 $ 700 $ 700,000
-------------
1,305,837
-------------
3,464,588
-------------
Total Bank Loans
(cost $20,919,017) 20,795,687
-------------
===============================================================================
SHORT-TERM INVESTMENTS-21.7%
- -------------------------------------------------------------------------------
U.S. Government & Government Sponsored
Agency Obligations-5.1%
Federal Home Loan Bank
Zero coupon, 11/13/06(e)(f) 13,000 12,921,398
Federal National Mortgage Association
Zero coupon, 10/02/06(e) 25,900 25,896,583
-------------
38,817,981
-------------
Commercial Paper-16.5%
AIG Funding, Inc.
5.23%, 10/12/06(e) 25,000 24,960,049
Citigroup Funding, Inc.
5.25%, 10/12/06(e) 25,000 24,959,896
Credit Suisse First Boston New York
5.26%, 10/12/06(e) 25,000 24,959,820
Deutsche Bank
5.24%, 10/12/06(e) 25,000 24,959,972
Societe Generale
5.235%, 10/12/06(e) 25,000 24,960,010
-------------
124,799,747
-------------
Time Deposit-0.1%
State Street Euro Dollar
4.60%, 10/02/06 444 444,000
-------------
Total Short-Term Investments
(cost $164,061,728) 164,061,728
-------------
Total Investments--119.8%
(cost $907,587,688)(g) 907,988,511
Other assets less liabilities--(19.8)% (150,186,288)
-------------
Net Assets--100% $ 757,802,223
-------------
===============================================================================
INTEREST RATE SWAP CONTRACTS
- -------------------------------------------------------------------------------
Rate Type
--------------------------------------
Notional Amount Termination Payments made Payments Received Unrealized Appreciation/
Swap Counterparty (000) Date by the Portfolio by the Portfolio (Depreciation)
- ----------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers 24,500 10/28/07 3 month LIBOR+ 4.800% $ 101,950
Lehman Brothers 10,130 11/02/07 3 month LIBOR+ 4.814% 44,098
Lehman Brothers 16,000 1/23/08 3 month LIBOR+ 4.778% (146,691)
+ LIBOR (London Interbank Offered Rate)
===============================================================================
FORWARD CURRENCY EXCHANGE CONTRACTS
- -------------------------------------------------------------------------------
Contract Amount U.S. $ Value on U.S. $ Unrealized Appreciation/
(000) Origination Date Current Value (Depreciation)
- ---------------------------------------------------------------------------------------------------------------------------------
Purchase Contracts
Mexican Peso Settling 10/06/06 9,473 $ 862,000 $ 861,381 $ (619)
Norwegian Krone Settling 10/02/06 35,688 5,507,469 5,469,143 (38,326)
Swedish Krona Settling 10/02/06 182,794 25,041,929 24,949,858 (92,071)
Sale Contracts
Japanese Yen Settling 10/18/06 4,861,445 41,905,038 41,276,679 628,359
Japanese Yen Settling 10/18/06 1,853,090 15,915,098 15,733,884 181,214
Mexican Peso Settling 10/06/06 133,230 12,131,636 12,114,101 17,535
Norwegian Krone Settling 10/02/06 35,688 5,666,759 5,469,143 197,616
Norwegian Krone Settling 11/08/06 35,688 5,519,052 5,481,078 37,974
Polish Zloty Settling 10/16/06 34,723 11,154,104 11,094,483 59,621
Polish Zloty Settling 10/16/06 1,210 385,531 386,615 (1,084)
Swedish Krona Settling 10/02/06 57,130 7,968,609 7,797,808 170,801
Swedish Krona Settling 10/02/06 125,663 17,309,964 17,152,050 157,914
Swedish Krona Settling 11/15/06 182,794 25,121,083 25,031,892 89,191
- --------------------------------------------------------------------------------
2006 Annual Report 13
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
================================================================================
FINANCIAL FUTURES CONTRACTS
- --------------------------------------------------------------------------------
Unrealized
Number of Expiration Original Value at Appreciation/
Type Contracts Month Value September 30, 2006 (Depreciation)
- -----------------------------------------------------------------------------------------------------------------------------
Purchased
U.S. Treasury Notes 5 Yr Futures 142 December 2006 $ 14,985,849 $ 14,983,218 $ (2,631)
U.S. Treasury Notes 10 Yr Futures 31 December 2006 3,314,668 3,349,938 35,270
U.S. Treasury Bonds Futures 112 December 2006 12,400,356 12,589,500 189,144
Sold
Japan Government Bonds 10 Yr Futures 17 December 2006 19,374,588 19,399,788 (25,200)
------------
$ 196,583
============
- --------------------------------------------------------------------------------
(a) Positions, or portion thereof, with an aggregate market value of
$570,212,123 have been segregated to collateralize open forward currency
exchange contracts.
(b) Variable rate coupon, rate shown as of September 30, 2006.
(c) When-issued security.
(d) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At September 30, 2006, the aggregate market value of these
securities amounted to $28,065,470 or 3.7% of net assets.
(e) Represents entire or partial position segregated as collateral for when
issued and delayed delivery securities.
(f) Represents entire or partial position segregated as collateral for
interest rate swap contracts.
(g) At September 30, 2006, the cost basis for tax purposes was $909,152,515.
Gross unrealized appreciation of investments was $5,115,504 and gross
unrealized depreciation of investments was $6,279,508, resulting in net
unrealized depreciation of $(1,164,004) (excluding foreign currency
transactions, interest rate swaps and futures transactions).
+ As of September 30, 2006, the current interest accrual is based on a
principal amount of $555,556. The remaining principal amount $444,444 has
not yet been funded.
Explanation of abbreviation:
TBA--To Be Announced.
Currency Abbreviations:
JPY--Japanese Yen
MXN--Mexican Peso
NOK--Norwegian Krone
PLN--Polish Zloty
SEK--Swedish Krona
See notes to financial statements.
- --------------------------------------------------------------------------------
14 Sanford C. Bernstein Fund II, Inc.
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities--September 30, 2006
INTERMEDIATE DURATION
INSTITUTIONAL PORTFOLIO
- -------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities at value $ 907,988,511
Foreign currency at value (a)(b) 120,889
Cash in bank (b) 984,866
Receivables:
Interest 6,261,610
Investment securities sold 1,875
Capital shares sold 126,150
Margin due from broker on futures contracts 24,775
Appreciation of interest rate swap agreements 146,048
Appreciation of foreign currency contracts 1,540,225
-------------
Total assets 917,194,949
-------------
LIABILITIES
Payables:
Dividends to shareholders 948,002
Investment securities purchased 157,348,411
Capital shares redeemed 450,000
Deferred income on dollar rolls 25,055
Management fee 226,090
Transfer Agent fee 5,141
Accrued expenses 111,236
Depreciation of interest rate swap agreement 146,691
Depreciation of foreign currency contracts 132,100
-------------
Total liabilities 159,392,726
-------------
NET ASSETS $ 757,802,223
=============
Cost of investments $ 907,587,688
=============
SHARES OF CAPITAL STOCK OUTSTANDING 50,311,379
=============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 15.06
=============
NET ASSETS CONSIST OF:
Capital stock, at par * $ 50,311
Additional paid-in capital 767,690,988
Undistributed net investment income/(excess distributions) (1,423,546)
Accumulated net realized loss on investments, futures and foreign currency transactions (10,524,097)
Unrealized appreciation/(depreciation) of:
Investments, futures and swaps 596,763
Foreign currency denominated assets and liabilities 1,411,804
-------------
$ 757,802,223
=============
(a) Cost: $121,713. (Note 1)
(b) The amount of U.S. $216,889 has been segregated to collaterize margin
requirement for the open futures contracts at September 30, 2006.
* The Sanford C. Bernstein Fund II, Inc. has authorized 300 million shares
of common stock with par value of $.001 per share.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
2006 Annual Report 15
- --------------------------------------------------------------------------------
Statement of Operations--For the Year Ended September 30, 2006
INTERMEDIATE DURATION
INSTITUTIONAL PORTFOLIO
- --------------------------------------------------------------------------------------------
INVESTMENT INCOME
Income:
Interest $ 36,440,758
------------
Total income 36,440,758
------------
Expenses:
Management fee 3,550,642
Custodian fee 245,690
Transfer Agent fee 23,937
Auditing and tax fees 62,480
Legal fees 93,041
Registration fees 72,612
Printing fees 28,989
Directors' fees and expenses 28,390
Miscellaneous 32,342
------------
Total expenses 4,138,123
Less: expenses waived and reimbursed by the Adviser (931,045)
------------
Net expenses 3,207,078
------------
Net investment income 33,233,680
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investment transactions (10,293,679)
Futures transactions 175,414
Foreign currency transactions (174,345)
Swap transactions (274,380)
------------
Net realized loss on investment and foreign currency transactions (10,566,990)
------------
Net increase in unrealized appreciation/(depreciation) of:
Investments, futures and swaps 1,569,054
Foreign currency denominated assets and liabilities 1,041,009
------------
Net increase in unrealized appreciation/(depreciation) of investments
and foreign currency denominated assets and liabilities 2,610,063
------------
Net realized and unrealized loss on investment and foreign
currency transactions (7,956,927)
------------
Net increase in net assets resulting from operations $ 25,276,753
============
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 Sanford C. Bernstein Fund II, Inc.
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
---------------------------------
INTERMEDIATE DURATION
INSTITUTIONAL PORTFOLIO
---------------------------------
YEAR YEAR
ENDED ENDED
9/30/06 9/30/05
- -----------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
Operations:
Net investment income $ 33,233,680 $ 25,442,124
Net realized gain (loss) on investment and
foreign currency transactions (10,566,990) 537,774
Increase (decrease) in unrealized appreciation/
(depreciation) of investments, futures, swaps and
foreign currency denominated assets and liabilities 2,610,063 (5,540,221)
------------- -------------
Net increase in net assets resulting
from operations 25,276,753 20,439,677
------------- -------------
Dividends and distributions to shareholders:
Dividends from net investment income (33,497,511) (25,875,590)
Distributions from net realized gain on
investment transactions 0 (3,830,748)
------------- -------------
Total dividends and distributions
to shareholders (33,497,511) (29,706,338)
------------- -------------
Capital-share transactions:
Net proceeds from sales of shares 289,200,582 197,365,725
Net proceeds from sales of shares issued
to shareholders on reinvestment of
dividends and distributions 9,550,714 13,042,331
------------- -------------
Total proceeds from shares sold 298,751,296 210,408,056
Cost of shares redeemed (183,643,506) (159,474,673)
------------- -------------
Increase in net assets from
capital-share transactions 115,107,790 50,933,383
------------- -------------
Net increase in net assets 106,887,032 41,666,722
NET ASSETS:
Beginning of period 650,915,191 609,248,469
------------- -------------
End of period (a) $ 757,802,223 $ 650,915,191
============= =============
(a) Includes excess distributions of: $ (1,423,546) $ (542,396)
============= =============
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
2006 Annual Report 17
- --------------------------------------------------------------------------------
Financial Highlights
Selected per-share data and ratios for a share of capital stock outstanding for
the Portfolio for each of the periods presented:
------------------------------------------------------------------
INTERMEDIATE DURATION INSTITUTIONAL PORTFOLIO
------------------------------------------------------------------
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
9/30/06 9/30/05 9/30/04 9/30/03 9/30/02(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.25 $ 15.48 $ 15.74 $ 15.44 $ 15.00(b)
-------- -------- -------- -------- --------
Income from investment operations:
Investment income, net+ 0.70 0.64 0.60 0.56 0.25
Net realized and unrealized gain (loss) on
investment and foreign currency transactions (0.18) (0.13) (0.03) 0.41 0.44
-------- -------- -------- -------- --------
Total from investment operations 0.52 0.51 0.57 0.97 0.69
-------- -------- -------- -------- --------
Less distributions:
Dividends from taxable net investment income (0.71) (0.65) (0.61) (0.57) (0.25)
Dividends from net realized gain on investment transactions 0 (0.09) (0.22) (0.10) 0
-------- -------- -------- -------- --------
Total distributions (0.71) (0.74) (0.83) (0.67) (0.25)
-------- -------- -------- -------- --------
Net asset value, end of period $ 15.06 $ 15.25 $ 15.48 $ 15.74 $ 15.44
======== ======== ======== ======== ========
Total return (c) 3.53% 3.41% 3.76% 6.44% 4.62%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $757,802 $650,915 $609,248 $464,517 $328,393
Average net assets (000 omitted) $710,128 $611,401 $535,624 $383,604 $237,462
Ratio of expenses to average net assets 0.45%(d) 0.45% 0.45% 0.45% 0.45%*
Ratio of expenses to average net assets
before reimbursement 0.58%(d) 0.57% 0.58% 0.64% 0.75%*
Ratio of net investment income to average
net assets 4.68%(d) 4.16% 3.86% 3.64% 4.37%*
Portfolio turnover rate 511% 619% 682% 791% 324%
* Annualized.
+ Based on average shares outstanding.
(a) Commenced operations on May 17, 2002.
(b) Prior to the commencement of operations, May 17, 2002, AllianceBernstein
L.P. (prior to February 24, 2006 known as Alliance Capital Management
L.P.), redeemed 1,333 shares representing $16,666 of the Portfolio and
made a capital contribution of $16,666 into the Portfolio, adjusting the
opening net asset value per share from $12.50 to $15.00.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total Return does not reflect
the deduction of taxes that a shareholder would pay on fund distributions
or the redemption of fund shares. Total investment return calculated for a
period of less than one year is not annualized.
(d) The ratio includes expenses attributable to costs of proxy solicitation.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 Sanford C. Bernstein Fund II, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements
NOTE 1. Organization and Significant Accounting Policies
Sanford C. Bernstein Fund II, Inc. (the "Fund") is a managed
open-end registered investment company incorporated in Maryland on
February 7, 2002. The Fund currently comprises one portfolio, the
Intermediate Duration Institutional Portfolio (the "Portfolio")
which commenced offering on May 17, 2002, through an investment of
securities received in an in-kind redemption in the amount of
$149,411,702 from the Intermediate Duration Portfolio of the Sanford
C. Bernstein Fund, Inc. The preparation of financial statements in
accordance with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. The following is a
summary of significant accounting policies followed by the Fund.
A. Portfolio Valuation
Portfolio securities are valued at their current market value
determined on the basis of market quotations or, if market
quotations are not readily available or are deemed unreliable, at
"fair value" as determined in accordance with procedures established
by and under the general supervision of the Fund's Board of
Directors.
In general, the market value of securities which are readily
available and deemed reliable are determined as follows: Securities
listed on a national securities exchange (other than securities
listed on the NASDAQ Stock Market, Inc. ("NASDAQ")) or on a foreign
securities exchange are valued at the last sale price at the close
of the exchange or foreign securities exchange. If there has been no
sale on such day, the securities are valued at the mean of the
closing bid and asked prices on such day. Securities listed on more
than one exchange are valued by reference to the principal exchange
on which the securities are traded; securities listed only on NASDAQ
are valued in accordance with the NASDAQ Official Closing Price;
listed put or call options are valued at the last sale price. If
there has been no sale on that day, such securities will be valued
at the closing bid prices on that day; open futures contracts and
options thereon are valued using the closing settlement price or, in
the absence of such a price, the most recent quoted bid price. If
there are no quotations available for the day of valuation, the last
available closing settlement price is used; securities traded in the
over-the-counter markets, ("OTC") are valued at the mean of the
current bid and asked prices as reported by the National Quotation
Bureau or other comparable sources; U.S. Government securities and
other debt instruments having 60 days or less remaining until
maturity are valued at amortized cost if their original maturity was
60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60
days; fixed-income securities, including mortgage backed and asset
backed securities, may be valued on the basis of prices provided by
a pricing service or at a price obtained from one or more of the
major broker/dealers. In cases where broker/dealer quotes are
obtained, AllianceBernstein, L.P. (prior to February 24, 2006 known
as Alliance Capital Management, L.P.), (the "Adviser") may establish
procedures whereby changes in market yields or spreads are used to
adjust, on a daily basis, a recently obtained quoted price on a
security; and OTC and other derivatives are valued on the basis of a
quoted bid price or spread from a major broker/dealer in such
security.
Securities for which market quotations are not readily available
(including restricted securities) or are deemed unreliable are
valued at fair value. Factors considered in making this
determination may include, but are not limited to, information
obtained by contacting the issuer, analysts, analysis of the
issuer's financial statements or other available documents. In
addition, the Fund may use fair value pricing for securities
primarily traded in non-U.S. markets because most foreign markets
close well before the Fund values its securities at 4:00 p.m.,
Eastern Time. The earlier close of these foreign markets gives rise
to the possibility that significant events, including broad market
moves, may have occurred in the interim and may materially affect
the value of those securities. To account for this, the Fund may
frequently value many of its foreign equity securities using fair
value prices based on third party vendor modeling tools to the
extent available.
B. Foreign Currency Translation
The accounting records of the Fund are maintained in U.S. dollars.
Prices of securities and other assets and liabilities denominated in
non-U.S. currencies are translated into U.S. dollars using the
exchange rate at 12:00 p.m., Eastern Time. Amounts related to the
purchases and sales of securities, investment income and expenses
are translated at the rates of exchange prevailing on the respective
dates of such transactions.
- --------------------------------------------------------------------------------
2006 Annual Report 19
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
Net realized gain or loss on foreign currency transactions
represents net foreign exchange gains or losses from the closure of
forward currency exchange contracts, disposition of foreign
currencies, currency gains or losses realized between the trade and
settlement dates on security transactions and the difference between
the amount of dividends, interest and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent amount
actually received or paid. Net unrealized currency gains and losses
arising from valuing foreign currency denominated assets and
liabilities, other than security investments, at the current
exchange rate are reflected as part of unrealized
appreciation/depreciation on foreign currencies.
The Fund does not isolate that portion of the results of operations
arising as a result of changes in the foreign exchange rates from
the changes in the market prices of securities held at period end.
The Fund does not isolate the effect of changes in foreign exchange
rates from changes in market prices of equity securities sold during
the year. The Fund does isolate the effect of changes in foreign
exchange rates from changes in market prices of debt securities sold
during the year, as required by the Internal Revenue Code.
The Fund may invest in foreign securities and foreign currency
transactions that may involve risks not associated with domestic
investments as a result of the level of governmental supervision and
regulation of foreign securities markets and the possibility of
political or economic instability, among others.
C. Security Transactions and Related Investment Income
Security transactions are accounted for on the trade date (the date
the buy or sell order is executed). Securities gains and losses are
calculated on the identified cost basis. Interest income is recorded
on the accrual basis and dividend income is recorded on the
ex-dividend date or as soon as the Fund is informed of the dividend.
D. Futures Contracts
Upon entering into a futures contract, the Portfolio is required to
deposit cash or to pledge securities and maintain as collateral on
initial margin with the broker, equal to a certain percentage of the
purchase price indicated in the futures contract. Subsequent
payments, which are dependent on the daily fluctuations in the
market value of the underlying index or security, are made or
received by the Portfolio each day (daily variation margin) or at
other intervals as is required. The aggregate of these payments or
receipts through the expiration of the futures contract is recorded
for book purposes as unrealized gains or losses by the Portfolio. If
the Portfolio enters into a closing transaction, it will realize,
for book purposes, a gain or loss equal to the difference between
the value of the futures contract at the time it was opened or
purchased and its value at the time it was closed.
E. Written Options
When the Portfolio writes an option, an amount equal to the premium
received by the Portfolio is recorded as an asset and a
corresponding liability. The amount of the liability is adjusted
daily to reflect the current market value of the option. When a call
option is exercised, the Portfolio realizes a gain or loss on the
underlying security, with the proceeds from the security sale
increased by the amount of the option premium received. When a put
option is exercised, the cost basis of the security purchased by the
Portfolio is reduced by the option premium received. For the year
ended September 30, 2006, the Portfolio had no transactions in
written options.
F. Taxes
The Portfolio intends to continue to comply with the requirements of
Subchapter M of the Internal Revenue Code of 1986 as they apply to
regulated investment companies. By so complying, the Portfolio will
not be subject to federal income taxes to the extent that all of its
income is distributed. The Portfolio may be subject to taxes imposed
by countries in which it invests. Such taxes are generally based on
income and/or capital gains earned or repatriated. Taxes are accrued
and applied to net investment income, net realized gains and net
unrealized appreciation/depreciation as such income and/or gains are
earned.
- --------------------------------------------------------------------------------
20 Sanford C. Bernstein Fund II, Inc.
- --------------------------------------------------------------------------------
G. Repurchase Agreements
The Portfolio may enter into repurchase agreements with banks or
securities broker-dealers. It is the Fund's policy that its
custodian receive delivery of the securities collateralizing
repurchase agreements, the amount of which at the time of purchase
and each subsequent business day is required to be maintained at
such a level that the market value of the collateral is equal to at
least 100% of the repurchase price. Repurchase agreements could
involve certain risks in the event of default or insolvency of the
other party, including possible delays or restrictions on the
Portfolio's ability to dispose of the underlying securities.
H. Securities Transactions on a When-Issued or Delayed-Delivery Basis
The Portfolio may purchase securities on a when-issued basis or
purchase or sell securities on a delayed-delivery basis. At the time
the Portfolio commits to purchase a security on a when-issued or
delayed-delivery basis, the Portfolio will record the transaction
and use the security's value in determining the Portfolio's net
asset value. At the time the Portfolio commits to sell a security on
a delayed-delivery basis, the Portfolio will record the transaction
and exclude the security's value in determining the Portfolio's net
asset value. The Portfolio segregates cash and marketable securities
at least equal in value to its purchase commitment for when-issued
or delayed-delivery securities, and segregates portfolio securities
on a delayed-delivery basis.
I. Distribution of Income and Gains
Net investment income of the Portfolio is declared and recorded as a
dividend to shareholders daily and is payable to shareholders
monthly.
Distributions of net realized gains, less any available loss
carryforwards, if any, for the Portfolio will be paid to
shareholders at least once a year, and recorded on the ex-dividend
date.
Elements of realized gains and net investment income may be recorded
in different accounting periods for financial reporting (book) and
federal income tax (tax) purposes (temporary differences). To the
extent that such distributions required for tax purposes exceed
income and gains recorded for book purposes as a result of such
temporary differences, "excess distributions" are reflected in the
accompanying financial statements. Certain other
differences--permanent differences--arise because treatment of
elements of income and gains is different between book and tax
accounting. Permanent differences are reclassified in the year they
arise.
Permanent differences have no effect on net assets. The effect of
such permanent differences on the Portfolio, due to foreign currency
gain (loss), paydown gain (loss), and swap income (loss) is
reflected as an adjustment to the components of capital as of
September 30, 2006, as shown below:
INCREASE (DECREASE)
INCREASE (DECREASE) TO ACCUMULATED
INCREASE (DECREASE) TO UNDISTRIBUTED NET REALIZED GAIN (LOSS)
TO ADDITIONAL NET INVESTMENT ON INVESTMENT AND FOREIGN
PAID-IN CAPITAL INCOME (LOSS) CURRENCY TRANSACTIONS
====================================================================================================
$ 0 $ (617,319) $ 617,319
----------------------------------------------------------------------------------------------------
J. Securities Lending
The Portfolio may enter into securities lending transactions. By
lending its portfolio securities, the Portfolio attempts to increase
its income through the interest earned on the loan. It is the policy
of the Portfolio to receive collateral consisting of cash or U.S.
government securities in an amount at least equal to the value of
the securities loaned. The securities lending agent has agreed to
indemnify the Fund in the case of default of any securities
borrower. Collateral received and securities loaned are marked to
market daily to ensure that collateral levels are maintained. Cash
collateral received is invested by the securities lending agent in
liquid short-term investments such as repurchase agreements and
overnight time deposits pursuant to investment guidelines set forth
by the Fund. Cash collateral received is recorded as an asset as
well as a corresponding liability in the statement of assets and
liabilities.
- --------------------------------------------------------------------------------
2006 Annual Report 21
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
K. Swap Agreements
The Portfolio may enter into swaps to hedge its exposure to interest
rates and credit risk or for investment purposes. A swap is an
agreement that obligates two parties to exchange a series of cash
flows at specified intervals based upon or calculated by reference
to changes in specified prices or rates for a specified amount of an
underlying asset. The payment flows are usually netted against each
other, with the difference being paid by one party to the other.
Risks may arise as a result of the failure of the counterparty to
the swap contract to comply with the terms of the swap contract. The
loss incurred by the failure of a counterparty is generally limited
to the net interim payment to be received by the Portfolio, and/or
the termination value at the end of the contract. Therefore, the
Portfolio considers the creditworthiness of each counterparty to a
swap contract in evaluating potential credit risk. Additionally,
risks may arise from unanticipated movements in interest rates or in
the value of the underlying securities.
As of October 1, 2003, the Portfolio has adopted the method of
accounting for interim payments on swap contracts in accordance with
Financial Accounting Standards Board Statement No. 133. The
Portfolio accrues for the interim payments on swap contracts on a
daily basis, with the net amount recorded within unrealized
appreciation/depreciation of swap contracts on the statement of
assets and liabilities. Once the interim payments are settled in
cash, the net amount is recorded as realized gain/loss on swaps, in
addition to realized gain/loss recorded upon the termination of swap
contracts on the statement of operations. Prior to October 1, 2003,
these interim payments were reflected within interest income/expense
in the statements of operations. Fluctuations in the value of swap
contracts are recorded as a component of net change in unrealized
appreciation/depreciation of investments.
The Portfolio may enter into credit default swaps. The Portfolio may
purchase credit protection on the referenced obligation of the
credit default swap ("Buy Contract") or provide credit protection on
the referenced obligation of the credit default swap ("Sale
Contract"). A sale/(buy) in a credit default swap provides upon the
occurrence of a credit event, as defined in the swap agreement, for
the Portfolio to buy/(sell) from/(to) the counterparty at the
notional amount (the "Notional Amount") and receive/(deliver) the
principal amount of the referenced obligation. If a credit event
occurs, the maximum payout amount for a Sale Contract is limited to
the Notional Amount of the swap contract ("Maximum Payout Amount").
During the term of the swap agreement, the Portfolio receives/(pays)
semi annual fixed payments from/(to) the respective counterparty,
calculated at the agreed upon interest rate applied to the Notional
Amount. These interim payments are recorded within unrealized
appreciation/depreciation of swap contracts on the statement of
assets and liabilities.
Credit default swaps may involve greater risks than if the Portfolio
had invested in the referenced obligation directly. Credit default
swaps are subject to general market risk, liquidity risk,
counterparty risk and credit risk. If the Fund is a buyer and no
credit event occurs, it will lose its investment. In addition, if
the Portfolio is a seller and a credit event occurs, the value of
the referenced obligation received by the Portfolio coupled with
periodic payments previously received, may be less than the Maximum
Payout Amount it pays to the buyer, resulting in a loss to the
Portfolio.
L. Reverse Repurchase Agreements
Under a reverse repurchase agreement, the Portfolio sells securities
and agrees to repurchase them at a mutually agreed upon date and
price. At the time the Portfolio enters into a reverse repurchase
agreement, it will establish a segregated account with the custodian
containing liquid assets having a value at least equal to the
repurchase price. For the year ended September 30, 2006, the Fund
had not entered into any reverse repurchase agreements.
M. Mortgage-Backed Dollar Rolls
The Portfolio may enter into dollar rolls. Dollar rolls involve
sales by the Portfolio of securities for delivery in the current
month and the Portfolio simultaneously contracting to repurchase
similar securities on a specified future date. During the roll
period, the Portfolio forgoes principal and interest paid on the
securities. In consideration for entering into the commitment to
repurchase, the Portfolio is compensated by "fee income," which is
received when the Portfolio enters into the commitment. Such fee
income is recorded as deferred income and accrued by the Portfolio
over the roll period. Dollar rolls involve the risk that the market
value of the securities the Portfolio is obligated to repurchase
under the agreement may decline below the repurchase price. Dollar
rolls are speculative techniques and may be considered to be
borrowings by the Portfolio.
- --------------------------------------------------------------------------------
22 Sanford C. Bernstein Fund II, Inc.
- --------------------------------------------------------------------------------
NOTE 2. Investment Management and Transactions with Affiliated Persons
A. Management Fee
Under the Investment Management Agreement between the Fund and the
Adviser, the Adviser manages the investment of the Portfolio's
assets, places purchase and sale orders, and bears various expenses,
including the salaries and expenses of all personnel except those of
outside directors. In addition, the Adviser agrees to permit its
directors, officers and employees who may be elected directors or
officers of the Fund to serve in the capacities to which they are
elected. The Adviser renders these services subject to the general
oversight of the Board of Directors.
The Portfolio pays the Adviser an advisory fee at an annual rate of
.50% of the average daily net assets of the Portfolio for the first
$1 billion and .45% thereafter. The Portfolio and the Adviser have
entered into an Expense Limitation Agreement (the "Agreement"),
dated March 22, 2002, under which the Adviser has agreed to waive
its fees and, if necessary, reimburse expenses in respect of the
Portfolio for the current fiscal year, so that total operational
expenses do not exceed the annual rate of 0.45% of average daily net
assets of the Portfolio. For the year ended September 30, 2006, the
aggregate amount of such fee waiver was $931,045.
B. Distribution Arrangements
Under the Distribution Agreement between the Fund, on behalf of the
Portfolio, and Sanford C. Bernstein & Co., LLC (the "Distributor"),
the Distributor agrees to act as agent to sell shares of the
Portfolio. The Distributor receives no fee for this service, and
furthermore agrees to pay all expenses arising from the performance
of its obligations under this agreement.
The Distributor is a wholly-owned subsidiary of the Adviser.
NOTE 3. Investment Security Transactions
A. Purchases and Sales
For the period from October 1, 2005, through September 30, 2006, the
Portfolio had purchases and sales transactions, excluding repurchase
transactions and transactions in short-term instruments, as follows:
PURCHASES SALES
============================================================================================================
Investment securities (excluding U.S. government securities) $ 464,579,817 $ 280,918,922
U.S. government securities 2,394,817,794 2,360,250,319
------------------------------------------------------------------------------------------------------------
B. Distributions to Shareholders
The tax character of distributions paid during the fiscal years
ended September 30, 2006 and September 30, 2005, were as follows:
2006 2005
============================================================================================================
Distributions paid from:
Ordinary income $ 33,497,511 $ 27,390,220
Net long-term capital gains -- 2,316,118
-------------- --------------
Total distributions paid $ 33,497,511 $ 29,706,338
-------------- --------------
------------------------------------------------------------------------------------------------------------
As of September 30, 2006, the components of accumulated earnings
(deficits) on a tax basis were as follows:
ACCUMULATED TOTAL
LONG TERM CAPITAL AND UNREALIZED ACCUMULATED
ORDINARY CAPITAL OTHER GAINS APPRECIATION/ EARNINGS/
INCOME GAIN (LOSSES)(a) (DEPRECIATION)(b) (DEFICIT)(c)
============================================================================================================
$ 2,830,510 $ 0 $(10,282,477) $(1,533,345) $(8,985,312)
------------------------------------------------------------------------------------------------------------
(a) At September 30, 2006, the Portfolio had capital loss
carryforwards of $2,287,616 of which $81,091 expires in the
year 2013 and $2,206,525 expires in the year 2014. The
Portfolio had deferred post-October losses of $7,994,860.
(b) The difference between book-basis and tax-basis unrealized
appreciation (depreciation) is attributable primarily to tax
deferral of losses on wash sales and straddles, swap income
(loss) accrual, and mark to market on forward contracts and
passive foreign investment companies.
(c) The difference between book-basis and tax-basis components of
accumulated earnings/(deficit) is attributable to dividends
payable and amortization of organizational expenses.
- --------------------------------------------------------------------------------
2006 Annual Report 23
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 4. Risks Involved in Investing in the Portfolio
Interest rate risk is the risk that changes in interest rates will
affect the value of the Portfolio's investments in fixed-income debt
securities such as bonds or notes. Increases in interest rates may
cause the value of the Portfolio's investments to decline. Credit
risk is the risk that the issuer or guarantor of a debt security, or
the counterparty to a derivative contract, will be unable or
unwilling to make timely principal and/or interest payments, or to
otherwise honor its obligations. The degree of risk for a particular
security may be reflected in its credit risk rating. Credit risk is
greater for medium quality and lower-rated securities. Lower-rated
debt securities and similar unrated securities (commonly known as
"junk bonds") have speculative elements or are predominantly
speculative risks.
Indemnification Risk--In the ordinary course of business, the
Portfolio enters into contracts that contain a variety of
indemnifications. The Portfolio's maximum exposure under these
arrangements is unknown. However, the Portfolio has not had prior
claims or losses pursuant to these indemnification provisions and
expects the risk of loss thereunder to be remote.
NOTE 5. Risks Involved in Futures and Foreign Currency Exchange Contracts
The Portfolio may purchase or sell financial futures contracts for
the purpose of hedging the portfolio against adverse effects of
anticipated movements in the market. Financial futures contracts
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. The contract
amounts reflect the extent of the Portfolio's involvement in these
financial instruments. To the extent that the Fund enters into short
futures, losses may be unlimited. The Portfolio participation in the
futures markets involves certain risks, including imperfect
correlation between movements in the price of the futures contracts
and movements in the price of the securities hedged or used for
cover. The Fund's activities in futures contracts are conducted
through regulated exchanges that do not result in counterparty
credit risks.
The Portfolio may enter into forward currency exchange contracts in
order to hedge exposure to changes in foreign currency exchange
rates on foreign portfolio holdings. Foreign currency contracts
involve elements of market risk in excess of the amount reflected in
the statements of assets and liabilities. The Portfolio bears the
risk of an unfavorable change in the foreign exchange rate
underlying the foreign currency exchange contract. In addition, the
Portfolio could be exposed to risks if the counterparties to the
contracts are unable to meet the terms of their contracts.
NOTE 6. Capital-Share Transactions
Share transactions for the period ended September 30, 2006 and the
year ended September 30, 2005, were as follows:
YEAR YEAR
ENDED ENDED
9/30/06 9/30/05
===========================================================================================================
Shares sold 19,294,882 12,843,724
Shares issued to shareholders on reinvestment of dividends and distributions 637,902 846,398
Shares redeemed (12,295,303) (10,364,588)
----------- -----------
Net increase in shares outstanding 7,637,481 3,325,534
Shares outstanding at beginning of period 42,673,898 39,348,364
----------- -----------
Shares outstanding at end of period 50,311,379 42,673,898
=========== ===========
-----------------------------------------------------------------------------------------------------------
NOTE 7. Line of Credit
A number of open-end mutual funds managed by the Adviser, including
the Sanford C. Bernstein Fund II, Inc., participate in a $250
million revolving credit facility (the "Facility") intended to
provide short-term financing, if necessary, subject to certain
restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the
participating funds and are included in miscellaneous expenses in
the statements of operations. The Portfolio did not utilize the
Facility during the year ended September 30, 2006.
- --------------------------------------------------------------------------------
24 Sanford C. Bernstein Fund II, Inc.
- --------------------------------------------------------------------------------
NOTE 8. Legal Proceedings
As has been previously reported, the staff of the U.S. Securities
and Exchange Commission ("SEC") and the Office of New York Attorney
General ("NYAG") have been investigating practices in the mutual
fund industry identified as "market timing" and "late trading" of
mutual fund shares. Certain other regulatory authorities have also
been conducting investigations into these practices within the
industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to
cooperate with all of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached
terms with the SEC and the NYAG for the resolution of regulatory
claims relating to the practice of "market timing" mutual fund
shares in some of the AllianceBernstein Mutual Funds. The agreement
with the SEC is reflected in an Order of the Commission ("SEC
Order"). The agreement with the NYAG is memorialized in an Assurance
of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders
for the adverse effects of market timing attributable to
market timing relationships described in the SEC Order.
According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i)
their aliquot share of losses suffered by the fund due to
market timing, and (ii) proportionate share of advisory fees
paid by such fund during the period of such market timing;
(ii) The Adviser agreed to reduce the advisory fees it receives
from some of the AllianceBernstein long-term, open-end retail
funds until December 31, 2008; however, the Portfolios did not
have their fees reduced; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the
NYAG Order contemplate that the Adviser's registered
investment company clients, including the Funds, will
introduce governance and compliance changes.
A special committee of the AllianceBernstein's Board of Directors,
comprised of the members of the AllianceBernstein's Audit Committee
and the other independent member of the AllianceBernstein's Board,
directed and oversaw an internal investigation and a comprehensive
review of the facts and circumstances relevant to the SEC's and the
NYAG's investigations.
In addition, the independent directors of the Sanford C. Bernstein
Fund, Inc. have designated an independent economic consultant and
independent counsel to investigate the above-mentioned matters.
On October 2, 2003, a purported class action complaint entitled
Hindo, et al. v. AllianceBernstein Growth & Income Fund, et al.
("Hindo Complaint") was filed against the Adviser, Alliance Capital
Management Holding L.P. ("Alliance Holding"), Alliance Capital
Management Corporation, AXA Financial, Inc., the AllianceBernstein
Funds, certain officers of the Adviser ("Alliance defendants"), and
certain other defendants not affiliated with the Adviser, as well as
unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by
alleged shareholders of two of the AllianceBernstein Funds. The
Hindo Complaint alleges that certain of the Alliance defendants
failed to disclose that they improperly allowed certain hedge funds
and other unidentified parties to engage in "late trading" and
"market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a)
of the Exchange Act and Sections 206 and 215 of the Advisers Act.
Plaintiffs seek an unspecified amount of compensatory damages and
rescission of their contracts with the Adviser, including recovery
of all fees paid to the Adviser pursuant to such contracts.
Since October 2, 2003, numerous additional lawsuits making factual
allegations generally similar to those in the Hindo Complaint were
filed in various federal and state courts against the Adviser and
certain other defendants. The plaintiffs in such lawsuits have
asserted a variety of theories for recovery including, but not
limited to, violations of the Securities Act, the Exchange Act, the
Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state
securities laws and common law. All state court actions against the
Adviser either were voluntarily dismissed or removed to federal
court. On February 20, 2004, the Judicial Panel on Multidistrict
Litigation transferred all federal actions to the United States
District Court for the District of Maryland (the "Mutual Fund MDL").
- --------------------------------------------------------------------------------
2006 Annual Report 25
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
On September 29, 2004, plaintiffs filed consolidated amended
complaints with respect to four claim types: mutual fund shareholder
claims; mutual fund derivative claims; derivative claims brought on
behalf of Alliance Holding; and claims brought under ERISA by
participants in the Profit Sharing Plan for Employees of the
Adviser. All four complaints include substantially identical factual
allegations, which appear to be based in large part on the SEC Order
and the NYAG Order.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in
the mutual fund shareholder claims, mutual fund derivative claims,
and ERISA claims entered into a confidential memorandum of
understanding ("MOU") containing their agreement to settle these
claims. The agreement will be documented by a stipulation of
settlement and will be submitted for court approval at a later date.
The derivative claims brought on behalf of Alliance Holding remain
pending.
On February 10, 2004, the Adviser received (i) a subpoena duces
tecum from the Office of the Attorney General of the State of West
Virginia and (ii) a request for information from West Virginia's
Office of the State Auditor, Securities Commission (the "West
Virginia Securities Commission") (together, the "Information
Requests"). Both Information Requests require the Adviser to produce
documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser
responded to the Information Requests and has been cooperating fully
with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the
State of West Virginia v. AIM Advisors, Inc., et al. ("WVAG
Complaint") was filed against the Adviser, Alliance Holding, and
various other defendants not affiliated with the Adviser. The WVAG
Complaint was filed in the Circuit Court of Marshall County, West
Virginia by the Attorney General of the State of West Virginia. The
WVAG Complaint makes factual allegations generally similar to those
in the Hindo Complaint. On May 31, 2005, defendants removed the WVAG
Complaint to the United States District Court for the Northern
District of West Virginia. On July 12, 2005, plaintiff moved to
remand. On October 19, 2005, the WVAG Complaint was transferred to
the Mutual Fund MDL.
On August 30, 2005, the West Virginia Securities Commission signed a
"Summary Order to Cease and Desist, and Notice of Right to Hearing"
addressed to the Adviser and Alliance Holding. The Summary Order
claims that the Adviser and Alliance Holding violated the West
Virginia Uniform Securities Act, and makes factual allegations
generally similar to those in the Commission Order and the NYAG
Order. On January 26, 2006, the Adviser, Alliance Holding, and
various unaffiliated defendants filed a Petition for Writ of
Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. The
court denied the writ and in September 2006 the Supreme Court of
Appeals declined the defendants' petition for appeal. On September
22, 2006, Alliance and Alliance Holding filed an answer and motion
to dismiss the Summary Order with the Securities Commissioner.
On June 22, 2004, a purported class action complaint entitled
Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin
Complaint") was filed against the Adviser, Alliance Holding,
Alliance Capital Management Corporation, AXA Financial, Inc.,
AllianceBernstein Investment Research & Management, Inc., certain
current and former directors of the AllianceBernstein Mutual Funds,
and unnamed Doe defendants. The Aucoin Complaint names certain of
the AllianceBernstein mutual funds as nominal defendants. The Aucoin
Complaint was filed in the United States District Court for the
Southern District of New York by an alleged shareholder of an
AllianceBernstein mutual fund. The Aucoin Complaint alleges, among
other things, (i) that certain of the defendants improperly
authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing
services, (ii) that certain of the defendants misrepresented and
omitted from registration statements and other reports material
facts concerning such payments, and (iii) that certain defendants
caused such conduct as control persons of other defendants. The
Aucoin Complaint asserts claims for violation of Sections 34(b),
36(b) and 48(a) of the Investment Company Act, Sections 206 and 215
of the Advisers Act, breach of common law fiduciary duties, and
aiding and abetting breaches of common law fiduciary duties.
Plaintiffs seek an unspecified amount of compensatory damages and
punitive damages, rescission of their contracts with the Adviser,
including recovery of all fees paid to the Adviser pursuant to such
contracts, an accounting of all fund related fees, commissions and
soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual
allegations substantially similar to those in the Aucoin Complaint
were filed against the Adviser and certain other defendants. All
nine of the lawsuits (i) were brought as class actions filed in the
United States District Court for the Southern District of New York,
(ii) assert claims substantially identical to the Aucoin Complaint,
and (iii) are brought on behalf of shareholders of the Funds.
- --------------------------------------------------------------------------------
26 Sanford C. Bernstein Fund II, Inc.
- --------------------------------------------------------------------------------
On February 2, 2005, plaintiffs filed a consolidated amended class
action complaint ("Aucoin Consolidated Amended Complaint") that
asserts claims substantially similar to the Aucoin Complaint and the
nine additional lawsuits referenced above. On October 19, 2005, the
District Court dismissed each of the claims set forth in the Aucoin
Consolidated Amended Complaint, except for plaintiffs' claim under
Section 36(b) of the Investment Company Act. On January 11, 2006,
the District Court granted defendants' motion for reconsideration
and dismissed the remaining Section 36(b) claim. On May 31, 2006,
the District Court denied plaintiffs' motion for leave to file an
amended complaint. On July 5, 2006, plaintiffs filed a notice of
appeal. On October 4, 2006, the appeal was withdrawn by stipulation,
with plaintiffs reserving the right to reinstate it at a later date.
It is possible that these matters and/or other developments
resulting from these matters could result in increased redemptions
of the AllianceBernstein Mutual Funds' shares or other adverse
consequences to the AllianceBernstein Mutual Funds. This may require
the AllianceBernstein Mutual Funds to sell investments held by those
funds to provide for sufficient liquidity and could also have an
adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that
these matters are not likely to have a material adverse effect on
its ability to perform advisory services relating to the
AllianceBernstein Mutual Funds.
NOTE 9. Change of Independent Registered Public Accounting Firm
On June 14, 2006, KPMG LLP ("KPMG") was selected as the Fund's
independent registered public accounting firm for the 2006 fiscal
year. A majority of the Fund's Board of Directors, including a
majority of the Independent Directors, approved the appointment of
KPMG. The predecessor independent registered public accounting
firm's reports on the Fund's financial statements for the year ended
September 30, 2005 and the year ended September 30, 2004 contained
no adverse opinion or disclaimer of opinion and were not qualified
or modified as to uncertainty, audit scope or accounting principles.
During such fiscal periods there were no disagreements between the
Fund and the predecessor independent registered public accounting
firm on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which such
disagreement, if not solved to the satisfaction of the predecessor
independent registered public accounting firm, would have caused
them to make reference to the subject matter of the disagreement in
connection with their reports on the financial statements for such
periods.
NOTE 10. Recent Accounting Pronouncements
On July 13, 2006, the Financial Accounting Standards Board ("FASB")
released FASB Interpretation No. 48 "Accounting for Uncertainty in
Income Taxes" ("FIN 48"). FIN 48 provides guidance for how uncertain
tax positions should be recognized, measured, presented and
disclosed in the financial statements. FIN 48 requires the
evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the
tax positions are "more-likely-than-not" of being sustained by the
applicable tax authority. Tax positions not deemed to meet the
more-likely-than-not threshold would be recorded in the current
period. Adoption of FIN 48 is required for fiscal years beginning
after December 15, 2006 and is to be applied to all open tax years
as of the effective date. At this time, management is evaluating the
implications of FIN 48 and its impact on the financial statements
has not yet been determined.
On September 20, 2006, the FASB released Statement of Financial
Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157").
FAS 157 establishes an authoritative definition of fair value, sets
out a framework for measuring fair value, and requires additional
disclosures about fair-value measurements. The application of FAS
157 is required for fiscal years beginning after November 15, 2007
and interim periods within those fiscal years. At this time,
management is evaluating the implications of FAS 157 and its impact
on the financial statements has not yet been determined.
- --------------------------------------------------------------------------------
2006 Annual Report 27
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
Sanford C. Bernstein Fund II, Inc. the Board of Directors and Shareholders
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Intermediate Duration Institutional Portfolio
(the "Fund"), a portfolio of Sanford C. Bernstein II, Inc. as of September 30,
2006, and the related statement of operations, statement of changes in net
assets, and the financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statements of
changes in net assets for the year ended September 30, 2005 and the financial
highlights for the years or periods ended prior to October 1, 2005 were audited
by other independent registered public accountants whose report thereon, dated
November 22, 2005, expressed an unqualified opinion on that financial statement
and those financial highlights.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of September 30, 2006, by correspondence with the custodian
and brokers or by other appropriate auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Intermediate Duration Institutional Portfolio as of September 30, 2006, and the
results of its operations, changes in its net assets, and the financial
highlights for the year then ended, in conformity with U.S. generally accepted
accounting principles.
/s/ KPMG LLP
New York, New York
November 28, 2006
- --------------------------------------------------------------------------------
28 Sanford C. Bernstein Fund II, Inc.
- --------------------------------------------------------------------------------
Tax Information (Unaudited)
98.6% of the ordinary income dividends paid by the Fund during the fiscal year
ended September 30, 2006, qualify as "interest related dividends" for non-U.S.
shareholders.
- --------------------------------------------------------------------------------
2006 Annual Report 29
- --------------------------------------------------------------------------------
Sanford C. Bernstein Fund II, Inc.
================================================================================
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
William H. Foulk, Jr.*
Chairman
Marc O. Mayer
President
Ruth Block*
David H. Dievler*
John H. Dobkin*
Michael J. Downey*
D. James Guzy*
Nancy P. Jacklin*
Marshall C. Turner, Jr.*
================================================================================
OFFICERS
- --------------------------------------------------------------------------------
Philip L. Kirstein
Senior Vice President and
Independent Compliance Officer
Shawn Keegan
Vice President
Joran Laird
Vice President
Alison M. Martier
Vice President
Jeffrey Phlegar
Vice President
Greg Wilensky
Vice President
Joseph J. Mantineo
Treasurer and Chief Financial Officer
Vincent S. Noto
Controller
Emilie D. Wrapp
Secretary
================================================================================
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
KPMG LLP
345 Park Avenue
New York, New York 10154
================================================================================
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York 10019
================================================================================
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
State Street Bank and Trust Company
One Lincoln Street
Boston, Massachusetts 02111
================================================================================
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
* Member of the Audit Committee, the Governance and Nominating Committee and
the Independent Directors Committee.
- --------------------------------------------------------------------------------
30 Sanford C. Bernstein Fund II, Inc.
- --------------------------------------------------------------------------------
================================================================================
DIRECTORS' INFORMATION
- --------------------------------------------------------------------------------
Portfolios in
Complex
Name, Address, Age Principal Occupation Overseen Other Directorships
(Year of Election*) During Past 5 Years By Director Held by Director
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS*
Marc O. Mayer,++ Executive Vice President of the Adviser since 111 SCB Partners, Inc.;
1345 Avenue of the 2001 and Executive Managing Director of SCB, Inc.
Americas, AllianceBernstein Investments, Inc. ("ABI")
New York, NY 10105 since 2003; prior thereto he was head of
49 (2003) AllianceBernstein Institutional Investments,
a unit of the Adviser, from 2001-2003. Prior
thereto, Chief Executive Officer of Sanford C.
Bernstein & Co., LLC (institutional research and
brokerage arm of Bernstein & Co. LCC) and its
predecessor since prior to 2001.
DISINTERESTED DIRECTORS*
William H. Foulk, Jr.,+ Investment Adviser and Independent Consultant. 113 None
P.O. Box 5060, Formerly Senior Manager of Barrett Associates,
Greenwich, CT 06831-0505 Inc., a registered investment adviser, with
74 (2002) which he had been associated since prior to
Chairman of the Board 2001. Formerly Deputy Comptroller and Chief
Investment Officer of the State of New York and,
prior thereto, Chief Investment Officer of the
New York Bank for Savings.
Ruth Block,+** Formerly: Executive Vice President and Chief 100 None
500 SE Mizner Blvd., Insurance Officer of the Equitable Life Assurance
Boca Raton, FL 33432 Society of the United States; Chairman and Chief
76 (2002) Executive Officer of Evlico (insurance); Director
of Avon, BP (oil and gas), Ecolab Incorporated
(specialty chemicals), Tandem Financial Group and
Donaldson, Lufkin & Jenrette Securities
Corporation; Governor at Large, National
Association of Securities Dealers, Inc.
David H. Dievler,+ Independent Consultant. Until December 1994, 112 None
P.O. Box 167, Senior Vice President of AllianceBernstein
Spring Lake, NJ 07762 Corporation ("AB Corp") (formerly Alliance
77 (2002) Capital Management Corporation ("ACMC"))
responsible for mutual fund administration. Prior
to joining AB Corp in 1984, Chief Financial
Officer of Eberstadt Asset Management since
1968. Prior to that Senior Manager at Price
Waterhouse & Co.; member of the American
Institute of Certified Public Accountants
since 1953.
- --------------------------------------------------------------------------------
2006 Annual Report 31
- --------------------------------------------------------------------------------
Sanford C. Bernstein Fund II, Inc. (continued)
================================================================================
DIRECTORS' INFORMATION (continued)
- --------------------------------------------------------------------------------
Portfolios in
Complex
Name, Address, Age Principal Occupation Overseen Other Directorships
(Year of Election*) During Past 5 Years By Director Held by Director
- ------------------------------------------------------------------------------------------------------------------------------------
John H. Dobkin,+ Consultant. Formerly President of Save Venice, 111 None
P.O. Box 12, Inc. (preservation organization) from 2001-2002;
Annandale, NY 12504 Senior Adviser from June 1999 to June 2000 and
64 (2002) President of Historic Hudson Valley (historic
preservation) from December 1989-May 1999.
Previously, Director of the National Academy of
Design and during 1988-1992, Director and Chairman
of the Audit Committee of AB Corp. (formerly
ACMC).
Michael J. Downey,+ Consultant since 2004. Formerly managing 111 Asia Pacific Fund, Inc.
c/o Philip L. Kirstein partner of Lexington Capital, LLC (investment and The MergerFund
AllianceBernstein L.P. advisory firm) from 1997 until December 2003.
1345 Avenue of the Prior thereto, Chairman and CEO of Prudential
Americas, Mutual Fund Management (1987-1993).
New York, NY 10105
62 (2005)
D. James Guzy,+ Chairman of the Board of PLX Technology 111 Intel Corporation (semi-
P.O. Box 128 (semi-conductors) and of SRC Computers Inc., conductors); Cirrus
Glenbrook, NV 89413 with which he has been associated since prior to Logic Corporation (semi-
70 (2005) 2001. He is also President of the Arbor Company conductors); and the
(private family investments). Davis Selected Advisors
Group of Mutual Funds
Nancy P. Jacklin,+ Formerly US Executive Director of the International 111 None
4046 Chancery Court NW Monetary Fund (December 2002-May 2006); partner,
Washington, DC 20007 Clifford Chance (1992-2002); Senior Counsel,
58 (2006) International Banking and Finance, and Associate
General Counsel, Citicorp (1985-1992); Assistant
General Counsel (International), Federal Reserve
Board of Governors (1982-1985); and Attorney
Advisor, US Department of the Treasury (1973-1982).
Member of the Bar of the District of Columbia and of
New York; member of the Council on Foreign
Relations.
Marshall C. Turner, Jr.,+ Principal of Turner Venture Associates (venture 111 The George Lucas
220 Montgomery Street capital and consulting) since prior to 2001. From Educational Foundation
Penthouse 10 2003 until May 31, 2006, he was CEO of DuPont and National Datacast, Inc.
San Francisco, CA 94104 Photomasks, Inc., Austin, Texas (semi-conductor
65 (2005) manufacturing services).
* There is no stated term of office for the Fund's Directors.
** Ms. Block was an "interested person", as defined in the 1940 Act, until
October 21, 2004 by reason of her ownership of equity securities of a
controlling person of the Adviser. Such securities were sold for
approximately $2,400 on October 21, 2004. Ms. Block received shares of The
Equitable Companies Incorporated as part of the demutualization of The
Equitable Life Assurance Society of the United States. Her Equitable
shares were subsequently converted through a corporate action into 116
American Depositary Shares of AXA.
+ Member of the Audit Committee, the Independent Directors Committee and the
Governance and Nominating Committee.
++ Mr. Mayer is an "interested person," as defined in the 1940 Act, due to
his position as an Executive Vice President of the Adviser.
- --------------------------------------------------------------------------------
32 Sanford C. Bernstein Fund II, Inc.
- --------------------------------------------------------------------------------
================================================================================
OFFICERS' INFORMATION
- --------------------------------------------------------------------------------
Principal Position(s) Principal Occupation
Name, Address* and Age Held with Fund During Past 5 Years
- -----------------------------------------------------------------------------------------------------------------------------------
Marc O. Mayer, 49 President and Chief See biography under Directors' Information
Executive Officer
Philip L. Kirstein, 61 Senior Vice President Senior Vice President and Independent Compliance
and Independent Compliance Officer of the AllianceBernstein Funds with which
Officer he has been associated since October 2004. Prior
thereto, he was Of Counsel to Kirkpatrick &
Lockhart, LLP from October 2003 to October 2004,
and General Counsel of Merrill Lynch Investment
Managers, L.P. since prior to 2001 until March 2003.
Shawn Keegan, 35 Vice President Vice President of the Adviser+ with which he has
been associated since prior to 2001.
Joran Laird, 31 Vice President Vice President of the Adviser+ with which he has
been associated since prior to 2001.
Alison Martier, 49 Vice President Senior Vice President of the Adviser+ with which
she has been associated since prior to 2001.
Jeffrey S. Phlegar, 40 Vice President Executive Vice President of the Adviser,+ with
which he has been associated since prior to 2001.
Greg Wilensky, 39 Vice President Vice President of the Adviser+ and Director of
Stable Value Investments, with which he has been
associated since prior to 2001.
Emilie D. Wrapp, 51 Secretary Senior Vice President, Assistant General Counsel
and Assistant Secretary of ABI+, with which she
has been associated since prior to 2001.
Joseph J. Mantineo, 47 Treasurer and Chief Senior Vice President of AllianceBernstein
Financial Officer Investor Services, Inc. ("ABIS")+ with which he
has been associated since prior to 2001.
Vincent S. Noto, 41 Controller Vice President of ABIS,+ with which he has been
associated since prior to 2001.
* The address for each of the Fund's officers is 1345 Avenue of the
Americas, New York, NY 10105.
+ The Adviser, ABI and ABIS are affiliates of the Fund.
- --------------------------------------------------------------------------------
2006 Annual Report 33
- --------------------------------------------------------------------------------
The Following Is Not Part of the Shareholders Report or
the Financial Statements
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the Investment Advisory
Agreement between AllianceBernstein L.P. (the "Adviser") and Sanford C.
Bernstein Fund II, Inc.--Intermediate Duration Institutional Portfolio
(the "Fund"),2 prepared by Philip L. Kirstein, the Senior Officer of the
Fund, for the Directors of the Fund, as required by an August 2004
agreement between the Adviser and the New York State Attorney General (the
"NYAG"). The Senior Officer's evaluation of the Investment Advisory
Agreement is not meant to diminish the responsibility or authority of the
Board of Directors of the Fund to perform its duties pursuant to Section
15 of the Investment Company Act of 1940 (the "40 Act") and applicable
state law. The purpose of the summary is to provide shareholders with a
synopsis of the independent evaluation of the reasonableness of the
advisory fees proposed to be paid by the Fund, which was provided to the
Directors in connection with their review of the proposed approval of the
continuance of the Investment Advisory Agreement. The Senior Officer's
evaluation considered the following factors:
1. Advisory fees charged to institutional and other clients of the
Adviser for like services;
2. Advisory fees charged by other mutual fund companies for like
services;
3. Costs to the Adviser and its affiliates of supplying services
pursuant to the advisory agreement, excluding any intra-corporate
profit;
4. Profit margins of the Adviser and its affiliates from supplying such
services;
5. Possible economies of scale as the Fund grows larger; and
6. Nature and quality of the Adviser's services including the
performance of the Fund.
FUND ADVISORY FEES, EXPENSE CAPS, REIMBURSEMENTS & RATIOS
The Adviser proposed that the Fund pay the advisory fee set forth in the
table below for receiving the services to be provided pursuant to the
Investment Advisory Agreement.(3)
ADVISORY FEE NET ASSETS
BASED ON % OF 09/30/06
FUND AVERAGE DAILY NET ASSETS ($MIL)
==============================================================================================================
Intermediate Duration Institutional Portfolio 50 bp on first 1 billion $758.1
45 bp on the balance
--------------------------------------------------------------------------------------------------------------
The Adviser has agreed to waive that portion of its advisory fees and/or
reimburse the Fund for that portion of the Fund's total operating expenses
to the degree necessary to limit the Fund's expense ratio to the amount
set forth below for the Fund's current fiscal year. The waiver is
terminable by the Adviser at the end of the Fund's fiscal year upon at
least 60 days written notice. In addition, set forth below is the Fund's
gross expense ratio as of the Fund's most recent semi-annual period:
EXPENSE CAP
PURSUANT TO EXPENSE GROSS EXPENSE
FUND LIMITATION UNDERTAKING RATIO(4) FISCAL YEAR END
==============================================================================================================
Intermediate Duration Institutional Portfolio 0.45% 0.57% September 30
--------------------------------------------------------------------------------------------------------------
(1) It should be noted that the information in the fee summary was completed
on October 23, 2006 and presented to the Board of Directors on October
31-November 2, 2006.
(2) Future references to the Fund do not include "Sanford C. Bernstein Fund
II, Inc."
(3) The Fund was not affected by the Adviser's agreement with the NYAG since
the Fund's fee schedule already had lower breakpoints than the NYAG
related fee schedule for AllianceBernstein Mutual Funds with a category of
"High Income."
(4) Annualized.
- --------------------------------------------------------------------------------
34 Sanford C. Bernstein Fund II, Inc.
- --------------------------------------------------------------------------------
I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The advisory fees charged to investment companies which the Adviser
manages and sponsors are normally higher than those charged to similar
sized institutional accounts, including pension plans and sub-advised
investment companies. The fee differential reflects, among other things,
different services provided to such clients, and different liabilities
assumed. Services provided by the Adviser to the Fund that are not
provided to non-investment company clients include providing office space
and personnel to serve as Fund Officers, who among other responsibilities
make the certifications required under the Sarbanes-Oxley Act of 2002, and
coordinating with and monitoring the Fund's third party service providers
such as Fund counsel, auditors, custodians, transfer agents and pricing
services. The accounting, administrative, legal and compliance
requirements for the Fund are more costly than those for institutional
assets due to the greater complexities and time required for investment
companies, although as previously noted, a portion of these costs are
reimbursed by the Fund to the Adviser. Also, retail mutual funds managed
by the Adviser are widely held. Servicing the Fund's investors is more
time consuming and labor intensive compared to institutional clients since
the Adviser needs to communicate with a more extensive network of
financial intermediaries and shareholders. In addition, managing the cash
flow of an investment company may be more difficult than that of a stable
pool of assets, such as an institutional account with little cash movement
in either direction, particularly, if a fund is in net redemption and the
Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a fund with positive cash flow may be
easier at times than managing a stable pool of assets. Finally, in recent
years, investment advisers have been sued by institutional clients and
have suffered reputational damage both by the attendant publicity and
outcomes other than complete victories. Accordingly, the legal and
reputational risks associated with institutional accounts are greater than
previously thought, although still not equal to those related to the
mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is
not comparable to managing other institutional accounts because the
services provided are different, it is worth considering information
regarding the advisory fees charged to institutional accounts with a
substantially similar investment style as the Fund.(5) In addition to the
AllianceBernstein Institutional fee schedule, set forth below is what
would have been the effective advisory fee of the Fund had the
AllianceBernstein Institutional fee schedule been applicable to the Fund
versus the Fund's advisory fees based on September 30, 2006 net assets.
NET ASSETS ALLIANCEBERNSTEIN ("AB") EFFECTIVE AB
09/30/06 INSTITUTIONAL INSTITUTIONAL FUND
FUND ($MIL) FEE SCHEDULE ADVISORY FEE ADVISORY FEE
============================================================================================================================
Intermediate Duration Institutional Portfolio $758.1 U.S. Core Plus Schedule 0.174% 0.500%
40 bp on first $20 million
25 bp on next $80 million
20 bp on next $100 million
15 bp on the balance
Minimum account size $20 m
----------------------------------------------------------------------------------------------------------------------------
The Adviser manages Sanford C. Bernstein Fund, Inc. ("SCB Fund"), an
open-end management investment company. The Intermediate Duration
Portfolio of SCB Fund has a similar investment style as the Fund, and its
advisory fee schedule is set forth below:
FUND SCB FUND PORTFOLIO FEE SCHEDULE
============================================================================================================================
Intermediate Duration Institutional Portfolio Intermediate Duration Portfolio 50 bp on first $1 billion
45 bp on next $2 billion
40 bp on next $2 billion
35 bp thereafter
----------------------------------------------------------------------------------------------------------------------------
The Adviser represented that it does not sub-advise any registered
investment company that has a similar investment strategy as the Fund.
(5) The Adviser has indicated that with respect to institutional accounts with
assets greater than $300 million, it will negotiate a fee schedule,
although it should be noted that there were no such institutional accounts
that are similar in investment style as the Fund, which opened in the last
three years. Discounts that are negotiated vary based upon each client
relationship.
- --------------------------------------------------------------------------------
2006 Annual Report 35
- --------------------------------------------------------------------------------
The Following Is Not Part of the Shareholders Report or
the Financial Statements (continued)
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES
Lipper, Inc. ("Lipper"), an analytical service that is not affiliated with
the Adviser, compared the fees charged to the Fund with fees charged to
other investment companies for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to
the proposed advisory fee relative to the median of the Fund's Lipper
Expense Group ("EG")(6) at the approximate current asset level of the
Fund.(7)
Lipper describes an EG as a representative sample of comparable funds.
Lipper's standard methodology for screening funds to be included in an EG
entails the consideration of several fund criteria, including fund type,
investment classification/ objective, load type and similar
12b-1/non-12b-1 service fees, asset (size) comparability, and expense
components and attributes. An EG will typically consist of seven to twenty
funds.
CONTRACTUAL LIPPER
MANAGEMENT EXPENSE GROUP
FUND FEE(8) MEDIAN RANK
====================================================================================================================
Intermediate Duration Institutional Portfolio 0.500 0.509 8/16
--------------------------------------------------------------------------------------------------------------------
Lipper also analyzed the Fund's most recently completed fiscal year total
expense ratio in comparison to the Fund's EG and Lipper Expense Universe
("EU"). The EU(9) is as a broader group compared to the EG, consisting of
all funds that have the same investment classification/objective and load
type as the subject Fund.
EXPENSE LIPPER LIPPER
RATIO EXPENSE GROUP EXPENSE UNIVERSE
FUND (%) MEDIAN (%) RANK MEDIAN (%) RANK
====================================================================================================================
Intermediate Duration Institutional Portfolio 0.450 0.623 2/16 0.654 19/126
--------------------------------------------------------------------------------------------------------------------
Based on this analysis, the Fund has a more favorable ranking on a total
expense ratio basis than on a management fee basis.(10)
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE ADVISORY FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
A consultant was retained by the Senior Officer to work with the Adviser's
personnel to align the Adviser's two profitability reporting systems. The
alignment, which now has been completed, allows the Adviser's management
and the Directors to receive consistent presentations of the financial
results and profitability although the two profitability reporting systems
operate independently. See Section IV for additional discussion.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer and the consultant.
The Adviser's profitability from providing investment advisory services to
the Fund increased during calendar year 2005, relative to 2004.
(6) It should be noted that Lipper does not consider average account size when
constructing EGs. Funds with relatively small average account sizes tend
to have higher transfer agent expense ratio than comparable sized funds
that have relatively large average account sizes. Note that there are
limitations on Lipper expense category data because different funds
categorize expenses differently.
(7) The contractual management fee is calculated by Lipper using the
Portfolio's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all
classes of the Portfolio, rounded up to the next $25 million. Lipper's
total expense ratio information is based on the most recent annual report
except as otherwise noted. A ranking of "1" means that the Portfolio has
the lowest effective fee rate in the Lipper peer group.
(8) The contractual management fee does not reflect any management fee waiver
for the expense cap that would effectively reduce the contractual
management fee.
(9) Except for asset (size) comparability, Lipper uses the same criteria for
selecting a Lipper Expense Group when selecting a Lipper Expense Universe.
Unlike the Lipper Expense Group, the Lipper Expense Universe allows for
the same adviser to be represented by more than just one fund.
(10) Note the Fund's total expense ratio is lower than the Fund's contractual
management fee, which is the result of the Fund's expense limitation
undertaking.
- --------------------------------------------------------------------------------
36 Sanford C. Bernstein Fund II, Inc.
- --------------------------------------------------------------------------------
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedules being
proposed reflect a sharing of economies of scale to the extent they exist.
Based on some of the professional literature that has considered economies
of scale in the mutual fund industry, it is thought that to the extent
economies of scale exist, they may more often exist across a fund family
as opposed to a specific fund. This is because the costs incurred by the
Adviser, such as investment research or technology for trading or
compliance systems can be spread across a greater asset base as the fund
family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased
over time, and advisory firms have made such investments in their business
to provide improved services, there may be a sharing of economies of scale
without a reduction in advisory fees.
An independent consultant, retained by the Senior Officer, made a
presentation to the Board of Directors regarding possible economies of
scale or scope in the mutual fund industry. Based on the presentation, it
was evident that fund management companies benefit from economies of
scale. However, due to the lack of cost data, researchers had to infer
facts about the costs from the behavior of fund expenses; there was a lack
of consensus among researchers as to whether economies of scale were being
passed on to the shareholders. In the meantime, it is clear that to the
extent a fund's assets were to exceed the initial breakpoint its
shareholders would benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES, INCLUDING THE PERFORMANCE OF
THE FUND
With assets under management of approximately $659 billion as of September
30, 2006, the Adviser has the investment experience to manage and provide
non-investment services (described in Section I) to the Fund.
The information below shows the 1 and 3 year performance returns and
rankings of the Fund(11) relative to the Fund's Lipper Performance Group
("PG")(12) and Lipper Performance Universe ("PU") for the periods ended
June 30, 2006.(13)
INTERMEDIATE DURATION
INSTITUTIONAL PORTFOLIO FUND RETURN PG MEDIAN PU MEDIAN PG RANK PU RANK
=========================================================================================================
1 year (0.35) (0.36) (0.80) 9/16 49/183
3 year 2.34 2.32 2.04 8/15 50/157
---------------------------------------------------------------------------------------------------------
Set forth below are the 1, 3 year and since inception performance returns
of the Fund (in bold) versus its benchmark:(14)
PERIODS ENDING JUNE 30, 2006
ANNUALIZED PERFORMANCE (%)
FUNDS 1 YEAR 3 YEAR SINCE INCEPTION
=========================================================================================================
Intermediate Duration Institutional Portfolio (0.35) 2.34 4.38
Lehman Brothers Aggregated Bond Index (0.81) 2.05 4.21
---------------------------------------------------------------------------------------------------------
CONCLUSION
Based on the factors discussed above the Senior Officer's conclusion is
that the proposed advisory fee for the Fund is reasonable and within the
range of what would have been negotiated at arms-length in light of all
the surrounding circumstances. This conclusion in respect of the Fund is
based on an evaluation of all of these factors and no single factor was
dispositive.
Dated: November 15, 2006
(11) It should be noted that the performance returns of the Fund that is shown
was provided by the Adviser. Lipper maintains its own database that
includes the Fund's performance returns. However, differences in the
distribution price (ex-date versus payable date) and rounding differences
may cause the Adviser's own performance returns of the Fund to be
different from Lipper. To maintain consistency in this evaluation, the
performance returns of the Fund, as reported by the Adviser, are provided
instead of Lipper.
(12) The Fund's PG is identical to the Fund's EG. The Fund's PU is not
identical to the Fund's EU. In addition to outliers, funds with negative
management fees are excluded from EUs but not necessarily from PUs.
(13) Note that the current Lipper investment classification/objective dictates
the PG and PU throughout the life of the Fund even if a Fund may have had
a different investment classification/objective at different points in
time.
(14) The Adviser provided fund and benchmark performance return information for
periods through June 30, 2006.
- --------------------------------------------------------------------------------
2006 Annual Report 37
[LOGO]
SANFORD C. BERNSTEIN & CO., LLC
A subsidiary of AllianceBernstein L.P.
Distributor
SANFORD C. BERNSTEIN FUND II, INC.
1345 Avenue of the Americas, New York, NY 10105
(212) 756-4097
SCB2-2038-1006
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer and principal accounting officer.
A copy of the registrant's code of ethics is filed herewith as Exhibit 12(a)(1).
(b) During the period covered by this report, no material amendments were made
to the provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers to
the provisions of the code of ethics adopted in 2(a) above were granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors has determined that independent directors
David H. Dievler and William H. Foulk, Jr. qualify as audit committee financial
experts.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) - (c) The following table sets forth the aggregate fees billed by the
independent registered public accounting firm PricewaterhouseCoopers LLP, for
the Fund's 2005 fiscal year, and by the independent registered public accounting
firm KPMG LLP, for the Fund's 2006 fiscal year, for professional services
rendered for: (i) the audit of the Fund's annual financial statements included
in the Fund's annual report to stockholders; (ii) assurance and related services
that are reasonably related to the performance of the audit of the Fund's
financial statements and are not reported under (i), which include advice and
education related to accounting and auditing issues, quarterly press release
review (for those Funds that issue quarterly press releases), and preferred
stock maintenance testing (for those Funds that issue preferred stock); and
(iii) tax compliance, tax advice and tax return preparation.
Audit-Related
Audit Fees Fees Tax Fees
---------- ---- --------
Bernstein Intermediate Duration Institutional Portfolio 2005 $37,000 $1,480 $11,826
2006 $32,500 $ 0 $ 7,650
(d) Not applicable.
(e) (1) Beginning with audit and non-audit service contracts entered into on or
after May 6, 2003, the Fund's Audit Committee policies and procedures require
the pre-approval of all audit and non-audit services provided to the Fund by the
Fund's independent auditors. The Fund's Audit Committee policies and procedures
also require pre-approval of all audit and non-audit services provided to the
Adviser and Service Affiliates to the extent that these services are directly
related to the operations or financial reporting of the Fund.
(e) (2) All of the amounts for Audit Fees, Audit-Related Fees and Tax Fees in
the table under Item 4 (a) - (c) are for services pre-approved by the Fund's
Audit Committee.
3
(f) Not applicable.
(g) The following table sets forth the aggregate non-audit services provided to
the Fund, the Fund's Adviser and entities that control, are controlled by or
under common control with the Adviser that provide ongoing services to the Fund
("Service Affiliates"):
Total Amount of
Foregoing Column
Pre-approved by the
All Fees for Audit Committee
Non-Audit Services (Portion Comprised of
Provided to the Audit Related Fees)
Portfolio, the Adviser (Portion Comprised of
and Service Affiliates Tax Fees)
---------------------- ---------
Bernstein Intermediate Duration Institutional Portfolio 2005 $992,200 [$13,306]
( $1,480)
($11,826)
*2006 $4,882,746 [$7,650]
($ 0 )
($7,650)
* On June 14, 2006, the Fund engaged KPMG LLP as independent accountants for
fiscal year 2006.
(h) The Audit Committee of the Fund has considered whether the provision of any
non-audit services not pre-approved by the Audit Committee provided by the
Fund's independent auditor to the Adviser and Service Affiliates is compatible
with maintaining the auditor's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the registrant.
ITEM 6. SCHEDULE OF INVESTMENTS.
Please see Schedule of Investments contained in the Report to Shareholders
included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
4
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Fund's Board of Directors since the Fund last provided
disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial officer
have concluded that the registrant's disclosure controls and procedures (as
defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended)
are effective at the reasonable assurance level based on their evaluation of
these controls and procedures as of a date within 90 days of the filing date of
this document.
(b) There were no significant changes in the registrant's internal controls over
financial reporting during the second fiscal quarter of the period that could
significantly affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
5
ITEM 12. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
12 (a) (1) Code of Ethics that is subject to the disclosure of
Item 2 hereof
12 (b) (1) Certification of Principal Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
12 (b) (2) Certification of Principal Financial Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
12 (c) Certification of Principal Executive Officer and
Principal Financial Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
6
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): Sanford C. Bernstein Fund II, Inc.
By: /s/ Marc O. Mayer
-----------------
Marc O. Mayer
President
Date: November 28, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Marc O. Mayer
-----------------
Marc O. Mayer
President
Date: November 28, 2006
By: /s/ Joseph J. Mantineo
----------------------
Joseph J. Mantineo
Treasurer and Chief Financial Officer
Date: November 28, 2006
7