As filed with the Securities and Exchange
Commission on October 7, 2008
Securities Act File No.:[ ]
Investment Company Act File No.: 811-04791
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF l933
Pre-Effective Amendment No.
Post-Effective Amendment No.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND, INC.
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:
(800) 221-5672
EMILIE D. WRAPP
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York l0105
(Name and address of agent for service)
Copies of communications to:
Kathleen K. Clarke
Seward & Kissel LLP
1200 G Street, N.W.
Suite 350
Washington, DC 20005
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective.
It is proposed that this filing will become effective on November 6, 2008
pursuant to Rule 488 under the Securities Act of 1933.
No filing fee is required because an indefinite number of shares has previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND, INC.
CONTENTS OF FORM N-14 REGISTRATION STATEMENT
This Registration Statement contains the following papers and documents:
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o Cover Sheet
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o Contents of Registration Statement
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o Form N-14 Cross Reference Sheet
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o Letter to Shareholders
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o Part A - Prospectus
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o Part B - Statement of Additional Information
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o Part C - Other Information
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o Signatures
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o Exhibits
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CROSS REFERENCE SHEET
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ITEM NO. PROXY/PROSPECTUS
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Part A
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1. Beginning of Registration Statement
and Outside Front Cover Page of
Prospectus Cover Page/Questions & Answers
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2. Beginning of Outside Back Cover
Page of Prospectus Questions & Answers
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3. Fee Table, Synopsis Information and
Risk Factors Summary, Appendix A
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4. Information about the Transaction Letter to Shareholders, Questions
and Answers, Summary, Information
About the Proposed Transaction
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5. Information about the Registrant Letters to Shareholders, Questions
and Answers, Summary, Information
About the Funds
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6. Information about the Company Being Letters to Shareholders, Questions
Acquired and Answers, Summary, Information
About the Funds
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7. Voting Information Notice of Special Meeting of
Shareholders/Voting Information
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8. Interest of Certain Persons and Experts Experts
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9. Additional Information Required for
Reoffering by Persons Deemed to be
Underwriters Not Applicable
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Part B
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10. Cover Page Cover Page
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11. Table of Contents Table of Contents
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12. Additional Information About the SAI
Registrant
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13. Additional Information about the SAI
Company being Acquired
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14. Financial Statements SAI
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15-17. Information required to be included
in Part C is set forth under the
appropriate item, so numbered, in
Part C of this Registration
Statement.
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AB
ALLIANCEBERNSTEIN
Investments
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND, INC. --
INSURED CALIFORNIA PORTFOLIO
1345 Avenue of the Americas
New York, New York 10105
November [___], 2008
Dear Shareholders:
The Board of Directors of AllianceBernstein Municipal Income Fund, Inc.
(the "Fund") is pleased to invite you to a Special Meeting of Shareholders of
California Portfolio II, currently known as Insured California Portfolio
("Insured California") and a series of the Fund (the "Meeting"), to be held on
Friday, December 12, 2008. At this Meeting, we are asking you to approve the
acquisition of the assets and the assumption of the liabilities of California
Portfolio II ("California II") by California Portfolio, another series of the
Fund. We sometimes refer to each of California II and California Portfolio as a
"Portfolio" and together as the "Portfolios".
The proposed acquisition is described in more detail in the attached
Prospectus/Proxy Statement. You should review the Prospectus/Proxy Statement
carefully and retain it for future reference. If the shareholders of California
II approve the acquisition by California Portfolio, the acquisition is expected
to take place in the first quarter of 2009.
The Board of Directors recently approved the elimination of Insured
California's policy to invest at least 80% of its net assets in insured
municipal securities and changes to certain other non-fundamental policies.
Consistent with the change in the 80% policy, the Directors approved a proposal
to rename the Portfolio California Portfolio II. These changes are expected to
become effective on or about December 1, 2008. You will find a further
explanation of these changes in the Prospectus/Proxy Statement. For the purposes
of this Prospectus/Proxy Statement, we will refer to California II as if the
name change had already taken effect.
California II and California Portfolio have identical investment objectives
and follow significantly similar investment strategies, except that California
II invests principally in securities exempt from the federal alternative minimum
tax ("AMT") while California Portfolio may invest without limit in securities
subject to the AMT for certain taxpayers. We anticipate that the proposed
acquisition will result in benefits to the shareholders of California II,
including a reduction in expenses, as discussed more fully in the
Prospectus/Proxy Statement.
The Directors have given careful consideration to the proposed acquisition
and have concluded that the acquisition is in the best interests of California
II. The Directors recommend that you vote "for" the proposed acquisition of
California II by California Portfolio.
If the acquisition of California II by California Portfolio is approved by
the shareholders of California II, each California II shareholder will receive
Fund. We sometimes refer to each of California II and California Portfolio as
currently owns, which will have an aggregate net asset value ("NAV") equal to
the aggregate NAV of the shareholder's shares in California II. California II
would then terminate. You will not be assessed any initial sales charges,
contingent deferred sales charges or other individual shareholder fees in
connection with the proposed acquisition.
We welcome your attendance at the Meeting. If you are unable to attend, we
encourage you to authorize proxies to cast your vote. Broadridge (the "Proxy
Solicitor"), 60 Research Rd., Hingham, MA 02043, a proxy solicitation firm, has
been selected to assist in the proxy solicitation process. If we have not
received your proxy as the date of the Meeting approaches, you may receive a
telephone call from the Proxy Solicitor to remind you to submit your proxy. No
matter how many shares you own, your vote is important.
Sincerely,
Robert M. Keith
President
AB
ALLIANCEBERNSTEIN
Investments
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND, INC. --
INSURED CALIFORNIA PORTFOLIO
1345 Avenue of the Americas
New York, New York 10105
(800) 221-5672
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
SCHEDULED FOR DECEMBER 12, 2008
To the shareholders of California Portfolio II, currently known as Insured
California Portfolio, a series of AllianceBernstein Municipal Income Fund, Inc.,
a Maryland corporation (the "Fund"):
Notice is hereby given that a Special Meeting of the Shareholders of the
Portfolio (the "Meeting") will be held at 1345 Avenue of the Americas, [_______]
Floor, New York, New York 10105 on Friday, December 12, 2008, at [______]
[p.m.], Eastern Time, to consider and vote on the following proposal, which is
more fully described in the accompanying Prospectus/Proxy Statement dated
November [___], 2008:
1. To approve a Plan of Acquisition and Liquidation of the Fund with
respect to its series, California Portfolio II and California
Portfolio, providing for the acquisition by California Portfolio of
all of the assets and assumption of all of the liabilities of
California Portfolio II in exchange for shares of California Portfolio
and subsequent termination of California Portfolio II.
2. To transact any other business that may properly come before the
Meeting and any adjournments or postponements thereof.
Any shareholder of record of the Portfolio at the close of business on
October 31, 2008 is entitled to notice of, and to vote at, the Meeting or any
adjournments or postponements thereof. Proxies are being solicited on behalf of
the Board of Directors. Each shareholder who does not expect to attend the
Meeting and vote in person is requested to complete, date, sign and promptly
return the enclosed proxy card, or to submit voting instructions by telephone as
described on the enclosed proxy card.
By Order of the Board of Directors,
Robert M. Keith
President
New York, New York
[__________], 2008
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YOUR VOTE IS IMPORTANT
Please indicate your voting instructions on the enclosed proxy card, sign
and date it, and return it in the envelope provided, which needs no postage if
mailed in the United States. Your vote is very important no matter how many
shares you own. In order to save any additional costs of further proxy
solicitation and to allow the Meeting to be held as scheduled, please complete,
date, sign and return your proxy card promptly.
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AllianceBernstein(R) and the AB Logo are registered trademarks and service marks
used by permission of the owner AllianceBernstein L.P.
PROSPECTUS/PROXY STATEMENT
Acquisition of the Assets and Assumption of the Liabilities of
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND, INC. --
CALIFORNIA PORTFOLIO II
(the successor to INSURED CALIFORNIA PORTFOLIO)
By, and in Exchange for Shares of,
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND, INC. --
CALIFORNIA PORTFOLIO
November [__], 2008
TABLE OF CONTENTS
Questions and Answers [__]
Proposal -- Approval of a Plan of Acquisition and Liquidation of
AllianceBernstein Municipal Income Fund, Inc. with respect
to its series, California Portfolio II and California
Portfolio [__]
Summary [__]
Comparison of Operating Expense Ratios [__]
Comparison of Investment Advisory Fees [__]
Comparison of Investment Objectives and Policies [__]
Principal Risks [__]
Federal Income Tax Consequences [__]
Comparison of Distribution and Purchase Procedures [__]
Service Providers [__]
Comparison of Business Structures [__]
Information about the Proposed Transaction [__]
Introduction [__]
Description of the Plan [__]
Reasons for the Acquisition [__]
Description of Securities to be Issued [__]
Dividends and Other Distributions [__]
Surrender and Exchange of California II Stock Certificates [__]
Federal Income Tax Consequences [__]
Capitalization Information [__]
Trading History and Share Price Data [__]
Information about the Portfolios [__]
Management of the Portfolios [__]
Advisory Agreement and Fees [__]
Administrator [__]
Distributor [__]
Other Service Providers [__]
Voting Information [__]
Legal Matters [__]
Experts [__]
Financial Highlights [__]
Appendix A -- Fee Table [__]
Appendix B -- Comparison of Investment Objectives and Policies [__]
Appendix C -- Portfolio Performance [__]
Appendix D -- Description of Principal Risks of the Portfolios [__]
Appendix E -- Certain Information Applicable to Shares of California
Portfolio [__]
Appendix F -- Other Information [__]
Appendix G -- Form of Plan of Acquisition and Liquidation [__]
Appendix H -- Capitalization [__]
Appendix I -- Legal Proceedings [__]
Appendix J -- Share Ownership Information [__]
Appendix K -- Financial Highlights [__]
QUESTIONS AND ANSWERS
The following questions and answers provide an overview of key features of the
proposed acquisition and of the information contained in this Prospectus/Proxy
Statement. Please review the full Prospectus/Proxy Statement before casting your
vote.
1. What is this document and why did we send it to you?
This is a combined Prospectus/Proxy Statement that provides you with information
about the proposed acquisition (the "Acquisition") of the assets and liabilities
of California Portfolio II ("California II"), currently known, prior to the
change in name expected to become effective on or about December 1, 2008, as
Insured California Portfolio ("Insured California") and a series of
AllianceBernstein Municipal Income fund, Inc. (the "Fund"), by California
Portfolio, a series of the Fund. (California Portfolio, California II and
Insured California are each a "Portfolio" and collectively, the "Portfolios").
This document also solicits your vote on the Acquisition by requesting that you
approve the Plan of Acquisition and Liquidation, dated as of [__________], 2008
(the "Plan") of the Fund with respect to its series, California II and
California Portfolio, and the subsequent termination of California II (the
"Proposal").
On September 23, 2008, the Board of Directors of the Fund (the "Board") approved
and declared advisable the Acquisition and the subsequent termination of
California II and directed that the Acquisition and termination be submitted to
the shareholders for approval at a Special Meeting of Shareholders to be held on
December 12, 2008 at [____] [p.m.], Eastern Time (the "Meeting"). You are
receiving this Prospectus/Proxy Statement because you own shares of California
II. Each shareholder of record of California II as of the close of business on
October 31, 2008 (the "Record Date") has the right under applicable legal and
regulatory requirements to vote on the Acquisition. The Acquisition will not
occur unless it is approved by California II shareholders. This Prospectus/Proxy
Statement contains the information you should know before voting on the
Acquisition.
You may contact a Portfolio at (800) 221-5672 or write to a Portfolio at 1345
Avenue of the Americas, New York, NY 10105.
2. Who is eligible to vote on the Acquisition?
Shareholders of record of California II at the close of business on the Record
Date are entitled to notice of, and to vote at, the Meeting or any adjournment
or postponement of the Meeting. If you owned shares of California II on the
Record Date, you have the right to vote even if you subsequently sold your
shares.
Each share is entitled to one vote. Shares represented by properly executed
proxies, unless revoked before or at the Meeting, will be voted according to
shareholders' instructions. If you sign and return a proxy card but do not fill
in a vote, your shares will be voted "FOR" the Proposal. If any other business
properly comes before the Meeting, your shares will be voted at the discretion
of the persons named as proxies.
3. How will the Acquisition work?
The Plan provides for (i) the transfer of all of the assets of California II to
California Portfolio, (ii) the assumption by California Portfolio of all of the
liabilities of California II, (iii) the issuance to California II shareholders
of shares of the equivalent class of California Portfolio, equal in aggregate
net asset value ("NAV") to the NAV of their former California II shares, in
redemption of their California II shares, and (iv) the termination of California
II.
As a shareholder of California II, you will receive the same class of shares of
California Portfolio as the shares you currently own, having an aggregate NAV
equal to the aggregate NAV of your shares in California II. The contingent
deferred sales charge ("CDSC") period applicable to California II shares prior
to the Acquisition will continue to apply to the shares of California Portfolio
issued in the Acquisition. Shareholders of California II will not be assessed
any sales charges or other shareholder fees in connection with the Acquisition.
The Acquisition will not occur unless it is approved by the shareholders of
California II.
4. Why is the Acquisition being proposed?
After considering the recommendation of AllianceBernstein L.P. (the "Adviser"),
the Board concluded that participation by California II in the Acquisition is in
the best interests of California II. The Board also concluded that the
Acquisition would not dilute shareholders' interests. In reaching this
conclusion, the Board considered, among other things, the similar investment
objectives and strategies and differences among the investment policies of the
Portfolios, the expense ratio reduction expected to result from the Acquisition,
the continuity of the portfolio management team, the comparison of fees for the
Portfolios and the pro forma combined Portfolio, the costs of the Acquisition,
and the tax-free nature of the Acquisition.
5. When will the Acquisition take place?
If the shareholders of California II approve the Acquisition on December 12,
2008, the Acquisition is expected to occur in the first quarter of 2009.
6. Who will bear the expenses of the Acquisition?
The expenses of the Acquisition, which are estimated to be approximately
$205,000 will be borne by California II.
7. Where May I Find Additional Information Regarding the Portfolios?
Additional information about the Portfolios is available in the Statement of
Additional Information ("SAI") dated [__________], 2008 that has been filed with
the Securities and Exchange Commission ("SEC") in connection with this
Prospectus/Proxy Statement. The SAI and the Portfolios' Annual Reports to
Shareholders, which contain audited financial statements for the Portfolios'
fiscal year ended October 31, 2007, are incorporated by reference into this
Prospectus/Proxy Statement. In addition, the Portfolios' Semi-Annual Reports for
the six-month period ended April 30, 2008 and the prospectus and SAI for the
Portfolios dated February 1, 2008, as revised August 6, 2008 and September 24,
2008 (collectively, the "Prospectuses") are incorporated by reference into this
Prospectus/Proxy Statement. (The Portfolios' file number is 811-04791).
Additional copies of the Annual and Semi-Annual reports are available at
www.AllianceBernstein.com and are also available, along with the
Prospectus/Proxy Statement and SAI, upon request, without charge, by writing to
or calling the address and telephone number listed below.
By mail: AllianceBernstein Investor Services, Inc.
P.O. Box 786003
San Antonio, TX 78278-6003
By phone: For Information: 1-800-221-5672
For Literature: 1-800-227-4618
All of this information is filed with the SEC. You may view or obtain these
documents from the SEC:
In person: at the SEC's Public Reference Room in Washington, D.C.
By phone: 202-551-8090 (for information on the operations of the
Public Reference Room only)
By mail: Public Reference Section, Securities and Exchange
Commission, Washington, DC 20549-0102 (duplicating fee required)
By electronic publicinfo@sec.gov (duplicating fee required)
mail:
On the Internet: www.sec.gov
Other Important Things to Note:
o You may lose money by investing in the Portfolios.
o The SEC has not approved or disapproved these securities or passed
upon the adequacy of this Prospectus/Proxy Statement. Any
representation to the contrary is a criminal offense.
PROPOSAL
APPROVAL OF A PLAN OF ACQUISITION AND LIQUIDATION OF
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND, INC. WITH RESPECT TO ITS
SERIES, CALIFORNIA PORTFOLIO II AND CALIFORNIA PORTFOLIO
On September 23, 2008, the Board of Directors (the "Directors") of
AllianceBernstein Municipal Income Fund, Inc. declared advisable and voted to
approve the Plan and the Acquisition, subject to the approval of the
shareholders of California Portfolio II ("California II"), currently known,
prior to the change in its name expected to become effective on or about
December 1, 2008, as Insured California Portfolio. The Plan provides for (i) the
transfer of all of the assets of California II to California Portfolio, (ii) the
assumption by California Portfolio of all of the liabilities of California II,
(iii) the issuance to California II shareholders of the equivalent class of
shares of California Portfolio, equal in aggregate net asset value ("NAV") to
the NAV of their former California II shares in redemption of their California
II shares, and (iv) the termination of California II.
Each California II shareholder will receive the number of full and
fractional shares of California Portfolio having an aggregate NAV that, on the
effective date of the Acquisition, is equal to the aggregate NAV of the
shareholder's shares of California II. Shareholders of California II will
recognize no gain or loss. If approved by the shareholders of California II, the
Acquisition is expected to occur in the first quarter of 2009.
The shareholders of California II must approve the Proposal in order for
the Acquisition to occur. Approval of the Proposal requires the affirmative vote
of the holders of a "majority of the outstanding voting securities" of
California II, as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"). Under the 1940 Act, a vote of the holders of a majority of the
outstanding voting securities of a Portfolio means the vote of the holders of
the lesser of: (i) 67% or more of the outstanding shares of the Portfolio
present at the Meeting, if the holders of more than 50% of the outstanding
shares are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Portfolio.
A quorum for the transaction of business by the shareholders of California
II at the Meeting will consist of the presence in person or by proxy of the
holders of one-third of the shares of California II entitled to vote at the
Meeting.
The Directors concluded that participation by California II in the
Acquisition is in the best interests of California II. The Directors also
concluded that the Acquisition would not dilute shareholders' interests. In
reaching this conclusion, the Directors considered, among other things, the
similar investment objectives and strategies and differences among the
investment policies of the Portfolios, the expense ratio reduction expected to
result from the Acquisition, the continuity of the portfolio management team,
the comparison of fees for each of California II and California Portfolio with
those of the pro forma combined Portfolio, the costs of the Acquisition, and the
tax-free nature of the Acquisition.
For a more complete discussion of the factors considered by the Directors
in approving the Acquisition, see "Reasons for the Acquisition" in Information
About the Proposed Transaction.
SUMMARY
The following summary highlights differences between the Portfolios. This
summary is not complete and does not contain all of the information that you
should consider before voting on the Acquisition. For more complete information,
please read this entire document. This Prospectus/Proxy Statement, the
accompanying Notice of the Special Meeting of Shareholders and the enclosed
proxy card are being mailed to shareholders of California II on or about
November [___], 2008. Certain information presented to the Directors at the
September 23, 2008 Special Meeting of the Board of Directors of the Fund
referred to below ("Board Meeting") is as of June 30, 2008. The Adviser
represented to the Board that, if the information was updated, it would not
differ in any material respect.
California II is a non-diversified open-end fund, with assets of, as of
June 30, 2008, approximately $94 million, that invests principally in
high-yielding, predominantly investment grade, municipal securities. As a matter
of fundamental policy, California II invests, under normal circumstances, at
least 80% of its net assets in municipal securities with interest that is exempt
from federal and California income tax. California Portfolio is a diversified
open-end fund, and is significantly larger than California II, with assets of,
as of June 30, 2008, approximately $745 million. California Portfolio pursues
investment strategies that are similar to those of California II. The principal
difference between the Portfolios is that California II invests principally in
securities exempt from the federal alternative minimum tax ("AMT") while
California Portfolio may invest, without limitation, in securities subject to
the AMT for certain taxpayers.
California Portfolio has outperformed California II for the one, three,
five and ten year periods largely because insured municipal bonds have lower
yields than their uninsured counterparts. The Portfolios' returns for the past
one year period were the same reflecting the fact that, because of declines in
the credit quality of bond insurers, insured municipal bonds are, similar to
other municipal bonds, valued in the market primarily with reference to the
credit quality of the issuer. Comparative performance for the Portfolios' Class
A shares as of June 30, 2008 is shown in the chart below.
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
California II 1.67% 1.90% 2.61% 4.11%
California Portfolio 1.67% 2.60% 3.68% 4.25%
The historical performance of the Portfolios is provided in Appendix C.
Comparison of Operating Expense Ratios
California II, because of its small asset size, has higher operating costs
and therefore a higher expense ratio than the California Portfolio. The
Acquisition is expected to result in an operating expense ratio for the combined
Portfolio that is lower than the current, actual operating expense ratio of
California II. The Adviser has adopted an expense cap for California Portfolio's
Class A shares of .77% (with corresponding expense caps for other classes of
shares) that is effective for California Portfolio until December 31, 2008.
Effective January 1, 2009, the Adviser has adopted a new, lower expense cap for
California Portfolio's Class A shares of .75% (with corresponding expense caps
for other classes of shares) that will be effective through the end of
California Portfolio's fiscal year and continue thereafter for one-year periods
unless terminated by the Adviser upon 60 days' notice prior to California
Portfolio's fiscal year end. The Acquisition would result in a significant
decrease in the operating expense ratio for California II.
The following table illustrates, as of June 30, 2008, the expected
reduction in operating expenses for California II.
Total Annual Total Annual Expense
Expense Ratio Ratio with Fee Cap
------------- ------------------
California II 1.16% --
California Portfolio (Class A) 0.85% 0.77%
California Portfolio (Class A pro forma) 0.85% 0.75%*
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* The current expense cap for California Portfolio Class A shares is
.77%. Effective January 1, 2009, the Adviser has adopted a new, lower
expense cap of .75% (with corresponding expense caps for other classes
of shares) that will be effective through the end of the Portfolio's
fiscal year and continue thereafter for one-year periods unless the
Adviser gives the Portfolio notice of termination at least 60 days
prior to the end of the Portfolio's fiscal year.
As the table indicates, the operating expenses per share, after fee waiver,
would be reduced for California II by .41% (.31% before fee waiver), if the
Acquisition is consummated. The Fee Table, attached hereto as Appendix A,
describes the fees and expenses of each Portfolio as of the Portfolios' fiscal
year end and includes pro forma expenses for the combined Portfolio assuming the
Acquisition is approved by California II's shareholders.
Comparison of Investment Advisory Fees
The Portfolios have the same investment advisory agreement and pay a
monthly advisory fee at the same annual rate of .45% of each Portfolio's average
daily net assets. The advisory fee rates are .45% of the first $2.5 billion,
..40% of the excess of $2.5 billion up to $5 billion and .35% of the excess over
$5 billion of each Portfolio's average daily net assets.
Advisory Fee Rates
------------------
California II .45%
California Portfolio .45%
California Portfolio (pro forma) .45%
Comparison of Investment Objectives and Policies
At the Board Meeting, the Directors approved revisions in Insured
California's investment policies to remove a non-fundamental investment policy
of investing at least 80% of its net assets in insured municipal securities. The
Adviser advised the Directors it believed that, as a result of declines in the
credit quality and associated downgrades of most bond insurers, insurance has
less value than it did in the past. Previously, insured municipal securities
typically received higher credit ratings and the issuer paid a lower interest
rate. The market now values insured municipal securities primarily based on the
credit quality of the issuer of the security with little value given to the
insurance feature. In addition, the supply of insured municipal securities has
declined leading to reduced availability of these securities. The Adviser
believed that it could better evaluate the risk and return characteristics of
municipal securities through its own research and provide investors and
shareholders with a greater opportunity for higher risk-adjusted returns than
those available from a portfolio primarily invested in insured municipal
securities. In connection with the policy change, the Board approved a change in
Insured California's name to California Portfolio II. The name and policy
changes will become effective on or about December 1, 2008.
The Directors also approved a proposal, effective immediately, to eliminate
the Portfolio's non-fundamental policies related to insurer's ratings. These
policies include (i) that no more than 25% of the Portfolio's total assets may
be invested in insured municipal securities covered by policies issued by
issuers with a claims-paying ability rated below AA by Moody's, S&P or Fitch and
(ii) that no insured security purchased by the Portfolio can be covered by a
policy issued by an insurer with a claims-paying ability rated below A. The
Adviser advised the Directors that these restrictions might unduly limit the
Portfolio's investment opportunities in light of recent and foreseeable
downgrades of certain insurance companies.
Once the policy change described above for Insured California becomes
effective and Insured California transitions into California II, the investment
objectives and strategies of California II and California Portfolio will be the
same except, as discussed below, that California Portfolio may invest, without
limitation, in securities subject to the AMT for certain taxpayers while
California II's investmements are principally limited to securities exempt from
the AMT. The following table shows the investment objective and principal
investment strategies of each of Insured California, California II and
California Portfolio.
Insured California California II California Portfolio
------------------------- ------------------------- -------------------------
Investment Objective The investment objective Same. Same.
of the Portfolio is to
earn the highest level of
current income, exempt
from Federal and State of
California taxation, that
is available without
assuming what the Adviser
considers to be undue
risk.
Principal
Investment Strategies The Portfolio invests, The Portfolio invests, The Portfolio invests,
under normal under normal under normal
circumstances, at least circumstances, at least circumstances, at least
80% of its net assets in 80% of its net assets in 80% of its net assets in
municipal securities with municipal securities with municipal securities with
interest which is exempt interest which is exempt interest which is exempt
from federal income tax, from federal income tax, from federal income tax
including the AMT, and including the AMT, and and at least 80% of its
80% of its net assets in 80% of its net assets in net assets in municipal
municipal securities of municipal securities of securities of California
California or municipal California or municipal or municipal securities
securities with interest securities with interest with interest that is
which is otherwise exempt which is otherwise exempt otherwise exempt from
from California state from California state California state income
income tax. income tax. tax.
The Portfolio invests, The Portfolio invests,
under normal and is permitted to
circumstances, at least invest without limit, in
80% of its net assets in AMT-subject bonds.
insured securities.
The investment strategies of California II and California Portfolio are the
same because both invest primarily in investment grade municipal securities with
interest which is exempt from federal income tax and in municipal securities of
California or municipal securities with interest that is otherwise exempt from
California state income tax. The only difference is that California Portfolio
may invest without limit in securities subject to the AMT for certain taxpayers
while California II invests principally in securities exempt from the AMT.
As the number of investors subject to the AMT has increased, California
Portfolio has reduced its holdings in AMT-subject securities and its holdings in
these securities have declined from approximately 60% at the beginning of 2000
to approximately 12% at the end of 2007. The Adviser does not anticipate a
significant increase in these investments. In addition, the Adviser believes
that its ability to generate higher distribution yields for all shareholders
should offset the value to California II's shareholders of investing in
AMT-exempt securities. If the Portfolios were combined as of July 31, 2008, the
combined Portfolio AMT would be 10.49% and, as the following table illustrates,
shareholders subject to the AMT would receive a higher after-tax distribution
yield than California II would provide:
After-Tax Distribution Yield
-----------------------------
Insured California 3.63%
California Portfolio 4.22%
California Portfolio (Before Tax) (pro forma) 4.20%
California Portfolio (After Tax) (pro forma) 4.08%
A more detailed comparison of the investment strategies and policies of the
Portfolios is provided in Appendix B. You can find additional information on the
Portfolios in the SAI.
As a result of the previously discussed decline in the credit quality of
most bond insurers, insured municipal bonds are valued in the market primarily
with reference to the credit quality of the issuer, with little if any value
being ascribed to the insurance component. Consequently, a combination of the
Portfolios' holdings will not significantly alter California Portfolio's credit
quality or other portfolio characteristics. Therefore, the Adviser does not
anticipate any significant portfolio repositioning as a result of the
Acquisition. California Portfolio will be the accounting survivor after the
consummation of the Acquisition.
Principal Risks
Each Portfolio is subject to market risk, municipal market risk, interest
rate risk, credit risk, inflation risk and derivatives risk. California II is
also subject to diversification risk because it is non-diversified. A
description of each of these risks is provided in Appendix D.
Federal Income Tax Consequences
No gain or loss will be recognized by California II or its shareholders as
a result of the Acquisition. The aggregate tax basis of the shares of California
Portfolio received by a shareholder of California II (including any fractional
shares to which the shareholder may be entitled) will be the same as the
aggregate tax basis of the shareholder's shares of California II. The holding
period of the shares of California Portfolio received by a shareholder of
California II (including any fractional share to which the shareholder may be
entitled) will include the holding period of the shares of California II held by
the shareholder, provided that such shares are held as capital assets by the
shareholder of California II at the time of the Acquisition. The holding period
and tax basis of each asset of California II in the hands of California
Portfolio as a result of the Acquisition will be the same as the holding period
and tax basis of each such asset in the hands of California II prior to the
Acquisition. Provided that California II shares surrendered constitute capital
assets in the hands of the shareholder, such gain or loss realized by the
shareholder will be capital gain or loss upon disposition of the shares. This
tax information is based on the advice of Seward & Kissel LLP, counsel to each
of the Portfolios. It is a condition to the closing of the Acquisition that such
advice be confirmed in a written opinion of counsel. An opinion of counsel is
not binding on the Internal Revenue Service.
California II has no capital loss carryforwards and California Portfolio
has capital loss carryforwards of approximately $18.6 million or $0.26 per
share. The combined Portfolio will have the same amount of capital loss
carryforwards, which will, as a result of the Acquisition, equal $0.23 per
share. The Capital loss carryforwards available to California II's shareholders
will increase and those available to California Portfolio's shareholders will
decrease slightly. California II has a small amount of capital gains, which will
be distributed to shareholders as dividends prior to the Acquisition. Although
not anticipated, California II, prior to the closing of the Acquisition, will
determine if additional distributions are necessary and will declare a
distribution to the California II shareholders which, together with all previous
distributions, will have the effect of distributing to the California II
shareholders all of California II's investment company taxable income (computed
without regard to the deduction for dividends paid) and net realized capital
gains, if any, through the closing.
Additional tax considerations are discussed under the section on "Federal
Income Tax Consequences" in "Information about the Transaction".
Comparison of Distribution and Purchase Procedures
The distribution and purchase procedures of the Portfolios are identical.
The shares of each Portfolio are offered to a broad range of investors. Class A
shares of each Portfolio are sold with a front-end sales load of up to 4.25% for
purchases of less than $1,000,000. Class B shares are available at NAV without
an initial sales charge. Your investment, however, is subject to a CDSC if you
redeem shares within three years of purchase. The CDSC varies depending on the
number of years you hold the shares. Class C shares are also available at NAV
without an initial sales charge. Your investment, however, is subject to a 1%
CDSC if you redeem your shares within one year. Advisor Class shares of
California Portfolio may be purchased through a financial adviser at NAV.
The CDSCs applicable to shares of California II will continue to apply to
California Portfolio shares issued in the Acquisition. The CDSC period will be
calculated from the date of the original purchase of California II shares. Class
B shares of California II will convert to Class A shares after six years.
Each Portfolio's Class A shares have a .30% distribution (Rule 12b-1) fee.
The Class B and Class C shares of each Portfolio have a 1.00% distribution fee.
The shares of each Portfolio may be exchanged for comparable classes of shares
of other AllianceBernstein mutual funds. More information on distribution and
purchase procedures of California Portfolio is provided in Appendix E.
Service Providers
The Portfolios have the same service providers, which will continue in
their capacity after the Acquisition.
Comparison of Business Structures
Each Portfolio is a series of the Fund, which is organized as a Maryland
corporation and is governed by its Charter, Bylaws and Maryland law. For more
information on the organizational structure and governance of the Portfolios,
see Appendix F.
INFORMATION ABOUT THE PROPOSED TRANSACTION
Introduction
This Prospectus/Proxy Statement is provided to you to solicit your proxy
for exercise at the Meeting to approve the acquisition of the assets and
assumption of the liabilities of California II by California Portfolio and the
subsequent termination of California II. The Meeting will be held at 1345 Avenue
of the Americas, [___] Floor, New York, New York 10105 at [____] [p.m.], Eastern
Time, on December 12, 2008. This Prospectus/Proxy Statement, the accompanying
Notice of the Special Meeting of Shareholders and the enclosed proxy card are
being mailed to shareholders of California II on or about November [___], 2008.
Description of the Plan
As provided in the Plan, California Portfolio will acquire all the assets
and assume all the liabilities of California II at the effective time of the
Acquisition (the "Effective Time"). In return, California Portfolio will issue,
and California II will distribute to its shareholders, a number of full and
fractional shares of California Portfolio, determined by dividing the net value
of all the assets of California II by the NAV of one share of California
Portfolio. For this purpose, the Plan provides the times for, and methods of,
determining the net value of the assets of each Portfolio. The Plan provides
that shareholders of California II will be credited with shares of California
Portfolio having an aggregate NAV equal to the aggregate NAV of the California
II shares that the shareholder holds of record at the Effective Time.
Following the distribution of California Portfolio shares in full
liquidation of California II, California II will wind up its affairs and
terminate as soon as is reasonably practicable after the Acquisition. In the
event the Acquisition does not receive the required shareholder approval,
California II will continue its operations and the Board will consider what
future action, if any, is appropriate.
The projected expenses of the Acquisition, largely those for legal,
accounting, printing and proxy solicitation expenses, are estimated to total
approximately $205,000. The expenses will be borne by California II.
The Acquisition is expected to occur in the first quarter of 2009. The
Acquisition is conditioned upon approval of the Plan by California II
shareholders and California II satisfying the terms of the Plan. Under
applicable legal and regulatory requirements, none of California II's
shareholders will be entitled to exercise shareholders' appraisal rights, i.e.,
to demand the fair value of their shares in connection with the Acquisition.
Therefore, shareholders will be bound by the terms of the Acquisition under the
Plan. However, any shareholder of California II may redeem shares of common
stock prior to the Acquisition.
Completion of the Acquisition is subject to certain conditions set forth in
the Plan. The Directors may terminate the Plan under certain circumstances.
Among other circumstances, the Directors may terminate the Plan upon a
determination that proceeding with the Plan is not in the best interests of a
Portfolio or of its shareholders.
A copy of a form of the Plan is attached as Appendix G.
Reasons for the Acquisition
The Adviser presented the following reasons in favor of the Acquisition:
o The Adviser discussed with the Directors that California II
commenced operations in November, 1985 under the aegis of another
investment adviser and became part of the AllianceBernstein
complex of mutual funds in November, 1986. California Portfolio
commenced operations in December, 1986. California II, with net
assets, as of June 30, 2008, of approximately $94 million, is
considerably smaller than California Portfolio, with net assets,
as of June 30, 2008, of approximately $745 million.
o The Adviser discussed with the Directors that it believed that
combining the relatively small California II with California
Portfolio would result in a more efficient investment opportunity
with lower expenses. As the Adviser noted, California II's
expense ratio is higher than California Portfolio's gross expense
ratio due to its small size and dwindling assets as a result of
net redemptions over the past six years. In addition, California
Portfolio has an expense limitation undertaking which further
lowers its expenses as compared to California II.
o The Adviser also discussed with the Directors that the Portfolios
have the same investment objectives. The Portfolios also have the
same investment policies and restrictions except in two respects.
First, California II has historically invested principally in
insured municipal securities. But, with the policy change
approved by the Directors at the Board Meeting, both Portfolios
will, beginning on or about December 1, 2008, be permitted to
invest in the same types of municipal securities. Second,
California II invests principally in securities exempt from the
AMT but California Portfolio can invest without limit in
securities subject to the AMT. As the Adviser explained to the
Directors, it believes that its ability to generate higher
distribution yields for all shareholders should offset the value
to California II's shareholders of investing in AMT-exempt
securities. In addition, as an increasing number of investors
have become subject to the AMT, the Adviser has sought to
minimize the tax burden for California Portfolio's shareholders
and reduce its holdings in AMT-subject securities. The
Portfolio's investments in AMT-subject securities declined from
approximately 60% at the beginning of 2000 to approximately 12%
at the end of 2007. The Adviser does not anticipate a significant
increase in California Portfolio's holdings of AMT-subject
securities.
At the Board Meeting, the Directors (with the advice and assistance of
independent counsel) also considered, among other things:
o potential shareholder benefits of the Acquisition, including the
fact that the expense ratio of the Class A shares of California
II, as of June 30, 2008, of 1.16%, was considerably higher than
that of California Portfolio, with a gross expense ratio of, as
of the same date, .85% and a net expense ratio, after the
Adviser's fee waiver/expense limitation, of .77%, and that the
pro forma net expense ratio of the combined Fund would be .75%, a
decrease of .41% for California II's shareholders;
o the Adviser's anticipation that no significant repositioning of
California II's portfolio will be required as a result of the
Acquisition because, as insured municipal bonds are currently
valued in the market based on the credit quality of the issuer, a
combination of the Portfolios' holdings will not significantly
alter California Portfolio's credit quality or other portfolio
characteristics;
o the current asset levels of the Portfolios and the pro forma
asset levels of the combined Portfolio;
o the historical investment performance of the Portfolios;
o the identical investment objectives and similar investment
strategies of California II, after the recent changes to its
non-fundament investment policies approved by the Directors, and
California Portfolio, except for the requirement that California
II invest primarily in AMT-exempt municipal securities, in which,
although not required, California Portfolio does not invest
significantly;
o the portfolio managers of California II and California Portfolio
with the most significant responsibility for the day-to-day
management of and investment decisions for the Portfolios'
portfolios, which are the same and will continue in that role for
the combined Portfolio;
o that California II has no capital loss carryforwards and
California Portfolio has capital loss carryforwards of
approximately $18.6 million or $0.26 per shares and that the
combined Portfolio will have the same amount of capital loss
carryforwards, which will, as a result of the Acquisition, equal
$0.23 per share, which means that the capital loss carryforwards
available to California II's shareholders will increase and those
available to California Portfolio's shareholders will decrease
slightly;
o that California II has a small amount of capital gains which are
expected to be distributed to shareholders as dividends prior to
the Acquisition, and that, although not anticipated, California
II will determine if additional distributions of capital gains
are required prior to the Acquisition;
o the form of the Plan and the terms and conditions of the
Acquisition;
o the fact that the Portfolios have identical advisory fee
schedules and pay advisory fees at the same rate;
o whether the Acquisition would result in the dilution of
shareholders' interests;
o the number of shareholder accounts and average account sizes of
the Portfolios;
o that no changes in service providers will result from the
Acquisition;
o the benefits of the Acquisition to persons other than California
II and its shareholders, in particular, the Adviser, which would
benefit from the elimination of monitoring and administrating the
smaller California II;
o the fact that California Portfolio will assume all the
liabilities of California II;
o the expected federal income tax consequences of the Acquisition;
o whether the Acquisition would be preferable to a merger with an
unaffiliated fund;
o the Adviser's representation that none of the financial
information presented to the Directors had changed materially
since June 30, 2008;
o the costs of the Acquisition, which will be borne by California
II; and
o the fact that the Adviser has agreed to indemnify California
Portfolio for a three-year period against any liability not
disclosed or not reflected in the NAV of California II at the
time of the Acquisition, to reimburse California Portfolio for
any reasonable legal or other costs and expenses in connection
with investigating any such liability, and to continue certain
insurance coverage for a six-year period.
Description of Securities to be Issued
Under the Plan, California Portfolio will issue additional shares of common
stock of its Class A, Class B and Class C for distribution to California II.
Under its Charter and Bylaws, California Portfolio may issue up to 3,000,000,000
shares of common stock, par value $.001 per share, for each of these Classes.
When the Acquisition is consummated, shareholders of Class A, Class B and
Class C of California II will receive corresponding class shares of California
Portfolio having an aggregate NAV equal to the aggregate NAV of the
shareholder's shares in California II.
Each share of California Portfolio represents an equal proportionate
interest with other shares of California Portfolio. Each share has equal
earnings, assets and voting privileges and is entitled to dividends and other
distributions out of the income earned and gain realized on the assets belonging
to California Portfolio as authorized by the Board. Shares of California
Portfolio entitle their holders to one vote per full share and fractional votes
for fractional shares held. Shares of California Portfolio received by
California II in the Acquisition will be issued at NAV without a sales charge,
fully paid and non-assessable.
Dividends and Other Distributions
On or before the Closing Date, as defined in the Plan, California II will,
if necessary, declare and pay as a distribution substantially all of its
undistributed net investment income, net short-term capital gain, net long-term
capital gain and net gains from foreign currency transactions, as applicable, to
maintain its treatment as a regulated investment company.
Surrender and Exchange of California II Stock Certificates
After the Plan's Effective Time, each holder of a certificate (or
certificates) formerly representing shares of California II will not receive,
upon surrender of the certificate, a certificate representing the number of
California Portfolio shares distributable as a result of the Acquisition since
California Portfolio will not issue certificates representing California
Portfolio shares in connection with the Acquisition. Ownership of California
Portfolio's shares will be shown on the books of California Portfolio's transfer
agent. Promptly after the Plan's Effective Time, AllianceBernstein Investor
Services, Inc. ("ABIS") will mail to California II's certificate holders
instructions and a letter of transmittal for use in surrendering the
certificates. Please do not send share certificates at this time. Although the
certificates will be deemed for all purposes to evidence ownership of the
equivalent number of California Portfolio shares, no dividends will be paid to
holders of certificates of California II until the holder surrenders the
certificates in accordance with the instructions and letter of transmittal. Any
dividends on California Portfolio shares payable after the Effective Time will
be paid to the certificate holder, without interest, when that holder surrenders
a California II share certificate for exchange.
Federal Income Tax Consequences
Subject to certain stated assumptions contained therein, California II will
receive an opinion of Seward & Kissel LLP, its counsel, substantially to the
following effect: (i) the Acquisition will constitute a "reorganization" within
the meaning of Section 368(a) of the Code and that California II and California
Portfolio will each be "a party to a reorganization" within the meaning of
Section 368(b) of the Code; (ii) a shareholder of California II will recognize
no gain or loss on the exchange of the shareholder's shares of California II
solely for shares of California Portfolio; (iii) neither California II nor
California Portfolio will recognize any gain or loss upon the transfer of all of
the assets of California II to California Portfolio in exchange for shares of
California Portfolio and the assumption by California Portfolio of the
liabilities of California II pursuant to the Plan or upon the distribution of
shares of California Portfolio to shareholders of California II in exchange for
their respective shares of California II; (iv) the holding period and tax basis
of the assets of California II acquired by California Portfolio will be the same
as the holding period and tax basis that California II had in such assets
immediately prior to the Acquisition; (v) the aggregate tax basis of shares of
California Portfolio received in connection with the Acquisition by each
shareholder of California II (including any fractional share to which the
shareholder may be entitled) will be the same as the aggregate tax basis of the
shares of California II surrendered in exchange therefore; (vi) the holding
period of shares of California Portfolio received in connection with the
Acquisition by each shareholder of California II (including any fractional share
to which the shareholder may be entitled) will include the holding period of the
shares of California II surrendered in exchange therefore, provided that such
California II shares constitute capital assets in the hands of the shareholder
as of the Closing Date; and (vii) California Portfolio will succeed to the
capital loss carryovers of California II, if any, under Section 381 of the Code,
but the use by California Portfolio of any such capital loss carryovers (and of
capital loss carryovers of California Portfolio) may be subject to limitation
under certain sections of the Code. This opinion of counsel will not be binding
on the Internal Revenue Service or a court and there is no assurance that the
Internal Revenue Service or a court will not take a view contrary to those
expressed in the opinion.
The Adviser does not anticipate the sale of the assets of California II in
connection with the Acquisition. If any sale occurred, the actual tax impact of
such sales will depend on the difference between the price at which such
portfolio assets are sold and California II's basis in such assets. Any capital
gains recognized in these sales will be distributed to California II
shareholders as capital gain dividends (to the extent of the excess of net
realized long-term capital gains over net realized short-term capital losses)
and ordinary dividends (to the extent of net realized short-term capital gains)
during or with respect to the year of sale, and such distributions will be
taxable to shareholders.
Shareholders of California II are encouraged to consult their tax advisers
regarding the effect, if any, of the Acquisition in light of their individual
circumstances. Because the foregoing only relates to the federal income tax
consequences of the Acquisition, those shareholders also should consult their
tax advisers as to state and local tax consequences, if any, of the Acquisition.
Capitalization Information
For information on the existing and pro forma capitalization of the
Portfolios, see Appendix H.
INFORMATION ABOUT THE PORTFOLIOS
California II is a non-diversified, open-end management investment company
registered under the 1940 Act and organized as a Maryland corporation in 1985.
California Portfolio is a diversified open-end management investment company
registered under the 1940 Act and organized as a Maryland corporation in 1986.
Management of the Portfolios
The Directors of the Fund direct the management of the business and affairs
of the Portfolios. The Directors approve all significant agreements between the
respective Portfolio and persons or companies furnishing services to it,
including a Portfolio's agreements with the Adviser and the Portfolio's
custodian, transfer and dividend disbursing agent. The day-to-day operations of
a Portfolio are delegated to its officers and the Portfolio's Adviser, subject
to the Portfolio's investment objective and policies and to general supervision
by the Directors.
Both California II and California Portfolio are overseen by the Adviser's
Municipal Bond Investment Team. The investment professionals with the most
significant responsibility for the day-to-day management of the Portfolios'
portfolios are Michael G. Brooks, Fred S. Cohen, Robert B. (Guy) Davidson III
and Terrance T. Hults. Messrs. Brooks, Cohen, Davidson and Hults are Senior Vice
Presidents of the Adviser, with which they have been associated in a
substantially similar capacity to their current positions since prior to 2003.
Subsequent to the consummation of the Acquisition, Messrs. Brooks, Cohen,
Davidson and Hults will be primarily responsible for day-to-day management of
the combined Portfolio. The SAI provide additional information about the
portfolio managers' compensation, other accounts managed by the portfolio
managers, and the portfolio manager's ownership of securities in the Portfolios.
Advisory Agreement and Fees
Each Portfolio's investment adviser is AllianceBernstein L.P. (the
"Adviser"), 1345 Avenue of the Americas, New York, New York 10105. The Adviser
is a leading international investment adviser managing client accounts with
assets as of June 30, 2008 totaling over $717 billion (of which approximately
$96 billion represented the assets of investment companies). As of June 30,
2008, the Adviser managed retirement assets for many of the largest public and
private employee benefit plans (including 53 of the nation's FORTUNE 100
companies), for public employee retirement funds in 38 states, for investment
companies, and for foundations, endowments, banks and insurance companies
worldwide. Currently, there are 37 registered investment companies managed by
the Adviser, comprising 111 separate investment portfolios, with approximately
4.2 million retail accounts. The Adviser also serves as administrator for each
Portfolio.
Under the Fund's advisory agreement with the Adviser with respect to the
Portfolios (the "Advisory Agreements"), the Adviser provides investment advisory
services and order placement facilities for the Portfolios and pays all
compensation of directors and officers of the Portfolios who are affiliated
persons of the Adviser. Under the Advisory Agreement, each Portfolio pays the
Adviser an advisory fee at an annual rate of .45% of its average daily net
assets.
The Advisory Agreement, by its terms, continues in effect from year to year
if such continuance is specifically approved, at least annually, by a majority
vote of the Directors of the Fund who neither are interested persons of the Fund
nor have any direct or indirect financial interest in the Advisory Agreement,
cast in person at a meeting called for the purpose of voting on such approval. A
discussion regarding the basis for the Directors' approval of the Advisory
Agreement is available in the Semi-Annual Report to Shareholders for the
Portfolios for the six-month period ended April 30, 2008.
The Adviser is the subject of certain legal proceedings and a discussion of
those proceedings is presented in Appendix I.
Administrator
The Adviser serves as administrator and performs standard administration
services for the Portfolios. Each of California II and California Portfolio
reimburses the Adviser for its costs incurred for providing administrative
services. For the most recently completed fiscal years ended October 31, 2007,
these reimbursements amounted to .08% and .01% for California II and California
Portfolio, respectively.
Distributor
AllianceBernstein Investments, Inc. ("ABI" or the "Distributor"), a
wholly-owned subsidiary of the Adviser, serves as the distributor of California
II's and California Portfolio's shares. Under a Distribution Services Agreement,
adopted under each Portfolio's Rule 12b-1 plan, California II and California
Portfolio pay distribution and service fees to the Distributor at an annual rate
of up to .30% of each Portfolio's average daily net assets attributable to their
Class A shares and up to 1.00% of each Portfolio's average daily net assets
attributable to their Class B and Class C shares. The Distribution Agreement
provides that the Distributor will use such payments in their entirety for
distribution assistance and promotional activities. Because these fees are paid
out of the Portfolios' assets on an on-going basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
Other Service Providers
The Portfolios will have the same service providers after the Acquisition.
AllianceBernstein Investor Services, Inc. ("ABIS"), an affiliate of the Adviser,
provides shareholder services for the Portfolios. The Portfolios compensate ABIS
for these services. State Street Bank and Trust Company, One Lincoln Street,
Boston, MA 02111, serves as custodian for the Portfolios. ABIS, P.O. Box 786003,
San Antonio, TX 78278-6003, serves as transfer agent for the Portfolios. After
the Acquisition, State Street Bank and Trust Company and ABIS will serve,
respectively, as custodian and transfer agent for the combined Portfolio. Ernst
& Young LLP serves as the independent registered public accounting firm for the
Portfolios and will continue to serve in that capacity for the combined
Portfolio after the Acquisition.
VOTING INFORMATION
The Directors have fixed the close of business on October 31, 2008 as the
record date for the determination of shareholders entitled to notice of, and to
vote at, the Meeting and at any adjournments thereof. As of the Record Date,
California II had [____________] shares of common stock issued and outstanding..
It also identifies holders of more than five percent of any class of shares of
each Portfolio, and contains information about the executive officers and
Directors of the Fund and their shareholdings in the Portfolios.
Those shareholders who hold shares directly and not through a broker or
nominee (that is, a shareholder of record) may authorize their proxies to cast
their votes by completing a Proxy Card and returning it by mail in the enclosed
postage-paid envelope as well as either telephoning toll free [1-800-331-5817].
Shares held for a shareholder through a broker or nominee (who is the
shareholder of record for those shares) should be voted by following the
instructions provided to the shareholder by the broker or nominee. The telephone
and Internet voting instructions to be followed by a shareholder of record,
including use of the Control Number on the shareholder's Proxy Card, are
designed to verify shareholder identities, to allow shareholders to give voting
instructions and to confirm that shareholder instructions have been recorded
properly. Shareholders who authorize proxies by telephone or through the
Internet should not also return a Proxy Card. Shareholders who authorize proxies
through the Internet should be aware that they are responsible for any
applicable telecommunication and access charges. A shareholder of record may
revoke that shareholder's proxy at any time prior to exercise thereof by giving
written notice to the Secretary of the Fund at 1345 Avenue of the Americas, New
York, New York 10105, by authorizing a later-dated proxy (either by signing and
mailing another Proxy Card or, by telephone or through the Internet as indicated
above), or by personally attending and voting at the Meeting.
Properly executed proxies may be returned with instructions to abstain from
voting or to withhold authority to vote (an "abstention") or represent a broker
"non-vote" (which is a proxy from a broker or nominee indicating that the broker
or nominee has not received instructions from the beneficial owner or other
person entitled to vote shares on a particular matter with respect to which the
broker or nominee does not have the discretionary power to vote).
Approval of the Proposal requires the affirmative vote of the holders of a
"majority of the outstanding voting securities" of California II, as defined in
the 1940 Act. Under the 1940 Act, a vote of the holders of a majority of the
outstanding voting securities of a Portfolio means the vote of the holders of
the lesser of: (i) 67% or more of the outstanding shares of the Portfolio
present at the Meeting, if the holders of more than 50% of the outstanding
shares are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Portfolio.
Abstentions and broker non-votes will be considered present for purposes of
determining the existence of a quorum for the transaction of business at the
meeting but will have the effect of a vote against the Proposal. If any
proposal, other than the Proposal to be voted on by the shareholders of
California II, properly comes before the Meeting, the shares represented by
proxies will be voted on all such proposals in the discretion of the person or
persons voting the proxies. The Portfolios have not received notice of, and are
not otherwise aware of, any other matter to be presented at the Meeting.
A quorum for the transaction of business by the shareholders of California
II at the Meeting will consist of the presence in person or by proxy of the
holders of one-third of the shares of California II entitled to vote at the
Meeting. In the event that a quorum is not represented at the Meeting or, even
if a quorum is so present, in the event that sufficient votes in favor of the
position recommended by the Board on the Proposal are not timely received, the
persons named as proxies may propose and vote in favor of one or more
adjournments of the Meeting, with no other notice than an announcement at the
Meeting, for up to 120 days after the Record Date, in order to permit further
solicitation of proxies. Shares represented by proxies indicating a vote against
the Proposal will be voted against adjournment.
California II has engaged Broadridge (the "Proxy Solicitor"), 60 Research
Rd., Hingham, MA 02043, to assist in soliciting proxies for the Meeting. The
Proxy Solicitor will receive a fee of approximately $3,500 for its solicitation
services, plus reimbursement of out-of-pocket expenses.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for
California II by Seward & Kissel LLP.
EXPERTS
The audited financial statements and financial highlights in the
Prospectus/Proxy Statement and the SAI have been included in reliance on the
reports of Ernst & Young LLP, 5 Times Square, New York, New York 10036, the
registered public accounting firm for the Portfolios, given on its authority as
experts in auditing and accounting.
FINANCIAL HIGHLIGHTS
Financial highlights information for each of the Portfolios is available at
Appendix K.
THE DIRECTORS RECOMMEND THAT YOU VOTE FOR THE PROPOSAL
APPENDIX A
FEE TABLE
The purpose of the tables below is to assist an investor in understanding
the various costs and expenses that a shareholder bears directly and indirectly
from an investment in the Portfolios. The tables allow you to compare the sales
charges, expenses of each Portfolio and estimates for the combined Portfolio in
its first year following the Acquisition. The tables also include Annual
Portfolio Operating Expenses and Expense Examples on a pro forma combined basis.
Shareholder Fees
(fees paid directly from your investment)
California California California
II Class A II Class B II Class C
California California California
Portfolio Portfolio Portfolio
Class A Class B Class C
California California California California
Portfolio Portfolio Portfolio Portfolio
(pro forma (pro forma (pro forma Advisor
Class A) Class B) Class C) Class
---------- ---------- ---------- ---------
Maximum Sales Charge
(Load) Imposed
on Purchases (as a
percentage of
offering price) 4.25%(a) None None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
price, whichever
is lower) None(a) 3.00%(a)(b) 1.00%(a)(c) None
Exchange Fee None None None None
- ----------
(a) Class A sales charges may be reduced or eliminated in certain
circumstances, typically for large purchases and for certain group
retirement plans. In some cases, however, 1%, 1-year contingent deferred
sales charge or CDSC may apply to Class A shares. CDSCs for Class A, Class
B and Class C shares may also be subject to waiver in certain
circumstances.
(b) Class B shares automatically convert to Class A shares after 6 years. The
CDSC decreases over time. For Class B shares, the CDSC decreases 1.00%
annually to 0% after the third year.
(c) For Class C shares, the CDSC is 0% after the first year.
Annual Portfolio Operating Expenses
(expenses that are deducted from Portfolio assets)
Class A
-------
California California Portfolio
California II Portfolio (pro forma)
------------- ---------- --------------------
Management Fees .45% .45% .45%
Distribution and/or
Service (12b-1) Fees .30% .30% .30%
Other Expenses
Transfer Agent .04% .04% .04%
Other Expenses .37% .06% .06%
Total Other Expenses .41% .10% .10%
Total Portfolio
Operating
Expenses 1.16% .85% .85%
Waiver and/or Expense
Reimbursement(a) 0% (.08)% (.10)%
Net Expenses 1.16% .77% .75%
Class B
-------
California California Portfolio
California II Portfolio (pro forma)
------------- ---------- --------------------
Management Fees .45% .45% .45%
Distribution and/or
Service (12b-1) Fees 1.00% 1.00% 1.00%
Other Expenses
Transfer Agent .06% .05% .05%
Other Expenses .37% .06% .06%
Total Other Expenses .43% .11% .11%
Total Portfolio
Operating
Expenses 1.88% 1.56% 1.56%
Waiver and/or Expense
Reimbursement(a) 0% (.09)% (.11)%
Net Expenses 1.88% 1.47% 1.45%
Class C
-------
California California Portfolio
California II Portfolio (pro forma)
------------- ---------- --------------------
Management Fees .45% .45% .45%
Distribution and/or
Service (12b-1) Fees 1.00% 1.00% 1.00%
Other Expenses
Transfer Agent .05% .04% .04%
Other Expenses .37% .06% .06%
Total Other Expenses .42% .10% .10%
Total Portfolio
Operating
Expenses 1.87% 1.55% 1.55%
Waiver and/or Expense
Reimbursement(a) 0% (.08)% (.10)%
Net Expenses 1.87% 1.47% 1.45%
Advisor Class
-------------
California California Portfolio
Portfolio (pro forma)
---------- --------------------
Management Fees .45% .45%
Distribution and/or
Service (12b-1) Fees None None
Other Expenses
Transfer Agent .04% .04%
Other Expenses .06% .06%
Total Other Expenses .10% .10%
Total Portfolio
Operating
Expenses .55% .55%
Waiver and/or Expense
Reimbursement(a) (.08)% (.10)%
Net Expenses .47% .45%
- ----------
(a) The Adviser has contractually agreed to waive a portion of its advisory fee
and/or reimburse California Portfolio for a portion of its operating
expenses. Effective January 1, 2009, the fee waiver and/or expense
reimbursement will limit operating expenses to .75% for Class A shares,
1.45% for Class B shares, 1.45% for Class C shares and .45% for Advisor
Class shares. This waiver extends through the end of the Portfolio's fiscal
year and may be extended by the Adviser for additional one-year term.
EXAMPLE
The Examples are to help you compare the cost of investing in each
Portfolio with the cost of investing in the combined Portfolio on a pro forma
combined basis. They assume that you invest $10,000 in a Portfolio for the time
periods indicated and then redeem all of your shares at the end of those
periods. They also assume that your investment has a 5% return each year, that a
Portfolio's operating expenses stay the same and that all dividends and
distributions are reinvested.
California II
-------------
Class A Class B+ Class B++ Class C+ Class C++
------- -------- --------- -------- ---------
After 1 Year $ 538 $ 491 $ 191 $ 290 $ 190
After 3 Years $ 778 $ 691 $ 591 $ 588 $ 588
After 5 Years $1,036 $1,016 $1,016 $1,011 $1,011
After 10 Years $1,774 $1,835 $1,835 $2,190 $2,190
California Portfolio
--------------------
Advisor
Class A Class B+ Class B++ Class C+ Class C++ Class
------- -------- --------- -------- --------- -------
After 1 Year $ 500 $ 450 $ 150 $ 250 $ 150 $ 48
After 3 Years* $ 677 $ 584 $ 484 $ 482 $ 482 $ 168
After 5 Years* $ 869 $ 841 $ 841 $ 837 $ 837 $ 299
After 10 Years* $1,422 $1,478 $1,478 $1,839 $1,839 $ 682
California Portfolio (Pro Forma)
--------------------------------
Advisor
Class A Class B+ Class B++ Class C+ Class C++ Class
------- -------- --------- -------- --------- -------
After 1 Year $ 498 $ 448 $ 148 $ 248 $ 148 $ 46
After 3 Years* $ 675 $ 582 $ 482 $ 480 $ 480 $ 166
After 5 Years* $ 867 $ 840 $ 840 $ 835 $ 835 $ 297
After 10 Years* $1,421 $1,476 $1,476 $1,837 $1,837 $ 680
- ----------
+ Assumes redemption at end of period and, with respect to shares held 10
years, conversion of Class B shares to Class A shares after 6 years.
++ Assumes no redemption at end of period and, with respect to shares held 10
years, conversion of Class B shares to Class A shares after 6 years.
* These examples assume that the Adviser's agreement to waive advisory fees
and/or reimburse portfolio operating expenses is not extended beyond its
current period.
The projected post-Acquisition pro forma Annual Portfolio Operating
Expenses and Examples presented above are based upon numerous material
assumptions. Although these projections represent good faith estimates, there
can be no assurance that any particular level of expenses or expense savings
will be achieved, because expenses depend on a variety of factors, including the
future level of fund assets, many of which are beyond the control of California
Portfolio and the Adviser.
APPENDIX B
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
Insured California California II California Portfolio
------------------------- ------------------------- -------------------------
Investment Objective The investment objective Same.(1) Same.
of the Portfolio is to
earn the highest level of
current income, exempt
from Federal and State of
California taxation, that
is available without
assuming what the Adviser
considers to be undue
risk.
Investment Policies(2)
- ---------------------------------------------------------------------------------------------------------------
Status The Portfolio is non- Same. The Portfolio is diversified. (F)
diversified.
Rule 35d-1/80% Policy The Portfolio invests, The Portfolio invests, The Portfolio invests,
under normal under normal under normal
circumstances, at least circumstances, at least circumstances, at least
80% of its net assets in 80% of its net assets in 80% of its net assets in
municipal securities with municipal securities with municipal securities with
interest which is exempt interest which is exempt interest which is exempt
from federal income tax, from federal income tax, from federal income tax
including the AMT, and including the AMT, and and at least 80% of its
80% of its net assets in 80% of its net assets in net assets in municipal
municipal securities of municipal securities of securities of California
California or municipal California or municipal or municipal securities
securities with interest securities with interest with interest that is
which is otherwise exempt which is otherwise exempt otherwise exempt from
from California state from California state California state income
income tax. (F) income tax. (F) tax. (F)
The Portfolio invests,
under normal
circumstances, at least
80% of its net assets in
insured securities.
AMT Subject Bonds The Portfolio does not, Same. The Portfolio invests,
and is not permitted to, and is permitted to
invest in AMT-subject invest without limit, in
bonds. AMT-subject bonds.
Insured Securities The Portfolio may obtain None. None.
insurance on its
municipal securities or
purchase insured
municipal securities
covered by policies
issued by any insurer
having a claims-paying
ability rated A or higher
by Moody's, S&P, or
Fitch. No more than 25%
of the Portfolio's total
assets may be invested in
insured municipal
securities covered by
policies issued by
insurers having a
claims-paying ability
rated below AA by
Moody's, S&P or Fitch.
Investment Quality The Portfolio pursues its Same. Same.
objective by investing
principally in
high-yielding,
predominantly investment
grade, municipal
securities.
The Portfolio invests at
least 75% of its total
assets in municipal
securities rated Baa or
higher by Moody's or BBB
or higher by S&P or Fitch
or, if unrated,
determined by Alliance to
be of equivalent quality.
The high tax-free yields
sought by the Portfolio
are generally obtainable
from medium-quality
municipal securities
rated A or Baa by
Moody's, or A or BBB by
S&P or Fitch.
Below Investment Grade The Portfolio invests Same. Same.
Securities principally in investment
grade fixed-income
securities.
Investment Quality- It is expected that Same. Same.
Downgrades normally that the
Portfolio will not retain
a municipal security
downgraded below Caa by
Moody's and CCC by S&P
and Fitch, or if unrated,
determined by the Adviser
to have undergone similar
credit quality
deterioration. The
Adviser may, however,
choose to retain such a
security if it determines
that doing so is in the
best interests of the
Portfolio and its
shareholders; provided,
however, that securities
subject to such a
downgrade will at no time
comprise more than 10% of
the Portfolio's net assets.
Unrated Securities The Portfolio may invest Same. Same.
in unrated securities
which the Adviser
believes are comparable
to rated securities that
are consistent with the
Portfolio's objectives
and policies.
Maturity The average dollar Same. Same.
weighted maturity of
securities in the
Portfolio will normally
range between 10 and 30
years.
Illiquid Securities The Portfolio will limit Same. Same.
its investment in
illiquid securities to no
more than 15% of net
assets or such other
amount permitted by
guidance regarding the
1940 Act.
Zero Coupon Securities The Portfolio may invest Same. Same.
in zero coupon
securities.
Forward Commitments The Portfolio may invest Same. Same.
in forward commitments.
Variable and Floating The Portfolio may invest Same. Same.
Rate Instruments in municipal securities
that have fixed,
variable, floating or
inverse floating rates of
interest.
Revenue Bonds The Portfolio may invest Same. Same.
more than 25% of its net
assets in revenue bonds.
The Portfolio may invest
more than 25% of its
total assets in
securities or obligations
that are related in such
a way that business or
political developments or
changes affecting one
such security could also
affect the others for
example, securities with
interest that is paid
from projects of a
similar type.
Municipal Lease The Portfolio may invest Same. Same.
Obligations in municipal lease
obligations.
Other Municipal For temporary defensive Same. Same.
Securities/Municipal purposes to attempt to
Notes/Taxable Cash respond to adverse
Investments market, economic,
political, or other
conditions, the Portfolio
may invest without limit
in other municipal
securities that are in
all other respects
consistent with the
Portfolio's investment
policies. For temporary
defensive purposes, the
Portfolio also may invest
without limit in
high-quality municipal
notes or variable rate
demand obligations, or in
taxable cash equivalents.
Derivatives-General The Portfolio may, but is Same. Same.
not required to, use
derivates for risk
management purposes or as
part of its investment
strategies.
The Portfolio may use
derivatives to earn
income and enhance
returns, to hedge or
adjust the risk profile
of a portfolio, to
replace more traditional
direct investments and to
obtain exposure to
otherwise inaccessible
markets.
The principal types of
derivatives in which the
Portfolios invest are
options, futures,
forwards and swaps.
Swaps The Portfolio may invest Same. Same.
in interest rate swaps,
swaptions, caps, and
floor transactions and
credit default swaps.
Each Portfolio that may
enter into interest rate
swap, swaptions, cap or
floor transactions
expects to do so
primarily for hedging
purposes, which may
include preserving a
return or spread on a
particular investment or
portion of its portfolio
or protecting against an
increase in the price of
securities the Portfolio
anticipates purchasing at
a later date. The
Portfolio does not intend
to use these transactions
in a speculative manner.
There is no limit on the
amount of interest rate
transactions that may be
entered into by the
Portfolio.
Options Options on futures Same. Same.
contracts written or
purchased by a Portfolio
will be traded on U.S.
exchanges and will be
used only for hedging
purposes.
The Portfolio may write
covered put and call
options and purchase put
and call options on
municipal securities,
U.S. Government
securities and financial
indices or reference
rates. The Portfolio may
also enter into options
on the yield "spread" or
yield differential
between securities.
Portfolio may write
covered straddles.
Short-Term Trading Although the Portfolio Same. Same.
typically has a low
turnover rate, the
Portfolio may engage in
active short-term trading
to benefit from yield
disparities among
different issues of
municipal securities, to
seek short-term profits
during periods of
fluctuating interest
rates, or for other
reasons.
Structured Instruments The Portfolio may invest Same. Same.
up to 20% of its total
assets in structured
instruments.
Repurchase Agreements The Portfolio may invest Same. Same.
in repurchase agreements.
Preferred Stock The Portfolio may invest Same. Same.
in preferred stock.
Other Investment The Portfolio may invest Same. Same.
Companies in other investment
companies, as permitted
by the Investment Company
Act of 1940, as amended
(the "1940 Act") or the
rules and regulations
thereunder. The Portfolio
intends to invest
uninvested cash balances
in an affiliated money
market fund as permitted
by Rule 12d1-1 under the
1940 Act.
Securities Lending The Portfolio may lend Same. Same.
portfolio securities to
the extent permitted
under the 1940 Act or the
rules and regulations
thereunder (as such
statute, rules or
regulations may be
amended from time to
time) or by guidance
regarding,
interpretations of, or
exemptive orders under,
the 1940 Act.
Margin The Portfolio may not Same. Same.
purchase securities on
margin, except (i) as
otherwise provided under
rules adopted by the SEC
under the 1940 Act or by
guidance regarding the
1940 Act, or
interpretations thereof,
and (ii) that the
Portfolio may obtain such
short-term credits as are
necessary for the
clearance of portfolio
transactions, and the
Portfolio may make margin
payments in connection
with futures contracts,
options, forward
contracts, swaps, caps,
floors, collars and other
financial instruments.
Industry Concentration The Portfolio may not Same. Same.
concentrate investments
in an industry, as
concentration may be
defined under the 1940
Act or the rules and
regulations thereunder
(as such statute, rules
or regulations may be
amended from time to
time) or by guidance
regarding,
interpretations of, or
exemptive orders under,
the 1940 Act or the rules
or regulations thereunder
published by appropriate
regulatory authorities.
(F)
Borrowing The Portfolio may not Same. Same.
issue any senior security
(as that term is defined
in the 1940 Act) or
borrow money, except to
the extent permitted by
the 1940 Act or the rules
and regulations
thereunder (as such
statute, rules or
regulations may be
amended from time to
time) or by guidance
regarding, or
interpretations of, or
exemptive orders under,
the 1940 Act or the rules
or regulations thereunder
published by appropriate
regulatory authorities.
(F)
For the purposes of this
restriction, margin and
collateral arrangements,
including, for example,
with respect to permitted
borrowings, options,
futures contracts,
options on futures
contracts and other
derivatives such as swaps
are not deemed to involve
the issuance of a senior
security.
Lending The Portfolio may not Same. Same.
make loans except through
(i) the purchase of debt
obligations in accordance
with its investment
objectives and policies;
(ii) the lending of
portfolio securities;
(iii) the use of
repurchase agreements; or
(iv) the making of loans
to affiliated funds as
permitted under the 1940
Act, the rules and
regulations thereunder
(as such statutes, rule
or regulations may be
amended from time to
time), or by guidance
regarding, and
interpretations of, or
exemptive orders under,
the 1940 Act. (F)
Underwriting The Portfolio may not act Same. Same.
as an underwriter of
securities of other
issuers, except that the
Portfolio may acquire
restricted securities
under circumstances in
which, if such securities
were sold, the Portfolio
might be deemed to be an
underwriter for purposes
of the Securities Act of
1933, as amended (the
"Securities Act"). (F)
Commodities The Portfolio may not Same. Same.
purchase or sell
commodities regulated by
the Commodity Futures
Trading Commission under
the Commodity Exchange
Act or commodities
contracts except for
futures contracts and
options on futures
contracts. (F)
Real Estate The Portfolio may not Same. Same.
purchase or sell real
estate except that it may
dispose of real estate
acquired as a result of
the ownership of
securities or other
instruments. (F)
This restriction does not
prohibit the Portfolio
from investing in
securities or other
instruments backed by
real estate or in
securities of companies
engaged in the real
estate business.
- ----------
(1) Policies with the notation "F" are fundamental policies.
APPENDIX C
PORTFOLIO PERFORMANCE
The charts below show the percentage gain or loss in each calendar year for
the ten-year period ended December 31, 2007, for Class A shares of each
Portfolio.
They should give you a general idea of how each Portfolio's return has
varied from year to year. The charts include the effects of Portfolio expenses,
but not applicable sales charges. Returns would be lower if any applicable sales
charges were included. The calculations of annual total return assume the
reinvestment of all dividends and capital gain distributions on the reinvestment
date. Performance results included the effect of expense reduction arrangements,
if any. If these arrangements had not been in place, the performance results
would have been lower. As with all mutual funds, past performance is not an
indication of future results. No assurance can be given that California
Portfolio will achieve any particular level of performance after the
Acquisition. Additional discussion of the manner of calculation of total return
is contained in the Prospectuses of each Portfolio.
Calendar Year Total Returns
California II
-------------
The annual returns in the bar chart are for the Portfolio's Class A shares and
do not reflect sales loads. If sales loads were reflected, returns would be less
than those shown.
[The following table was depicted as a bar chart in the printed material.]
-6.12 -4.73 14.53 3.57 8.60 3.96 3.28 3.90 4.18 2.64
- --------------------------------------------------------------------------------
98 99 00 01 02 03 04 05 06 07
Calendar Year End (%)
You should consider an investment in the Portfolio as a long-term investment.
The Portfolio's returns will fluctuate over long and short periods. For example,
during the period shown in the bar chart, the Portfolio's:
Best quarter was up 6.52% in the 3rd quarter, 2002; and Worst quarter was down
- -3.24% in the 2nd quarter, 2004.
The performance return for the period January 1, 2008 through September 30, 2008
was 5.40%.
California Portfolio
--------------------
The annual returns in the bar chart are for the Portfolio's Class A shares and
do not reflect sales loads. If sales loads were reflected, returns would be less
than those shown.
[The following table was depicted as a bar chart in the printed material.]
6.36 -3.29 10.13 4.07 7.22 4.44 5.45 5.01 5.13 2.17
- --------------------------------------------------------------------------------
98 99 00 01 02 03 04 05 06 07
Calendar Year End (%)
You should consider an investment in the Portfolio as a long-term investment.
The Portfolio's returns will fluctuate over long and short periods. For example,
during the period shown in the bar chart, the Portfolio's:
Best quarter was up 4.87% in the 3rd quarter, 2002; and Worst quarter was down
- -2.61% in the 4th quarter, 1999.
The performance return for the period January 1, 2008 through September 30, 2008
was 4.04%.
The following tables list each Portfolio's average annual total return
before taxes for each class of shares that will be involved in the Acquisition
for the one-year, five-year and ten-year periods ending December 31, 2007 for
each Portfolio (including applicable sales charges). These tables are intended
to provide you with some indication of the risks of investing in the Portfolios.
At the bottom of each table, you can compare the Portfolios' performance with
the performance of a broad-based market index.
Average Annual Total Returns
California II
-------------
PERFORMANCE TABLE
Average Annual Total Returns*
(For the periods ended December 31, 2007)
1 Year 5 Year 10 Years
------ ------ --------
Class A** Return Before Taxes -1.71% 2.69% 4.05%
Return After Taxes on -1.80% 2.56% 3.90%
Distributions
Return After Taxes on 0.15% 2.83% 3.99%
Distributions and Sale of
Portfolio Shares
Class B Return Before Taxes -1.04% 2.87% 4.05%
Class C Return Before Taxes 0.94% 2.87% 3.75%
Lehman Brothers 3.36% 4.30% 5.18%
Municipal Bond Index+
- ----------
* Average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charges as well as conversion of Class B shares
to Class A shares after the applicable period.
** After-tax Returns:
-- Are shown for Class A shares only and will vary for Class B and Class
C shares because these Classes have different expense ratios;
-- Are an estimate, which is based on the highest historical individual
federal marginal income tax rates and do not reflect the impact of
state and local taxes; actual after-tax returns depend on an
individual investor's tax situation and are likely to differ from
those shown; and
-- Are not relevant to investors who hold Portfolio shares through
tax-deferred arrangements such as 401(k) plans or individual
retirement accounts.
+ Reflects no deduction for fees, expenses or taxes.
California Portfolio
--------------------
PERFORMANCE TABLE
Average Annual Total Returns*
(For the periods ended December 31, 2007)
1 Year 5 Year 10 Years
------ ------ --------
Class A** Return Before Taxes -2.17% 3.54% 4.16%
Return After Taxes on -2.18% 3.51% 4.11%
Distributions
Return After Taxes on -0.02% 3.64% 4.19%
Distributions and Sale of
Portfolio Shares
Class B Return Before Taxes -1.39% 3.71% 4.18%
Class C Return Before Taxes 0.57% 3.71% 3.89%
Advisor Class *** Return Before Taxes 2.47% 4.75% 4.93%
Lehman Brothers 3.36% 4.30% 5.18%
Municipal Bond Index+
- ----------
* Average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charges as well as conversion of Class B shares
to Class A shares after the applicable period.
** After-tax Returns:
-- Are shown for Class A shares only and will vary for Class B, Class C
and Advisor Class shares because these Classes have different expense
ratios;
-- Are an estimate, which is based on the highest historical individual
federal marginal income tax rates and do not reflect the impact of
state and local taxes; actual after-tax returns depend on an
individual investor's tax situation and are likely to differ from
those shown; and
-- Are not relevant to investors who hold Portfolio shares through
tax-deferred arrangements such as 401(k) plans or individual
retirement accounts.
*** Inception date for Advisor Class shares: 8/06/2008. Performance information
for periods prior to the inception of Advisor Class shares is the
performance of the Portfolio's Class A shares adjusted to reflect the lower
expense ratio of Advisor Class shares.
+ Reflects no deduction for fees, expenses or taxes.
APPENDIX D
DESCRIPTION OF PRINCIPAL RISKS OF THE PORTFOLIOS
Among the principal risks of investing in the Portfolios are market risk,
municipal market risk, interest rate risk, credit risk, inflation risk and
derivatives risk. California II is also subject to diversification risk because
it is non-diversified. Each of these risks is more fully described below. Each
Portfolio could become subject to additional risks because the types of
investments made by each Portfolio can change over time.
Market Risk This is the risk that the value of a Portfolio's investments
will fluctuate as the stock or bond markets fluctuate and
that prices overall will decline over shorter- or longer-term
periods.
Municipal This is the risk that special factors may adversely affect
Market Risk the value of municipal securities and have a significant
effect on the yield or value of a Portfolio's investments in
municipal securities. These factors include political or
legislative changes, uncertainties related to the tax status
of municipal securities, or the rights of investors in these
securities. Because the Portfolios may invest a large portion
of their assets in municipal securities issued within the
State of California, they are more vulnerable to events
adversely affecting that state, including economic, political
and regulatory occurrences, court decisions, terrorism and
catastrophic natural disasters, such as hurricanes or
earthquakes. A Portfolio's investments in certain municipal
securities with principal and interest payments that are made
from the revenues of a specific project or facility, and not
general tax revenues, may have increased risks. Factors
affecting the project or facility, such as local business or
economic conditions, could have a significant effect on the
project's ability to make payments of principal and interest
on these securities.
Interest Changes in interest rates will affect the value of a
Rate Risk Portfolio's investments in fixed-income securities. When
interest rates rise, the value of a Portfolio's investments
tends to fall and this decrease in value may not be offset by
higher interest income from new investments. Interest rate
risk is generally greater for Portfolios that invest in
fixed-income securities with longer maturities or durations.
Credit Risk This is the risk that the issuer, the guarantor or the
insurer of a fixed-income security, or the counterparty to a
derivatives or other contract, will be unable or unwilling to
make timely payments of interest or principal, or to
otherwise honor its obligations. The degree of risk for a
particular security may be reflected in its credit rating.
There is the possibility that the credit rating of a
fixed-income security or its guarantor or insurer may be
downgraded after purchase of the security and adversely
affect the value of the security. Investments in fixed-income
securities with lower ratings tend to have a higher
probability that an issuer will default or fail to meet its
payment obligations.
Inflation This is the risk that the value of assets or income from
Rate Risk investments will be less in the future as inflation decreases
the value of money. As inflation increases, the value of each
Portfolio's assets can decline as can the value of the
Portfolio's distributions. This risk is generally greater for
those Portfolios that invest a significant portion of their
assets in fixed-income securities with longer maturities.
Derivatives The Portfolios may use derivative securities. These
Risk investment strategies may be riskier than other investment
strategies and may result in greater volatility for a
Portfolio, particularly during periods of market declines.
Diversification Portfolios that are "non-diversified" may invest more of
Risk their assets in a relatively small number of issuers.
Portfolios that invest in a relatively small number of
issuers are more susceptible to risks associated with a
single economic, political or regulatory occurrence than a
more diversified portfolio might be.
Management Each Portfolio is subject to management risk because it is an
Risk actively managed investment portfolio. The Adviser will apply
its investment techniques and risk analyses in making
investment decisions for the Portfolios, but there can be no
guarantee that its techniques will produce the intended
results.
APPENDIX E
CERTAIN INFORMATION APPLICABLE TO CLASS A, CLASS B, CLASS C AND ADVISOR CLASS
SHARES OF CALIFORNIA PORTFOLIO
How to Buy Shares
Class A, Class B and Class C Shares
- -----------------------------------
You may purchase the Portfolio's Class A, Class B, or Class C shares
through financial intermediaries, such as broker-dealers or banks. You also may
purchase shares directly from the Portfolio's principal underwriter,
AllianceBernstein Investments, Inc., or ABI.
Purchases Minimums and Maximums
Minimums:*
- --Initial: $2,500
- --Subsequent: $50
*These purchase minimums may not apply to accounts established in connection
with the Automatic Investment Program and to some retirement-related investment
programs. Please see "Automatic Investment Program" and "Retirement and Employee
Benefit Plans", respectively, below. Additionally, these investment minimums do
not apply to persons participating in a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial intermediary and
approved by ABI.
Maximum Individual Purchase Amount:
- --Class A shares None
- --Class B shares $ 100,000
- --Class C shares $1,000,000
Advisor Class Shares
- --------------------
You may purchase Advisor Class shares through your financial advisor at
NAV. Advisor Class shares may be purchased and held solely:
o through accounts established under a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial
intermediary and approved by the Fund's principal underwriter;
o through a defined contribution employee benefit plan (e.g., a 401(k)
plan) that has at least $10,000,000 in assets and that purchases
shares directly without the involvement of a financial intermediary;
and
o by investment advisory clients of, and certain other persons
associated with, the Adviser and its affiliates or the Fund.
The Fund's Prospectuses have more detailed information about who may
purchase and hold Advisor Class shares.
Retirement and Employee Benefit Plans
- -------------------------------------
Special eligibility rules apply to some retirement and employee benefit
plans. Although the Portfolio offers its shares to various types of tax-deferred
accounts as described below, investments in the Portfolio may not be appropriate
for tax-deferred accounts because the Portfolio's returns consist primarily of
tax-exempt interest income. Except as indicated, there are no investment
minimums for the plans listed below. Class A shares are available to:
o Traditional and Roth IRAs (the minimums listed in the table above
apply);
o SEPs, SAR-SEPs, SIMPLE IRAs, and individual 403(b) plans;
o all 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit
sharing and money purchase pension plans, defined benefit plans, and
non-qualified deferred compensation plans where plan level or omnibus
accounts are held on the books of the Portfolio ("group retirement
plans") with assets of $1,000,000 or more;
o AllianceBernstein-sponsored Coverdell Education Savings Accounts
($2,000 initial investment minimum, $150 automatic investment program
monthly minimum);
o AllianceBernstein-sponsored group retirement plans;
o AllianceBernstein Link, AllianceBernstein Individual 401(k), and
AllianceBernstein SIMPLE IRA plans; and
o Certain defined contribution retirement plans that do not have plan
level or omnibus accounts on the books of the Portfolio.
Class B shares are generally not available to group retirement plans;
however, group retirement plans that selected Class B shares as an investment
alternative under their plan before September 2, 2003 may continue to purchase
Class B shares.
Class C shares are available to AllianceBernstein Link, AllianceBernstein
Individual 401(k), and AllianceBernstein SIMPLE IRA plans with less than
$250,000 in plan assets and 100 employees and to group retirement plans with
plan assets of less than $1,000,000.
Required Information
- --------------------
The Portfolio is required by law to obtain, verify and record certain
personal information from you or persons on your behalf in order to establish an
account. Required information includes name, date of birth, permanent
residential address and taxpayer identification number (for most investors, your
social security number). The Portfolio may also ask to see other identifying
documents. If you do not provide the information, the Portfolio will not be able
to open your account. If the Portfolio is unable to verify your identity, or
that of another person(s) authorized to act on your behalf, or if the Portfolio
believes it has identified potential criminal activity, the Portfolio reserves
the right to take action it deems appropriate or as required by law, which may
include closing your account. If you are not a U.S. citizen or Resident Alien,
your account must be affiliated with a Financial Industry Regulatory Authority,
or FINRA, member firm.
The Portfolio is required to withhold 28% of taxable dividends, capital
gains distributions, and redemptions paid to any shareholder who has not
provided the Portfolio with his or her certified taxpayer identification number.
To avoid this, you must provide your correct tax identification number (social
security number for most investors) on your Mutual Fund Application.
General
- -------
ABI may refuse any order to purchase shares. The Portfolio reserves the
right to suspend the sale of its shares to the public in response to conditions
in the securities markets or for other reasons.
The Different Share Class Expenses
This section describes the different expenses of investing in each class
and explains factors to consider when choosing a class of shares. The expenses
can include distribution and/or service fees (Rule 12b-1 fees) or contingent
deferred sales charges ("CDSCs"). Please see below for a discussion of how CDSCs
are calculated.
This section describes the different expenses of investing in each class
and explains factors to consider when choosing a class of shares. The expenses
can include distribution and/or service (Rule 12b-1) fees, initial sales charges
and/or CDSCs. Please see below for a discussion of how CDSCs are calculated. If
you are not eligible to buy Advisor Class shares, you will need to choose among
Class A, Class B and Class C shares. Only Class A shares offer Quantity
Discounts, as described below under "Sales Charge Reduction Programs."
What is a Rule 12b-1 Fee?
A Rule 12b-1 fee is a fee deducted from the Portfolio's assets that is
used to pay for personal service, maintenance of shareholder accounts
and distribution costs, such as advertising and compensation of
financial intermediaries. The amount of each share class's 12b-1 fee,
if any, is disclosed below and in the Portfolio's fee table near the
front of its Prospectus.
Asset-Based Sales Charges or Distribution and/or Service (Rule 12b-1) Fees
- --------------------------------------------------------------------------
The Portfolio has adopted plans under SEC Rule 12b-1 that allow the
Portfolio to pay asset-based sales charges or distribution and/or service fees
for the distribution and sale of its shares. The amount of these fees for each
class of the Portfolio's shares involved in the Acquisition is:
Distribution and/or Service
(Rule 12b-1) Fee (as a
Percentage of Aggregate
Average Daily Net Assets)
-------------------------
Class A .30%
Class B 1.00%
Class C 1.00%
Advisor Class None
Because these fees are paid out of the Portfolio's assets on an ongoing
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales fees. Class B and Class C shares
are subject to higher Rule 12b-1 fees than Class A shares. (Class B shares are
subject to these higher fees for a period of six years, after which they convert
to Class A shares.) The higher fees mean a higher expense ratio, so Class B and
Class C shares pay correspondingly lower dividends and may have a lower NAV (and
returns) than Class A shares. All or some of these fees may be paid to financial
intermediaries, including your financial advisor's firm.
Class A Shares - Initial Sales Charge Alternative
- -------------------------------------------------
You can purchase Class A shares at their public offering price (or cost),
which is NAV plus an initial sales charge of up to 4.25% of the offering price.
Purchases of Class A shares in the amount of $1,000,000 or more are not subject
to a sales charge but, if redeemed within one year, may be subject to a CDSC of
up to 1%. When a non-AllianceBernstein sponsored group retirement plan
terminates the Portfolio within one year, all investments in Class A shares of
the Portfolio through the plan are subject to a 1% CDSC upon redemption.
AllianceBernstein-sponsored group retirement plan program within one year,
investments in the Portfolio's Class A shares through the plan are subject to a
1% CDSC upon redemption.
Class B Shares - Deferred Sales Charge Alternative
- --------------------------------------------------
You can purchase Class B shares at NAV without an initial sales charge.
Your investment, however, is subject to a CDSC if you redeem shares within three
years of purchase. The CDSC varies depending on the number of years you hold the
shares. The CDSC amounts for Class B shares are:
Year Since Purchase CDSC
-------------------------------------------------------------- ----
First 3.00%
Second 2.00%
Third 1.00%
Fourth and thereafter None
If you exchange your shares for the Class B shares of another
AllianceBernstein Mutual Fund, the CDSC also will apply to the Class B shares
received. If you redeem your shares and directly invest the proceeds in units of
CollegeBoundfund, the CDSC will apply to the units of the CollegeBoundfund. The
CDSC period begins with the date of your original purchase, not the date of
exchange for the other Class B shares or purchase of CollegeBoundfund units.
Class B shares purchased for cash automatically convert to Class A shares
six years after the end of the month of your purchase. If you purchase shares by
exchange for the Class B shares of another AllianceBernstein Mutual Fund, the
conversion period runs from the date of your original purchase.
Class C Shares - Asset-Based Sales Charge Alternative
- -----------------------------------------------------
You can purchase Class C shares at NAV without an initial sales charge.
Your investment, however, is subject to a 1% CDSC if you redeem your shares
within one year. If you exchange your shares for the Class C shares of another
AllianceBernstein Mutual Fund, the 1% CDSC also will apply to the Class C shares
received. The one-year period for the CDSC begins with the date of your original
purchase, not the date of the exchange for the other Class C shares. Class C
shares do not convert to any other class of shares of the Portfolio.
Advisor Class Shares - Fee-Based Program Alternative
- ----------------------------------------------------
You may purchase Advisor Class shares through your financial advisor.
Advisor Class shares are not subject to any initial or contingent sales charges.
However, when you purchase Advisor Class shares through your financial advisor,
your financial advisor may charge a fee. Advisor Class shares are not available
to everyone. See "How to Buy Shares" above.
Distribution Arrangements for Group Retirement Plans
The Portfolio offers distribution arrangements for group retirement plans.
However, plan sponsors, plan fiduciaries and other financial intermediaries may
establish requirements for group retirement plans as to the purchase, sale or
exchange of shares of the Portfolio, including maximum and minimum initial
investment requirements that are different from those described in the
Portfolio's Prospectus and SAI. Therefore, plan sponsors or fiduciaries may not
impose the same share class parameters as set forth in the Portfolio's
Prospectus and SAI. Group retirement plans also may not offer all classes of
shares of the Portfolio. The Portfolio is not responsible for, and has no
control over, the decision of any plan sponsor or fiduciary to impose such
differing requirements.
Payments to Financial Intermediaries
Financial intermediaries market and sell shares of the Portfolio. These
financial intermediaries may receive compensation for selling shares of the
Portfolio. This compensation is paid from various sources, including any CDSC
and/or Rule 12b-1 fee that you may pay.
What is a Financial Intermediary?
A financial intermediary is a firm that receives compensation for
selling shares of the Portfolio offered in this Prospectus and/or
provides services to the Portfolio's shareholders. Financial
intermediaries may include, among others, brokers, financial planners
or advisors, banks, pension plan consultants and insurance companies.
Financial intermediaries employ financial advisors who deal with you
and other investors on an individual basis.
In the case of Class A shares, the Portfolio's principal underwriter, ABI,
may pay financial intermediaries a fee of up to 1%. Additionally, up to 100% of
the Rule 12b-1 fees applicable to Class A shares each year may be paid to
financial intermediaries, including your financial intermediary, that sell Class
A shares.
In the case of Class B shares, ABI must pay, at the time of your purchase,
a commission to financial intermediaries selling Class B shares in an amount
equal to 4% of your investment. Additionally, up to 30% of the Rule 12b-1 fees
applicable to Class B shares each year may be paid to financial intermediaries,
including your financial intermediary, that sell Class B shares.
In the case of Class C shares, ABI must pay, at the time of your purchase,
a commission to firms selling Class C shares in an amount equal to 1% of your
investment. Additionally, up to 100% of the Rule 12b-1 fees applicable to Class
C shares each year may be paid to financial intermediaries, including your
financial intermediary, that sell Class C shares.
In the case of Advisor Class shares, your financial advisor may charge
ongoing fees or transactional fees.
Your financial advisor's firm receives compensation from the Portfolio, ABI
and/or the Adviser in several ways from various sources, which include some or
all of the following:
o upfront sales commissions;
o Rule 12b-1 fees;
o additional distribution support;
o defrayal of costs for educational seminars and training; and
o payments related to providing shareholder recordkeeping and/or
transfer agency services.
Other Payments for Distribution Services and Educational Support
In addition to the Rule 12b-1 fees described above, ABI, at its expense,
currently provides additional payments to firms that sell shares of the
AllianceBernstein Mutual Funds. Although the individual components may be higher
and the total amount of payments made to each qualifying firm in any given year
may vary, the total amount paid to a financial intermediary in connection with
the sale of shares of the AllianceBernstein Mutual Funds will generally not
exceed the sum of (a) 0.25% of the current year's fund sales by that firm and
(b) 0.10% of average daily net assets attributable to that firm over the year.
These sums include payments to reimburse directly or indirectly the costs
incurred by these firms and their employers in connection with educational
seminars and training efforts about the AllianceBernstein Mutual Funds for the
firm's employees and/or their clients and potential clients. The costs and
expenses associated with these efforts may include travel, lodging,
entertainment, and meals.
For 2008, ABI's additional payments to these firms for educational support
and distribution assistance related to the AllianceBernstein Mutual Funds is
expected to be approximately $1.5 million. In 2007, ABI paid additional payments
of approximately $1.2 million, for the AllianceBernstein Mutual Funds.
A number of factors are considered in determining the additional payments,
including each firm's AllianceBernstein Mutual Fund sales, assets and redemption
rates, and the willingness and ability of the firm to allow ABI to provide
information for educational and marketing purposes. In some cases, firms will
include the AllianceBernstein Mutual Funds on a "preferred" list. ABI's goal is
to make the financial intermediaries who interact with current and prospective
investors and shareholders more knowledgeable about the AllianceBernstein Mutual
Funds so that they can provide suitable information and advice about the funds
and related investor services.
The Portfolio and ABI also make payments for recordkeeping and other
transfer agency services to financial intermediaries that sell AllianceBernstein
Mutual Fund shares. These expenses paid by the Fund are included in "Other
Expenses" under "Fees and Expenses of the Funds - Annual Fund Operating
Expenses" in the Fund's Prospectus.
If one mutual fund sponsor makes greater distribution assistance payments
than another, a financial advisor and his or her firm may have an incentive to
recommend one fund complex over another. Similarly, if a financial intermediary
receives more distribution assistance for one share class versus another, the
financial intermediary may have an incentive to recommend that class.
Please speak with your financial advisor to learn more about the total
amounts paid to your financial advisor and his or her firm by the Portfolio, the
Adviser, ABI, and by sponsors of other mutual funds he or she may recommend to
you. You should also consult disclosures made by your financial advisor at the
time of purchase.
ABI anticipates that the firms that will receive additional payments for
distribution services and/or educational support include:
A.G. Edwards
AIG Advisor Group
Ameriprise Financial Services
AXA Advisors
Cadaret, Grant & Co.
CCO Investment Services
Charles Schwab
Chase Investment Services
Citigroup Global Markets
Commonwealth Financial Network
Donegal Securities
Independent Financial Marketing Group
ING Advisors Network
LPL Financial Corporation
McDonald Investments
Merrill Lynch
MetLife Securities
Morgan Stanley
Mutual Service Corporation
PFS Investments
Raymond James
RBC Dain Rauscher
Robert W. Baird
Securities America
Signator Investors
UBS AG
UBS Financial Services
Wachovia Securities
Wells Fargo Investments
Although the Portfolio may use brokers or other financial intermediaries
who sell shares of the Portfolio to effect portfolio transactions, the Portfolio
does not consider the sale of AllianceBernstein Mutual Fund shares as a factor
when selecting brokers or dealers to effect portfolio transactions.
How to Exchange Shares
You may exchange your Portfolio shares for shares of the same class of
other AllianceBernstein Mutual Portfolios (including AllianceBernstein Exchange
Reserves, a money market fund managed by the Adviser). Exchanges of shares are
made at the next-determined NAV, without sales or service charges. You may
request an exchange by mail or telephone or through your financial intermediary.
In order to receive a day's NAV, ABIS or your financial intermediary must
receive and confirm your telephone exchange request by 4:00 p.m., Eastern Time,
on that day. The Portfolio may modify, restrict, or terminate the exchange
privilege on 60 days' written notice.
How to Sell or Redeem Shares
You may "redeem" your shares (i.e., sell your shares to the Portfolio) on
any day the New York Stock Exchange (the "Exchange") is open. Your sale price
will be the next-determined NAV, less any applicable CDSC, after the Portfolio
receives your redemption request in proper form. Normally, redemption proceeds
are sent to you within 7 days. If you recently purchased your shares by check or
electronic funds transfer, your redemption payment may be delayed until the
Portfolio is reasonably satisfied that the check or electronic funds transfer
has been collected (which may take up to 15 days). For Advisor Class shares, if
you are in doubt about what procedures or documents are required by your
fee-based program or employee benefit plan to sell your shares, you should
contact your financial advisor. Your financial intermediary must receive your
sales request by 4:00 p.m., Eastern Time, and submit it to the Portfolio by a
pre-arranged time for you to receive the next-determined NAV, less any
applicable CDSC. Your financial intermediary is responsible for submitting all
necessary documentation to the Portfolio and may charge you a fee for this
service.
Frequent Purchases and Redemptions of Portfolio Shares
The Fund's Board of Directors has adopted policies and procedures designed
to detect and deter frequent purchases and redemptions of the Portfolio's shares
or excessive or short-term trading that may disadvantage long-term shareholders
of the Portfolio. These policies are described below. The Portfolio reserves the
right to restrict, reject or cancel, without any prior notice, any purchase or
exchange order for any reason, including any purchase or exchange order accepted
by any shareholder's financial intermediary.
Risks Associated With Excessive Or Short-Term Trading Generally
- ---------------------------------------------------------------
While the Portfolio will try to prevent market timing by utilizing the
procedures described below, these procedures may not be successful in
identifying or stopping excessive or short-term trading in all circumstances. By
realizing profits through short-term trading, shareholders that engage in rapid
purchases and sales or exchanges of a Portfolio's shares dilute the value of
shares held by long-term shareholders. Volatility resulting from excessive
purchases and sales or exchanges of Portfolio shares, especially involving large
dollar amounts, may disrupt efficient portfolio management. In particular, the
Portfolio may have difficulty implementing its long-term investment strategies
if it is forced to maintain a higher level of its assets in cash to accommodate
significant short-term trading activity. Excessive purchases and sales or
exchanges of the Portfolio's shares may force the Portfolio to sell portfolio
securities at inopportune times to raise cash to accommodate short-term trading
activity. In addition, the Portfolio may incur increased expenses if one or more
shareholders engage in excessive or short-term trading. For example, the
Portfolio may be forced to liquidate investments as a result of short-term
trading and incur increased brokerage costs and realization of taxable capital
gains without attaining any investment advantage. Similarly, the Portfolio may
bear increased administrative costs due to asset level and investment volatility
that accompanies patterns of short-term trading activity. All of these factors
may adversely affect Portfolio performance.
Significant investments in foreign securities may be particularly
susceptible to short-term trading strategies. This is because foreign securities
are typically traded on markets that close well before the time a fund
calculates its NAV at 4:00 p.m., Eastern Time, which gives rise to the
possibility that developments may have occurred in the interim that would affect
the value of these securities. The time zone differences among international
stock markets can allow a shareholder engaging in a short-term trading strategy
to exploit differences in fund share prices that are based on closing prices of
foreign securities established some time before a fund calculates its own share
price (referred to as "time zone arbitrage"). This risk is generally not
applicable to the Portfolio because it does not invest in foreign securities.
Investments in other types of securities may also be susceptible to
short-term trading strategies. These investments include securities that are,
among other things, thinly traded, traded infrequently, or relatively illiquid
has the risk that the current market price for the securities may not accurately
reflect current market values. A shareholder may seek to engage in short-term
trading to take advantage of these pricing differences (referred to as "price
arbitrage"). The Portfolios may be adversely affected by price arbitrage because
they significantly invest in municipal bonds, which may be thinly traded or
traded infrequently.
Policy Regarding Short-Term Trading
- -----------------------------------
Purchases and exchanges of shares of the Portfolios should be made for
investment purposes only. The Portfolios seek to prevent patterns of excessive
purchases and sales or exchanges of Portfolio shares. The Portfolios will seek
to prevent such practices to the extent they are detected by the procedures
described below. The Portfolios reserve the right to modify this policy,
including any surveillance or account blocking procedures established from time
to time to effectuate this policy, at any time without notice.
Transaction Surveillance Procedures. If the Portfolio determines, in its
sole discretion, that a particular transaction or pattern of transactions
identified by the transaction surveillance procedures described above is
excessive or short-term trading in nature, the relevant Portfolio account(s)
will be immediately "blocked" and no future purchase or exchange activity will
be permitted. However, sales of Portfolio shares back to the Portfolio or
redemptions will continue to be permitted in accordance with the terms of the
Portfolio's current Prospectus. In the event an account is blocked, certain
account-related privileges, such as the ability to place purchase, sale and
exchange orders over the internet or by phone, may also be suspended. A blocked
account will generally remain blocked unless and until the account holder or the
associated broker, dealer or other financial intermediary provides evidence or
assurance acceptable to the Portfolio that the account holder did not or will
not in the future engage in excessive or short-term trading.
Account Blocking Procedures. If the Portfolios determine, in their sole
discretion, that a particular transaction or pattern of transactions identified
by the transaction surveillance procedures described above is excessive or
short-term trading in nature, the relevant Portfolio account(s) will be
immediately "blocked" and no future purchase or exchange activity will be
permitted. However, sales of Portfolio shares back to a Portfolio or redemptions
will continue to be permitted in accordance with the terms of the Portfolio's
current Prospectus. In the event an account is blocked, certain account-related
privileges, such as the ability to place purchase, sale and exchange orders over
the internet or by phone, may also be suspended. A blocked account will
generally remain blocked unless and until the account holder or the associated
broker, dealer or other financial intermediary provides evidence or assurance
acceptable to the Portfolio that the account holder did not or will not in the
future engage in excessive or short-term trading.
Applications of Surveillance Procedures and Restrictions to Omnibus
Accounts. Omnibus account arrangements are common forms of holding shares of the
Portfolio, particularly among certain brokers, dealers and other financial
intermediaries, including sponsors of retirement plans and variable insurance
products. The Portfolio applies its surveillance procedures to these omnibus
account arrangements. As required by Commission rules, the Portfolio has entered
into agreements with all of their financial intermediaries that require the
financial intermediaries to provide the Portfolio, upon request of the Portfolio
or its agents, with individual account level information about their
transactions. If the Portfolio detects excessive trading through its monitoring
of omnibus accounts, including trading at the individual account level, the
financial intermediaries will also execute instructions from the Portfolio to
take actions to curtail the activity, which may include applying blocks to
accounts to prohibit future purchases and exchanges of Portfolio shares. For
certain retirement plan accounts, the Portfolio may request that the retirement
plan or other intermediary revoke the relevant participant's privilege to effect
transactions in Portfolio shares via the internet or telephone, in which case
the relevant participant must submit future transaction orders via the U.S.
Postal Service (i.e., regular mail).
Risks to Shareholders Resulting From Imposition of Account Blocks in
Response to Excessive Short-Term Trading Activity
- --------------------------------------------------------------------------------
A shareholder identified as having engaged in excessive or short-term
trading activity whose account is "blocked" and who may not otherwise wish to
redeem his or her shares effectively may be "locked" into an investment in the
Portfolio that the shareholder did not intend to hold on a long-term basis or
that may not be appropriate for the shareholder's risk profile. To rectify this
situation, a shareholder with a "blocked" account may be forced to redeem
Portfolio shares, which could be costly if, for example, these shares have
declined in value, the shares are subject to a CDSC, or the sale results in
adverse tax consequences to the shareholder. To avoid this risk, a shareholder
should carefully monitor the purchases, sales, and exchanges of Portfolio shares
and avoid frequent trading in Portfolio shares.
Limitations on Ability to Detect and Curtail Excessive Trading Practices
- ------------------------------------------------------------------------
Shareholders seeking to engage in excessive short-term trading activities
may deploy a variety of strategies to avoid detection and, despite the efforts
of the Portfolio and its agents to detect excessive or short duration trading in
Portfolio shares, there is no guarantee that the Portfolio will be able to
identify these shareholders or curtail their trading practices. In particular,
the Portfolio may not be able to detect excessive or short-term trading in
Portfolio shares attributable to a particular investor who effects purchase
and/or exchange activity in Portfolio shares through omnibus accounts. Also,
multiple tiers of these entities may exist, each utilizing an omnibus account
arrangement, which may further compound the difficulty of detecting excessive or
short duration trading activity in Portfolio shares.
How the Portfolio Values Its Shares
The Portfolio's NAV is calculated at the close of regular trading on the
Exchange (ordinarily, 4:00 p.m., Eastern Time), only on days when the Exchange
is open for business. To calculate NAV, the Portfolio's assets are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares outstanding. If the Portfolio invests in
securities that are primarily traded on foreign exchanges that trade on weekends
or other days when the Portfolio does not price its shares, the NAV of the
Portfolio's shares may change on days when shareholders will not be able to
purchase or redeem their shares in the Portfolio.
The Portfolio values its securities at their current market value
determined on the basis of market quotations or, if market quotations are not
readily available or are unreliable, at "fair value" as determined in accordance
with procedures established by and under the general supervision of the Board.
When the Portfolio uses fair value pricing, it may take into account any factors
it deems appropriate. The Portfolio may determine fair value based upon
developments related to a specific security and/or U.S. sector or broader stock
market indices. The prices of securities used by the Portfolio to calculate its
NAV may differ from quoted or published prices for the same securities. Fair
value pricing involves subjective judgments and it is possible that the fair
value determined for a security is materially different than the value that
could be realized upon the sale of that security.
Securities for which market quotations are not readily available or deemed
unreliable (including restricted securities) are valued at fair market value.
Factors considered in making this determination may include, but are not limited
to, information obtained by contacting the issuer or analysts, or by analysis of
the issuer's financial statements. The Portfolio may use fair value pricing more
frequently for securities primarily traded in non-U.S. markets because, among
other things, most foreign markets close well before the Portfolio 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. To account for this, the
Portfolio may frequently value many of these securities using fair value prices
based on independent pricing services or third party vendor tools to the extent
available.
Subject to the Board's oversight, the Portfolio's Board has delegated
responsibility for valuing the Portfolio's assets to the Adviser. The Adviser
has established a Valuation Committee, which operates under the policies and
procedures approved by the Board, to value the Portfolio's assets on behalf of
the Portfolio. The Valuation Committee values Portfolio assets as described
above.
Your order for purchase, sale, or exchange of shares is priced at the
next-determined NAV after your order is received in proper form by the
Portfolio.
APPENDIX F
OTHER INFORMATION
The following information provides only a summary of the key features of
the organizational structure and governing documents of the Portfolios. Each
Portfolio is organized as a series of the same Maryland corporation. The Charter
and Bylaw provisions that govern the Fund apply to California II and California
Portfolio. Accordingly, there are no differences between California II and
California Portfolio in terms of their corporate organizational structures.
General
Each Portfolio has procedures available to its respective shareholders for
calling shareholders' meetings and for the removal of directors. Under Maryland
law, unless the charter provides otherwise (which the Fund's does not), a
director may be removed, either with or without cause, at a meeting duly called
and at which a quorum is present by the affirmative vote of the holders of a
majority of the votes entitled to be cast for the election of directors. Under
the Bylaws, shareholder-requested special meetings of shareholders for any other
purpose shall be called by the Fund's Secretary only upon the written request of
shareholders entitled to cast not less than a majority of all the votes entitled
to be cast at the meeting.
For each Portfolio, the presence in person or by proxy of the holders of
one-third of the shares entitled to be cast constitutes a quorum at any meeting
of shareholders of the Portfolio. When a quorum is present at any meeting, the
affirmative vote of a majority of the votes (or with respect to the election of
directors, a plurality of votes) cast shall decide any question brought before
such meeting, except as otherwise required by law.
Shares of Common Stock of the Portfolios
The Portfolios' shares have no preemptive rights. Each share has equal
voting, dividend, distribution and liquidation rights. Shareholders are entitled
to one vote per share. All voting rights for the election of directors are
non-cumulative, which means that the holders of more than 50% of the shares of
common stock of the Fund can elect 100% of the directors then nominated for
election if they choose to do so and, in such event, the holders of the
remaining shares of common stock will not be able to elect any directors. The
Portfolios are organized as series of the same Maryland corporation and thus
their shareholders have the same rights due to them under state law. The
Portfolios are not required to, and do not, hold annual meetings of shareholders
and have no current intention to hold such meetings, except as required by the
1940 Act. Under the 1940 Act, California II and California Portfolio are
required to hold a shareholder meeting if, among other reasons, the number of
Directors elected by shareholders is less than a majority of the total number of
Directors, or if a Portfolio seeks to change its fundamental investment
policies.
Dividends and Distributions
The Portfolios have the same dividends and distributions policies. While
each of the Portfolios intends to distribute to its shareholders substantially
all of each fiscal year's net income and net realized capital gains, if any, the
amount and time of any dividend or distribution will depend on the realization
by the Portfolio of income and capital gains from investments. There is no fixed
dividend rate and there can be no assurance that the Portfolio will pay any
dividends or realize any capital gains. The final determination of the amount of
the Portfolio's return of capital distributions for the period will be made
after the end of each calendar year.
Each of the Portfolio's income dividends and capital gains distributions,
if any, declared by the Portfolio on its outstanding shares will, at the
election of each shareholder, be paid in cash or in additional shares. If paid
in additional shares, the shares will have an aggregate net asset value as of
the close of business on the declaration date of the dividend or distribution
equal to the cash amount of the dividend or distribution. A shareholder may make
an election to receive dividends and distributions in cash or in shares at the
time of purchase of shares. The shareholder's election can be changed at any
time prior to a record date for a dividend. There is no sales or other charge in
connection with the reinvestment of dividends or capital gains distributions.
Indemnification and Liability of Directors and Officers
The charter of the Fund generally provides for the indemnification of
officers and directors, as applicable, to the full extent permitted by Maryland
law. This indemnification does not protect any such person against any liability
to a Portfolio or any shareholder thereof to which such person would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the satisfaction of such person's
office.
Maryland law permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its shareholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Fund's charter
contains such a provision that eliminates directors' and officers' liability to
the maximum extent permitted by Maryland law. This exculpation does not protect
any such person against any liability to a Portfolio or any shareholder thereof
to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the satisfaction of such person's office.
APPENDIX G
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND, INC.
WITH RESPECT TO ITS SERIES
CALIFORNIA PORTFOLIO II AND
CALIFORNIA PORTFOLIO
As of
[__________], 2008
This Plan of Acquisition and Liquidation (the "Plan") has been adopted by
the Board of Directors of AllianceBernstein Municipal Income Fund, Inc., a
Maryland corporation (the "Corporation"), as of this [____] day of [__________],
2008, to provide for the reorganization of California Portfolio II (the
"Acquired Portfolio") into California Portfolio (the "Acquiring Portfolio"). The
Acquired Portfolio and the Acquiring Portfolio (together, the "Portfolios") are
each separate series of the Corporation, an open-end management investment
company registered with the Securities and Exchange Commission (the "SEC") under
the Investment Company Act of 1940, as amended (the "1940 Act").
The Board of Directors (the "Board") has determined that it is in the best
interest of the stockholders of the Acquiring Portfolio and the Acquired
Portfolio that the Acquired Portfolio transfer all of the assets attributable to
its Class A shares held by its stockholders ("Stockholders") in exchange for
Class A shares of equal net asset value of the Acquiring Portfolio ("Class A
Acquisition Shares"), transfer all of the assets attributable to its Class B
shares held by its Stockholders in exchange for Class B shares of equal net
asset value of the Acquiring Portfolio ("Class B Acquisition Shares") and
transfer all of the assets attributable to its Class C shares held by its
Stockholders in exchange for Class C shares of equal net asset value of the
Acquiring Portfolio ("Class C Acquisition Shares" and together with Class A
Acquisition Shares and Class B Acquisition Shares, the "Acquisition Shares") and
distribute Class A Acquisition Shares, Class B Acquisition Shares and Class C
Acquisition Shares, respectively, of the Acquired Portfolio and that the
Corporation redeem the outstanding shares (the "Acquired Portfolio Shares") of
the Acquired Portfolio, all as provided for below (the "Acquisition").
In this Plan of Acquisition, any references to a Portfolio taking action
shall mean and include all necessary actions of the Corporation on behalf of a
Portfolio, unless the context of this Plan of Acquisition or the 1940 Act
requires otherwise.
The Corporation intends that the Acquisition qualify as a "reorganization"
within the meaning of Section 368(a) of the United States Internal Revenue Code
of 1986, as amended (the "Code"), and any successor provisions, and that with
respect to the Acquisition, the Acquiring Portfolio and the Acquired Portfolio
will each be a "party to a reorganization" within the meaning of Section 368(b)
of the Code.
1. Definitions
In addition to the terms elsewhere defined herein, each of the following
terms shall have the meaning indicated for that term as follows:
1933 Act Securities Act of 1933, as amended.
Assets All assets of any kind and all interests, rights, privileges
and powers of or attributable to the Acquired Portfolio or its
shares, as appropriate, whether or not determinable at the
Effective Time (as defined herein) and wherever located,
including, without limitation, all cash, cash equivalents,
securities, claims (whether absolute or contingent, known or
unknown, accrued or unaccrued or conditional or unmatured),
contract rights and receivables (including dividend and
interest receivables) owned by the Acquired Portfolio or
attributable to its shares and any deferred or prepaid
expense, other than unamortized organizational expenses, shown
as an asset on the Acquired Portfolio's books.
Closing Date Such date as the officers of the Corporation shall designate.
Effective Time 5:00 p.m., Eastern Time, on the Closing Date, or such other
time as the officers of the Corporation shall designate.
Financial The audited financial statements of the relevant Portfolio for
Statements its most recently completed fiscal year and, if applicable,
the unaudited financial statements of that Portfolio for its
most recently completed semi-annual period.
Liabilities All liabilities, expenses and obligations of any kind
whatsoever of the Acquired Portfolio, whether known or
unknown, accrued or unaccrued, absolute or contingent or
conditional or unmatured.
N-14 The Registration Statement of the Acquiring Portfolio on Form
Registration N-14 under the 1940 Act that will register the Acquisition
Statement Shares to be issued in the Acquisition.
Valuation The close of regular session trading on the New York Stock
Time Exchange ("NYSE") on the Closing Date, when for purposes of
the Plan, the Corporation determines the net asset value per
Acquisition Share of the Acquiring Portfolio and the net value
of the assets of the Acquired Portfolio.
NAV A Portfolio's net asset value is calculated by valuing and
totaling assets and then subtracting liabilities and then
dividing the balance by the number of shares that are
outstanding.
2. Regulatory Filings
The Acquiring Portfolio shall promptly prepare and file the N-14
Registration Statement with the SEC, and the Acquiring Portfolio and the
Acquired Portfolio also shall make any other required or appropriate filings
with respect to the actions contemplated hereby.
3. Transfer of the Acquired Portfolio's Assets
The Acquiring Portfolio and the Acquired Portfolio shall take the following
steps with respect to the Acquisition, as applicable:
(a) On or prior to the Closing Date, the Acquired Portfolio shall pay or
provide for the payment of all of the Liabilities, expenses, costs and
charges of or attributable to the Acquired Portfolio that are known to
the Acquired Portfolio and that are due and payable prior to or as of
the Closing Date.
(b) Prior to the Effective Time, except to the extent prohibited by Rule
19b-1 under the 1940 Act, the Acquired Portfolio will declare to
Acquired Portfolio Stockholders of record a dividend or dividends
which, together with all previous such dividends, shall have the
effect of distributing (a) all the excess of (i) the Acquired
Portfolio's investment income excludable from gross income under
Section 103(a) of the Code over (ii) the Acquired Portfolio's
deductions disallowed under Sections 265 and 171(a)(2) of the Code,
(b) all of the Acquired Portfolio's investment company taxable income
(as defined in Code Section 852), (computed in each case without
regard to any deduction for dividends paid), and (c) all of the
Acquired Portfolio's net realized capital gain (as defined in Code
Section 1222), if any (after reduction for any capital loss
carryover), for the taxable year ending on December 31, 2007 and for
the short taxable year beginning on January 1, 2008, and ending on the
Closing Date. Such dividends will be declared and paid to ensure
continued qualification of the Acquired Portfolio as a "regulated
investment company" for tax purposes and to eliminate fund-level tax.
(c) At the Effective Time, the Acquired Portfolio shall assign, transfer,
deliver and convey the Assets to the Acquiring Portfolio, subject to
the Liabilities, and the Acquiring Portfolio shall then accept the
Assets and assume the Liabilities such that at and after the Effective
Time (i) the Assets at and after the Effective Time shall become and
be assets of the Acquiring Portfolio, and (ii) the Liabilities at the
Effective Time shall attach to the Acquiring Portfolio, and shall be
enforceable against the Acquiring Portfolio to the same extent as if
initially incurred by the Acquiring Portfolio. The Corporation shall
redeem the outstanding shares of the Acquired Portfolio by issuance of
shares of Acquiring Portfolio as described more fully below.
(d) Within a reasonable time prior to the Closing Date, the Acquired
Portfolio shall provide, if requested, a list of the Assets to the
Acquiring Portfolio. The Acquired Portfolio may sell any asset on such
list prior to the Effective Time. After the Acquired Portfolio
provides such list, the Acquired Portfolio will not acquire any
additional securities or permit to exist any encumbrances, rights,
restrictions or claims not reflected on such list, without the
approval of the Acquiring Portfolio. Within a reasonable time after
receipt of the list and prior to the Closing Date, the Acquiring
Portfolio will advise the Acquired Portfolio in writing of any
investments shown on the list that the Acquiring Portfolio has
determined to be inconsistent with its investment objective, policies
and restrictions. The Acquired Portfolio will dispose of any such
securities prior to the Closing Date to the extent practicable and
consistent with applicable legal requirements, including the Acquired
Portfolio's investment objectives, policies and restrictions. In
addition, if the Acquiring Portfolio determines that, as a result of
the Acquisition, the Acquiring Portfolio would own an aggregate amount
of an investment that would exceed a percentage limitation applicable
to the Acquiring Portfolio, the Acquiring Portfolio will advise the
Acquired Portfolio in writing of any such limitation and the Acquired
Portfolio shall dispose of a sufficient amount of such investment as
may be necessary to avoid the limitation as of the Effective Time, to
the extent practicable and consistent with applicable legal
requirements, including the Acquired Portfolio's investment
objectives, policies and restrictions.
(e) The Acquired Portfolio shall assign, transfer, deliver and convey the
Assets to the Acquiring Portfolio at the Effective Time on the
following basis:
(1) The value of the Assets less the Liabilities of the Acquired
Portfolio attributable to shares of Class A held by Stockholders,
shares of Class B held by Stockholders and shares of Class C held
by Stockholders, determined as of the Valuation Time, shall be
divided by the then NAV of one Class A, Class B and Class C
Acquisition Share, as applicable, and, in exchange for the
transfer of the Assets, the Acquiring Portfolio shall
simultaneously issue and deliver to the Acquired Portfolio the
number of Class A, Class B and Class C Acquisition Shares
(including fractional shares) so determined, rounded to the
second decimal place or such other decimal place as the officers
of the Corporation shall designate;
(2) The NAV of Class A, Class B and Class C Acquisition Shares to be
delivered to the Acquired Portfolio shall be determined as of the
Valuation Time in accordance with the Acquiring Portfolio's then
applicable valuation procedures, and the net value of the Assets
to be conveyed to the Acquiring Portfolio shall be determined as
of the Valuation Time in accordance with the then applicable
valuation procedures of the Acquired Portfolio; and
(3) The portfolio securities of the Acquired Portfolio shall be made
available by the Acquired Portfolio to The Bank of New York, as
custodian for the Acquiring Portfolio (the "Custodian"), for
examination no later than five business days preceding the
Valuation Time. On the Closing Date, such portfolio securities
and all the Acquired Portfolio's cash shall be delivered by the
Acquired Portfolio to the Custodian for the account of the
Acquiring Portfolio, such portfolio securities to be duly
endorsed in proper form for transfer in such manner and condition
as to constitute good delivery thereof in accordance with the
custom of brokers or, in the case of portfolio securities held in
the U.S. Treasury Department's book-entry system or by The
Depository Trust Company, Participants Trust Company or other
third party depositories, by transfer to the account of the
Custodian in accordance with Rule 17f-4, Rule 17f-5 or Rule
17f-7, as the case may be, under the 1940 Act and accompanied by
all necessary federal and state stock transfer stamps or a check
for the appropriate purchase price thereof. The cash delivered
shall be in the form of currency or certified or official bank
checks, payable to the order of the Custodian, or shall be wired
to an account pursuant to instructions provided by the Acquiring
Portfolio.
(f) Promptly after the Closing Date, the Acquired Portfolio will deliver
to the Acquiring Portfolio a Statement of Assets and Liabilities of
the Acquired Portfolio as of the Closing Date.
4. Termination of the Acquired Portfolio, Registration of Acquisition Shares
and Access to Records
The Acquired Portfolio and the Acquiring Portfolio also shall take the
following steps, as applicable:
(a) At or as soon as reasonably practical after the Effective Time, the
Acquired Portfolio shall terminate by transferring pro rata to its
Class A Stockholders of record Class A Acquisition Shares received by
the Acquired Portfolio pursuant to Section 3(e)(1) of this Plan, to
its Class B Stockholders of record Class B Acquisition Shares received
by the Acquired Portfolio pursuant to Section 3(e)(1) of this Plan and
to its Class C Stockholders of record Class C Acquisition Shares
received by the Acquired Portfolio pursuant to Section 3(e)(1) of this
Plan. The Acquiring Portfolio shall establish accounts on its share
records and note on such accounts the names of the former Acquired
Portfolio Stockholders and the types and amounts of the Acquisition
Shares that former Acquired Portfolio Stockholders are due based on
their respective holdings of the Acquired Portfolio Shares as of the
close of business on the Closing Date. Fractional Acquisition Shares
shall be carried to the second decimal place. The Acquiring Portfolio
shall not issue certificates representing the Acquisition Shares in
connection with such exchange. All issued and outstanding Acquired
Portfolio Shares will be simultaneously redeemed and cancelled on the
books of the Acquired Portfolio. Ownership of the Acquisition Shares
will be shown on the books of the Acquiring Portfolio's transfer
agent.
Following distribution by the Acquired Portfolio to its Stockholders
of all Acquisition Shares delivered to the Acquired Portfolio, the
Acquired Portfolio shall wind up its affairs and shall take all steps
as are necessary and proper to terminate as soon as is reasonably
possible after the Effective Time.
(b) At and after the Closing Date, the Acquired Portfolio shall provide
the Acquiring Portfolio and its transfer agent with immediate access
to: (i) all records containing the names, addresses and taxpayer
identification numbers of all of the Acquired Portfolio's Stockholders
and the number and percentage ownership of the outstanding shares of
the Acquired Portfolio owned by Stockholders as of the Effective Time,
and (ii) all original documentation (including all applicable Internal
Revenue Service forms, certificates, certifications and
correspondence) relating to the Acquired Portfolio Stockholders'
taxpayer identification numbers and their liability for or exemption
from back-up withholding. The Acquired Portfolio shall preserve and
maintain, or shall direct its service providers to preserve and
maintain, records with respect to the Acquired Portfolio as required
by Section 31 of, and Rules 31a-1 and 31a-2 under, the 1940 Act.
5. Conditions to Consummation of the Acquisition
The consummation of the Acquisition shall be subject to the following
conditions precedent:
(a) There shall have been no material adverse change in the financial
condition, results of operations, business, properties or assets of
the Acquiring Portfolio or the Acquired Portfolio since the date of
the most recent Financial Statements. Negative investment performance
shall not be considered a material adverse change.
(b) The Corporation shall have received an opinion of Seward & Kissel LLP,
substantially to the effect that for federal income tax purposes:
(1) The Acquisition will constitute a "reorganization" within the
meaning of Section 368(a) of the Code and that the Acquiring
Portfolio and the Acquired Portfolio will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code;
(2) A Stockholder of the Acquired Portfolio will recognize no gain or
loss on the exchange of the Stockholder's shares of the Acquired
Portfolio solely for Acquisition Shares;
(3) Neither the Acquired Portfolio nor the Acquiring Portfolio will
recognize any gain or loss upon the transfer of all of the Assets
to the Acquiring Portfolio in exchange for Acquisition Shares and
the assumption by the Acquiring Portfolio of the Liabilities
pursuant to this Plan or upon the distribution of Acquisition
Shares to Stockholders of the Acquired Portfolio in exchange for
their respective shares of the Acquired Portfolio;
(4) The holding period and tax basis of the Assets acquired by the
Acquiring Portfolio will be the same as the holding period and
tax basis that the Acquired Portfolio had in such Assets
immediately prior to the Acquisition;
(5) The aggregate tax basis of Acquisition Shares received in
connection with the Acquisition by each Stockholder of the
Acquired Portfolio (including any fractional share to which the
Stockholder may be entitled) will be the same as the aggregate
tax basis of the shares of the Acquired Portfolio surrendered in
exchange therefor, and increased by any gain recognized on the
exchange;
(6) The holding period of Acquisition Shares received in connection
with the Acquisition by each Stockholder of the Acquired
Portfolio (including any fractional share to which the
stockholder may be entitled) will include the holding period of
the shares of the Acquired Portfolio surrendered in exchange
therefor, provided that such Acquired Portfolio shares constitute
capital assets in the hands of the Stockholder as of the Closing
Date; and
(7) The Acquiring Portfolio will succeed to the capital loss
carryovers of the Acquired Portfolio but the use of the Acquiring
Portfolio's existing capital loss carryovers (as well as the
carryovers of the Acquired Portfolio) may be subject to
limitation under Section 383 of the Code after the Acquisition.
The opinion will be based on certain factual certifications made by
officers of the Portfolios and will also be based on customary
assumptions and subject to certain qualifications. The opinion is not
a guarantee that the tax consequences of the Acquisition will be as
described above.
Notwithstanding this subparagraph (b), Seward & Kissel LLP will
express no view with respect to the effect of the Acquisition on any
transferred asset as to which any unrealized gain or loss is required
to be recognized at the end of a taxable year (or on the termination
or transfer thereof) under federal income tax principles. Each
Portfolio shall provide additional factual representations to Seward &
Kissel LLP with respect to the Portfolios that are reasonably
necessary to enable Seward & Kissel LLP to deliver the tax opinion.
Notwithstanding anything in this Plan to the contrary, neither
Portfolio may waive in any material respect the conditions set forth
under this subparagraph (b).
(c) The N-14 Registration Statement shall have become effective under the
1933 Act as to the Acquisition Shares, and the SEC shall not have
instituted and, to the knowledge of the Acquiring Portfolio, is not
contemplating instituting any stop order suspending the effectiveness
of the N-14 Registration Statement.
(d) No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection
with the Acquisition.
(e) The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking to
enjoin consummation of the Acquisition under Section 25(c) of the 1940
Act.
(f) The Acquired Portfolio shall have received a letter from
AllianceBernstein L.P. (the "Adviser") with respect to insurance
matters in form and substance satisfactory to the Acquired Portfolio.
(g) The Acquiring Portfolio shall have received a letter from the Adviser
agreeing to indemnify the Acquiring Portfolio in respect of certain
liabilities of the Acquired Portfolio in form and substance
satisfactory to the Acquiring Portfolio.
6. Closing
(a) The Closing shall be held at the offices of the Corporation, 1345
Avenue of the Americas, New York, New York 10105, or at such other
place as the officers of the Corporation may designate.
(b) In the event that at the Valuation Time (i) the NYSE shall be closed
to trading or trading thereon shall be restricted, or (ii) trading or
the reporting of trading on said Exchange or elsewhere shall be
disrupted so that accurate appraisal of the value of the net assets of
the Acquired Portfolio or the Acquiring Portfolio is impracticable,
the Closing Date shall be postponed until the first business day after
the day when trading shall have been fully resumed and reporting shall
have been restored; provided that if trading shall not be fully
resumed and reporting restored within three business days of the
Valuation Time, this Plan may be terminated by the Board.
(c) The Acquiring Portfolio will provide to the Acquired Portfolio
evidence satisfactory to the Acquired Portfolio that Acquisition
Shares issuable pursuant to the Acquisition have been credited to the
Acquired Portfolio's account on the books of the Acquiring Portfolio.
After the Closing Date, the Acquiring Portfolio will provide to the
Acquired Portfolio evidence satisfactory to the Acquired Portfolio
that such Shares have been credited pro rata to open accounts in the
names of the Acquired Portfolio Stockholders.
(d) At the Closing, each party shall deliver to the other such bills of
sale, instruments of assumption of liabilities, checks, assignments,
stock certificates, receipts or other documents as such other party or
its counsel may reasonably request in connection with the transfer of
assets, assumption of liabilities and liquidation contemplated by this
Plan.
7. Termination of Plan
A majority of the Corporation's Board may terminate this Plan before the
applicable Effective Time if: (i) any of the conditions precedent set forth
herein are not satisfied; or (ii) the Board determines that the consummation of
the Acquisition is not in the best interests of either Portfolio or its
Stockholders.
8. Termination of the Acquired Portfolio
If the Acquisition is consummated, the Acquired Portfolio shall terminate
its registration under the 1940 Act and the 1933 Act and will terminate.
9. Expenses
The Acquisition expenses shall be borne by the Acquired Portfolio.
APPENDIX H
CAPITALIZATION
The following table shows on an unaudited basis the capitalization of each
of IRG and California Portfolio as of September 30, 2008 and on a pro forma
combined basis, giving effect to the acquisition of the assets and liabilities
of IRG by California Portfolio at net asset value as of September 30, 2008.
California
California Pro Forma Portfolio
California II Portfolio Adjustments (Pro Forma)(1)
------------- --------- ----------- --------------
Class A
Net Asset Value $ 72,441,786 $ 577,582,949 $ -- $ 650,024,735
Shares outstanding 5,785,651 57,333,993 1,405,310(3) 64,524,954
Net asset value per share $ 12.52(2) $ 10.07 -- $ 10.07
Class B
Net Asset Value $ 2,301,034 $ 20,382,680 $ -- $ 22,683,714
Shares outstanding 183,852 2,023,760 44,614(3) 2,252,226
Net asset value per share $ 12.52(2) $ 10.07 -- $ 10.07
Class C
Net Asset Value $ 13,028,673 $ 104,749,842 $ -- $ 117,778,515
Shares outstanding 1,041,250 10,400,372 $ 252,337(3) 11,693,959
Net asset value per share $ 12.51(2) $ 10.07 -- $ 10.07
Advisor Class
Net Asset Value $ N/A(4) $ 1,500,117 $ -- $ 1,500,117
Shares outstanding N/A(4) 148,867 0 148,867
Net asset value per share $ N/A(4) $ 10.08 -- $ 10.08
- ----------
(1) Assumes the Acquisition was consummated on September 30, 2008 and is for
information purposes only. No assurance can be given as to how many shares
of California Portfolio will be received by the shareholders of California
II on the date the Acquisition takes place, and the foregoing should not be
relied upon to reflect the number of shares of California Portfolio that
actually will be received on or after such date.
(2) Costs associated with the Acquisition in the amount of $205,000 were borne
by California II and reflected in the NAV of California II as of September
30, 2008.
(3) In connection with the Acquisition, shares of California Portfolio will be
issued to the shareholders of California II. The number of shares assumed
to be issued is equal to the net asset value of California II divided by
the net asset value per share of California Portfolio as of September 30,
2008.
(4) There are currently no Advisory Class Shares offered on California II.
No repositioning of California II's portfolio securities is expected in
connection with the Acquisition.
APPENDIX I
LEGAL PROCEEDINGS
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, AllianceBernstein Holding L.P. ("Holding"),
AllianceBernstein Corporation, AXA Financial, Inc., the AllianceBernstein Funds,
certain officers of the Adviser ("AllianceBernstein defendants"), and certain
other unaffiliated defendants, 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
Mutual Funds. The Hindo Complaint alleges that certain of the AllianceBernstein
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 Mutual Fund securities, violating Sections 11 and 15 of the
Securities Act of 1933, as amended, Sections 10(b) and 20(a) of the Securities
and Exchange Act of 1934, as amended, and Sections 206 and 215 of the Investment
Advisers Act of 1940, as amended. 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.
Following October 2, 2003, 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. 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"). 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 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 Order of the SEC dated December 18, 2003 as
amended and restated January 15, 2004 (the "SEC Order") and the New York State
Attorney General Assurance of Discontinuance dated September 1, 2004 (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 settlement amount ($30 million), which we previously accrued and
disclosed, has been disbursed. The derivative claims brought on behalf of
Holding, in which plaintiffs seek an unspecified amount of damages, remain
pending.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the affected fund's
shares or other adverse consequences to those funds. This may require those
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 Portfolio. 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 those funds or the portfolio.
APPENDIX J
SHARE OWNERSHIP INFORMATION
Shares Outstanding
As of September 19, 2008, each Portfolio had the following number of shares
of common stock outstanding.
Number of
Outstanding Shares
Fund Class of Common Stock
- ---- ----- ---------------
California II
A 5,798,695.3450
B 190,800.5960
C 1,044,140.8560
California Portfolio
A 57,217,819.5680
B 2,042,419.2190
C 10,431,532.9210
Advisor 134,127.7590
Ownership of Shares
As of September 19, 2008, the Directors and officers of the Fund as a group
beneficially owned approximately 2.12% of the outstanding shares of common stock
of California Portfolio. To the knowledge of each Portfolio, the following table
shows the persons owning, as of September 19, 2008, either of record or
beneficially, 5% or more of the outstanding shares of the Portfolio and the
percentage of the combined Portfolio's shares to be owned by the persons if the
Acquisition had been consummated as of that date.
Number of Percentage Percentage of
Outstanding of Outstanding Outstanding Shares
Name and Address Shares of Shares of of Combined
Portfolio and Class of Shareholder Class Owned Class Owned Portfolio Class Owned
- ------------------- -------------- ----------- ----------- ---------------------
California II
- -------------
Class A
- -------
MLPF&S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS
ATTN FUND ADMIN
JACKSONVILLE FL 32246-6484 559,015 9.64% 1.08%
CITIGROUP GLOBAL MARKETS
HOUSE ACCOUNT
ATTN CINDY TEMPESTA
333 W 34TH ST FL 3
NEW YORK NY 10001-2402 602,362 10.39% 1.17%
Class B
- -------
MORGAN STANLEY & CO
HARBORSIDE FINANCIAL CENTER
PLAZA II 3RD FL
JERSEY CITY NJ 07311 9,653 5.06% 0.53%
PERSHING LLC
PO BOX 2052
JERSEY CITY NJ 07303-2052 10,324 5.41% 0.57%
Class C
- -------
CITIGROUP GLOBAL MARKETS
HOUSE ACCOUNT
ATTN CINDY TEMPESTA
333 W 34TH ST FL 3
NEW YORK NY 10001-2402 342,855 32.84% 3.65%
MLPF&S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS
ATTN FUND ADMIN
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484 226,351 21.68% 2.41%
AG EDWARDS & SONS INC
ONE NORTH JEFFERSON
ST LOUIS MO 63103 149,308 14.30% 1.59%
California Portfolio
- --------------------
Class A
- -------
MLPF&S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS
ATTN FUND ADMIN
JACKSONVILLE FL 32246-6484 4,958,215 8.67% 7.69%
CITIGROUP GLOBAL MARKETS
HOUSE ACCOUNT
ATTN CINDY TEMPESTA
333 W 34TH ST FL 3
NEW YORK NY 10001-2402 6,049,641 10.57% 9.38%
FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR
THE EXCLUSIVE BENEFIT
OF CUSTOMER
10750 WHEAT FIRST DR
GLEN ALLEN VA 23060-9245 2,894,604 5.06% 4.49%
MORGAN STANLEY & CO
HARBORSIDE FINANCIAL CENTER
PLAZA II 3RD FL
JERSEY CITY NJ 07311 4,877,908 8.53% 7.57%
Class B
- -------
MLPF&S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS
ATTN FUND ADMIN
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484 147,727 7.23% 6.48%
CITIGROUP GLOBAL MARKETS
HOUSE ACCOUNT
ATTN CINDY TEMPESTA
333 W 34TH ST FL 3
NEW YORK NY 10001-2402 115,389 5.65% 5.06%
Class C
- -------
MORGAN STANLEY & CO
HARBORSIDE FINANCIAL CENTER
PLAZA II 3RD FL
JERSEY CITY NJ 07311 678,965 6.51% 5.78%
CITIGROUP GLOBAL MARKETS
HOUSE ACCOUNT
ATTN CINDY TEMPESTA
333 W 34TH ST FL 3
NEW YORK NY 10001-2402 833,969 7.99% 7.11%
MLPF&S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS
ATTN FUND ADMIN
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484 2,799,099 26.83% 23.85%
Advisor Class
- -------------
CITIGROUP GLOBAL MARKETS
333 W 34TH ST 3RD FL
NEW YORK NY 10001-2402 141,504 100.00% 100.00%
APPENDIX K
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
Portfolio's financial performance for the past 5 years. Certain information
reflects financial results for a single share of each Portfolio. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Portfolio (assuming reinvestment of all dividends
and distributions). Except as otherwise indicated, this information has been
audited by Ernst & Young LLP, the independent registered public accounting firm
for both Insured California, the predecessor to California II, and California
Portfolio as of the end of the Portfolios' last fiscal year, whose reports,
along with each Portfolio's financial statements, are included in the
Portfolios' annual reports and available upon request. There is no financial
information available for the Advisor Class shares of California Portfolio, as
these shares were not offered prior to August 6, 2008.
Insured California
------------------
Income from Investment Operations Less Dividends and Distributions
-------------------------------------- --------------------------------
Net Gains
Net Asset or Losses Dividends
Value, Net on Investments Total from from Net Distributions
Beginning Investment (both realized Investment Investment from
Fiscal Year or Period of Period Income+(a) and unrealized) Operations Income Capital Gains
- --------------------- --------- ---------- --------------- ---------- ------ -------------
Class A
11/1/07 to 4/30/08 $13.61 $.24 $(.16) $.08 $(.24) $(.07)
(unaudited)
Year ended 10/31/07 13.95 .48 (.18) .30 (.48) (.16)
Year ended 10/31/06 14.01 .53 .17 .70 (.53) (.23)
Year ended 10/31/05 14.21 .57 (.20) .37 (.57) 0.00
Year ended 10/31/04** 14.03 .61 .18 .79 (.61) 0.00
Year ended 10/31/03 14.17 .60 (.12) .48 (.62) 0.00
Class B
11/1/07 to 4/30/08 $13.60 $.19 $(.16) $.03 $(.19) $(.07)
(unaudited)
Year ended 10/31/07 13.95 .38 (.19) .19 (.38) (.16)
Year ended 10/31/06 14.01 .44 .16 .60 (.43) (.23)
Year ended 10/31/05 14.20 .47 (.19) .28 (.47) 0.00
Year ended 10/31/04** 14.02 .50 .19 .69 (.51) 0.00
Year ended 10/31/03 14.16 .50 (.12) .38 (.52) 0.00
Class C
11/1/07 to 4/30/08 $13.60 $.19 $(.16) $.03 $(.19) $(.07)
(unaudited)
Year ended 10/31/07 13.94 .39 (.19) .20 (.38) (.16)
Year ended 10/31/06 14.00 .43 .17 .60 (.43) (.23)
Year ended 10/31/05 14.20 .47 (.20) .27 (.47) 0.00
Year ended 10/31/04** 14.02 .51 .18 .69 (.51) 0.00
Year ended 10/31/03 14.16 .50 (.12) .38 (.52) 0.00
Please refer to the footnotes on pages [ ] through [ ].
Insured California
------------------
Less Distributions Ratios/Supplemental Data
------------------ ---------------------------------
Total Net Asset Ratio of Ratio of Net
Dividends Value, Net Assets, Expenses Income (Loss)
and End of Total End of Period to Average to Average Portfolio
Fiscal Year or Period Distributions Period Return (b) (000's Omitted) Net Assets* Net Assets+ Turnover Rate
- --------------------- ------------- ------ ---------- --------------- ----------- ----------- -------------
Class A
11/1/07 to 4/30/08 $(.31) $13.38 .58% $77,387 1.15%(c) 3.56%(c) 0%
(unaudited)
Year ended 10/31/07 (.64) 13.61 2.17 85,238 1.08 3.52 18
Year ended 10/31/06 (.76) 13.95 5.19 89,501 1.03(e) 3.85(e) 26
Year ended 10/31/05 (.57) 14.01 2.60 97,079 1.02 3.99 37
Year ended 10/31/04** (.61) 14.21 5.75 103,414 1.00(d) 4.29 5
Year ended 10/31/03 (.62) 14.03 3.39 124,817 1.07 4.24 34
Class B
11/1/07 to 4/30/08 $(.26) $13.37 .22% $3,450 1.87%(c) 2.83%(c) 0%
(unaudited)
Year ended 10/31/07 (.54) 13.60 1.38 6,046 1.79 2.81 18
Year ended 10/31/06 (.66) 13.95 4.45 11,013 1.74(e) 3.15(e) 26
Year ended 10/31/05 (.47) 14.01 1.96 15,626 1.73 3.29 37
Year ended 10/31/04** (.51) 14.20 5.02 21,559 1.71(d) 3.58 5
Year ended 10/31/03 (.52) 14.02 2.67 29,285 1.77 3.52 34
Class C
11/1/07 to 4/30/08 $(.26) $13.37 .23% $13,813 1.85%(c) 2.86%(c) 0%
(unaudited)
Year ended 10/31/07 (.54) 13.60 1.46 14,300 1.78 2.82 18
Year ended 10/31/06 (.66) 13.94 4.46 16,184 1.73(e) 3.15(e) 26
Year ended 10/31/05 (.47) 14.00 1.88 18,204 1.73 3.29 37
Year ended 10/31/04** (.51) 14.20 5.02 19,603 1.70(d) 3.59 5
Year ended 10/31/03 (.52) 14.02 2.67 21,951 1.77 3.53 34
California Portfolio
--------------------
Income from Investment Operations Less Dividends and Distributions
------------------------------------- --------------------------------
Net Gains
Net Asset or Losses Dividends
Value, Net on Investments Total from from Net Distributions
Beginning Investment (both realized Investment Investment from
Fiscal Year or Period of Period Income+(a) and unrealized) Operations Income Capital Gains
- --------------------- --------- ---------- --------------- ---------- ------ -------------
Class A
11/1/07 to 4/30/08 $10.88 $.23 $(.24) $(.01) $(.22) $0.00
(unaudited)
Year ended 10/31/07 11.07 .46 (.20) .26 (.45) 0.00
Year ended 10/31/06 10.86 .47 .21 .68 (.47) 0.00
Year ended 10/31/05 10.93 .48 (.07) .41 (.48) 0.00
Year ended 10/31/04** 10.63 .51 .30 .81 (.51) 0.00
Year ended 10/31/03 10.84 .53 (.19) .34 (.55) 0.00
Class B
11/1/07 to 4/30/08 $10.87 $.19 $(.22) $(.03) $(.19) $0.00
(unaudited)
Year ended 10/31/07 11.07 .38 (.20) .18 (.38) 0.00
Year ended 10/31/06 10.86 .40 .21 .61 (.40) 0.00
Year ended 10/31/05 10.93 .40 (.07) .33 (.40) 0.00
Year ended 10/31/04** 10.63 .44 .30 .74 (.44) 0.00
Year ended 10/31/03 10.84 .46 (.20) .26 (.47) 0.00
Class C
11/1/07 to 4/30/08 $10.88 $.19 $(.23) $(.04) $(.19) $0.00
(unaudited)
Year ended 10/31/07 11.07 .38 (.19) .19 (.38) 0.00
Year ended 10/31/06 10.86 .40 .21 .61 (.40) 0.00
Year ended 10/31/05 10.93 .40 (.07) .33 (.40) 0.00
Year ended 10/31/04** 10.63 .44 .30 .74 (.44) 0.00
Year ended 10/31/03 10.84 .46 (.20) .26 (.47) 0.00
Please refer to the footnotes on pages [ ] through [ ].
California Portfolio
--------------------
Less Distributions Ratios/Supplemental Data
------------------ -----------------------------
Total Net Asset Ratio of Ratio of Net
Dividends Value, Net Assets, Expenses Income (Loss)
and End of Total End of Period to Average to Average Portfolio
Fiscal Year or Period Distributions Period Return (b) (000's Omitted) Net Assets* Net Assets+ Turnover Rate
- --------------------- ------------- ------ ---------- --------------- ----------- ----------- -------------
Class A
11/1/07 to 4/30/08 $(.22) $10.65 (.05)% $594,167 .77%(c)(f) 4.25%(c) 1%
(unaudited)
Year ended 10/31/07 (.45) 10.88 2.45 594,039 .77(f) 4.19 21
Year ended 10/31/06 (.47) 11.07 6.42 594,150 .77(e)(f) 4.33(e) 10
Year ended 10/31/05 (.48) 10.86 3.78 590,042 .77(f) 4.36 17
Year ended 10/31/04** (.51) 10.93 7.80 587,874 .78(f) 4.75 34
Year ended 10/31/03 (.55) 10.63 3.15 644,868 .77(f) 4.93 33
Class B
11/1/07 to 4/30/08 $(.19) $10.65 (.30)% $30,796 1.47%(c)(f) 3.54%(c) 1%
(unaudited)
Year ended 10/31/07 (.38) 10.87 1.65 43,581 1.47(f) 3.48 21
Year ended 10/31/06 (.40) 11.07 5.69 80,928 1.47(e)(f) 3.64(e) 10
Year ended 10/31/05 (.40) 10.86 3.06 122,128 1.47(f) 3.66 17
Year ended 10/31/04** (.44) 10.93 7.05 175,215 1.48(f) 4.05 34
Year ended 10/31/03 (.47) 10.63 2.43 237,147 1.48(f) 4.22 33
Class C
11/1/07 to 4/30/08 $(.19) $10.65 (.40)% $112,603 1.47%(c)(f) 3.55%(c) 1%
(unaudited)
Year ended 10/31/07 (.38) 10.88 1.73 111,697 1.47(f) 3.49 21
Year ended 10/31/06 (.40) 11.07 5.69 120,731 1.47(e)(f) 3.64(e) 10
Year ended 10/31/05 (.40) 10.86 3.06 125,067 1.47(f) 3.66 17
Year ended 10/31/04** (.44) 10.93 7.05 141,031 1.48(f) 4.05 34
Year ended 10/31/03 (.47) 10.63 2.43 170,003 1.47(f) 4.23 33
- ----------
* Net of any waivers/reimbursements and interest expense.
** As of November 1, 2003, the Portfolios have adopted the method of
accounting for interim payments on swap contracts in accordance with
Financial Accounting Standards Board Statement No. 133. These interim
payments are reflected within net realized and unrealized gain (loss) on
swap contracts; however, prior to November 1, these interim payments were
reflected within interest income/expense on the statement of operations.
For the year ended October 31, 2004, the effect of this change to the net
investment income and the net realized and unrealized gain (loss) on
investment transactions was less than $0.01 per share. The effect on the
ratio of net investment income to average net assets for the aforementioned
year ends was as follows:
Class A Class B Class C
------- ------- -------
Insured California 0.00%* 0.00%* 0.00%*
California Portfolio 0.00* 0.00* 0.00*
* Amount is less than .01%
+ Net of expenses assumed and/or waived by the Adviser for all fiscal
periods, except in the case of the Insured California Portfolio for the
fiscal period ended October 31, 2004.
(a) Based on average shares outstanding.
(b) 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 the net asset value during the period, and a
redemption on the last day of the period. Initial sales charge or
contingent deferred sales charge, if applicable, is not reflected in the
calculation of total investment return. Total investment return does not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Total investment returns
calculated for periods of less than one year are not annualized.
(c) Annualized.
(d) If the Insured California had borne all expenses, the expense ratios for
the fiscal period ended October 31, 2004 would have been 1.07% for Class A
shares, 1.77% for Class B shares and 1.77% for Class C shares.
(e) The ratio includes expenses attributable to costs of proxy solicitation.
(f) If the California Portfolio had borne all expenses, the expense ratios
would have been as follows:
Six Months
Ended Year Year Year Year Year
April 30, Ended Ended Ended Ended Ended
2008 October 31, October 31, October 31, October 31, October 31,
(unaudited) 2007 2006 2005 2004 2003
----------- ---- ---- ---- ---- ----
California Portfolio
Class A .86% .85% .85% .86% 1.01% 1.02%
Class B 1.57 1.56 1.56 1.56 1.71 1.73
Class C 1.56 1.55 1.56 1.56 1.71 1.72
SK 00250 0457 919944 v3
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND INC. -
CALIFORNIA PORTFOLIO
1345 Avenue of the Americas
New York, New York
Toll Free (800) 221-5672
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
[_____________], 2008
This Statement of Additional Information (the "SAI") relates to the
acquisition (the "Acquisition") of all of the assets and liabilities of
California Portfolio II ("California II"), currently known as Insured California
Portfolio and a series of AllianceBernstein Municipal Income Fund, Inc. by
California Portfolio, another series of AllianceBernstein Municipal Income Fund,
Inc. (California Portfolio and California II are each a "Portfolio" and
collectively, the "Portfolios.")
This SAI contains information which may be of interest to shareholders but
which is not included in the Prospectus dated [_________], 2008 (the
"Prospectus") of California Portfolio which relates to the Acquisition. As
described in the Prospectus, the Acquisition would involve the transfer of all
the assets of California II in exchange for shares of California Portfolio and
the assumption by California Portfolio of all the liabilities of California II.
California II would distribute the California Portfolio shares it receives to
its shareholders in complete liquidation of the Portfolio. California Portfolio
will be the survivor for accounting purposes.
This SAI is not a prospectus and should be read in conjunction with the
Prospectus. The Prospectus has been filed with the Securities and Exchange
Commission and is available upon request and without charge by writing to a
Portfolio at 1345 Avenue of the Americas, New York, New York 10105, or by
calling 1-800-221-5672.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
ADDITIONAL INFORMATION ABOUT THE PORTFOLIOS
FINANCIAL STATEMENTS
Additional Information About the Portfolios
Further information about California Portfolio and California II is
contained in their Statements of Additional Information each dated February 1,
2008, as revised August 6, 2008 and September 24, 2008, which are available upon
request and without charge by writing to the applicable Portfolio at 1345 Avenue
of the Americas, New York, New York 10105, or by calling 1-800-221-5672.
Financial Statements
The financial statements and Report of Independent Registered Public
Accounting Firm contained in the Annual Report for the twelve months ended
October 31, 2007, of each of the Portfolios, which report contains historical
financial information regarding the Portfolio, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. Each
Portfolio's Semi-Annual Report for the six-month period ended April 30, 2008 is
also incorporated herein by reference.
The following represents the pro forma financial information. The pro forma
financial statements give effect to the Acquisition of the assets and
liabilities of California II by California Portfolio in exchange for shares of
California Portfolio pursuant to the Plan of Acquisition and Liquidation.
California Portfolio's unaudited pro forma Portfolio of Investments, Statement
of Assets and Liabilities and Statement of Operations are prepared as though the
Acquisition were effective for the period May 1, 2007 - April 30, 2008.
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
AllianceBernstein AllianceBernstein
Municipal AllianceBernstein Municipal Income AllianceBernstein
Income Fund Municipal Fund Insured Municipal Income
California Income Fund California Fund Insured
Portfolio California Portfolio California
Principal Portfolio Principal Portfolio
Amount (000) (U.S. $ Value) Amount (000) (U.S. $ Value)
------------ -------------- ------------ --------------
MUNICIPAL OBLIGATIONS - 99.9%
Long-Term Municipal Bonds - 98.2%
California - 94.8%
Acalanes Union High Sch Dist
(Ref-2013 Crossover)
FSA Series 05B
5.25%, 8/01/24 $ 3,000 $ 3,196,590 $ 2,000 $ 2,131,060
Bakerfield Wastewtr Rev
FSA
5.00%, 9/15/22 -0- -0- 5,000 5,306,700
Banning Util Auth Wtr & Enterprise Rev
(Ref & Impr Proj)
FGIC Series 05
5.25%, 11/01/30 7,265 7,429,698 1,140 1,165,844
Bay Area Infra Fin Auth
FGIC
5.00%, 8/01/17 2,000 2,072,420 4,000 4,144,840
Beaumont Fin Auth
AMBAC
5.00%, 9/01/26 2,900 2,937,149 405 410,188
Butte-Glenn Comnty Coll Dist
(Election 2002)
MBIA Series 05B
5.00%, 8/01/25 -0- -0- 3,620 3,732,763
Calfornia St GO
(Prerefunded)
MBIA Series 02
5.00%, 2/01/32 3,500 3,768,800 -0- -0-
California Dept of Veteran Affairs
(Home Purchase Rev)
AMBAC Series 02A
5.35%, 12/01/27 22,320 22,793,407 -0- -0-
California Dept of Wtr Res Pwr Sup Rev
5.00%, 12/01/24 (a) 5,000 5,266,800 -0- -0-
California Dept of Wtr Res Pwr Sup Rev
(Prerefunded)
FGIC Series 02A
5.125%, 5/01/18 10,000 10,933,400 -0- -0-
Series 02A
5.375%, 5/01/21 3,000 3,308,100 -0- -0-
California Ed Fac Auth
(Coll of Arts & Crafts)
Series 01
5.875%, 6/01/30 2,200 2,246,574 -0- -0-
California Ed Fac Auth
(Univ of the Pacific)
5.00%, 11/01/21 990 1,003,573 -0- -0-
Series 04
5.00%, 11/01/20 1,000 1,031,840 -0- -0-
5.25%, 5/01/34 1,000 1,010,390 -0- -0-
California HFA MFHR
(Mtg Rev)
AMBAC Series 95A
6.25%, 2/01/37 -0- -0- 1,235 1,238,322
California HFA SFMR
(Mtg Rev) AMT
Series 99A-2
5.25%, 8/01/26 1,705 1,676,578 -0- -0-
California Hlth Fac Fin Auth
(Cottage Hlth Sys)
MBIA Series 03B
5.00%, 11/01/23 2,500 2,563,850 -0- -0-
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma
AllianceBernstein Pro Forma
Municipal AllianceBernstein
Income Fund Municipal
California Income Fund
Portfolio California
Principal Portfolio
Adjustments Amount (000) (U.S. $ Value)
----------- ------------ ------------
MUNICIPAL OBLIGATIONS - 99.9%
Long-Term Municipal Bonds - 98.2%
California - 94.8%
Acalanes Union High Sch Dist
(Ref-2013 Crossover)
FSA Series 05B
5.25%, 8/01/24 -0- $ 5,000 $ 5,327,650
Bakerfield Wastewtr Rev
FSA
5.00%, 9/15/22 -0- 5,000 5,306,700
Banning Util Auth Wtr & Enterprise Rev
(Ref & Impr Proj)
FGIC Series 05
5.25%, 11/01/30 -0- 8,405 8,595,542
Bay Area Infra Fin Auth
FGIC
5.00%, 8/01/17 -0- 6,000 6,217,260
Beaumont Fin Auth
AMBAC
5.00%, 9/01/26 -0- 3,305 3,347,337
Butte-Glenn Comnty Coll Dist
(Election 2002)
MBIA Series 05B
5.00%, 8/01/25 -0- 3,620 3,732,763
Calfornia St GO
(Prerefunded)
MBIA Series 02
5.00%, 2/01/32 -0- 3,500 3,768,800
California Dept of Veteran Affairs
(Home Purchase Rev)
AMBAC Series 02A
5.35%, 12/01/27 -0- 22,320 22,793,407
California Dept of Wtr Res Pwr Sup Rev
5.00%, 12/01/24 (a) -0- 5,000 5,266,800
California Dept of Wtr Res Pwr Sup Rev
(Prerefunded)
FGIC Series 02A
5.125%, 5/01/18 -0- 10,000 10,933,400
Series 02A
5.375%, 5/01/21 -0- 3,000 3,308,100
California Ed Fac Auth
(Coll of Arts & Crafts)
Series 01
5.875%, 6/01/30 -0- 2,200 2,246,574
California Ed Fac Auth
(Univ of the Pacific)
5.00%, 11/01/21 -0- 990 1,003,573
Series 04
5.00%, 11/01/20 -0- 1,000 1,031,840
5.25%, 5/01/34 -0- 1,000 1,010,390
California HFA MFHR
(Mtg Rev)
AMBAC Series 95A
6.25%, 2/01/37 -0- 1,235 1,238,322
California HFA SFMR
(Mtg Rev) AMT
Series 99A-2
5.25%, 8/01/26 -0- 1,705 1,676,578
California Hlth Fac Fin Auth
(Cottage Hlth Sys)
MBIA Series 03B
5.00%, 11/01/23 -0- 2,500 2,563,850
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
AllianceBernstein AllianceBernstein
Municipal AllianceBernstein Municipal Income AllianceBernstein
Income Fund Municipal Fund Insured Municipal Income
California Income Fund California Fund Insured
Portfolio California Portfolio California
Principal Portfolio Principal Portfolio
Amount (000) (U.S. $ Value) Amount (000) (U.S. $ Value)
------------ ------------ ------------ ------------
California Hlth Fac Fin Auth
(Lucile Salter Packard Hosp)
AMBAC Series 03C
5.00%, 8/15/21 $ 3,365 $ 3,454,172 $ -0- $ -0-
California Infra & Econ Dev Bank
(Kaiser Hosp)
Series 01A
5.55%, 8/01/31 18,000 18,275,940 -0- -0-
California Pollution Ctl Fin Auth
(Pacific Gas & Elec) AMT
MBIA Series 96A
5.35%, 12/01/16 15,500 15,929,350 -0- -0-
California Pollution Ctl Fin Auth
(So Calif Edison) AMT
MBIA Series 99C
5.55%, 9/01/31 7,950 7,796,486 -0- -0-
California Pollution Ctl Fin Auth
(Tracy Material Recovery) AMT
ACA Series 99A
5.70%, 8/01/14 3,670 3,670,330 -0- -0-
California Pub Wks Brd Lease Rev
(Dept of Hlth Svcs-Richmond Lab)
XLCA Series 05B
5.00%, 11/01/30 1,270 1,272,350 3,000 3,005,550
California Pub Wks Brd Lease Rev
(Dept of Mental Hlth-Coalinga)
Series 04A
5.50%, 6/01/22 - 6/01/23 6,790 7,197,625 -0- -0-
California Pub Wks Brd Lease Rev
(Univ of Calif Proj)
Series 05C
5.00%, 4/01/23 3,130 3,235,012 -0- -0-
California Pub Wks Brd Lease Rev
(Various Univ Calif Proj)
Series 04F
5.00%, 11/01/26 8,065 8,271,464 -0- -0-
California Rural MFA SFMR
(Mtg Rev) AMT
GNMA/ FNMA Series 00B
6.25%, 12/01/31 80 80,622 -0- -0-
GNMA/ FNMA Series 00D
6.00%, 12/01/31 290 289,858 -0- -0-
GNMA/ FNMA Series 99A
5.40%, 12/01/30 290 285,232 -0- -0-
MBIA Series 99A
5.40%, 12/01/30 720 712,649 -0- -0-
California St GO
5.00%, 8/01/22 - 2/01/32 28,200 28,675,266 -0- -0-
MBIA
5.00%, 6/01/18 5,000 5,361,400 -0- -0-
MBIA- IBC Series 03
5.25%, 2/01/16 2,050 2,176,772 -0- -0-
Series 03
5.25%, 2/01/24 3,500 3,616,095 -0- -0-
California St GO
(Prerefunded)
5.00%, 2/01/33 6,925 7,596,310 -0- -0-
5.125%, 6/01/31 1,710 1,837,720 -0- -0-
5.25%, 2/01/30 - 4/01/30 1,200 1,304,612 -0- -0-
5.30%, 4/01/29 6,395 7,134,134 -0- -0-
California St GO
(Unrefunded) -0- -0-
5.125%, 6/01/31 20 20,166 -0- -0-
5.25%, 2/01/30 - 4/01/30 13,975 14,206,021 -0- -0-
5.30%, 4/01/29 5 5,132 -0- -0-
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma
AllianceBernstein Pro Forma
Municipal AllianceBernstein
Income Fund Municipal
California Income Fund
Portfolio California
Principal Portfolio
Adjustments Amount (000) (U.S. $ Value)
----------- ------------ ------------
California Hlth Fac Fin Auth
(Lucile Salter Packard Hosp)
AMBAC Series 03C
5.00%, 8/15/21 -0- $ 3,365 $ 3,454,172
California Infra & Econ Dev Bank
(Kaiser Hosp)
Series 01A
5.55%, 8/01/31 -0- 18,000 18,275,940
California Pollution Ctl Fin Auth
(Pacific Gas & Elec) AMT
MBIA Series 96A
5.35%, 12/01/16 -0- 15,500 15,929,350
California Pollution Ctl Fin Auth
(So Calif Edison) AMT
MBIA Series 99C
5.55%, 9/01/31 -0- 7,950 7,796,486
California Pollution Ctl Fin Auth
(Tracy Material Recovery) AMT
ACA Series 99A
5.70%, 8/01/14 -0- 3,670 3,670,330
California Pub Wks Brd Lease Rev
(Dept of Hlth Svcs-Richmond Lab)
XLCA Series 05B
5.00%, 11/01/30 -0- 4,270 4,277,900
California Pub Wks Brd Lease Rev
(Dept of Mental Hlth-Coalinga)
Series 04A
5.50%, 6/01/22 - 6/01/23 -0- 6,790 7,197,625
California Pub Wks Brd Lease Rev
(Univ of Calif Proj)
Series 05C
5.00%, 4/01/23 -0- 3,130 3,235,012
California Pub Wks Brd Lease Rev
(Various Univ Calif Proj)
Series 04F
5.00%, 11/01/26 -0- 8,065 8,271,464
California Rural MFA SFMR
(Mtg Rev) AMT
GNMA/ FNMA Series 00B
6.25%, 12/01/31 -0- 80 80,622
GNMA/ FNMA Series 00D
6.00%, 12/01/31 -0- 290 289,858
GNMA/ FNMA Series 99A
5.40%, 12/01/30 -0- 290 285,232
MBIA Series 99A
5.40%, 12/01/30 -0- 720 712,649
California St GO
5.00%, 8/01/22 - 2/01/32 -0- 28,200 28,675,266
MBIA
5.00%, 6/01/18 -0- 5,000 5,361,400
MBIA- IBC Series 03
5.25%, 2/01/16 -0- 2,050 2,176,772
Series 03
5.25%, 2/01/24 -0- 3,500 3,616,095
California St GO
(Prerefunded)
5.00%, 2/01/33 -0- 6,925 7,596,310
5.125%, 6/01/31 -0- 1,710 1,837,720
5.25%, 2/01/30 - 4/01/30 -0- 1,200 1,304,612
5.30%, 4/01/29 -0- 6,395 7,134,134
California St GO
(Unrefunded) -0-
5.125%, 6/01/31 -0- 20 20,166
5.25%, 2/01/30 - 4/01/30 -0- 13,975 14,206,021
5.30%, 4/01/29 -0- 5 5,132
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
AllianceBernstein AllianceBernstein
Municipal AllianceBernstein Municipal Income AllianceBernstein
Income Fund Municipal Fund Insured Municipal Income
California Income Fund California Fund Insured
Portfolio California Portfolio California
Principal Portfolio Principal Portfolio
Amount (000) (U.S. $ Value) Amount (000) (U.S. $ Value)
------------ ------------ ------------ ------------
California St Univ
AMBAC
5.00%, 11/01/19 $ 6,025 $ 6,344,084 $ -0- $ -0-
FGIC Series 03A
5.00%, 11/01/22 6,000 6,159,660 -0- -0-
California Statewide CDA
(Daughters of Charity Hlth)
Series 05A
5.25%, 7/01/24 3,225 3,046,819 -0- -0-
California Statewide CDA
(Drew College Prep)
Series 00
7.25%, 10/01/30 7,750 8,433,163 -0- -0-
California Statewide CDA
(Saint Mark's Sch)
Series 01
6.75%, 6/01/28 2,455 2,508,077 -0- -0-
California Statewide CDA
(San Diego Space & Science)
Series 96
7.50%, 12/01/16 2,240 2,355,091 -0- -0-
California Statewide CDA
(Wildwood Elem Sch)
Series 01
7.00%, 11/01/29 3,845 3,955,890 -0- -0-
California Statewide CDA MFHR
FNMA Series 98D
5.43%, 5/01/28 2,090 2,090,627 -0- -0-
California Statewide CDA MFHR
(Highland Creek Apts) AMT
FNMA Series 01K
5.40%, 4/01/34 5,745 5,771,657 -0- -0-
California Statewide Comnty Dev Auth
(Catholic Healthcare Ctr)
MBIA Series 2007
6.27%, 7/01/31 (b)+ 3,475 3,475,000 -0- -0-
Capistrano Uni Sch Dist School Fac Impr
District No 1
FGIC Series 00A
6.00%, 8/01/24 -0- -0- 1,550 1,650,456
FSA Series 01B
Zero Coupon, 8/01/25 -0- -0- 8,000 3,301,840
Castaic Lake Wtr Agy
AMBAC Series 04A
5.00%, 8/01/16 - 8/01/18 4,325 4,579,149 -0- -0-
MBIA Series 01A
5.20%, 8/01/30 1,625 1,643,005 -0- -0-
Chino Hills CFD
(Fairfield Ranch 10)
Series 00
6.95%, 9/01/30 5,200 5,315,804 -0- -0-
Chino Redev Agy Spl Tax ETM
AMBAC Series 01B
5.25%, 9/01/30 -0- -0- 5,210 5,325,766
Coachella Valley Uni Sch Dist
AMBAC
5.00%, 9/01/23 -0- -0- 2,500 2,564,850
Commerce Joint Pwr Fin Auth Lease Rev
(Comnty Ctr Proj)
XLCA Series 04
5.00%, 10/01/34 2,015 1,937,805 -0- -0-
Corona CFD
(Eagle Glen 97-2) ETM
Series 98
5.875%, 9/01/23 6,065 6,008,292 -0- -0-
East Palo Alto Pub Fin Auth
(Univ Circle Gateway 101)
RADIAN Series 05A
5.00%, 10/01/25 4,390 4,304,790 680 666,801
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma
AllianceBernstein Pro Forma
Municipal AllianceBernstein
Income Fund Municipal
California Income Fund
Portfolio California
Principal Portfolio
Adjustments Amount (000) (U.S. $ Value)
----------- ------------ ------------
California St Univ
AMBAC
5.00%, 11/01/19 -0- $ 6,025 $ 6,344,084
FGIC Series 03A
5.00%, 11/01/22 -0- 6,000 6,159,660
California Statewide CDA
(Daughters of Charity Hlth)
Series 05A
5.25%, 7/01/24 -0- 3,225 3,046,819
California Statewide CDA
(Drew College Prep)
Series 00
7.25%, 10/01/30 -0- 7,750 8,433,163
California Statewide CDA
(Saint Mark's Sch)
Series 01
6.75%, 6/01/28 -0- 2,455 2,508,077
California Statewide CDA
(San Diego Space & Science)
Series 96
7.50%, 12/01/16 -0- 2,240 2,355,091
California Statewide CDA
(Wildwood Elem Sch)
Series 01
7.00%, 11/01/29 -0- 3,845 3,955,890
California Statewide CDA MFHR
FNMA Series 98D
5.43%, 5/01/28 -0- 2,090 2,090,627
California Statewide CDA MFHR
(Highland Creek Apts) AMT
FNMA Series 01K
5.40%, 4/01/34 -0- 5,745 5,771,657
California Statewide Comnty Dev Auth
(Catholic Healthcare Ctr)
MBIA Series 2007
6.27%, 7/01/31 (b)+ -0- 3,475 3,475,000
Capistrano Uni Sch Dist School Fac Impr
District No 1
FGIC Series 00A
6.00%, 8/01/24 -0- 1,550 1,650,456
FSA Series 01B
Zero Coupon, 8/01/25 -0- 8,000 3,301,840
Castaic Lake Wtr Agy
AMBAC Series 04A
5.00%, 8/01/16 - 8/01/18 -0- 4,325 4,579,149
MBIA Series 01A
5.20%, 8/01/30 -0- 1,625 1,643,005
Chino Hills CFD
(Fairfield Ranch 10)
Series 00
6.95%, 9/01/30 -0- 5,200 5,315,804
Chino Redev Agy Spl Tax ETM
AMBAC Series 01B
5.25%, 9/01/30 -0- 5,210 5,325,766
Coachella Valley Uni Sch Dist
AMBAC
5.00%, 9/01/23 -0- 2,500 2,564,850
Commerce Joint Pwr Fin Auth Lease Rev
(Comnty Ctr Proj)
XLCA Series 04
5.00%, 10/01/34 -0- 2,015 1,937,805
Corona CFD
(Eagle Glen 97-2) ETM
Series 98
5.875%, 9/01/23 -0- 6,065 6,008,292
East Palo Alto Pub Fin Auth
(Univ Circle Gateway 101)
RADIAN Series 05A
5.00%, 10/01/25 -0- 5,070 4,971,591
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
AllianceBernstein AllianceBernstein
Municipal AllianceBernstein Municipal Income AllianceBernstein
Income Fund Municipal Fund Insured Municipal Income
California Income Fund California Fund Insured
Portfolio California Portfolio California
Principal Portfolio Principal Portfolio
Amount (000) (U.S. $ Value) Amount (000) (U.S. $ Value)
------------ ------------ ------------ ------------
Eastern Wtr Dist Impr Area A
(Morningstar Ranch)
Series 02
6.40%, 9/01/32 $ 3,660 $ 3,671,675 $ -0- $ -0-
El Centro Fin Auth
(El Centro Med Ctr)
Series 01
5.375%, 3/01/26 18,000 18,297,360 -0- -0-
Encinitas Rec Ranch Golf Auth
(Encinitas Ranch Golf Course)
Series 04
5.50%, 9/01/23 - 9/01/24 1,110 1,031,871 -0- -0-
5.60%, 9/01/26 1,000 927,520 -0- -0-
Fontana CFD 11 Spl Tax
(Heritage West End)
Series B
6.50%, 9/01/28 8,505 8,584,267 -0- -0-
Fontana Pub Fin Auth
(North Fontana Redev Proj)
AMBAC Series 03A
5.50%, 9/01/32 1,000 1,044,770 4,200 4,388,034
Foothill/Eastern Corridor Agy
Series 95
Zero Coupon, 1/01/24 10,255 4,867,331 -0- -0-
Zero Coupon, 1/01/25 15,000 6,777,750 -0- -0-
Franklin-McKinley Sch Dist
(Prerefunded)
FSA Series 02B
5.00%, 8/01/27 -0- -0- 700 769,153
Fremont Uni Sch Dist/Alameda Cnty
FSA Series 05B
5.00%, 8/01/26 1,745 1,804,819 -0- -0-
Fresno Joint Pwr Lease Rev
XLCA Series 04A
5.25%, 10/01/21 1,265 1,318,661 -0- -0-
Fresno Joint Pwrs Lease Rev
XLCA Series 04A
5.25%, 10/01/24 2,160 2,232,187 -0- -0-
5.375%, 10/01/17 1,315 1,414,690 -0- -0-
Fullerton Redev Agy
RADIAN
5.00%, 4/01/21 2,225 2,234,412 1,025 1,029,336
Gilroy Uni Sch Dist
FGIC
5.00%, 8/01/27 1,500 1,538,775 -0- -0-
Golden St Tobacco Securitization Corp.
(Prerefunded)
RADIAN Series 03
5.50%, 6/01/43 -0- -0- 1,400 1,539,300
Huntington Park Pub Fin Auth
FSA Series 04A
5.25%, 9/01/17 1,000 1,098,900 -0- -0-
Jurupa Uni Sch Dist
FGIC Series 04
5.00%, 8/01/22 -0- -0- 1,340 1,383,496
Kaweah Delta Hlth Care Dist
MBIA Series 04
5.25%, 8/01/25 - 8/01/26 3,780 3,962,306 -0- -0-
La Verne CFD 88-1 Spl Tax
Series 98
5.875%, 3/01/14 3,910 3,933,382 -0- -0-
Lammersville Sch Dist CFD Spl Tax
(Mountain House)
Series 02
6.375%, 9/01/32 4,250 4,231,810 -0- -0-
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma
AllianceBernstein Pro Forma
Municipal AllianceBernstein
Income Fund Municipal
California Income Fund
Portfolio California
Principal Portfolio
Adjustments Amount (000) (U.S. $ Value)
----------- ------------ ------------
Eastern Wtr Dist Impr Area A
(Morningstar Ranch)
Series 02
6.40%, 9/01/32 -0- $ 3,660 $ 3,671,675
El Centro Fin Auth
(El Centro Med Ctr)
Series 01
5.375%, 3/01/26 -0- 18,000 18,297,360
Encinitas Rec Ranch Golf Auth
(Encinitas Ranch Golf Course)
Series 04
5.50%, 9/01/23 - 9/01/24 -0- 1,110 1,031,871
5.60%, 9/01/26 -0- 1,000 927,520
Fontana CFD 11 Spl Tax
(Heritage West End)
Series B
6.50%, 9/01/28 -0- 8,505 8,584,267
Fontana Pub Fin Auth
(North Fontana Redev Proj)
AMBAC Series 03A
5.50%, 9/01/32 -0- 5,200 5,432,804
Foothill/Eastern Corridor Agy
Series 95
Zero Coupon, 1/01/24 -0- 10,255 4,867,331
Zero Coupon, 1/01/25 -0- 15,000 6,777,750
Franklin-McKinley Sch Dist
(Prerefunded)
FSA Series 02B
5.00%, 8/01/27 -0- 700 769,153
Fremont Uni Sch Dist/Alameda Cnty
FSA Series 05B
5.00%, 8/01/26 -0- 1,745 1,804,819
Fresno Joint Pwr Lease Rev
XLCA Series 04A
5.25%, 10/01/21 -0- 1,265 1,318,661
Fresno Joint Pwrs Lease Rev
XLCA Series 04A
5.25%, 10/01/24 -0- 2,160 2,232,187
5.375%, 10/01/17 -0- 1,315 1,414,690
Fullerton Redev Agy
RADIAN
5.00%, 4/01/21 -0- 3,250 3,263,748
Gilroy Uni Sch Dist
FGIC
5.00%, 8/01/27 -0- 1,500 1,538,775
Golden St Tobacco Securitization Corp.
(Prerefunded)
RADIAN Series 03
5.50%, 6/01/43 -0- 1,400 1,539,300
Huntington Park Pub Fin Auth
FSA Series 04A
5.25%, 9/01/17 -0- 1,000 1,098,900
Jurupa Uni Sch Dist
FGIC Series 04
5.00%, 8/01/22 -0- 1,340 1,383,496
Kaweah Delta Hlth Care Dist
MBIA Series 04
5.25%, 8/01/25 - 8/01/26 -0- 3,780 3,962,306
La Verne CFD 88-1 Spl Tax
Series 98
5.875%, 3/01/14 -0- 3,910 3,933,382
Lammersville Sch Dist CFD Spl Tax
(Mountain House)
Series 02
6.375%, 9/01/32 -0- 4,250 4,231,810
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
AllianceBernstein AllianceBernstein
Municipal AllianceBernstein Municipal Income AllianceBernstein
Income Fund Municipal Fund Insured Municipal Income
California Income Fund California Fund Insured
Portfolio California Portfolio California
Principal Portfolio Principal Portfolio
Amount (000) (U.S. $ Value) Amount (000) (U.S. $ Value)
------------ ------------ ------------ ------------
Lancaster Redev Agy Tax Alloc Rev
(Fire Protn Fac Proj)
XLCA Series 04
5.00%, 12/01/23 $ 1,120 $ 1,140,675 $ -0- $ -0-
Lancaster Redev Agy Tax Alloc Rev
(Sheriffs Fac Proj)
XLCA Series 04
5.00%, 12/01/23 1,875 1,909,613 -0- -0-
Loma Linda Hosp
(Loma Linda Univ Med Ctr)
Series 05A
5.00%, 12/01/23 2,000 1,850,820 -0- -0-
Long Beach Fin Auth
(Aquarium of the Pacific Proj)
AMBAC Series 01
5.25%, 11/01/30 -0- -0- 6,500 6,440,655
Los Angeles Cnty Metro Transp Auth
(Prerefunded)
FGIC Series 00A
5.25%, 7/01/30 2,750 2,944,535 -0- -0-
Los Angeles Comnty Redev Agy
Series 04L
5.00%, 3/01/17 2,565 2,596,575 -0- -0-
5.10%, 3/01/19 1,350 1,356,777 -0- -0-
Los Angeles Dept of Wtr & Pwr
(Pwr Sys Rev)
AMBAC
5.00%, 7/01/24 5,325 5,547,053 -0- -0-
MBIA Series 01A
5.00%, 7/01/24 1,500 1,509,945 5,900 5,939,117
Los Angeles MFHR
(Park Plaza West) AMT
GNMA
5.50%, 1/20/43 5,000 4,946,050 -0- -0-
Los Angeles Uni Sch Dist
AMBAC Series B
5.00%, 7/01/19 - 7/01/21 13,685 14,559,725 -0- -0-
Manteca Uni Sch Dist
(Prerefunded)
FSA Series 04
5.25%, 8/01/22 1,390 1,559,121 -0- -0-
Marin Wtr Dist Rev
AMBAC Series 04
5.25%, 7/01/20 3,040 3,216,472 -0- -0-
Murrieta Valley Uni Sch Dist
(Election 2002)
FSA Series 05B
5.125%, 9/01/29 1,275 1,321,742 225 233,249
Norco Redev Agy Tax Alloc
(Norco Redev Proj Area No 1)
AMBAC Series 05
5.00%, 3/01/26 1,360 1,404,322 540 557,599
Norco Redev Agy Tax Alloc
(Ref Norco Redev Proj No 1)
RADIAN Series 04
5.00%, 3/01/24 3,060 3,004,033 -0- -0-
Oakland Uni Sch Dist/Alameda Cnty
FGIC
5.00%, 8/01/22 8,975 9,007,310 -0- -0-
MBIA Series 05
5.00%, 8/01/25 7,455 7,503,905 -0- -0-
Ohlone Comnty Coll Dist
FSA Series 05B
5.00%, 8/01/24 1,850 1,925,036 -0- -0-
Ontario Assmt Dist
(Calif Commerce Ctr So)
7.70%, 9/02/10 2,465 2,496,281 -0- -0-
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma
AllianceBernstein Pro Forma
Municipal AllianceBernstein
Income Fund Municipal
California Income Fund
Portfolio California
Principal Portfolio
Adjustments Amount (000) (U.S. $ Value)
----------- ------------ ------------
Lancaster Redev Agy Tax Alloc Rev
(Fire Protn Fac Proj)
XLCA Series 04
5.00%, 12/01/23 -0- $ 1,120 $ 1,140,675
Lancaster Redev Agy Tax Alloc Rev
(Sheriffs Fac Proj)
XLCA Series 04
5.00%, 12/01/23 -0- 1,875 1,909,613
Loma Linda Hosp
(Loma Linda Univ Med Ctr)
Series 05A
5.00%, 12/01/23 -0- 2,000 1,850,820
Long Beach Fin Auth
(Aquarium of the Pacific Proj)
AMBAC Series 01
5.25%, 11/01/30 -0- 6,500 6,440,655
Los Angeles Cnty Metro Transp Auth
(Prerefunded)
FGIC Series 00A
5.25%, 7/01/30 -0- 2,750 2,944,535
Los Angeles Comnty Redev Agy
Series 04L
5.00%, 3/01/17 -0- 2,565 2,596,575
5.10%, 3/01/19 -0- 1,350 1,356,777
Los Angeles Dept of Wtr & Pwr
(Pwr Sys Rev)
AMBAC
5.00%, 7/01/24 -0- 5,325 5,547,053
MBIA Series 01A
5.00%, 7/01/24 -0- 7,400 7,449,062
Los Angeles MFHR
(Park Plaza West) AMT
GNMA
5.50%, 1/20/43 -0- 5,000 4,946,050
Los Angeles Uni Sch Dist
AMBAC Series B
5.00%, 7/01/19 - 7/01/21 -0- 13,685 14,559,725
Manteca Uni Sch Dist
(Prerefunded)
FSA Series 04
5.25%, 8/01/22 -0- 1,390 1,559,121
Marin Wtr Dist Rev
AMBAC Series 04
5.25%, 7/01/20 -0- 3,040 3,216,472
Murrieta Valley Uni Sch Dist
(Election 2002)
FSA Series 05B
5.125%, 9/01/29 -0- 1,500 1,554,991
Norco Redev Agy Tax Alloc
(Norco Redev Proj Area No 1)
AMBAC Series 05
5.00%, 3/01/26 -0- 1,900 1,961,921
Norco Redev Agy Tax Alloc
(Ref Norco Redev Proj No 1)
RADIAN Series 04
5.00%, 3/01/24 -0- 3,060 3,004,033
Oakland Uni Sch Dist/Alameda Cnty
FGIC
5.00%, 8/01/22 -0- 8,975 9,007,310
MBIA Series 05
5.00%, 8/01/25 -0- 7,455 7,503,905
Ohlone Comnty Coll Dist
FSA Series 05B
5.00%, 8/01/24 -0- 1,850 1,925,036
Ontario Assmt Dist
(Calif Commerce Ctr So)
7.70%, 9/02/10 -0- 2,465 2,496,281
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
AllianceBernstein AllianceBernstein
Municipal AllianceBernstein Municipal Income AllianceBernstein
Income Fund Municipal Fund Insured Municipal Income
California Income Fund California Fund Insured
Portfolio California Portfolio California
Principal Portfolio Principal Portfolio
Amount (000) (U.S. $ Value) Amount (000) (U.S. $ Value)
------------ ------------ ------------ ------------
Ontario COP
(Wtr Sys Impr Proj)
MBIA Series 04
5.25%, 7/01/21 $ 1,700 $ 1,797,733 $ -0- $ -0-
Orange Cnty CFD 99-1
(Ladera Ranch)
(Prerefunded)
Series 99A
6.70%, 8/15/29 3,000 3,225,390 -0- -0-
Orange Cnty COP
(Loma Ridge Data Ctr Proj)
(Prerefunded)
AMBAC
6.00%, 6/01/21 -0- -0- 1,000 1,159,280
Palm Springs COP ETM
Series 91B
Zero Coupon, 4/15/21 37,500 20,526,750 -0- -0-
Palmdale Wtr Dist Rev COP
FGIC Series 04
5.00%, 10/01/24 1,775 1,814,920
Perris Union High Sch Dist
FGIC Series 05A
5.00%, 9/01/24 -0- -0- 800 815,168
Pittsburg Redev Agy
(Los Medanos Proj)
MBIA Series 03A
5.00%, 8/01/21 6,410 6,624,158 -0- -0-
Placentia-Yorba Linda Uni Sch Dist
FGIC Series 06
5.00%, 10/01/27 4,200 4,267,326 -0- -0-
Port of Oakland AMT
FGIC Series 02L
5.375%, 11/01/27 2,500 2,480,600 -0- -0-
Poway Redev Agy
(Paguay Proj) ETM
AMBAC Series 01
5.375%, 12/15/31 -0- -0- 5,940 6,047,514
Rancho Cordova COP
(City Hall Fac Acq Proj)
(Prerefunded)
XLCA Series 05
5.00%, 2/01/24 -0- -0- 2,645 2,901,168
Rancho Etiwanda Pub Fac CFD 1
(Rancho Etiwanda)
Series 01
6.40%, 9/01/31 8,000 8,724,640 -0- -0-
Rancho Etiwanda Pub Fac CFD 1
(Rancho Etiwanda) ETM
Series 01
6.40%, 9/01/31 3,105 3,374,514 -0- -0-
Redding Elec Sys Rev
MBIA Series 92A
8.726%, 7/01/22 (b)(c) -0- -0- 1,720 2,335,691
Riverside CFD No 89-1
(MTN Cove)
(Prerefunded)
Series 00
6.50%, 9/01/25 3,390 3,642,352 -0- -0-
Riverside Cmnty Coll Dist
(Prerefunded)
MBIA Series 04A
5.25%, 8/01/25 - 8/01/26 1,980 2,220,907 -0- -0-
Riverside Cnty Pub Fin Auth
(Tax Alloc Rev)
(Redev Proj)
XLCA Series 04
5.00%, 10/01/35 2,475 2,427,802 -0- -0-
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma
AllianceBernstein Pro Forma
Municipal AllianceBernstein
Income Fund Municipal
California Income Fund
Portfolio California
Principal Portfolio
Adjustments Amount (000) (U.S. $ Value)
----------- ------------ ------------
Ontario COP
(Wtr Sys Impr Proj)
MBIA Series 04
5.25%, 7/01/21 -0- $ 1,700 $ 1,797,733
Orange Cnty CFD 99-1
(Ladera Ranch)
(Prerefunded)
Series 99A
6.70%, 8/15/29 -0- 3,000 3,225,390
Orange Cnty COP
(Loma Ridge Data Ctr Proj)
(Prerefunded)
AMBAC
6.00%, 6/01/21 -0- 1,000 1,159,280
Palm Springs COP ETM
Series 91B
Zero Coupon, 4/15/21 -0- 37,500 20,526,750
Palmdale Wtr Dist Rev COP
FGIC Series 04
5.00%, 10/01/24 1,775 1,814,920
Perris Union High Sch Dist
FGIC Series 05A
5.00%, 9/01/24 -0- 800 815,168
Pittsburg Redev Agy
(Los Medanos Proj)
MBIA Series 03A
5.00%, 8/01/21 -0- 6,410 6,624,158
Placentia-Yorba Linda Uni Sch Dist
FGIC Series 06
5.00%, 10/01/27 -0- 4,200 4,267,326
Port of Oakland AMT
FGIC Series 02L
5.375%, 11/01/27 -0- 2,500 2,480,600
Poway Redev Agy
(Paguay Proj) ETM
AMBAC Series 01
5.375%, 12/15/31 -0- 5,940 6,047,514
Rancho Cordova COP
(City Hall Fac Acq Proj)
(Prerefunded)
XLCA Series 05
5.00%, 2/01/24 -0- 2,645 2,901,168
Rancho Etiwanda Pub Fac CFD 1
(Rancho Etiwanda)
Series 01
6.40%, 9/01/31 -0- 8,000 8,724,640
Rancho Etiwanda Pub Fac CFD 1
(Rancho Etiwanda) ETM
Series 01
6.40%, 9/01/31 -0- 3,105 3,374,514
Redding Elec Sys Rev
MBIA Series 92A
8.726%, 7/01/22 (b)(c) -0- 1,720 2,335,691
Riverside CFD No 89-1
(MTN Cove)
(Prerefunded)
Series 00
6.50%, 9/01/25 -0- 3,390 3,642,352
Riverside Cmnty Coll Dist
(Prerefunded)
MBIA Series 04A
5.25%, 8/01/25 - 8/01/26 -0- 1,980 2,220,907
Riverside Cnty Pub Fin Auth
(Tax Alloc Rev)
(Redev Proj)
XLCA Series 04
5.00%, 10/01/35 -0- 2,475 2,427,802
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
AllianceBernstein AllianceBernstein
Municipal AllianceBernstein Municipal Income AllianceBernstein
Income Fund Municipal Fund Insured Municipal Income
California Income Fund California Fund Insured
Portfolio California Portfolio California
Principal Portfolio Principal Portfolio
Amount (000) (U.S. $ Value) Amount (000) (U.S. $ Value)
------------ ------------ ------------ ------------
Riverside Cnty Pub Fin Auth Tax Alloc Rev
(Redev Proj)
XLCA Series 04
5.00%, 10/01/23 $ -0- $ -0- $ 1,955 $ 1,990,288
Riverside Cnty Redev Agy
(Jurupa Valley Proj)
AMBAC Series 01
5.125%, 10/01/35 -0- -0- 2,500 2,747,600
Riverside Cnty Redev Agy
(Jurupa Valley Proj) ETM
AMBAC Series 01
5.25%, 10/01/35 -0- -0- 5,000 5,515,450
Riverside Comnty Coll Dist
MBIA
5.00%, 8/01/25 1,720 1,792,223 -0- -0-
Rocklin Uni Sch Dist Comnty Fac District
MBIA Series 04
5.00%, 9/01/25 1,000 1,023,840 -0- -0-
Roseville CFD
(No 1 Central Roseville Highland Park)
Series 99-A
5.80%, 9/01/17 6,630 6,646,442 -0- -0-
Roseville High Sch Dist
Series 01E
5.25%, 8/01/26 2,435 2,529,332 -0- -0-
Sacramento CFD 97-01B
(N Natomas Drain)
(Prerefunded)
Series 00B
7.25%, 9/01/30 5,375 5,827,306 -0- -0-
Sacramento City Uni Sch Dist
FSA Series 04D
5.25%, 7/01/21 - 7/01/23 8,525 8,974,122 -0- -0-
Sacramento Cnty Hsg Auth MFHR
(Cottage Estates) AMT
FNMA Series 00B
6.00%, 2/01/33 5,300 5,391,531 -0- -0-
Sacramento Cnty Hsg Auth MFHR
(Verandas Apts) AMT
FNMA Series 00H
5.70%, 3/01/34 2,875 2,883,452 -0- -0-
Sacramento Muni Util Dist Elec Rev
MBIA Series 03S
5.00%, 11/15/17 5,000 5,281,250 -0- -0-
MBIA Series 04R-289-2
5.00%, 8/15/17 10,000 10,539,100 -0- -0-
San Bernardino Cnty CFD 2002-1
(Kaiser Commerce Ctr)
Series 02-1
5.90%, 9/01/33 4,750 4,603,985 -0- -0-
San Bernardino SFMR
(Mtg Rev) AMT
GNMA/ FNMA Series 01-A1
6.35%, 7/01/34 (b) 350 352,401 -0- -0-
San Diego Cnty COP
Series 04A
5.50%, 9/01/44 5,000 5,093,000 -0- -0-
San Diego HFA MFHR
(Rental Rev) AMT
GNMA/ FNMA Series 98C
5.25%, 1/20/40 6,105 5,763,242 -0- -0-
San Diego HFA MFHR
(Vista La Rosa Apt) AMT
GNMA Series 00A
6.00%, 7/20/41 10,230 10,397,977 -0- -0-
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma
AllianceBernstein Pro Forma
Municipal AllianceBernstein
Income Fund Municipal
California Income Fund
Portfolio California
Principal Portfolio
Adjustments Amount (000) (U.S. $ Value)
----------- ------------ ------------
Riverside Cnty Pub Fin Auth Tax Alloc Rev
(Redev Proj)
XLCA Series 04
5.00%, 10/01/23 -0- $ 1,955 $ 1,990,288
Riverside Cnty Redev Agy
(Jurupa Valley Proj)
AMBAC Series 01
5.125%, 10/01/35 -0- 2,500 2,747,600
Riverside Cnty Redev Agy
(Jurupa Valley Proj) ETM
AMBAC Series 01
5.25%, 10/01/35 -0- 5,000 5,515,450
Riverside Comnty Coll Dist
MBIA
5.00%, 8/01/25 -0- 1,720 1,792,223
Rocklin Uni Sch Dist Comnty Fac District
MBIA Series 04
5.00%, 9/01/25 -0- 1,000 1,023,840
Roseville CFD
(No 1 Central Roseville Highland Park)
Series 99-A
5.80%, 9/01/17 -0- 6,630 6,646,442
Roseville High Sch Dist
Series 01E
5.25%, 8/01/26 -0- 2,435 2,529,332
Sacramento CFD 97-01B
(N Natomas Drain)
(Prerefunded)
Series 00B
7.25%, 9/01/30 -0- 5,375 5,827,306
Sacramento City Uni Sch Dist
FSA Series 04D
5.25%, 7/01/21 - 7/01/23 -0- 8,525 8,974,122
Sacramento Cnty Hsg Auth MFHR
(Cottage Estates) AMT
FNMA Series 00B
6.00%, 2/01/33 -0- 5,300 5,391,531
Sacramento Cnty Hsg Auth MFHR
(Verandas Apts) AMT
FNMA Series 00H
5.70%, 3/01/34 -0- 2,875 2,883,452
Sacramento Muni Util Dist Elec Rev
MBIA Series 03S
5.00%, 11/15/17 -0- 5,000 5,281,250
MBIA Series 04R-289-2
5.00%, 8/15/17 -0- 10,000 10,539,100
San Bernardino Cnty CFD 2002-1
(Kaiser Commerce Ctr)
Series 02-1
5.90%, 9/01/33 -0- 4,750 4,603,985
San Bernardino SFMR
(Mtg Rev) AMT
GNMA/ FNMA Series 01-A1
6.35%, 7/01/34 (b) -0- 350 352,401
San Diego Cnty COP
Series 04A
5.50%, 9/01/44 -0- 5,000 5,093,000
San Diego HFA MFHR
(Rental Rev) AMT
GNMA/ FNMA Series 98C
5.25%, 1/20/40 -0- 6,105 5,763,242
San Diego HFA MFHR
(Vista La Rosa Apt) AMT
GNMA Series 00A
6.00%, 7/20/41 -0- 10,230 10,397,977
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
AllianceBernstein AllianceBernstein
Municipal AllianceBernstein Municipal Income AllianceBernstein
Income Fund Municipal Fund Insured Municipal Income
California Income Fund California Fund Insured
Portfolio California Portfolio California
Principal Portfolio Principal Portfolio
Amount (000) (U.S. $ Value) Amount (000) (U.S. $ Value)
------------ ------------ ------------ ------------
San Diego Uni Sch Dist
(Election of 1998)
MBIA Series 04E-1
5.00%, 7/01/23 - 7/01/24 $ 2,240 $ 2,349,749 $ 1,000 $ 1,049,770
San Francisco City & Cnty Int'l Arpt AMT
FSA Series 00A
6.125%, 1/01/27 1,480 1,513,374 -0- -0-
San Francisco Univ Funding, Inc.
ACA Series 99
5.25%, 7/01/32 16,650 17,358,790 -0- -0-
San Joaquin Hills Transp Corr Agy
(Toll Road Rev)
MBIA Series A
Zero Coupon, 1/15/36 47,415 8,858,544 -0- -0-
San Joaquin Hills Transp Corr Agy ETM
Series 93
Zero Coupon, 1/01/20 20,000 11,990,200 -0- -0-
Zero Coupon, 1/01/21 20,000 11,391,000 -0- -0-
Zero Coupon, 1/01/23 25,000 12,659,750 -0- -0-
San Jose Redev Agy Tax Alloc Rev
MBIA Series 04A
5.25%, 8/01/19 5,000 5,237,650 -0- -0-
San Mateo Cnty Comnty Coll Dist COP
(Prerefunded)
MBIA Series 04
5.25%, 10/01/20 (d) 2,870 3,227,688 -0- -0-
Santa Margarita Wtr Dist
6.25%, 9/01/29 11,550 11,762,078 -0- -0-
Semitropic Impr Dist Wtr Storage
XLCA Series 04A
5.50%, 12/01/23 1,640 1,740,007 -0- -0-
South Gate Pub Fin Auth
(South Gate Redev Proj No 1)
XLCA Series 02
5.125%, 9/01/24 1,800 1,767,654 -0- -0-
Southwestern Comnty Coll Dist
MBIA Series 05
5.00%, 8/01/24 -0- -0- 1,000 1,040,080
Stockton Pub Fin Auth
RADIAN Series 06A
5.00%, 9/01/17 - 9/01/21 -0- -0- 5,060 5,229,530
Tejon Ranch Pub Fac Fin Auth CFD 1
(Tejon Indl Complex)
Series 00A
7.20%, 9/01/30 9,880 10,193,614 -0- -0-
Tejon Ranch Pub Fac Fin Auth CFD 2000-1
Series 03
6.125%, 9/01/27 1,000 961,080 -0- -0-
6.20%, 9/01/33 2,375 2,247,177 -0- -0-
Torrance COP
(Ref & Pub Impt Proj)
AMBAC Series 05B
5.00%, 6/01/24 2,900 2,985,521 465 478,713
Univ of California
5.00%, 5/15/21 5,525 5,831,195 -0- -0-
FSA Series 05B
5.00%, 5/15/24 3,600 3,724,776 1,400 1,448,524
Univ of California
(Prerefunded)
FGIC Series 01M
5.125%, 9/01/30 12,270 12,845,708 -0- -0-
West Contra Costa Hlthcare Dist COP
AMBAC Series 04
5.375%, 7/01/21 - 7/01/24 4,720 4,656,473 -0- -0-
West Kern Cnty Wtr Rev
(Prerefunded)
Series 01
5.625%, 6/01/31 3,000 3,224,850 -0- -0-
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma
AllianceBernstein Pro Forma
Municipal AllianceBernstein
Income Fund Municipal
California Income Fund
Portfolio California
Principal Portfolio
Adjustments Amount (000) (U.S. $ Value)
----------- ------------ ------------
San Diego Uni Sch Dist
(Election of 1998)
MBIA Series 04E-1
5.00%, 7/01/23 - 7/01/24 -0- $ 3,240 $ 3,399,519
San Francisco City & Cnty Int'l Arpt AMT
FSA Series 00A
6.125%, 1/01/27 -0- 1,480 1,513,374
San Francisco Univ Funding, Inc.
ACA Series 99
5.25%, 7/01/32 -0- 16,650 17,358,790
San Joaquin Hills Transp Corr Agy
(Toll Road Rev)
MBIA Series A
Zero Coupon, 1/15/36 -0- 47,415 8,858,544
San Joaquin Hills Transp Corr Agy ETM
Series 93
Zero Coupon, 1/01/20 -0- 20,000 11,990,200
Zero Coupon, 1/01/21 -0- 20,000 11,391,000
Zero Coupon, 1/01/23 -0- 25,000 12,659,750
San Jose Redev Agy Tax Alloc Rev
MBIA Series 04A
5.25%, 8/01/19 -0- 5,000 5,237,650
San Mateo Cnty Comnty Coll Dist COP
(Prerefunded)
MBIA Series 04
5.25%, 10/01/20 (d) -0- 2,870 3,227,688
Santa Margarita Wtr Dist
6.25%, 9/01/29 -0- 11,550 11,762,078
Semitropic Impr Dist Wtr Storage
XLCA Series 04A
5.50%, 12/01/23 -0- 1,640 1,740,007
South Gate Pub Fin Auth
(South Gate Redev Proj No 1)
XLCA Series 02
5.125%, 9/01/24 -0- 1,800 1,767,654
Southwestern Comnty Coll Dist
MBIA Series 05
5.00%, 8/01/24 -0- 1,000 1,040,080
Stockton Pub Fin Auth
RADIAN Series 06A
5.00%, 9/01/17 - 9/01/21 -0- 5,060 5,229,530
Tejon Ranch Pub Fac Fin Auth CFD 1
(Tejon Indl Complex)
Series 00A
7.20%, 9/01/30 -0- 9,880 10,193,614
Tejon Ranch Pub Fac Fin Auth CFD 2000-1
Series 03
6.125%, 9/01/27 -0- 1,000 961,080
6.20%, 9/01/33 -0- 2,375 2,247,177
Torrance COP
(Ref & Pub Impt Proj)
AMBAC Series 05B
5.00%, 6/01/24 -0- 3,365 3,464,234
Univ of California
5.00%, 5/15/21 -0- 5,525 5,831,195
FSA Series 05B
5.00%, 5/15/24 -0- 5,000 5,173,300
Univ of California
(Prerefunded)
FGIC Series 01M
5.125%, 9/01/30 -0- 12,270 12,845,708
West Contra Costa Hlthcare Dist COP
AMBAC Series 04
5.375%, 7/01/21 - 7/01/24 -0- 4,720 4,656,473
West Kern Cnty Wtr Rev
(Prerefunded)
Series 01
5.625%, 6/01/31 -0- 3,000 3,224,850
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
AllianceBernstein AllianceBernstein
Municipal AllianceBernstein Municipal Income AllianceBernstein
Income Fund Municipal Fund Insured Municipal Income
California Income Fund California Fund Insured
Portfolio California Portfolio California
Principal Portfolio Principal Portfolio
Amount (000) (U.S.$ Value) Amount (000) (U.S. $ Value)
------------ ------------ ------------ ------------
Westminster Redev Agy MFHR
(Rose Garden Apt) AMT
Series 93A
6.75%, 8/01/24 $ 4,300 $ 4,317,587 $ -0- $ -0-
------------ ------------
699,416,036 89,683,695
------------ ------------
Nevada - 0.4%
Henderson Loc Impr Dist
FSA Series A
5.00%, 3/01/22 -0- -0- 2,765 2,907,867
------------ ------------
Puerto Rico - 3.0%
Puerto Rico Conv Ctr Auth
AMBAC
5.00%, 7/01/17 10,730 11,189,029 -0- -0-
Puerto Rico GO
(Pub Impr)
5.25%, 7/01/23 3,000 3,013,620 -0- -0-
Series 01A
5.50%, 7/01/19 1,880 1,962,776 -0- -0-
Series 03A
5.25%, 7/01/23 800 804,240 -0- -0-
Puerto Rico Govt Dev Bank
(Sr Notes)
Series 06B
5.00%, 12/01/15 500 513,935 -0- -0-
Univ of Puerto Rico
5.00%, 6/01/18 4,930 4,982,012 -0- -0-
Series 06Q
5.00%, 6/01/19 2,490 2,501,404 -0- -0-
------------ ------------
24,967,016 0
------------ ------------
Total Long-Term Municipal Bonds
(cost $782,132,583) 724,383,052 92,591,562
------------ ------------
Short-Term Municipal Notes - 1.7%
California - 1.7%
Abag Fin Auth for Nonprofit Corp.
2.30%, 10/01/29 (e) 500 500,000 -0- -0-
COP Series D
2.19%, 10/01/27 (e) 500 500,000 -0- -0-
Abag Fin Auth for Nonprofit Corp.(Oshman
Family Jewish Comnty)
2.50%, 6/01/37 (e) 1,100 1,100,000 -0- -0-
California Dept of Wtr Res Pwr Sup Rev
Series 01B-3
2.35%, 5/01/22 (e)(f) 1,500 1,500,000 -0- -0-
California Infra & Econ Dev Bank
(Asian Art Museum Fndtn)
MBIA Series 05
2.65%, 6/01/34 (e) -0- -0- 500 500,000
California Pollution Ctl Fin Auth
2.35%, 11/01/26 (e) 4,000 4,000,000 -0- -0-
2.40%, 11/01/26 (e) 500 500,000 -0- -0-
California St GO
2.19%, 5/01/33 (e) 500 500,000 -0- -0-
2.50%, 5/01/34 (e) 500 500,000 -0- -0-
2.50%, 5/01/33 (e)(f) 4,300 4,300,000 -0- -0-
------------ ------------
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma
AllianceBernstein Pro Forma
Municipal AllianceBernstein
Income Fund Municipal
California Income Fund
Portfolio California
Principal Portfolio
Adjustments Amount (000) (U.S. $ Value)
----------- ------------ ------------
Westminster Redev Agy MFHR
(Rose Garden Apt) AMT
Series 93A
6.75%, 8/01/24 -0- $ 4,300 $ 4,317,587
------------ ------------
-0- 789,099,731
------------ ------------
Nevada - 0.4%
Henderson Loc Impr Dist
FSA Series A
5.00%, 3/01/22 -0- 2,765 2,907,867
------------ ------------
Puerto Rico - 3.0%
Puerto Rico Conv Ctr Auth
AMBAC
5.00%, 7/01/17 -0- 10,730 11,189,029
Puerto Rico GO
(Pub Impr)
5.25%, 7/01/23 -0- 3,000 3,013,620
Series 01A
5.50%, 7/01/19 -0- 1,880 1,962,776
Series 03A
5.25%, 7/01/23 -0- 800 804,240
Puerto Rico Govt Dev Bank
(Sr Notes)
Series 06B
5.00%, 12/01/15 -0- 500 513,935
Univ of Puerto Rico
5.00%, 6/01/18 -0- 4,930 4,982,012
Series 06Q
5.00%, 6/01/19 -0- 2,490 2,501,404
------------ ------------
-0- 24,967,016
------------ ------------
Total Long-Term Municipal Bonds
(cost $782,132,583) -0- 816,974,614
------------ ------------
Short-Term Municipal Notes - 1.7%
California - 1.7%
Abag Fin Auth for Nonprofit Corp.
2.30%, 10/01/29 (e) -0- 500 500,000
COP Series D
2.19%, 10/01/27 (e) -0- 500 500,000
Abag Fin Auth for Nonprofit Corp.(Oshman
Family Jewish Comnty)
2.50%, 6/01/37 (e) -0- 1,100 1,100,000
California Dept of Wtr Res Pwr Sup Rev
Series 01B-3
2.35%, 5/01/22 (e)(f) -0- 1,500 1,500,000
California Infra & Econ Dev Bank
(Asian Art Museum Fndtn)
MBIA Series 05
2.65%, 6/01/34 (e) -0- 500 500,000
California Pollution Ctl Fin Auth
2.35%, 11/01/26 (e) -0- 4,000 4,000,000
2.40%, 11/01/26 (e) -0- 500 500,000
California St GO
2.19%, 5/01/33 (e) -0- 500 500,000
2.50%, 5/01/34 (e) -0- 500 500,000
2.50%, 5/01/33 (e)(f) -0- 4,300 4,300,000
------------ ------------
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
AllianceBernstein AllianceBernstein
Municipal AllianceBernstein Municipal Income AllianceBernstein
Income Fund Municipal Fund Insured Municipal Income
California Income Fund California Fund Insured
Portfolio California Portfolio California
Principal Portfolio Principal Portfolio
Amount (000) (U.S. $ Value) Amount (000) (U.S. $ Value)
------------ ------------ ------------ ------------
New York - 0.5%
New York City
FSA Series A6
2.40%, 11/01/26 (d) $ -0- $ -0- $ 500 $ 500,000
------------- -------------
Total Short-Term Municipal Notes ------------- -------------
(cost $14,400,000) 13,400,000 1,000,000
------------- -------------
Total Investments - 99.9%
(cost $796,532,583) 737,783,052 93,591,562
Other assets less liabilities - 0.1% (216,335) 1,058,200
------------- -------------
Net Assets - 100.0% $ 737,566,717 $ 94,649,762
------------- -------------
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - Insured California Portfolio
AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma
AllianceBernstein Pro Forma
Municipal AllianceBernstein
Income Fund Municipal
California Income Fund
Portfolio California
Principal Portfolio
Adjustments Amount (000) (U.S. $ Value)
----------- ------------ ------------
New York - 0.5%
New York City
FSA Series A6
2.40%, 11/01/26 (d) -0- $ 500 $ 500,000
------------- -------------
Total Short-Term Municipal Notes ------------- -------------
(cost $14,400,000) -0- 14,400,000
------------- -------------
Total Investments - 99.9%
(cost $796,532,583) 831,374,614
Other assets less liabilities - 0.1% 841,865
-------------
Net Assets - 100.0% $ 832,216,479
-------------
INTEREST RATE SWAP TRANSACTIONS
Pro-Forma
AllianceBernstein AllianceBernstein AllianceBernstein
Municipal Income Fund Municipal Income Fund Municipal Income Fund
California Portfolio Insured California Portfolio California Portfolio
Notional Notional Notional
Swap Amount Amount Amount Termination
Counterparty (000) (000) (000) Date
- -------------------------------------------------------------------------------------------------------------
Citigroup $ 5,600 $ 900 $ 6,500 1/25/26
Merrill Lynch 3,900 600 4,500 7/12/08
Merrill Lynch 2,800 -0- 2,800 10/01/16
Merrill Lynch -0- 3,100 3,100 10/21/16
Merrill Lynch 13,800 700 14,500 7/30/26
Merrill Lynch 10,200 -0- 10,200 8/09/26
Merrill Lynch 13,400 1,600 15,000 11/15/26
INTEREST RATE SWAP TRANSACTIONS
Pro-Forma
AllianceBernstein AllianceBernstein AllianceBernstein
Rate Type Municipal Income Fund Municipal Income Fund Municipal Income Fund
----------------------------- California Portfolio Insured California Portfolio California Portfolio
Payments Payments Unrealized Unrealized Unrealized
Swap made by received by Appreciation/ Appreciation/ Appreciation/
Counterparty the Portfolio the Portfolio (Depreciation) (Depreciation) (Depreciation)
- -----------------------------------------------------------------------------------------------------------------------------
Citigroup BMA* 4.108% $ 335,512 $ 53,922 $ 389,434
Merrill Lynch BMA* 3.815% 14,868 2,287 17,155
Merrill Lynch BMA* 4.147% 197,463 -0- 197,463
Merrill Lynch BMA* 4.128% -0- 210,863 210,863
Merrill Lynch 4.090% BMA* (794,341) (40,293) (834,634)
Merrill Lynch 4.063% BMA* (589,646) -0- (589,646)
Merrill Lynch 4.378% BMA* (1,302,351) (155,505) (1,457,856)
- ----------
(a) When-Issued security.
(b) Variable rate coupon, rate shown as of April 30, 2008.
(c) Inverse Floater Security - Security with variable or floating interest rate
that moves in the opposite direction of short-term interest rates.
(d) Position, or a portion thereof, has been segregated to collateralize
interest rate swaps.
(e) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specific date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as
the prime interest rate). This instrument is payable on demand and is
secured by letters of credit or other credit support agreements from major
banks.
(f) Position, or a portion thereof, has been segregated to collateralize when
issued securities.
* Variable interest rate based on the Securities Industry & Financial Markets
Association, formerly the Bond Market Association (BMA).
+ An auction rate security whose interest rate resets at each auction date.
Auctions are typically held every week or month. The rate shown is as of
April 30, 2008 and the aggregate market value of these securities amounted
to $3,475,000 or 0.42% of total investments.
As of April 30, 2008, the Portfolio held 50% of the investments in insured
bonds (of this amount 11% represents the Portfolio's holdings in
pre-refunded bonds).
Glossary:
ACA - ACA Capital
AMBAC - American Bond Assurance Corporation
AMT - Alternative Minimum Tax (subject to)
CDA - Community Development Administration
CFD - Community Facilities District
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Company
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance Inc.
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Authority
MBIA - Municipal Bond Investors Assurance
MFA - Mortgage Finance Authority
MFHR - Multi-Family Housing Revenue
RADIAN - Radian Group, Inc.
SFMR - Single Family Mortgage Revenue
XLCA - XL Capital Assurance Inc.
STATEMENT OF ASSETS AND LIABILITIES
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
AllianceBernstein Municipal Income Fund - Insured California Portfolio
April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance-
Alliance- Bernstein Pro Forma
Bernstein Municipal Alliance-
Municipal Income Bernstein
Income Fund Municipal
Fund Insured Income Fund
California California California
Portfolio Portfolio Adjustments Portfolio
--------- --------- ----------- ---------
ASSETS
Investments in securities, at value
(cost $705,756,862 and $90,775,721, respectively) $ 737,783,052 $ 93,591,562 $ $ -0- $ 831,374,614
Cash -0- 239,119 -0- 239,119
Interest receivable 9,193,220 1,125,616 -0- 10,318,836
Receivable for capital stock sold 1,630,623 100,947 -0- 1,731,570
Unrealized appreciation of interest rate swap contracts 547,843 267,072 -0- 814,915
Receivable for investment securities sold 215,556 10,000 -0- 225,556
----------------- --------------- ----------- ---------------
Total assets 749,370,294 95,334,316 -0- 844,704,610
----------------- --------------- ----------- ---------------
LIABILITIES
Due to custodian 61,583 -0- -0- 61,583
Payable for investment securities purchased 5,271,150 -0- -0- 5,271,150
Unrealized depreciation of interest rate swap contracts 2,686,338 195,798 -0- 2,882,136
Payable for capital stock redeemed 2,312,412 225,213 -0- 2,537,625
Dividends payable 819,227 90,645 -0- 909,872
Distribution fee payable 263,765 33,025 -0- 296,790
Advisory fee payable 217,717 34,686 -0- 252,403
Administrative fee payable 25,356 36,533 -0- 61,889
Transfer Agent fee payable 11,500 767 -0- 12,267
Accrued expenses 134,529 67,887 -0- 202,416
----------------- --------------- ----------- ---------------
Total liabilities 11,803,577 684,554 -0- 12,488,131
----------------- --------------- ----------- ---------------
NET ASSETS $ 737,566,717 $ 94,649,762 $ -0- $ 832,216,479
----------------- --------------- ----------- ---------------
Composition of Net Assets
Capital stock, at par $ 69,246 $ 7,077 $ -0- $ 76,323
Additional paid-in capital 726,688,866 91,114,284 -0- 817,803,150
Distributions in excess of net investment income (549,426) (101,548) -0- (650,974)
Accumulated net realized gain
(loss) on investment transactions (18,529,664) 742,834 -0- (17,786,830)
Net unrealized appreciation of investments 29,887,695 2,887,115 -0- 32,774,810
----------------- --------------- ----------- ---------------
NET ASSETS $ 737,566,717 94,649,762 $ -0- 832,216,479
----------------- --------------- ------------ ---------------
CLASS A SHARES
Net Assets $ 594,167,098 $ 77,386,486 671,553,584
Shares of capital stock outstanding 55,780,346 5,785,202 1,479,833 63,045,381
----------------- --------------- ----------- ---------------
Net asset value per share $ 10.65 $ 13.38 $ 10.65
----------------- --------------- ---------------
CLASS B SHARES
Net Assets $ 30,796,410 $ 3,449,906 34,246,316
Shares of capital stock outstanding 2,891,980 258,017 65,951 3,215,948
----------------- --------------- ----------- ---------------
Net asset value per share $ 10.65 $ 13.37 $ 10.65
----------------- --------------- ---------------
CLASS C SHARES
Net Assets $ 112,603,209 $ 13,813,370 $ 126,416,579
Shares of capital stock outstanding 10,573,670 1,033,341 263,762 11,870,773
----------------- --------------- ----------- ---------------
Net asset value per share $ 10.65 $ 13.37 $ 10.65
----------------- --------------- ---------------
See Notes to Pro Forma AllianceBernstein Municipal Income Fund - California Portfolio Financial Statements.
STATEMENT OF OPERATIONS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTFOLIO
AllianceBernstein Municipal Income Fund - Insured California Portfolio
Twelve Months Ended April 30, 2008 (unaudited) AllianceBernstein Municipal Income Fund - California Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance-
Alliance- Bernstein Pro Forma
Bernstein Municipal Alliance-
Municipal Income Bernstein
Income Fund Municipal
Fund Insured Income Fund
California California California
Portfolio Portfolio Adjustments Portfolio
--------- --------- ----------- ---------
INVESTMENT INCOME
Interest $ 37,588,744 $ 4,813,761 $ -0- $ 42,402,505
-------------- -------------- ----------- ---------------
EXPENSES
Advisory fee 3,384,203 464,243 (79,023) 3,769,423 (a)
Distribution fee- Class A 1,779,303 248,733 (12,914) 2,015,122 (b)
Distribution fee- Class B 462,621 59,637 0 522,258 (c)
Distribution fee- Class C 1,126,817 142,901 0 1,269,718 (c)
Transfer agency 268,475 43,281 (15,228) 296,528 (d)
Custodian 224,679 123,112 (135,866) 211,925 (d)
Administrative 91,000 96,500 (93,500) 94,000 (d)
Audit & legal 78,830 81,980 (74,810) 86,000 (d)
Printing 70,954 9,286 (14,530) 65,710 (d)
Registration 24,736 13,868 (13,604) 25,000 (d)
Directors' fees 7,194 6,907 (4,950) 9,151 (d)
Miscellaneous 25,433 16,681 (16,114) 26,000 (d)
-------------- -------------- ----------- ---------------
Total expenses 7,544,245 1,307,129 (460,539) 8,390,835
Less: advisory fee waived (630,151) -0- (184,163) (814,314)
Less: expense offset agreement (10,739) (1,495) -0- (12,234)
-------------- -------------- ----------- ---------------
Net expenses 6,903,355 1,305,634 (644,702) 7,564,287
-------------- -------------- ----------- ---------------
Net investment income 30,685,389 3,508,127 644,702 34,838,218
-------------- -------------- ----------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized gain (loss) on:
Investment transactions 2,058,313 387,480 -0- 2,445,793
Futures contracts (197,529) (27,968) (225,497)
Swap contracts 670,743 85,435 756,178
Net change in unrealized
appreciation/depreciation of:
Investments (26,666,501) (2,610,947) -0- (29,277,448)
Futures contracts - -
Swap contracts (2,138,495) 71,274 -0- (2,067,221)
-------------- -------------- ----------- ---------------
Net gain on investment transactions (26,273,469) (2,094,726) -0- (28,368,195)
-------------- -------------- ----------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 4,411,920 $ 1,413,401 $ 644,702 $ 6,470,023
-------------- -------------- ----------- ---------------
- ----------------
(a) Advisory fee based on an annual rate of .45% of the first $2.5 billion, .40% of the next $2.5 billion and .35% in excess of $5
billion, of the Portfolio's average daily net assets.
(b) Distribution fee based on an annual rate of .30% of the Portfolio's average daily net assets attributable to Class A shares.
(c) Distribution fee based on an annual rate of 1% of the Portfolio's average daily net assets attributable to Class B and Class C
shares.
(d) Expenses are based on one fund.
See Notes to Pro Forma AllianceBernstein Municipal Income Fund - California Portfolio Financial Statements.
NOTES TO FINANCIAL STATEMENTS
PRO FORMA
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - CALIFORNIA PORTOFLIO
April 30, 2008 (unaudited)
NOTE A: General
The Pro Forma AllianceBernstein Municipal Income Fund - California Portfolio
Financial Statements give effect to the proposed acquisition (the "Acquisition")
of the assets and liabilities of AllianceBernstein Municipal Income Fund -
Insured California Portfolio (the "Acquired Fund") by AllianceBernstein
Municipal Income Fund - California Portfolio (the "Fund" or "Acquiring Fund")
pursuant to the Agreement and Plan of Reorganization. The Acquisition would be
accomplished by a tax-free exchange of the assets and liabilities of
AllianceBernstein Municipal Income Fund - Insured California Portfolio for
shares of the Fund. After the proposed acquisition, the tax survivor for federal
income tax purposes will be AllianceBernstein Municipal Income Fund - California
Portfolio.
AllianceBernstein Municipal Income Fund (the "Registrant") is incorporated under
the laws of the State of Maryland. The Fund is a series of the AllianceBernstein
Municipal Income Fund, currently comprised of five portfolios; the diversified
National Portfolio, Insured National Portfolio, New York Portfolio and
California Portfolio and the non-diversified Insured California Portfolio. The
Fund's unaudited Pro Forma Portfolio of Investments, Statement of Assets and
Liabilities and Statement of Operations are prepared as though the Acquisition
was effective for the period May 1, 2007 - April 30, 2008. You should read them
in conjunction with the Fund's historical financial statements, which are
included in the Fund's Shareholder reports. The Fund's Pro Forma Statement of
Operations reflects the assumption that certain expenses would be lower for the
combined Fund as a result of the Acquisition. Insured California Portfolio will
bear the expenses of the Acquisition including the cost of proxy solicitation.
NOTE B: Significant Accounting Policies
The Fund's Pro Forma Financial Statements have been prepared in conformity with
U.S. generally accepted accounting principles, which require management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the
basis of market quotations or, if market quotations are not readily available or
are deemed unreliable, at "fair value" as determined in accordance with
procedures established by and under the general supervision of the Fund's Board
of Directors.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange (other than securities listed on the NASDAQ Stock Market,
Inc. ("NASDAQ")) or on a foreign securities exchange are valued at the last sale
price at the close of the exchange or foreign securities exchange. If there has
been no sale on such day, the securities are valued at the mean of the closing
bid and asked prices on such day. Securities listed on more than one exchange
are valued by reference to the principal exchange on which the securities are
traded; securities listed only on NASDAQ are valued in accordance with the
NASDAQ Official Closing Price; listed put or call options are valued at the last
sale price. If there has been no sale on that day, such securities will be
valued at the closing bid prices on that day; open futures contracts and options
thereon are valued using the closing settlement price or, in the absence of such
a price, the most recent quoted bid price. If there are no quotations available
for the day of valuation, the last available closing settlement price is used;
securities traded in the over-the-counter market, ("OTC") are valued at the mean
of the current bid and asked prices as reported by the National Quotation Bureau
or other comparable sources; U.S. government securities and other debt
instruments having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less; or by amortizing
their fair value as of the 61st day prior to maturity if their original term to
maturity exceeded 60 days; fixed-income securities, including mortgage backed
and asset backed securities, may be valued on the basis of prices provided by a
pricing service or at a price obtained from one or more of the major
broker/dealers. In cases where broker/dealer quotes are obtained,
AllianceBernstein L.P. (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.
2. Taxes
It is each Portfolios' policy to meet the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. Investment Income and Investment Transactions
Interest income is accrued daily. Investment transactions are accounted for on
the date the securities are purchased or sold. As described more fully in the
prospectus for the Portfolios, each portfolio may buy and sell securities from
other affiliated funds in accordance with the requirements of Rule 17a-7 of the
Investment Company Act of 1940. Each Portfolio has adopted procedures to ensure
that all such transactions are done in accordance with the requirements of Rule
17a-7. Investment gains and losses are determined on the identified cost basis.
The Portfolios amortize premiums and accrete original issue discount and market
discount as adjustments to interest income.
The New York, Insured California and California Portfolios follow an investment
policy of investing primarily in municipal obligations of one state. Economic
changes affecting the state and certain of its public bodies and municipalities
may affect the ability of issuers within the state to pay interest on, or repay
principal of, municipal obligations held by the Portfolios.
4. Class Allocations
All income earned and expenses incurred by the Portfolios are borne on a
pro-rata basis by each settled class of shares, based on the proportionate
interest in each Portfolio represented by the net assets of such class, except
for class specific expenses which are allocated to the respective class.
Expenses of the Fund are charged to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on respective net assets.
5. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the
ex-dividend date. Income dividends and capital gains distributions are
determined in accordance with federal tax regulations and may differ from those
determined in accordance with U.S. generally accepted accounting principles. To
the extent these differences are permanent, such amounts are reclassified within
the capital accounts based on their federal tax basis treatment; temporary
differences do not require such reclassification.
NOTE C: Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser
an advisory fee at an annual rate of .45% of the first $2.5 billion, .40% of the
next $2.5 billion and .35% in excess of $5 billion, of each Portfolio's average
daily net assets. Such fee is accrued daily and paid monthly. Effective January
1, 2009, the Adviser has agreed to waive its fees and bear certain expenses to
the extent necessary to limit total operating expenses on an annual basis to
..75%, 1.45%, 1.45% and .45% of the daily average net assets for the Class A,
Class B, Class C and Advisor Class shares, respectively. Assuming the merger had
been consummated prior to May 1, 2007, for the twelve months ended April 30,
2008; such waiver would have amounted to approximately $814,314.
Pursuant to the Advisory agreement, the Fund paid $94,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the twelve months ended April 30, 2008.
The Fund compensates AllianceBernstein Investor Services, Inc. ("ABIS"), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. ABIS may make payments to intermediaries that provide omnibus account
services, sub accounting services and/or networking services.
For the twelve months ended April 30, 2008, the Fund's expenses were reduced by
$12,234 under an expense offset arrangement with ABIS.
AllianceBernstein Investments, Inc. (the "Distributor"), a wholly-owned
subsidiary of the Adviser, serves as the Distributor of the Portfolio's shares.
NOTE D
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Portfolio pays distribution and servicing fees to the Distributor
at an annual rate of .30 of 1% of the average daily net assets attributable to
Class A shares and 1% of the average daily net assets attributable to both Class
B and Class C shares. The fees are accrued daily and paid monthly. The Agreement
provides that the Distributor will use such payments in their entirety for
distribution assistance and promotional activities.
NOTE E: Capital Stock
The pro-forma combining net asset value per share assumes the issuance of
Acquiring Fund shares to Acquired Fund shareholders in connection with the
proposed merger. The number of shares assumed to be issued is equal to the net
asset value per share of the Acquired Fund divided by the net asset value per
share of the Acquiring Fund as of April 30, 2008. The pro-forma number of shares
outstanding for the combined entity consists of the following at April 30, 2008.
Shares of Additional
Acquiring Shares Assumed Total Shares
Fund Issued with Outstanding
Class of Shares Pre-Combination Merger Post-Combination
- --------------------- --------------- ---------------- -----------------
Class A 55,780,346 1,479,833 63,045,381
Class B 2,891,980 65,951 3,215,948
Class C 10,573,670 263,762 11,870,773
SK 00250 0034 923876
PART C
OTHER INFORMATION
ITEM 15. Indemnification
It is the Registrant's policy to indemnify its directors and officers,
employees and other agents to the maximum extent permitted by Section
2-418 of the General Corporation Law of the State of Maryland, which
is incorporated by reference herein, and as set forth in Article
EIGHTH of Registrant's Articles of Amendment and Restatement of
Articles of Incorporation, filed as Exhibit (a) and Section 10 of the
proposed Distribution Services Agreement filed as Exhibit (e)(1) in
response to Item 23 of the Registrant's Registration Statement on Form
N-1A (File Nos. 33-7812 and 811-04791), filed with the Securities and
Exchange Commission on January 31, 2007 and Article IX of Registrant's
Amended and Restated By-laws filed as Exhibit 99.77Q1 - Other Exhibits
to the Registrant's Semi-Annual Report on Form NSAR-A (File Nos.
33-7812 and 811-04791), filed with the Securities and Exchange
Commission on June 29, 2006., and as set forth below.
The liability of the Registrant's directors and officers is dealt with
in Article EIGHTH of Registrant's Articles of Amendment and
Restatement of Articles of Incorporation, as set forth below. The
Adviser's liability for any loss suffered by the Registrant or its
shareholders is set forth in Section 4 of the Advisory Agreement filed
as Exhibit (d) in response to Item 23 of the Registrant's Registration
Statement on Form N-1A ( File Nos. 33-7812 and 811-04791), filed with
the Securities and Exchange Commission on January 31, 2007, as set
forth below.
ARTICLE EIGHTH OF REGISTRANT'S ARTICLES OF AMENDMENT AND
RESTATEMENT OF ARTICLES OF INCORPORATION READS AS FOLLOWS:
(1) To the maximum extent that Maryland law in effect from time to
time permits limitation of the liability of directors and officers of a
corporation, no present or former director or officer of the Corporation shall
be liable to the Corporation or its stockholders for money damages.
(2) The Corporation shall have the power, to the maximum extent
permitted by Maryland law in effect from time to time, to obligate itself to
indemnify, and to pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to, (a) any individual who is a present or former
director or officer of the Corporation or (b) any individual who, while a
director or officer of the Corporation and at the request of the Corporation,
serves or has served as a director, officer, partner or trustee of another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise from and against any claim or
liability to which such person may become subject or which such person may incur
by reason of his status as a present or former director or officer of the
Corporation. The Corporation shall have the power, with the approval of the
Board of Directors, to provide such indemnification and advancement of expenses
to a person who served a predecessor of the Corporation in any of the capacities
described in (a) or (b) above and to any employee or agent of the Corporation or
a predecessor of the Corporation.
(3) The provisions of this Article EIGHTH shall be subject to the
limitations of the Investment Company Act.
(4) Neither the amendment nor repeal of this Article EIGHTH, nor the
adoption or amendment of any other provision of the Charter or Bylaws
inconsistent with this Article EIGHTH, shall apply to or affect in any respect
the applicability of the preceding sections of this Article EIGHTH with respect
to any act or failure to act which occurred prior to such amendment, repeal or
adoption.
ARTICLE IX OF THE REGISTRANT'S AMENDED AND RESTATED BY-LAWS READS AS FOLLOWS:
To the maximum extent permitted by Maryland law in effect from time to
time, the Corporation shall indemnify and, without requiring a preliminary
determination of the ultimate entitlement to indemnification, shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any individual who is a present or former director or officer of the
Corporation and who is made or threatened to be made a party to the proceeding
by reason of his or her service in any such capacity or (b) any individual who,
while a director or officer of the Corporation and at the request of the
Corporation, serves or has served as a director, officer, partner or trustee of
another corporation, real estate investment trust, partnership, joint venture,
trust, employee benefit plan or other enterprise and who is made or threatened
to be made a party to the proceeding by reason of his or her service in any such
capacity. The Corporation may, with the approval of its Board of Directors or
any duly authorized committee thereof, provide such indemnification and advance
for expenses to a person who served a predecessor of the Corporation in any of
the capacities described in (a) or (b) above and to any employee or agent of the
Corporation or a predecessor of the Corporation. The termination of any claim,
action, suit or other proceeding involving any person, by judgment, settlement
(whether with or without court approval) or conviction or upon a plea of guilty
or nolo contendere, or its equivalent, shall not create a presumption that such
person did not meet the standards of conduct required for indemnification or
payment of expenses to be required or permitted under Maryland law, these Bylaws
or the Charter. Any indemnification or advance of expenses made pursuant to this
Article shall be subject to applicable requirements of the 1940 Act. The
indemnification and payment of expenses provided in these Bylaws shall not be
deemed exclusive of or limit in any way other rights to which any person seeking
indemnification or payment of expenses may be or may become entitled under any
bylaw, regulation, insurance, agreement or otherwise.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the Bylaws or Charter inconsistent with this
Article, shall apply to or affect in any respect the applicability of the
preceding paragraph with respect to any act or failure to act which occurred
prior to such amendment, repeal or adoption.
The Advisory Agreement between the Registrant and AllianceBernstein
L.P. provides that AllianceBernstein L.P. will not be liable under such
agreements for any mistake of judgment or in any event whatsoever except for
lack of good faith and that nothing therein shall be deemed to protect
AllianceBernstein L.P. against any liability to Registrant or its security
holders to which it would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties thereunder, or by
reason of reckless disregard of its duties or obligations thereunder.
The Distribution Services Agreement between the Registrant and
AllianceBernstein Investments, Inc. ("ABI") (formerly Alliance Fund
Distributors, Inc.) provides that the Registrant will indemnify, defend and hold
ABI, and any person who controls it within the meaning of Section 15 of the
Securities Act of 1933 (the "Securities Act"), free and harmless from and
against any and all claims, demands, liabilities and expenses which ABI or any
controlling person may incur arising out of or based upon any alleged untrue
statement of a material fact contained in Registrant's Registration Statement,
Prospectus or Statement of Additional Information or arising out of, or based
upon any alleged omission to state a material fact required to be stated in any
one of the foregoing or necessary to make the statements in any one of the
foregoing not misleading, provided that nothing therein shall be so construed as
to protect ABI against any liability to the Registrant or its security holders
to which it would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence in the performance of its duties thereunder or by reason
of reckless disregard of its obligations and duties thereunder.
The foregoing summaries are qualified by the entire text of
Registrant's Articles of Incorporation (and any amendments thereto), the
Advisory Agreement between the Registrant and AllianceBernstein L.P. and the
Distribution Services Agreement between the Registrant and ABI which are filed
as Exhibits (a), (d), and (e)(1), respectively, in response to Item 23 of Form
N-1A and each of which are incorporated by reference herein.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The Registrant participates in a joint directors and officers
liability insurance policy issued by the ICI Mutual Insurance Company. Coverage
under this policy has been extended to directors, trustees and officers of the
investment companies managed by AllianceBernstein L.P. Under this policy,
outside trustees and directors are covered up to the limits specified for any
claim against them for acts committed in their capacities as trustee or
director. A pro rata share of the premium for this coverage is charged to each
investment company and to the Adviser.
ITEM 16. Exhibits
(1) Articles of Amendment and Restatement of Articles of Incorporation of
the Registrant, dated February 1, 2006 and filed February 23, 2006 -
Incorporated by reference to Exhibit (a) to Post-Effective Amendment
No. 37 of the Registrant's Registration Statement on Form N-1A (File
Nos. 33-7812 and 811-04791), filed with the Securities and Exchange
Commission on January 31, 2007.
(2) Amended and Restated By-Laws of the Registrant - Incorporated by
reference to Exhibit 99.77Q1 - Other Exhibits to the Registrant's
Semi-Annual Report on Form NSAR-A (File Nos. 33-7812 and 811-04791),
filed with the Securities and Exchange Commission on June 29, 2006.
(3) Not applicable.
(4) Form of Plan of Acquisition and Liquidation between the California
Portfolio and the Insured California Portfolio, each a series of
AllianceBernstein Municipal Income Fund, Inc. - constitutes Appendix G
to Part A hereof.
(5) Not applicable.
(6) Form of Amended Advisory Agreement between the Registrant and
AllianceBernstein L.P. - Incorporated by reference to Exhibit (d) to
Post-Effective Amendment No. 37 of the Registrant's Registration
Statement on Form N-1A (File Nos. 33-7812 and 811-04791), filed with
the Securities and Exchange Commission on January 31, 2007.
(7) (a) Distribution Services Agreement between the Registrant and
AllianceBernstein Investments, Inc. (formerly Alliance Fund
Distributors, Inc.) - Incorporated by reference to Exhibit 6(a)
to Post-Effective Amendment No. 24 of the Registrant's
Registration Statement on Form N-1A (File Nos. 33-7812 and
811-04791), filed with the Securities and Exchange Commission on
January 30, 1998.
(b) Amendment to Distribution Services Agreement between the
Registrant and AllianceBernstein Investments, Inc. (formerly
Alliance Fund Distributors, Inc.) - Incorporated by reference to
Exhibit 6(b) to Post-Effective Amendment No. 24 of the
Registrant's Registration Statement on Form N-1A (File Nos.
33-7812 and 811-04791), filed with the Securities and Exchange
Commission on February 3, 1997.
(c) Form of Amendment to Distribution Services Agreement between
Registrant and AllianceBernstein Investments, Inc. (formerly
known as Alliance Fund Distributors, Inc.) - Incorporated by
reference to Exhibit (e)(3) to Post-Effective Amendment No. 37 of
the Registrant's Registration Statement on Form N-1A (File Nos.
33-7812 and 811-04791), filed with the Securities and Exchange
Commission on January 31, 2007.
(d) Form of Selected Dealer Agreement between AllianceBernstein
Investments, Inc. (formerly Alliance Fund Distributors, Inc.)
and selected dealers offering shares of Registrant -
Incorporated by reference to Exhibit (e)(3) to Post-Effective
Amendment No. 34 of the Registrant's Registration Statement on
Form N-1A (File Nos. 33-7812 and 811-04791), filed with the
Securities and Exchange Commission on January 28, 2005.
(e) Form of Selected Agent Agreement between AllianceBernstein
Investments, Inc. (formerly Alliance Fund Distributors, Inc.)
and selected agents making available shares of Registrant -
Incorporated by reference to Exhibit (e)(4) to Post-Effective
Amendment No. 34 of the Registrant's Registration Statement on
Form N-1A (File Nos. 33-7812 and 811-04791), filed with the
Securities and Exchange Commission on January 28, 2005.
(8) Not applicable.
(9) (a) Custodian Contract with State Street Bank and Trust Company as
assigned to Registrant by Alliance Tax-Free Income Fund, the
predecessor of the Registrant - Incorporated by reference to
Exhibit 8(a) to Post-Effective Amendment No. 24 of the
Registrant's Registration Statement on Form N-1A (File Nos.
33-7812 and 811-04791), filed with the Securities and Exchange
Commission on January 30, 1998.
(b) Assignment to Registrant of the then existing Custodian Agreement
between Alliance Tax-Free Income Fund, the predecessor of the
Registrant, and State Street Bank and Trust Company -
Incorporated by reference to Exhibit 8(b) to Post-Effective
Amendment No. 24 of the Registrant's Registration Statement on
Form N-1A (File Nos. 33-7812 and 811-04791), filed with the
Securities and Exchange Commission on January 30, 1998.
(10) (a) Rule 12b-1 Plan - See Exhibit (7)(a) hereto.
(b) Amended and Restated Rule 18f-3 Plan - Incorporated by reference
to Exhibit (n) to Post-Effective Amendment No. 32 of the
Registrant's Registration Statement on Form N-1A (File Nos.
33-7812 and 811-04791) filed with the Securities and Exchange
Commission on January 30, 2004.
(11) Opinion and Consent of Seward & Kissel LLP regarding the legality of
securities being registered - Filed herewith.
(12) Opinion and Consent of Seward & Kissel LLP as to Tax matters - To be
filed by amendment.
(13) (a) Transfer Agency Agreement between Registrant and
AllianceBernstein Investor Services, Inc. - Incorporated by
reference to Exhibit 9 to Post-Effective Amendment No. 24 of the
Registrant's Registration Statement on Form N-1A (File Nos.
33-7812 and 811-04791), filed with the Securities and Exchange
Commission on January 30, 1998.
(b) Form of Amendment to Transfer Agency Agreement between Registrant
and AllianceBernstein Investor Services, Inc. (formerly known as
Alliance Fund Services, Inc.) - Incorporated by reference to
Exhibit (h)(2) to Post-Effective Amendment No. 37 of the
Registrant's Registration Statement on Form N-1A (File Nos.
33-7812 and 811-04791), filed with the Securities and Exchange
Commission on January 31, 2007.
(c) Form of Expense Limitation Undertaking by AllianceBernstein L.P.
- Incorporated by reference to Exhibit (h)(2) to Post-Effective
Amendment No. 25 of the Registrant's Registration Statement on
Form N-1A (File Nos. 33-7812 and 811-04791), filed with the
Securities and Exchange Commission on January 29, 1999.
(d) Code of Ethics for the Fund - Incorporated by reference to
Exhibit (p)(1) to Post-Effective Amendment No. 74 of the
Registration Statement on Form N-1A of AllianceBernstein Bond
Fund, Inc. (File Nos. 2-48227 and 811-2383), filed with the
Securities and Exchange Commission on October 6, 2000, which is
substantially identical in all material respects except as to the
party which is the Registrant.
(e) Code of Ethics for the AllianceBernstein L.P. and
AllianceBernstein Investments, Inc. - Incorporated by reference
to Exhibit (p)(2) to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A of The AllianceBernstein
Pooling Portfolios (File Nos. 333-120487 and 811-21673), filed
with the Securities and Exchange Commission on December 29, 2006.
(14) Consent of Independent Registered Public Accounting Firm - Filed
herewith.
(15) Not applicable.
(16) Powers of Attorney for: Marc O. Mayer, John H. Dobkin, Michael J.
Downey, William H. Foulk, Jr., Nancy P. Jacklin, Garry L. Moody,
Marshall C. Turner, Jr. and Earl D. Weiner - Filed herewith.
(17) Not applicable.
ITEM 17. Undertakings
(1) The undersigned registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is
a part of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act 17 CFR 230.145(c), the reoffering prospectus will
contain the information called for by the applicable registration form
for reofferings by persons who may be deemed underwriters, in addition
to the information called for by the other items of the applicable
form.
(2) The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to
the registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act,
each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
(3) The undersigned registrant undertakes to file a post-effective
amendment to this registration statement upon the closing of the
Acquisition described in this registration statement that contains an
opinion of counsel supporting the tax matters discussed in this
registration statement.
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, duly authorized, in the City of New York and
the State of New York, on the 7th day of October, 2008.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND, INC.
By: Robert M. Keith*
--------------------
Robert M. Keith
President
Pursuant to the requirements of the Securities Act of l933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
(1) Principal
Executive Officer:
Robert M. Keith* President and October 7, 2008
----------------------- Executive Managing
Robert M. Keith Director
(2) Principal Financial
and Accounting Officer:
/s/Joseph J. Mantineo Treasurer and October 7, 2008
----------------------- Chief Financial
Joseph J. Mantineo Officer
(3) Majority of the Directors:
Marc O. Mayer*
John H. Dobkin*
Michael J. Downey*
William H. Foulk, Jr.*
Nancy P. Jacklin*
Garry L. Moody*
Marshall C. Turner, Jr.*
Earl D. Weiner*
*By /s/ Emilie D. Wrapp October 7, 2008
-----------------------
Emilie D. Wrapp
(Attorney-in-fact)
INDEX TO EXHIBITS
-----------------
Exhibit No. Description of Exhibits
- ----------- -----------------------
(11) Opinion and Consent of Seward & Kissel LLP
(14) Consent of Independent Registered Public Accounting Firm
(16) Powers of Attorney
SK 00250 0157 919653 v3