As filed with the Securities and Exchange
Commission on March 23, 2009
Securities Act File No.: 333-157449
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. 1
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 March 23, 2009 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:
- --------------------------------------------------------------------------------
o Cover Sheet
- --------------------------------------------------------------------------------
o Contents of Registration Statement
- --------------------------------------------------------------------------------
o Form N-14 Cross Reference Sheet
- --------------------------------------------------------------------------------
o Letter to Shareholders
- --------------------------------------------------------------------------------
o Part A - Prospectus
- --------------------------------------------------------------------------------
o Part B - Statement of Additional Information
- --------------------------------------------------------------------------------
o Part C - Other Information
- --------------------------------------------------------------------------------
o Signatures
- --------------------------------------------------------------------------------
o Exhibits
- --------------------------------------------------------------------------------
CROSS REFERENCE SHEET
- --------------------------------------------------------------------------------
ITEM NO. PROXY/PROSPECTUS
- --------------------------------------------------------------------------------
Part A
- --------------------------------------------------------------------------------
1. Beginning of Registration Statement
and Outside Front Cover Page of
Prospectus Cover Page/Questions & Answers
- --------------------------------------------------------------------------------
2. Beginning of Outside Back Cover
Page of Prospectus Questions & Answers
- --------------------------------------------------------------------------------
3. Fee Table, Synopsis Information
and Risk Factors Summary, Appendix A
- --------------------------------------------------------------------------------
4. Information about the Transaction Letter to Shareholders, Questions and
Answers, Summary, Information About the
Proposed Transaction
- --------------------------------------------------------------------------------
5. Information about the Registrant Letters to Shareholders, Questions and
Answers, Summary, Information About the
Funds
- --------------------------------------------------------------------------------
6. Information about the Companies Letters to Shareholders, Questions and
Being Acquired Answers, Summary, Information About
the Funds
- --------------------------------------------------------------------------------
7. Voting Information Notice of Special Meeting of
Shareholders/Voting Information
- --------------------------------------------------------------------------------
8. Interest of Certain Persons and
Experts Experts
- --------------------------------------------------------------------------------
9. Additional Information Required for
Reoffering by Persons Deemed to be
Underwriters Not Applicable
- --------------------------------------------------------------------------------
Part B
- --------------------------------------------------------------------------------
10. Cover Page Cover Page
- --------------------------------------------------------------------------------
11. Table of Contents Table of Contents
- --------------------------------------------------------------------------------
12. Additional Information About the
Registrant SAI
- --------------------------------------------------------------------------------
13. Additional Information about the
Companies being Acquired SAI
- --------------------------------------------------------------------------------
14. Financial Statements SAI
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
[LOGO]
ALLIANCEBERNSTEIN
Investments
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND, INC. -- NATIONAL PORTFOLIO II
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II -- FLORIDA PORTFOLIO
1345 Avenue of the Americas
New York, New York 10105
[ ], 2009
Dear Shareholders:
The Board of Directors of AllianceBernstein Municipal Income Fund, Inc.
("Muni Income") and the Board of Trustees of AllianceBernstein Municipal Income
Fund II ("Muni Income II") are asking the shareholders of National Portfolio II
("National II"), a series of Muni Income, and Florida, a series of Muni Income
II, to approve the acquisition of the assets and liabilities of each portfolio
by National Portfolio ("National"), another series of Muni Income. For this
purpose, you are invited to a Joint Special Meeting of Shareholders of National
II and Florida (the "Meeting") to be held on Thursday, May 21, 2009. We
sometimes refer to each of National II, Florida and National as a "Portfolio"
and, together, as the "Portfolios".
The proposed acquisitions are described in more detail in the attached
combined Prospectus/Proxy Statement. You should review the Prospectus/Proxy
Statement carefully and retain it for future reference. If the shareholders of
each of National II and Florida approve the acquisitions by National, the
acquisitions will take effect in the second quarter of 2009. Each acquisition
will not be contingent upon the other acquisition.
National has the same investment objective as National II and substantially
the same investment objective as Florida. Florida has an additional investment
objective of achieving income exempt from Florida state taxation but Florida
has repealed the relevant state taxation. All three Portfolios follow very
similar investment strategies, except that National II invests principally in
securities exempt from the federal alternative minimum tax ("AMT") while
National and Florida may invest without limit in securities subject to the AMT
for certain taxpayers. We anticipate that the proposed acquisitions will result
in benefits to the shareholders of National II and Florida, including a
reduction in expenses, as discussed more fully in the Prospectus/Proxy
Statement.
The Boards of Directors and Trustees (the "Directors") of Muni Income and of
Muni Income II have given careful consideration to the proposed acquisitions
and have concluded that the acquisitions are in the best interests of National
II and Florida. The Directors unanimously recommend that you vote "for" the
proposed acquisition of your Portfolio by National.
If the acquisition of each of National II and Florida by National is
approved by their shareholders, each shareholder will receive shares of
National of the same class as the shares the shareholder currently owns. These
shares will have an aggregate net asset value ("NAV") equal to the aggregate
NAV of the shareholder's shares in the Portfolio. Each Portfolio would then
terminate. Shareholders of National II and Florida will not be assessed any
initial sales charges, contingent deferred sales charges or other individual
shareholder fees in connection with the proposed acquisitions.
We welcome your attendance at the May 21, 2009 Meeting. If you are unable to
attend, we encourage you to authorize proxies to cast your votes. [ ] (the
"Proxy Solicitor"), 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
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND, INC. -- NATIONAL PORTFOLIO II
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II -- FLORIDA PORTFOLIO
1345 Avenue of the Americas,
New York, New York 10105
NOTICE OF A JOINT SPECIAL MEETING OF SHAREHOLDERS
SCHEDULED FOR MAY 21, 2009
To the shareholders of National Portfolio II ("National II"), a series of
AllianceBernstein Municipal Income Fund, Inc., a Maryland corporation ("Muni
Income"):
Notice is hereby given that a Special Meeting of the Shareholders of
National II (the "Meeting") will be held at the office of Muni Income, 1345
Avenue of the Americas, 8th Floor, New York, New York 10105 on Thursday,
May 21, 2009, at 3:00 p.m., Eastern time, to consider and vote on the following
proposal, which is more fully described in the accompanying Prospectus/Proxy
Statement dated [ ], 2009:
1. To approve a Plan of Acquisition and Liquidation of Muni Income with
respect to its series, National II and National, providing for the
acquisition by National of all of the assets and assumption of all of
the liabilities of National II in exchange for shares of National and
subsequent termination of National II.
2. To transact any other business that may properly come before the Meeting
and any adjournments or postponements thereof.
To the shareholders of Florida Portfolio ("Florida"), a series of
AllianceBernstein Municipal Income Fund II, a Massachusetts business trust
("Muni Income II"):
Notice is hereby given that a Special Meeting of the Shareholders of Florida
(the "Meeting") will be held at the office of Muni Income II, 1345 Avenue of
the Americas, 8th Floor, New York, New York 10105 on Thursday, May 21, 2009, at
3:00 p.m., Eastern time, to consider and vote on the following proposal, which
is more fully described in the accompanying Prospectus/Proxy Statement dated
[ ], 2009:
1. To approve an Agreement and Plan of Acquisition between Muni Income and
Muni Income II, providing for the acquisition by National of all of the
assets and assumption of all of the liabilities of Florida in exchange
for shares of National and subsequent termination of Florida.
2. To transact any other business that may properly come before the Meeting
and any adjournments or postponements thereof.
Any shareholder of record of National II or Florida at the close of business
on March 31, 2009 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 of Muni Income and the Board of Trustees of Muni Income
II. 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
and the Board of Trustees,
Robert M. Keith
President
New York, New York
[ ], 2009
- --------------------------------------------------------------------------------
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. You may by telephone authorize a proxy to vote
your shares. To do so, please follow the instructions on the enclosed Proxy
Card. 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.
- --------------------------------------------------------------------------------
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. -- NATIONAL PORTFOLIO II
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II -- FLORIDA PORTFOLIO
By, and in Exchange for Shares of,
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND, INC. -- NATIONAL PORTFOLIO
[ ], 2009
TABLE OF CONTENTS
Questions and Answers 3
Proposals 6
-- Approval of a Plan of Acquisition and Liquidation of
AllianceBernstein Municipal Income Fund, Inc. with respect to
its series, National Portfolio II and National Portfolio 6
-- Approval of an Agreement and Plan of Acquisition between
AllianceBernstein Municipal Income Fund, Inc. and
AllianceBernstein Municipal Income Fund II relating to the
Acquisition of the Assets and Liabilities of AllianceBernstein
Municipal Income Fund II -- Florida Portfolio 6
Summary 7
Comparison of Operating Expense Ratios 7
Comparison of Investment Advisory Fees 8
Comparison of Investment Objectives and Policies 8
Principal Risks 11
Federal Income Tax Consequences 11
Comparison of Distribution and Purchase Procedures 12
Service Providers 12
Comparison of Business Structures 12
Information about the Transactions 13
Introduction 13
Description of the Plans 13
Reasons for the Acquisitions 14
Description of Securities to be Issued 16
Dividends and Other Distributions 17
Acquired Portfolio Stock Certificates 17
Federal Income Tax Consequences 17
Capitalization Information 18
Information about the Portfolios 19
Management of the Portfolios 19
Advisory Agreement and Fees 19
Administrator 20
Distributor 20
Other Service Providers 20
Voting Information 21
Legal Matters 22
Experts 22
Financial Highlights 22
Appendix A -- Portfolio Performance 23
Appendix B -- National -- Management's Discussion of Fund Performance 27
Appendix C -- Fee Table 31
1
Appendix D -- Comparison of Investment Objectives and Policies 35
Appendix E -- Description of Principal Risks of the Portfolios 43
Appendix F -- Certain Information Applicable to Shares of National 45
Appendix G -- Other Information 56
Appendix H -- Form of Plan of Acquisition and Liquidation --
AllianceBernstein Municipal Income Fund, Inc. with Respect
to Its Series, National Portfolio II and National Portfolio 58
Appendix I -- Form of Agreement and Plan of Acquisition between
AllianceBernstein Municipal Income Fund II -- Florida
Portfolio and AllianceBernstein Municipal Income Fund, Inc.
-- National Portfolio 64
Appendix J -- Capitalization 79
Appendix K -- Legal Proceedings 80
Appendix L -- Share Ownership Information 81
Appendix M -- Financial Highlights 86
2
QUESTIONS AND ANSWERS
The following questions and answers provide an overview of key features of the
proposed acquisitions and of the information contained in this Prospectus/Proxy
Statement. Some of the information provided below and in this Prospectus/Proxy
Statement applies to both National Portfolio II ("National II"), a series of
AllianceBernstein Municipal Income Fund, Inc. ("Muni Income"), and Florida
Portfolio ("Florida"), a series of AllianceBernstein Municipal Income Fund II
("Muni Income II"), and some to only one portfolio. (Muni Income and Muni
Income II are each a "Fund" and collectively, the "Funds") You do not
necessarily need to review information that does not apply to the portfolio in
which you own shares unless, of course, you own shares in both portfolios.
Where information applies only to one portfolio, we have tried to identify the
portfolio to make it easier for you to focus on information that is relevant to
your vote. Please review the full Prospectus/Proxy Statement prior to casting
your vote.
1. What is this document and why did we send this document to you?
This is a combined Prospectus/Proxy Statement that provides you with
information about the proposed acquisitions of the assets and liabilities of
National II and Florida (each an "Acquisition" and, collectively, the
"Acquisitions") by National Portfolio ("National"), a series of Muni Income.
(National, National II and Florida are collectively, the "Portfolios.") This
document also solicits votes of the respective shareholders of each of National
II and Florida on their respective Acquisitions by requesting that National II
shareholders approve a Plan of Acquisition and Liquidation and that Florida
shareholders approve an Agreement and Plan of Acquisition, each dated as of
[ ], 2009 (each a "Plan" and, collectively, the "Plans") and the
subsequent termination of each of National II and Florida.
. National II
On February 5, 2009, the Board of Directors of Muni Income approved and
declared advisable the Acquisition and the subsequent termination of National
II and directed that the Acquisition and termination be submitted to the
shareholders of National II for approval at a Joint Special Meeting of
Shareholders to be held on May 21, 2009 at 3:00 p.m., Eastern time (the
"Meeting"). You are receiving this Prospectus/Proxy Statement because you own
shares of National II. The Acquisition will not occur unless it is approved by
National II shareholders. This Prospectus/Proxy Statement contains the
information you should know before voting on the Acquisition.
. Florida
On February 5, 2009, the Board of Trustees of Muni Income II approved and
declared advisable the Acquisition and the subsequent termination of Florida
and directed that the Acquisition and termination be submitted to the
shareholders of Florida for approval at the Meeting. You are receiving this
Prospectus/Proxy Statement because you own shares of Florida. This
Prospectus/Proxy Statement contains the information you should know before
voting on the Acquisition.
Please note that each Acquisition is not contingent on the other Acquisition
proposed in this Prospectus/Proxy Statement. Shareholders may contact a
Portfolio at 1-800-221-5672 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 each of National II and Florida at the close of
business on March 31, 2009 (the "Record Date") are entitled to notice of, and
to vote at, their respective Meeting or any adjournment or postponement
thereof. If you owned a National II and Florida shares on the Record Date, you
have the right to vote even if you later 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 Acquisition. If any other
business properly comes before the Meeting, your shares will be voted at the
discretion of the persons named as proxies.
3
3. How will the Acquisitions work?
Each Plan provides for (i) the transfer of all of the assets of each of
National II or Florida, as the case may be, to National, (ii) the assumption by
National of all of their respective liabilities, (iii) the issuance to each of
National II's and Florida's shareholders of shares of the equivalent class of
National, equal in aggregate net asset value ("NAV") to the NAV of their former
shares, in redemption of their shares, and (iv) the termination of each of
National II and Florida, respectively.
As a shareholder of National II and Florida, you will receive the same class of
shares of National as the shares you currently own, having an aggregate NAV
equal to the aggregate NAV of shares currently held. The contingent deferred
sales charge ("CDSC") period applicable to your shares prior to the Acquisition
will continue to apply to the shares of National issued in the Acquisition.
Shareholders of National II and Florida will not be assessed any sales charges
or other shareholder fees in connection with the Acquisitions. The Acquisition
will not occur unless it is approved by the shareholders of each of National II
and Florida.
4. Why are the Acquisitions being proposed?
After considering the recommendation of AllianceBernstein L.P. (the "Adviser"),
the Boards of Directors and Trustees (the "Directors") of the Funds, on behalf
of each of National II and Florida, respectively, concluded that participation
by National II and Florida, respectively, in the Acquisitions is in the best
interests of each of them. The Directors also concluded that the Acquisitions
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 Acquisitions, the
continuity of the portfolio management team, the comparison of fees for the
Portfolios and the pro forma combined Portfolio, the costs of the Acquisitions,
and the tax-free nature of the Acquisitions.
5. When will the Acquisitions take place?
If the shareholders of each of National II and Florida approve the Acquisitions
by National on May 21, 2009, then the Acquisitions are expected to occur in the
second quarter of 2009.
6. Who will bear the expenses of the Acquisitions?
Each of National II and Florida will bear the expenses of their respective
Acquisition, which are estimated to be approximately $140,000 for each
Acquisition. Due to the Adviser's expense limitation undertakings, however, the
Adviser will ultimately bear these expenses.
7. Where may I find additional information regarding the Portfolios?
Additional information about the Portfolios is available in the:
. the Statement of Additional Information ("SAI") dated [ ], 2009 that
has been filed with the Securities and Exchange Commission ("SEC") in
connection with this Prospectus/Proxy Statement;
. the SAI and Annual Reports to Shareholders for National, National II and
Florida, which contain audited financial statements for the fiscal year
ended October 31, 2008, October 31, 2008 and September 30, 2008,
respectively;
. the Semi-Annual Reports for National, National II and Florida for the
six-month period ended April 30, 2008, April 30, 2008 and March 31, 2008,
respectively; and
. the prospectus and SAI for each of National II and Florida dated
January 30, 2009, as supplemented (collectively, the "Prospectuses"),
which are incorporated by reference into this Prospectus/Proxy Statement.
National's and National II's file number is 811-04791 and Florida's file number
is 811-07618.
4
Additional copies of the Annual and Semi-annual Reports and the Prospectuses
are available at www.alliancebernstein.com and are also available, along with
this Prospectus/Proxy Statement and SAI, upon request, without charge, by
writing to the address or calling the 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 additional information is also available in documents 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, DC
By phone: 1-202-551-8090 (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 mail: publicinfo@sec.gov (duplicating fee required)
On the Internet: www.sec.gov
Other Important Things to Note:
. You may lose money by investing in the Portfolios.
. 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.
5
PROPOSAL
APPROVAL OF A PLAN OF ACQUISITION AND LIQUIDATION OF ALLIANCEBERNSTEIN
MUNICIPAL INCOME FUND, INC. WITH RESPECT TO ITS SERIES, NATIONAL PORTFOLIO II
AND NATIONAL PORTFOLIO
APPROVAL OF AN AGREEMENT AND PLAN OF ACQUISITION BETWEEN ALLIANCEBERNSTEIN
MUNICIPAL INCOME FUND II AND ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND, INC.
RELATING TO THE ACQUISITION OF THE ASSETS AND LIABILITIES OF ALLIANCEBERNSTEIN
MUNICIPAL INCOME FUND II -- FLORIDA PORTFOLIO
On February 5, 2009, the Directors of the Funds, on behalf of National II
and Florida (each an "Acquired Portfolio" and, together, the "Acquired
Portfolios"), declared advisable and voted to approve the Plan and the
Acquisition applicable to the Acquired Portfolio, subject to the approval of
the shareholders of that Portfolio. Each Plan provides for (i) the transfer of
all of the assets of an Acquired Portfolio to National, (ii) the assumption by
National of all of the liabilities of the Acquired Portfolio, (iii) the
issuance to each Acquired Portfolio's shareholders of the equivalent class of
shares of National, equal in aggregate NAV to the NAV of their former Acquired
Portfolio shares in redemption of their Acquired Portfolio shares, and (iv) the
termination of the Acquired Portfolios.
Each Acquired Portfolio shareholder will receive the number of full and
fractional shares of National having an aggregate NAV that, on the effective
date of the Acquisition, is equal to the aggregate NAV of the shareholder's
shares of Acquired Portfolios. Shareholders of the Acquired Portfolios will
recognize no gain or loss. If approved by the shareholders of the Acquired
Portfolios, the Acquisitions are expected to occur in the second quarter of
2009.
The Acquisitions require shareholder approval. The shareholders of each of
National II and Florida must approve the Proposal submitted to them in order
for the applicable Acquisition to occur. Although the Directors are proposing
that National acquire each of the Acquired Portfolios, the acquisition of one
Acquired Portfolio is not contingent upon the acquisition of the other Acquired
Portfolio. For National II, approval of the Acquisition requires the
affirmative vote of the holders of a "majority of the outstanding voting
securities" of the Portfolio, 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. For Florida, approval of the
Acquisition requires the affirmative vote of the holders of not less than a
majority of the outstanding shares of the Portfolio.
A quorum for the transaction of business by the shareholders of National II
at the Meeting will consist of the presence in person or by proxy of the
holders of one-third of the shares of National II entitled to vote at the
Meeting. A quorum for the transaction of business by the shareholders of
Florida at the Meeting will consist of the presence in person or by proxy of
the holders of a majority of the shares of Florida entitled to vote at the
Meeting.
The Directors concluded that participation by the respective Acquired
Portfolio in each Acquisition is in the best interests of each of the
Portfolios. The Directors also concluded that the Acquisitions 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 each of the Acquisitions, the continuity of
the portfolio management team, the comparison of fees, expenses, portfolio
composition and yield for the Portfolios with those of the pro forma combined
Portfolio, the costs of the Acquisitions, and the tax-free nature of the
Acquisitions.
For a more complete discussion of the factors considered by the Directors in
approving the Acquisitions, see "Reasons for the Acquisitions" in Information
About the Proposed Transactions.
6
SUMMARY
The following summary highlights differences between National and each
Acquired Portfolio. 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 Meeting and the
enclosed proxy card are being mailed to shareholders of the Acquired Portfolios
on or about March 31, 2009. Certain information presented to the Directors at
the February 3-5, 2009 Regular Meetings of the Board of Directors of Muni
Income and the Board of Trustees of Muni Income II (the "Board Meetings") is as
of October 31, 2008. The Adviser represented to the Directors that, if the
information was updated, it would not differ in any material respect.
Each of National II and Florida is a diversified open-end fund, with assets
of, as of October 31, 2008, approximately $142 million and $150 million,
respectively, that invests principally in high-yielding, predominantly
investment grade, municipal securities. As a matter of fundamental policy, each
of National II and Florida invest, under normal circumstances, at least 80% of
its net assets in municipal securities with interest that is exempt from
federal income tax. Florida has an additional investment objective of achieving
income exempt from Florida state taxation and related fundamental investment
policy but Florida has repealed the relevant state taxation. National is a
diversified open-end fund, and is significantly larger than National II and
Florida, with assets of, as of October 31, 2008, approximately $482 million.
National pursues investment strategies that are similar to those of National II
and Florida. The principal difference between National II and the other two
Portfolios is that National II invests principally in securities exempt from
the federal alternative minimum tax ("AMT") while Florida and National may
invest, without limitation, in securities subject to the AMT for certain
taxpayers.
National has in many years outperformed National II on a calendar year basis
but National II's average annual returns, as reflected in the chart below, are
better due to deterioration in the credit markets in 2008, which led to better
performance for higher credit quality bonds which were held by National II.
Although Florida has outperformed National over 10-year annualized periods, it
is expected that the two Portfolios should perform similarly going forward
because the Portfolios invest in the same pool of eligible securities since
repeal of Florida state taxation. Comparative annualized and calendar year
performance for the Portfolios' Class A shares as of December 31, 2008 is shown
in the chart below.
Annualized
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
National II -2.75% 1.33% 2.40% 3.53%
Florida -9.28% -0.90% 1.37% 3.22%
National -9.41% -0.88% 1.33% 2.60%
Calendar Year Performance
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999
------ ----- ----- ----- ----- ----- ----- ----- ------ ------
National II -2.75% 2.72% 4.15% 3.72% 4.32% 7.20% 6.90% 4.80% 12.08% -6.61%
Florida -9.28% 2.27% 4.89% 4.74% 5.01% 5.40% 7.84% 5.99% 10.64% -3.81%
National -9.41% 1.90% 5.51% 4.60% 4.84% 7.42% 4.01% 4.85% 9.80% -5.89%
The historical performance of the Portfolios is provided in Appendix A.
Additional discussion of the material factors affecting National's performance
is provided in Appendix B.
Comparison of Operating Expenses
The Acquired Portfolios, because of their small asset size, have higher
operating costs and therefore a higher expense ratio than National. The
Acquisitions are expected to result in an operating expense ratio for the
combined Portfolio that is lower than the current, actual gross operating
expense ratio of each Acquired Portfolio, and
7
a reduction in operating expenses after waiver for the Acquired Portfolios. The
Adviser has adopted an expense cap for the Class A shares of National II and
Florida, of 1.04% and .78%, respectively (with corresponding expense caps for
other classes of shares), that is effective through October 31, 2009 for
National II and September 31, 2009 for Florida. Effective January 1, 2009, the
Adviser adopted an expense cap for the Class A shares of National of .75% (with
corresponding expense caps for other classes of shares) that is effective
through October 31, 2009. The expense caps continue for one-year periods unless
terminated by the Adviser upon 60 days' notice prior to a Portfolio's fiscal
year end.
The following table illustrates, as of October 31, 2008, the expected
reduction in operating expenses, for the Class A shares of each Portfolio as
well as expense ratios, assuming that either or both Acquisitions are
consummated.
Total Annual
Total Annual Expense Ratio
Expense Ratio with Fee Cap
------------- -------------
National II 1.06% 1.04%
Florida .98% .78%
National .91% .75%*
National II Acquisition Alone (pro forma) .89% .75%*
Florida Acquisition Alone (pro forma) .89% .75%*
All Three Combined Portfolio (pro forma) .87% .75%*
- --------
* Reflects expense cap for National effective January 1, 2009.
As the table indicates, the operating expenses per share, after fee waiver,
would be reduced for National II by .29% (.19% before fee waiver) and for
Florida by .03% (.11% before fee waiver), if both of the Acquisitions are
consummated. If only one of the Acquisitions is approved, the operating
expenses per share, after fee waiver, would be reduced by the same amount but
by slightly less before fee waivers, i.e., .17% for National II and .09% for
Florida. The Fee Table, attached hereto as Appendix C, describes the fees and
expense of each Portfolio as of the Portfolio's fiscal year end and includes
pro forma expenses for the combined Portfolio, assuming that the Acquisition is
approved by shareholders of each Acquired Portfolio.
The expenses of the Acquisitions will be borne by National II and Florida.
Due to the Adviser's expense limitation undertakings, the Adviser will
ultimately bear these expenses.
Comparison of Investment Advisory Fees
The Portfolios have substantially the same investment advisory agreements
and pay a monthly advisory fee at the same annual rate of .45% of each
Portfolio's average daily net assets and have the same breakpoint schedule. The
annual 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. In addition, the advisory
agreements provide for the Portfolios to reimburse the Adviser for expenses
incurred in providing administrative services to the Portfolios. For their most
recently completed fiscal years, these reimbursements amounted to .07%, .05%
and .02% for National II, Florida and National, respectively.
Comparison of Investment Objectives and Policies
Summary: Given their shared investment objective and guidelines, each
Portfolio tends to invest in similar types of bonds, both with respect to
maturity and credit quality. Each Portfolio predominantly holds bonds with
maturities greater than 10 years because these bonds generate more income than
bonds with shorter maturities. Florida and National have similar average
portfolio credit quality since these portfolios have shared the same guidelines
with respect to credit quality since their inception dates. Largely due to
National II's previous requirement of investing principally in insured bonds,
it has a somewhat higher credit quality. This requirement was eliminated in
December 2008, and the Adviser believes that the shareholders will benefit from
a credit quality more similar to that of Florida and National.
8
Discussion: All three Portfolios pursue the same investment objective: to
earn the highest level of current income, exempt from Federal taxation, that is
available without assuming what the Adviser considers to be undue risk. Florida
has an additional investment objective of achieving income exempt from Florida
state taxation and related fundamental investment policy, which has been mooted
by the repeal of any such taxation. All three Portfolios also have identical
fundamental investment policies except, as discussed below, that Florida and
National may invest, without limitation, in securities subject to the
Alternative Minimum Tax ("AMT") for certain taxpayers while National II's
investments are principally limited to securities exempt from the AMT. Each of
the Portfolios invests primarily in investment grade municipal securities with
interest that is exempt from federal income tax. The following table shows the
investment objective and principal investment strategies of each Portfolio.
National II Florida National
------------------------ ------------------------ ------------------------
Investment The investment objective The investment objective Same as National II.
Objective of the Portfolio is to of the Portfolio is to
earn the highest level earn the highest level
of current income, of current income,
exempt from Federal exempt from Federal
taxation, that is taxation and State of
available without Florida taxation, that
assuming what the is available without
Adviser considers to be assuming what the
undue risk. Adviser considers to be
undue risk.
Principal (i) The Portfolio is (i) Same as National II. (i) Same as National II.
Investment diversified.
Strategies
(ii) The Portfolio (ii) The Portfolio (ii) The Portfolio
invests, under normal invests, under normal invests, un-der 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 municipal securities municipal securities
with interest that is with interest which is with interest that is
exempt from federal exempt from federal exempt from federal
income tax, including income tax and at least income tax. These
the AMT. 80% of its net assets in securities may be
municipal securities subject to the AMT.
issued by the State of
Florida or municipal
securities with interest
that is otherwise exempt
from Florida income tax.
(iii) The Portfolio may (iii) The Portfolio may (iii) Same as National
invest 25% or more of purchase municipal II.
its total assets in securities that are
municipal securities insured under policies
whose issuers are issued by certain
located in the same insurance companies.
state.
9
National II Florida National
------------------------ ------------------------ -------------------------
(iv) The Portfolio may (iv) The Portfolio (iv) Same as National II.
purchase municipal pursues its objective by
securities that are investing principally in
insured under policies high-yielding,
issued by certain predominantly investment
insurance companies. grade, municipal
securities.
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.
(v) The Portfolio (v) Same as National II.
pursues its objective by
investing principally in
high-yielding,
predominantly investment
grade, municipal
securities.
The high tax-free yields Same as National II.
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.
Prior to December 2008, National II was named Insured National Portfolio and
had a fundamental policy to invest at least 80% of its net assets in insured
municipal securities. At a Special Meeting of the Board of Directors in
September 2008, the Adviser recommended and the Directors approved the removal
to the Portfolio's fundamental policy and the change of the Portfolio's name.
The Adviser based its recommendation on its belief that, as a result of recent
declines in the credit quality and associated downgrades of bond insurers,
insurance had less value than it did in the past. Previously, insured municipal
securities typically received higher credit ratings and the issuers of insured
municipal securities paid a lower interest rate. The market valued 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 had declined, leading to the 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 risk-adjusted returns than those available from a portfolio
primarily invested in insured municipal securities.
Currently, the only difference in investment policies between National II
and National is that National may invest without limit in securities subject to
the AMT for certain taxpayers while National II invests principally in
securities exempt from the AMT. As the number of investors subject to the AMT
has increased, National has reduced its holdings in AMT-subject securities, and
its holdings in these securities have declined from approximately 75% in 2000
to approximately 13% 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 National II's shareholders of investing only in
AMT-exempt securities. If National II and National were combined as of
January 7, 2009, 10.49% of the combined Portfolio would be subject to the AMT,
and if all three Portfolios were combined as of January 7, 2009, 13.30% of the
combined Portfolio would be subject to the AMT. As the following table
illustrates, National II shareholders subject to the
10
AMT would receive a higher after-tax distribution yield than National II would
provide if the National II Acquisition occurs or if both Acquisitions occur:
After-Alternative Minimum
Tax Distribution Yield*
-------------------------
National II 4.03%
National Portfolio 5.03%
National Portfolio (National II Acquisition Alone) (Before Tax) (pro forma) 4.86%
National Portfolio (National II Acquisition Alone) (After Tax) (pro forma) 4.72%
All Three Combined Portfolio (Before Tax) (pro forma) 4.96%
All Three Combined Portfolio (After Tax) (pro forma) 4.78%
- --------
* After-tax distribution yields are estimates, which are based on the highest
alternative minimum tax rates, and do not reflect the impact of state and
local taxes. Actual after-alternative minimum tax distribution yields depend
on an individual investor's tax situation and are likely to differ from
those shown.
A more detailed comparison of the investment strategies and policies of the
Portfolios is provided in Appendix D. You can find additional information on
the Portfolios in the SAI.
As a result of the previously discussed repeal of relevant Florida state
taxation, Florida and National share many characteristics. As of October 31,
2008, more than 55% of the bonds held by Florida were also held by National.
The remainder of Florida's portfolio has general characteristics similar to
that of National's. Consequently, a combination of these Portfolios' holdings
will not significantly alter the credit quality, maturities and sector exposure
of National's portfolio holdings and the Adviser does not expect that there
will be any significant repositioning as a result of the Acquisition. On the
other hand, the shareholders of Florida would benefit from increased
diversification and slightly better credit quality.
As a result of previously discussed declines in the credit quality of most
bond insurers, insured 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 National II's and
National's holdings will not significantly alter National's credit quality or
other portfolio characteristics. Therefore, the Adviser does not anticipate any
significant portfolio repositioning as a result of the Acquisitions. National
will be the accounting survivor after the consummation of the Acquisitions.
Principal Risks
Each Portfolio is subject to market risk, municipal market risk, interest
rate risk, credit risk, inflation risk and derivatives risk. A description of
each of these risks is provided in Appendix E.
Federal Income Tax Consequences
No gain or loss will be recognized by the Acquired Portfolios or their
shareholders as a result of the Acquisitions. The aggregate tax basis of the
shares of National received by a shareholder of the Acquired Portfolios
(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 the
Acquired Portfolios. The holding period of the shares of National received by a
shareholder of the Acquired Portfolios (including any fractional share to which
the shareholder may be entitled) will include the holding period of the shares
of the Acquired Portfolios held by the shareholder, provided that such shares
are held as capital assets by the shareholder of the Acquired Portfolios at the
time of the Acquisitions. The holding period and tax basis of each asset of the
Acquired Portfolios in the hands of National as a result of the Acquisitions
will be the same as the holding period and tax basis of each such asset in the
hands of the Acquired Portfolios prior to the Acquisitions. Provided that
National II shares and Florida 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 Acquisitions that such
advice be confirmed in a written opinion of counsel. An opinion of counsel is
not binding on the Internal Revenue Service.
11
National II has capital loss carryforwards of approximately $420,000 or $.03
per share, Florida has capital loss carryforwards of approximately $3.5 million
or $.21 per share, and National Portfolio has capital loss carryforwards of
approximately $23.5 million or $.43 per share. The combined Portfolio will, as
a result of the Acquisitions, have capital loss carryforwards of approximately
$26.9 million or $.38 per share. The capital loss carryforwards available to
National II's and Florida's shareholders will increase significantly and those
available to National's shareholders will decrease slightly. This decrease
should have no practical effect since it is unlikely that National would
generate sufficient gains to use all of its capital loss carryforwards before
their expiration. Although not anticipated, the Acquired Portfolios, prior to
the closing of the Acquisition, will determine if additional distributions are
necessary and will declare a distribution to the Acquired Portfolio
shareholders which, together with all previous distributions, will have the
effect of distributing to the Acquired Portfolio shareholders all of the
Acquired Portfolio'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 Transactions".
Comparison of Distribution and Purchase Procedures
The distribution and purchase procedures of the Portfolios are identical,
except that National offers an additional class of shares, Advisor Class
shares, which are available generally only to fee-based programs and certain
defined contribution employee benefit plans. The shares of each Portfolio are
offered to a broad range of investors. Class A shares of each Portfolio are
sold with an initial 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 National may be
purchased through a financial adviser at NAV.
The CDSCs applicable to shares of the Acquired Portfolios will continue to
apply to National shares issued in the Acquisitions. The CDSC period will be
calculated from the date of the original purchase of the Acquired Portfolio
shares. Class B shares of the Acquired Portfolios 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 National is provided in Appendix F.
Service Providers
The Portfolios have the same service providers, which will continue in their
capacity after the Acquisitions, with one exception. State Street Bank & Trust
Company, which is the custodian for National II and National, will serve in
that capacity after the Acquisitions in lieu of Florida's current custodian,
which is The Bank of New York Mellon.
Comparison of Business Structures
Muni Income, of which National II and National are each a series, is
organized as a Maryland corporation and is governed by its Charter, Bylaws and
Maryland law. Muni Income II, of which Florida is a series, is organized as a
Massachusetts business trust and is governed by its Agreement and Declaration
of Trust, Bylaws and Massachusetts law. For more information on the comparison
of the business structure of the Portfolios, see Appendix G.
12
INFORMATION ABOUT THE TRANSACTIONS
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 each Acquired Portfolio by National and the subsequent
termination of the Acquired Portfolios. The Meeting will be held at 1345 Avenue
of the Americas, 8th Floor, New York, New York 10105 at 3:00 p.m., Eastern
Time, on May 21, 2009. This Prospectus/Proxy Statement, the accompanying Notice
of the Joint Special Meeting of Shareholders and the enclosed Proxy Card are
being mailed to shareholders of the Acquired Portfolios on or about March 31,
2009.
Description of the Plans
As provided in each Plan, National will acquire all the assets and assume
all the liabilities of the applicable Acquired Portfolio at the effective time
of the Acquisition (the "Effective Time"). In return, National will issue, and
the Acquired Portfolio will distribute to its shareholders, a number of full
and fractional shares of National, determined by dividing the net value of all
the assets of the Acquired Portfolio by the NAV of one share of National. For
this purpose, the Plan provides the times for and methods of determining the
net value of the assets of each Portfolio. The Plans provide that shareholders
of the Acquired Portfolios will be credited with shares of National
corresponding to the aggregate NAV of each Acquired Portfolio's shares that the
shareholder holds of record at the Effective Time.
Following the distribution of National shares, each Acquired Portfolio will
redeem its outstanding shares, wind up its affairs, cease operations, and
dissolve as soon as is reasonably possible after the Acquisition. In the event
an Acquisition does not receive the required shareholder approval, the
applicable Portfolio will continue its operations and its Board will consider
what future action, if any, is appropriate.
The projected expenses of the Acquisitions, largely those for legal,
accounting, printing and proxy solicitation expenses, are estimated to total
approximately $140,000 for the National Acquisition and $140,000 for the
Florida Acquisition. The projected expenses will be borne by each of National
II and Florida, respectively, although, due to the Adviser's expense limitation
undertakings, these expenses will ultimately be borne by the Adviser.
The Acquisitions are expected to occur in the second quarter of 2009. Each
Acquisition is conditioned upon approval of the Plan by the shareholders of the
applicable Portfolio and each such Portfolio satisfying the terms of the
applicable Plan. Under applicable legal and regulatory requirements, none of
Acquired Portfolio's shareholders will be entitled to exercise objecting
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 to which their Portfolio is a party.
Completion of the Acquisition of National II is subject to certain
conditions set forth in the National II Plan. The Directors of Muni Income 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 its shareholders.
Completion of the Acquisition Florida is subject to certain conditions set
forth in the Florida Plan, some of which may be waived by a party to the Plan.
The Plan may be amended in any mutually agreed manner, except that no amendment
may be made subsequent to the Meeting that materially alters the obligations of
either party. The parties to each Plan may terminate the Plan by mutual consent
and either party has the right to terminate the Plan under certain
circumstances. Among other circumstances, either party may at any time
terminate the Plan unilaterally upon a determination by the party's Directors
or Trustees that proceeding with the Plan is not in the best interests of a
Portfolio or its shareholders.
A copy of a form of each of the Plans is attached as Appendix H and Appendix
I.
13
Reasons for the Acquisitions
At the Board Meetings, the Adviser recommended that the Directors approve
and recommend to the Acquired Portfolios' shareholders for their approval each
of the Plans and Acquisitions. The Directors considered the factors discussed
below from the point of view of the interests of each Acquired Portfolio and
its shareholders separately. After careful consideration, the Directors
(including all Directors who are not "interested persons" of the Funds, the
Adviser or its affiliates), on behalf of the Acquired Portfolios, determined
that the Acquisitions would be in the best interests of each Acquired Portfolio
and that the interests of existing shareholders of the Portfolios would not be
diluted as a result of the Acquisitions. The Directors have unanimously
approved the Plans and Acquisitions and recommended that the shareholders of
each Acquired Portfolio vote in favor of the applicable Acquisition by
approving the Plans.
The Adviser presented the following reasons in favor of the Acquisitions:
Florida
. The Adviser discussed with the Directors that Florida and National pursue
the same investment objective of achieving the highest level of current
income, exempt from federal taxation, that is available without assuming
what the Adviser believes to be undue risk. Florida has an additional
investment objective of achieving income exempt from Florida state
taxation and related fundamental investment policy, which has been mooted
by the repeal of any such taxation. Florida has no state income tax and
its intangibles tax was repealed in 2007. The Adviser noted that since
the repeal of the Florida intangibles tax, the universe of eligible
portfolio securities for Florida and National has become identical. The
Adviser believes that combining the relatively small Florida with the
larger National will result in a more efficient investment opportunity
with lower expenses. As of October 31, 2008, the net assets of National
and Florida were $482 million and $150 million, respectively.
. The Adviser also discussed with Directors that, as a result of the
Acquisition, Florida's shareholders would enjoy an immediate expense
ratio reduction of 0.03% on a net basis, from 0.78% to 0.75% (and 0.09%
on a gross basis, from 0.98% to 0.89%) and, if both Acquisitions occur,
0.11% on a gross basis, from 0.98% to 0.87%. In the Adviser's view, the
benefit of this cost savings, together with the greater diversification
shareholders of Florida will achieve as a result of the Acquisition(s)
and a slight improvement in credit quality, outweighs a resulting
reduction in Florida's yield. If the Portfolios were to be combined as of
January 7, 2009, the yields on Class A shares would be current Florida
yield, 5.36%, Florida combined with National yield, 5.12% and all three
Portfolios combined yield, 4.96%.
. The Adviser also discussed with the Directors that Florida and National
have considered the same investment universe since January 1, 2007, the
effective date of the repeal of the Florida intangibles tax. As a result,
the two Portfolios have gradually come to share many characteristics,
although there are still substantial differences. As of October 31, 2008,
more than 55% of the bonds held by Florida were also held by National.
The remainder of Florida's portfolio has general characteristics similar
to that of National's. As a result, the Acquisition is not anticipated to
cause significant change to the credit quality, maturities or sector
exposure of National's portfolio holdings; consequently, the Adviser does
not expect that there will be any significant portfolio repositioning as
a result of the Acquisition. If the Acquisition were to occur as of
November 30, 2008, National's exposure to bonds issued in Florida would
double from 9% to approximately 18%. Of this 18%, however, approximately
6% represents bonds that rely on guarantees from federal agencies or that
have non-Florida-specific obligors, such as pre-refunded bonds secured by
U.S. government securities. The Adviser also noted that none of the
Florida-specific bonds is directly exposed to the state's credit.
Consequently, the Adviser believes that the combined portfolio will be
adequately diversified.
. The Adviser noted that the performance of National over the last ten
years does not compare favorably to that of Florida, but the two
Portfolios were classified in different Lipper universes during this
time, reflecting their differences in mandate. However, because the pool
of eligible portfolio securities for both Portfolios is now identical,
the Adviser expects that the two Portfolios should perform similarly
going forward.
14
National II
. The Adviser discussed with the Directors that, like Florida, National II
is a smaller fund than National and has a higher expense ratio. The
Adviser believed that combining the relatively small National II with the
larger National would result in a more efficient investment opportunity
with lower expenses. As of October 31, 2008, the net assets of National
and National II were $482 million and $142 million, respectively.
. The Adviser also discussed with Directors that, as a result of the
Acquisition, National II's shareholders would enjoy an immediate expense
ratio reduction of 0.29% on a net basis, from 1.04% to 0.75% (and 0.17%
on a gross basis, from 1.06% to 0.89%) and, if both Acquisitions occur,
0.19% on a gross basis, from 1.06% to 0.87%.
. The Adviser also discussed with the Directors that National II commenced
operations in December 1986 as the "Alliance High Bracket Tax-Free
Portfolio" (the "High Bracket Portfolio") of "Alliance Tax-Free Income
Fund," later AllianceBernstein Municipal Income Fund, Inc. The High
Bracket Portfolio invested principally in municipal securities exempt
from the AMT. In 1988, the Portfolio's shareholders adopted a fundamental
investment policy requiring the Portfolio to invest at least 65% of its
assets in insured municipal securities. The Portfolio's name was changed
to "Insured National" at that time. As a result of the adoption of the
1940 Act Rule 35d-1, the so-called "Names Rule," the Directors approved a
non-fundamental investment policy in 2001 requiring Insured National to
invest at least 80% of its total assets in insured municipal securities.
In 2005, the Portfolio's shareholders voted to eliminate Insured
National's fundamental policy regarding insurance, and in September 2008,
the Directors eliminated the Portfolio's non-fundamental policy regarding
insurance and changed its name to "National Portfolio II". Those last
modifications took effect on December 1, 2008.
. The Adviser also discussed with Directors that both National and National
II pursue the same investment objective of achieving the highest level of
current income, exempt from federal taxation that is available without
assuming what the Adviser believes to be undue risk. The Adviser noted
that the investment policies and restrictions of National and National II
differ in only one principal respect. National may invest without limit
in securities subject to the AMT for certain taxpayers; National II
invests principally in securities exempt from the AMT. The Adviser noted
that, for six of the last ten calendar years, National has outperformed
National II. During occasional periods of stress for lower-rated bonds,
insured bonds have performed well. In the Adviser's view, the average
annual total return favors National II, because of the poor performance
of the credit markets in 2008. However, the Adviser believes the
flexibility for National to buy lower-rated bonds will provide stronger
risk-adjusted returns in the future.
. The Adviser also discussed its expectation that the combination of
National's and National II's holdings will not require significant
repositioning. As a result of the 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, the
Adviser does not expect a combination of the Portfolios' holdings to
significantly alter National's credit quality or other portfolio
characteristics.
At the Board Meetings, the Directors (with the advice and assistance of
independent counsel) also considered, among other things:
. the current asset levels of the Portfolios and the pro forma asset levels
of the combined Portfolio;
. the historical investment performance of the Portfolios;
. that the portfolio managers of the Portfolios with the most significant
responsibility for the day-to-day management of, and investment decisions
for, the Portfolios are the same and will continue in that role for the
combined Portfolio;
15
. that National II has capital loss carryforwards of approximately $420,000
or $0.03 per share and Florida has capital loss carryforwards of
approximately $3.5 million or $0.21 per share, and National has capital
loss carryforwards of approximately $23.5 million or $0.43 per share and
that the combined Portfolio will, as a result of the Acquisitions, have
capital loss carryforwards of approximately $26.0 million or $.38 per
share, which means that the capital loss carryforwards available to
National II's and Florida's shareholders will increase significantly and
those available to National's shareholders will decrease slightly, and
the Adviser's view that such decrease should have no practical impact
because it is unlikely that National would generate sufficient capital
gains to utilize all of its capital loss carryforwards before their
expiration;
. the form of the Plans and the terms and conditions of the Acquisitions;
. the fact that the Portfolios have identical advisory fee schedules and
pay advisory fees at the same rate;
. whether the Acquisitions would result in the dilution of shareholders'
interests;
. the portfolio characteristics of National, National II and Florida;
. the number of shareholder accounts and average account sizes of the
Portfolios, which indicate that National's costs for maintaining
shareholder accounts for the combined Portfolio will not be adversely
affected by the Acquisitions;
. that no changes in service providers will result from the Acquisitions,
except that The Bank of New York Mellon currently serves as Florida's
custodian, while State Street Bank and Trust Company is National's
custodian and will continue to serve in that capacity after the
Acquisition;
. the benefits of the Acquisitions to persons other than the Acquired
Portfolios and their shareholders, in particular, the Adviser, which
would benefit from the elimination of monitoring and administrating the
smaller Florida and National II;
. the fact that National will assume all the liabilities of the Acquired
Portfolios;
. the expected federal income tax consequences of the Acquisitions;
. the Adviser's representation that none of the financial information
presented to the Directors had changed materially since October 31, 2008;
. the costs of the Acquisitions, which will be borne by National II and
Florida but which, due to the Adviser's expense limitation undertaking
with respect to National, the Adviser will ultimately bear; and
. the fact that the Adviser has agreed to indemnify National for a
three-year period against any liability not disclosed or not reflected in
the respective NAVs of the Acquired Portfolios at the time of the
Acquisitions, to reimburse National 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.
Also at the Board Meetings, the Directors of Muni Income, on behalf of
National, approved the proposed Plans. No vote of shareholders of National is
required in connection with the Acquisitions.
Description of Securities to be Issued
. National II Acquisition
Under the National II Plan, National will issue additional shares of its
Class A, Class B and Class C common stock for distribution to National II.
Under Muni Income's Charter and Bylaws, National may issue up to 3,000,000,000
shares of common stock, par value $0.001 per share, for each of these Classes.
When the Acquisition of National II by National is consummated, holders of
Class A, Class B and Class C shares of National II will receive corresponding
class shares of National having an aggregate NAV equal to the aggregate NAV of
the shareholder's shares in National II.
. Florida Acquisition
16
Under the Florida Plan, National will issue additional shares of its
Class A, Class B and Class C common stock for distribution to Florida. Under
Muni Income's Charter and Bylaws, National may issue up to 3,000,000,000 shares
of common stock, par value $0.001 per share, for each of these Classes.
When the Acquisition of Florida by National is consummated, holders of
Class A, Class B and Class C shares of Florida will receive corresponding class
shares of National having an aggregate NAV equal to the aggregate NAV of the
shareholder's shares in Florida.
Each share of National represents an equal proportionate interest with other
shares of National. 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 National as authorized by the
Directors. Shares of National entitle their holders to one vote per full share
and fractional votes for fractional shares held. Shares of National received by
the Acquired Portfolios in the Acquisitions 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 Plans, each Acquired
Portfolio 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.
Acquired Portfolio Stock Certificates
After a Plan's Effective Time, each holder of a certificate (or
certificates) formerly representing shares of an Acquired Portfolio will not
receive, upon surrender of the certificate, a certificate representing the
number of National shares distributable as a result of an Acquisition since
National will not issue certificates representing National shares in connection
with the Acquisitions. Ownership of National's shares will be shown on the
books of National's transfer agent. If you currently hold certificates
representing shares of National II or Florida, it is not necessary to surrender
the certificates.
Federal Income Tax Consequences
Subject to certain stated assumptions contained therein, each Acquired
Portfolio 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 an
Acquired Portfolio and National will each be "a party to a reorganization"
within the meaning of section 368(b) of the Code; (ii) a shareholder of an
Acquired Portfolio will recognize no gain or loss on the exchange of the
shareholder's shares of the Acquired Portfolio solely for shares of National;
(iii) neither an Acquired Portfolio nor National will recognize any gain or
loss upon the transfer of all of the assets of an Acquired Portfolio to
National in exchange for shares of National and the assumption by National of
the liabilities of an Acquired Portfolio pursuant to a Plan or upon the
distribution of shares of National to shareholders of an Acquired Portfolio in
exchange for their respective shares of an Acquired Portfolio; (iv) the holding
period and tax basis of the assets of an Acquired Portfolio acquired by
National will be the same as the holding period and tax basis that the Acquired
Portfolio had in such assets immediately prior to the Acquisition; (v) the
aggregate tax basis of shares of National received in connection with an
Acquisition by each shareholder of an Acquired Portfolio (including any
fractional share to which the shareholder may be entitled) will be the same as
the aggregate tax basis of the shares of the Acquired Portfolio surrendered in
exchange therefor; (vi) the holding period of shares of National received in
connection with an Acquisition by each shareholder of an Acquired Portfolio
(including any fractional share to which the shareholder 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 shareholder as of the Closing Date; and
(vii) National will succeed to the capital loss carryovers of an Acquired
Portfolio, if any, under section 381 of the Code, but the use by National of
any such capital loss carryovers (and of capital loss carryovers of National)
may be subject to limitation under section 383 of the Code. This opinion of
17
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.
Shareholders of an Acquired Portfolio are encouraged to consult their tax
advisers regarding the effect, if any, of an Acquisition in light of their
individual circumstances. Because the foregoing discussion only relates to the
federal income tax consequences of an Acquisition, those shareholders also
should consult their tax advisers as to state and local tax consequences, if
any, of an Acquisition.
Capitalization Information
For information on the existing and pro forma capitalization of the
Portfolios, see Appendix J.
18
INFORMATION ABOUT THE PORTFOLIOS
Muni Income, of which National II and National are each a series, is a
diversified, open-end management investment company registered under the 1940
Act and organized as a Maryland corporation in 1987. Muni Income II, of which
Florida is a series, diversified, open-end management investment company
registered under the 1940 Act and organized as a Massachusetts business trust
in 1993.
Management of the Portfolios
The Board of Directors of Muni Income and the Board of Trustees of Muni
Income II, which are comprised of the same persons, direct the management of
the business and affairs of the Portfolios. Each Board approves all significant
agreements between the respective Portfolio and persons or companies furnishing
services to it, including a Portfolio's agreements with the Adviser, custodian
and transfer and dividend disbursing agent. The day-to-day operations of a
Portfolio are delegated to its officers and the Portfolio's administrator,
subject to the Portfolio's investment objective and policies and to general
supervision by the Directors. Subsequent to the consummation of the
Acquisitions, the directors and officers of National will continue to serve as
the directors and officers of the combined Portfolio.
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 2004.
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 provides 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 December 31, 2008 totaling more than $462 billion (of which over
$65 billion represented the assets of investment companies). As of December 31,
2008, the Adviser managed retirement assets for many of the largest public and
private employee benefit plans (including 49 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. The 36 registered investment companies managed by the Adviser,
comprising 104 separate investment portfolios, currently have approximately
4.0 million shareholder accounts. The Adviser also serves as administrator for
each Portfolio.
Under the Funds' respective advisory agreements 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 Funds 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 Agreements is available in the Semi-Annual Report to Shareholders for
National II, Florida and National for the six-month period ended April 30,
2008, March 31, 2008 and April 30, 2008, respectively.
The Adviser is the subject of certain legal proceedings relating to the
AllianceBernstein Mutual Funds and a discussion of those proceedings is
presented in Appendix K.
19
Administrator
The Adviser serves as administrator and performs standard administration
services for the Portfolios. Each of the Portfolios reimburses the Adviser for
its costs incurred for providing administrative services. For the most recently
completed fiscal years ended October 31, 2008, these reimbursements amounted to
..07% and .02% for National II and National, respectively. For the most recently
completed fiscal year ended September 31, 2008, the reimbursement amounted to
..05% for Florida.
Distributor
AllianceBernstein Investments, Inc. ("ABI" or the "Distributor"), a
wholly-owned subsidiary of the Adviser, serves as the distributor of the
Portfolios' shares. Under a Distribution Services Agreement, adopted under each
Portfolio's Rule 12b-1 plan, each Portfolio pays 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 have the same service providers, which will continue in their
capacity after the Acquisitions, with one exception. State Street Bank & Trust
Company, which is the custodian and accounting agent for National and National
II, will serve in that capacity after the Acquisitions in lieu of Florida's
current custodian and accounting agent, which is The Bank of New York Mellon.
20
VOTING INFORMATION
The Directors of the Funds have fixed the close of business on March 31,
2009 as the record date for the determination of shareholders entitled to
notice of, and to vote at, the Meeting and at any adjournments thereof.
Appendix L to this Prospectus/Proxy Statement lists the total number of shares
outstanding as of that date for each class of each Acquired Portfolio entitled
to vote at the Meeting. 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 Funds 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 by telephoning toll free 1-866-412-8384.
Owners of shares held through a broker or nominee (who is the shareholder of
record for those shares) should follow directions provided to the shareholder
by the broker or nominee to submit voting instructions. Instructions to be
followed by a shareholder of record to submit a proxy via telephone, 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 should not also
return a Proxy Card. 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 Funds 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, 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 Acquisition for National II requires the affirmative vote of
the holders of a "majority of the outstanding voting securities" of the
Portfolio, 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. Approval of the
Acquisition for Florida requires the affirmative vote of the holders of not
less than a majority of the outstanding voting securities 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 but will
have the effect of a vote against the Acquisition. If any proposal, other than
the Acquisition, to be voted on by the shareholders of each Fund 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
Funds 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 National II
at the Meeting will consist of the presence in person or by proxy of the
holders of one-third of the shares of National II entitled to vote at the
Meeting. A quorum for the transaction of business by the shareholders of
Florida at the Meeting will consist of the presence in person or by proxy of
the holders of a majority of the shares of Florida 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 Directors on the Acquisition are not timely
received, the Chairman of the Board of Directors and the Chairman of the Board
of Trustees, as applicable, may authorize, or the persons named as proxies may
propose and vote for, one or more adjournments of the Meeting with no other
notice than announcement at the Meeting, 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 Acquisition will be voted against
adjournment.
21
National II and Florida have engaged [ ] (the "Proxy Solicitor"),
[ ], to assist in soliciting proxies for the Meeting. The Proxy Solicitor
will receive a fee of $[ ] and $[ ] for its solicitation services for
National II and Florida, respectively, plus reimbursement of out-of-pocket
expenses.
LEGAL MATTERS
The validity of the shares of National offered hereby will be passed upon
for National II and Florida 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
independent registered public accounting firm for the Portfolios, given on its
authority as an expert in auditing and accounting.
FINANCIAL HIGHLIGHTS
Financial highlights information for National is available at Appendix M.
THE DIRECTORS OF MUNI INCOME AND THE TRUSTEES OF MUNI INCOME II
UNANIMOUSLY RECOMMEND THAT
YOU VOTE FOR THE ACQUISITION OF THE ASSETS AND LIABILITIES OF
YOUR PORTFOLIO BY ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND, INC. -- NATIONAL
PORTFOLIO
22
APPENDIX A
PORTFOLIO PERFORMANCE
The charts below show the percentage gain or loss in each calendar year for
the ten-year period ended December 31, 2008, 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 National will achieve any particular level of performance after the
Acquisitions.
Calendar Year Total Returns
National 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.
[CHART]
Calendar Year End (%)
99 00 01 02 03 04 05 06 07 08
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
-6.61 12.05 4.80 6.92 7.20 4.32 3.72 4.15 2.72 -2.75
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 4.62%, 3rd quarter, 2002; and Worst quarter was down
- -3.23%, 2nd quarter, 2004.
23
Florida
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.
[CHART]
Calendar Year End (%)
99 00 01 02 03 04 05 06 07 08
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
-3.81 10.61 5.99 7.86 5.40 5.01 4.74 4.89 2.27 -9.28
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 4.11%, 3rd quarter, 2002; and Worst quarter was down
- -4.87%, 4th quarter, 2008.
National
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.
[CHART]
Calendar Year End (%)
99 00 01 02 03 04 05 06 07 08
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
-5.89 9.77 4.85 4.03 7.42 4.84 4.60 5.51 1.90 -9.41
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 4.02%, 2nd quarter, 2003; and Worst quarter was down
- -4.69%, 4th quarter, 2008.
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, 2008 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.
24
Average Annual Total Returns
National II
PERFORMANCE TABLE
Average Annual Total Returns*
(For the periods ended December 31, 2008)
1 Year 5 Years 10 Years
------ ------- --------
Class A** Return Before Taxes -6.89% 1.51% 3.08%
Return After Taxes on Distributions -6.90% 1.50% 3.04%
Return After Taxes on Distributions and Sale of
Portfolio Shares -3.21% 1.88% 3.21%
Class B Return Before Taxes -6.24% 1.70% 3.09%
Class C Return Before Taxes -4.37% 1.69% 2.82%
Barclays Capital
Municipal Bond Index+ -2.47% 2.71% 4.25%
- --------
* 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 C shares
because these Classes have higher 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.
Florida
PERFORMANCE TABLE
Average Annual Total Returns*
(For the periods ended December 31, 2008)
1 Year 5 Years 10 Years
------- ------- --------
Class A** Return Before Taxes -13.15% 0.49% 2.77%
Return After Taxes on Distributions -13.17% 0.47% 2.75%
Return After Taxes on Distributions and Sale of
Portfolio Shares -7.03% 1.13% 3.07%
Class B Return Before Taxes -12.51% 0.67% 2.79%
Class C Return Before Taxes -10.78% 0.66% 2.49%
Barclays Capital Municipal
Bond Index+ -2.47% 2.71% 4.25%
- --------
* 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.
25
** After-tax Returns:
-- Are shown for Class A shares only and will vary for Class B and C shares
because these Classes have higher 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.
National
PERFORMANCE TABLE
Average Annual Total Returns*
(For the periods ended December 31, 2008)
1 Year 5 Years 10 Years
------- ------- --------
Class A** Return Before Taxes -13.24% 0.45% 2.15%
Return After Taxes on Distributions -13.25% 0.43% 2.10%
Return After Taxes on Distributions and Sale of
Portfolio Shares -7.16% 1.08% 2.50%
Class B Return Before Taxes -12.64% 0.63% 2.18%
Class C Return Before Taxes -10.91% 0.62% 1.90%
Advisor Class*** Return Before Taxes -9.14% 1.63% 2.91%
Barclays Capital Municipal
Bond Index+ -2.47% 2.71% 4.25%
- --------
* 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 C shares
because these Classes have higher 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: 7/31/2008. 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.
26
APPENDIX B
NATIONAL -- MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
This following is management's discussion of fund performance for the
National Portfolio of AllianceBernstein Municipal Income Fund (the "Portfolio")
for the annual reporting period ended October 31, 2008.
Investment Results
For both the six- and 12-month periods ended October 31, 2008, the
Portfolio's Class A shares without sales charges underperformed the benchmark,
the BC Municipal Index, which represents the U.S. municipal market, and posted
negative returns of -4.70% and -3.30% for the respective time periods.
Though the Portfolio's Municipal Bond Investment Team (the "Team") primarily
bought higher credit quality bonds, the Portfolio's weights in lower-credit
quality bonds across various sectors, compared with the benchmark's, detracted
from relative performance as credit spreads widened. The Team focused new
purchases on high credit quality bonds and generally avoided the longest
maturity bonds. This was beneficial to the Portfolio's performance during the
six- and 12-month periods because higher-credit quality bonds outperformed
lower-credit quality bonds and shorter-maturity bonds outperformed
longer-maturity bonds. Overall, the Portfolio benefited from relatively less
interest-rate exposure compared with the benchmark.
The Portfolio's underperformance compared with the benchmark was primarily
the result of security selection in the hospital, education, housing and
general obligation sectors. The Portfolio's relative underweight in the general
obligation sector and overweight in the hospital sector also detracted from the
Portfolio's performance.
Market Review & Investment Strategy
The crisis in the financial markets continued toward the end of the annual
reporting period ended October 31, 2008, and created severe dislocations in the
municipal market. As investors grew increasingly more risk averse, demand for
lower-rated and longer-maturity bonds diminished. As a result, municipal credit
spreads - the extra yield investors demand to move down in credit quality -
widened sharply, and the slope of the municipal yield curve steepened
dramatically over both the six- and 12-month periods. The Team's strategies
over the last year of primarily buying high credit quality bonds and avoiding
the longest maturity bonds benefited performance because credit spreads widened
sharply and the slope of the yield curve steepened dramatically.
Concerns about deteriorating municipal credit quality and a weakening
economy contributed to investors' sense of unease, but it was the news in
September 2008 that the Reserve Primary Fund, a large "prime" money market
fund, had "broken the buck" that ignited a wave of fear in all the financial
markets. In the ensuing panic, investors apparently feared that similar funds
would have similar problems and redeemed significant amounts of their
investments in such funds. Yields of municipal cash-equivalent securities
spiked from around 2.5% to around 9% as buyers flocked to the safety of
Treasury bills. As a result, three-month T-bill yields dropped to a rate of
virtually zero. In light of this turmoil, municipal bond portfolios generally
had low to negative returns in this environment.
As the Portfolio's fiscal year drew to a close, regulators and policymakers
across the globe were continuing work to address the financial crisis. At the
same time, economic growth was beginning to slow dramatically. Historically,
tax revenues have been very economically sensitive. And, there were signs that
tax revenue growth was slowing quickly across the country. Fortunately, many
state and local officials had successfully built up reserves to address the
looming budget shortfalls. On average, state budget reserves were at 7.5% of
general fund spending to start the fiscal year (July 1 for most states). States
also cut spending on average this fiscal year. The average projected increase
in states' budgeted expenses was only 1% - the second lowest in 25 years.
The Portfolio may purchase municipal securities that are insured under
policies issued by certain insurance companies. When issued, insured municipal
securities typically receive a higher credit rating which means that
27
the issuer of the securities pays a lower interest rate. In purchasing insured
securities, the Team gives consideration to both the insurer and to the credit
quality of the underlying issuer. The purpose of insurance is to reduce the
credit risk of a particular municipal security by supplementing the
creditworthiness of the underlying issuer and providing additional security for
payment of the principal and interest. Certain of the insurance companies that
insure municipal securities insure other types of securities, including some
involving subprime mortgages. The credit quality of many subprime mortgage
securities has declined and some bond insurers' risk of having to make payments
to holders of subprime mortgage securities has increased. Because of this risk,
the credit ratings of some insurance companies have been downgraded and may be
further downgraded; it is possible that certain insurance companies may become
insolvent. If an insurance company's rating is downgraded or the company
becomes insolvent, the prices of municipal securities insured by the insurance
company may decline.
As of October 31, 2008, the Portfolio's percentages of net assets in insured
bonds and in insured bonds that have been pre-refunded are as follows:
Pre-Refunded
Insured Insured
Portfolio Bonds Bonds
--------- ------- ------------
National 44% 4%
The Team believes that downgrades in insurance company ratings or insurance
company insolvencies present limited risk to the Portfolio. The Portfolio is
diversified by bond insurer, reducing the exposure to any single insurer. In
addition, the Team believes that the generally investment-grade underlying
credit quality of the insured municipal securities reduces the risk of a
significant reduction in the value of the insured municipal security.
HISTORICAL PERFORMANCE
An Important Note About the Value of Historical Performance
The performance shown on the following pages represents past performance and
does not guarantee future results. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by visiting www.alliancebernstein.com.
The investment return and principal value of an investment in the Portfolio
will fluctuate, so that your shares, when redeemed, may be worth more or less
than their original cost. You should consider the investment objectives, risks,
charges and expenses of the Portfolio carefully before investing.
All fees and expenses related to the operation of the Portfolio have been
deducted. NAV returns do not reflect sales charges; if sales charges were
reflected, the Portfolio's quoted performance would be lower. SEC returns
reflect the applicable sales charges for each share class: a 4.25% maximum
front-end sales charge for Class A shares; the applicable contingent deferred
sales charge for Class B shares (3% year 1, 2% year 2, 1% year 3, 0% year 4); a
1% 1 year contingent deferred sales charge for Class C shares. Returns for the
different share classes will vary due to different expenses associated with
each class. Performance assumes reinvestment of distributions and does not
account for taxes.
Benchmark Disclosure
The unmanaged Barclays Capital (BC) Municipal Index does not reflect fees
and expenses associated with the active management of a mutual fund portfolio.
The Index is a total return performance benchmark for the long-term investment
grade, tax-exempt bond market. An investor cannot invest directly in an index,
and its results are not indicative of the performance for any specific
investment, including the Portfolio.
28
A Word About Risk
Price fluctuation in the Portfolio's securities may be caused by changes in
the general level of interest rates or changes in bond credit quality ratings.
Changes in interest rates have a greater effect on bonds with longer maturities
than on those with shorter maturities. Please note, as interest rates rise,
existing bond prices fall and can cause the value of an investment in the
Portfolio to decline. The yield or value of the Portfolio's investments in
municipal securities may be affected by political or legislative changes and
uncertainties related to the tax status of municipal securities or the rights
of investors in these securities. The Portfolio may invest in high yield bonds
(i.e., "junk bonds") which involves a greater risk of default and price
volatility than other bonds. Investing in non-investment grade debt presents
special risks, including credit risk. While the Portfolio invests principally
in bonds and other fixed-income securities, in order to achieve its investment
objectives, the Portfolio may at times use certain types of investment
derivatives, such as options, futures, forwards and swaps. These instruments
involve risks different from, and in certain cases, greater than, the risks
presented by more traditional investments.
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
10/31/98 TO 10/31/08
[CHART]
This chart illustrates the total value of an assumed $10,000 investment in
the Portfolio's Class A shares (from 10/31/98 to 10/31/08) as compared to the
performance of the Portfolio's benchmark. The chart assumes the reinvestment of
dividends and capital gains distributions.
29
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2008
Taxable
NAV SEC SEC Equivalent
Returns Returns Yields** Yields***
------- ------- -------- ----------
Class A Shares 5.04% 7.75%
1 Year -7.32% -11.30%
5 Years 2.36% 1.48%
10 Years 2.92% 2.48%
Class B Shares 4.57% 7.03%
1 Year -7.97% -10.63%
5 Years 1.66% 1.66%
10 Years(a) 2.49% 2.49%
Class C Shares 4.57% 7.03%
1 Year -7.98% -8.87%
5 Years 1.65% 1.65%
10 Years 2.22% 2.22%
Advisor Class Shares+ 5.57% 8.57%
Since Inception* -6.79% -6.79%
The Portfolio's current prospectus fee table shows the Portfolio's total
annual operating expense ratios as 0.92%, 1.63%, 1.62% and 0.62% for Class A,
Class B, Class C and Advisor Class, respectively, gross of any fee waivers or
expense reimbursements. Until January 1, 2009 contractual fee waivers and/or
expense reimbursements limit the Portfolio's annual operating expense ratios to
0.68%, 1.38%, 1.38% and 0.38% for Class A, Class B, Class C and Advisor Class,
respectively. Effective January 1, 2009, contractual fee waivers and/or expense
reimbursements will limit the Portfolio's annual operating expenses to 0.75%,
1.45%, 1.45% and 0.45% for Class A, Class B, Class C and Advisor Class,
respectively. These waivers/reimbursements extend through the Portfolio's
current fiscal year and may be extended by the Adviser for additional one-year
terms. Absent reimbursements or waivers, performance would have been lower. The
Financial Highlights section of this report sets forth expense ratio data for
the current reporting period; the expense ratios shown above may differ from
the expense ratios in the Financial Highlights section since they are based on
different time periods.
- --------
(a)Assumes conversion of Class B shares into Class A shares after six years.
* Inception Date: 8/6/08 for Advisor Class shares.
** SEC Yields are calculated based on SEC guidelines for the 30-day period
ended October 31, 2008.
***Taxable equivalent yields are based on SEC yields and a 35% marginal Federal
income tax rate and maximum state taxes where applicable.
+ This share class is offered at net asset value (NAV) to eligible investors
and its SEC returns are the same as the NAV returns. Please note that this
share class is for investors purchasing shares through accounts established
under certain fee-based programs sponsored and maintained by certain
broker-dealers and financial intermediaries, institutional pension plans
and/or investment advisory clients of, and certain other persons associated
with, the Adviser and its affiliates or the Funds. The inception date for
Advisor Class is listed above.
30
APPENDIX C
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)
National II National II National II
Florida Florida Florida
National National National
Class A Class B Class C
------------------- ------------------- -------------------
National National National
(pro forma Class A) (pro forma Class B) (pro forma Class C)
------------------- ------------------- -------------------
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)............................. 4.25%(a) None None
Maximum Deferred Sales Charge (Load) (as a percentage of
original purchase price or redemption proceeds, whichever
is lower)................................................. None(a) 3.00%(a)(b) 1.00%(a)(c)
Exchange Fee................................................ 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
Total Pro
Pro Forma Pro Forma Forma
Combined of Combined of Combined
National II Florida of All
National II Florida National into National into National Portfolios
----------- ------- -------- ------------- ------------- ----------
Management Fees .45% .45% .45% .45% .45% .45%
Distribution and/or Service (12b-1) Fees .30% .30% .30% .30% .30% .30%
Other Expenses
Transfer Agent .05% .03% .05% .05% .05% .05%
Other Expenses .27% .18% .11% .09% .09% .07%
---- ---- ---- ---- ---- ----
Total Other Expenses .32% .21% .16% .14% .14% .12%
---- ---- ---- ---- ---- ----
Total Portfolio Operating Expenses 1.07% .96% .91% .89% .89% .87%
==== ==== ==== ==== ==== ====
Waiver and/or Expense Reimbursement (.03)%(a) (.18)%(b) (.16)%(c) (.14)% (.14)% (.12)%
---- ---- ---- ---- ---- ----
Net Expenses 1.04% .78% .75%(d) .75% .75% .75%
==== ==== ==== ==== ==== ====
31
Class B
Total Pro
Pro Forma Pro Forma Forma
Combined of Combined of Combined
National II Florida of All
National II Florida National into National into National Portfolios
----------- ------- -------- ------------- ------------- ----------
Management Fees .45% .45% .45% .45% .45% .45%
Distribution and/or Service (12b-1) Fees 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Other Expenses
Transfer Agent .07% .06% .07% .07% .07% .07%
Other Expenses .27% .18% .11% .09% .09% .07%
---- ---- ---- ---- ---- ----
Total Other Expenses .34% .24% .18% .16% .16% .14%
---- ---- ---- ---- ---- ----
Total Portfolio Operating Expenses 1.79% 1.69% 1.63% 1.61% 1.61% 1.59%
==== ==== ==== ==== ==== ====
Waiver and/or Expense Reimbursement (.05)%(a) (.21)%(b) (.18)%(c) (.16)% (.16)% (.14)%
---- ---- ---- ---- ---- ----
Net Expenses 1.74% 1.48% 1.45%(d) 1.45% 1.45% 1.45%
==== ==== ==== ==== ==== ====
Class C
Total Pro
Pro Forma Pro Forma Forma
Combined of Combined of Combined
National II Florida of All
National II Florida National into National into National Portfolios
----------- ------- -------- ------------- ------------- ----------
Management Fees .45% .45% .45% .45% .45% .45%
Distribution and/or Service (12b-1) Fees 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Other Expenses
Transfer Agent .06% .03% .06% .06% .06% .06%
Other Expenses .27% .19% .10% .09% .09% .07%
---- ---- ---- ---- ---- ----
Total Other Expenses .33% .22% .16% .15% .15% .13%
---- ---- ---- ---- ---- ----
Total Portfolio Operating Expenses 1.78% 1.67% 1.61% 1.60% 1.60% 1.58%
==== ==== ==== ==== ==== ====
Waiver and/or Expense Reimbursement (.04)%(a) (.19)%(b) (.16)%(c) (.15)% (.15)% (.13)%
---- ---- ---- ---- ---- ----
Net Expenses 1.74% 1.48% 1.45%(d) 1.45% 1.45% 1.45%
==== ==== ==== ==== ==== ====
- --------
# The Annual Portfolio Operating Expenses information is as of October 31,
2008.
+ The expenses of the Acquisitions will be borne by each of National II and
Florida, respectively, although, due to the Adviser's expense limitation
undertakings, these expenses will ultimately be borne by the Adviser.
(a)The Adviser has contractually agreed to waive a portion of its advisory fees
and/or reimburse the Portfolio for a portion of its operating expenses. This
waiver extends through October 31, 2009 and may be extended by the Adviser
for additional one-year terms.
(b)The Adviser has contractually agreed to waive a portion of its advisory fees
and/or reimburse the Portfolio for a portion of its operating expenses. This
waiver extends through September 30, 2009 and may be extended by the Adviser
for additional one-year terms.
(c)Effective January 1, 2009, the Adviser has contractually agreed to waive its
fees and bear certain expenses so that total operating expenses of the
Portfolio do not exceed .75% for Class A shares, 1.45% for Class B shares
and 1.45% for Class C shares. This contractual agreement extends through
October 31, 2009 and may be extended by the Adviser for additional one-year
terms.
(d)Expense information has been restated to reflect current fees.
32
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.
National II
Class A Class B+ Class B++ Class C+ Class C++
------- -------- --------- -------- ---------
After 1 Year $ 527 $ 477 $ 177 $ 277 $ 177
After 3 Years* $ 748 $ 658 $ 558 $ 556 $ 556
After 5 Years* $ 987 $ 965 $ 965 $ 960 $ 960
After 10 Years* $1,672 $1,737 $1,737 $2,090 $2,090
Florida
Class A Class B+ Class B++ Class C+ Class C++
------- -------- --------- -------- ---------
After 1 Year $ 501 $ 450 $ 150 $ 250 $ 150
After 3 Years* $ 700 $ 611 $ 511 $ 507 $ 507
After 5 Years* $ 916 $ 896 $ 896 $ 888 $ 488
After 10 Years* $1,535 $1,605 $1,605 $1,957 $1,957
National
Class A Class B+ Class B++ Class C+ Class C++
------- -------- --------- -------- ---------
After 1 Year $ 498 $ 447 $ 147 $ 247 $ 147
After 3 Years* $ 687 $ 596 $ 496 $ 492 $ 492
After 5 Years* $ 892 $ 868 $ 868 $ 860 $ 860
After 10 Years* $1,481 $1,546 $1,546 $1,895 $1,895
National (pro forma)
Class A Class B+ Class B++ Class C+ Class C++
------- -------- --------- -------- ---------
After 1 Year $ 503 $ 453 $ 153 $ 253 $ 153
After 3 Years* $ 684 $ 594 $ 494 $ 491 $ 494
After 5 Years* $ 880 $ 858 $ 858 $ 853 $ 858
After 10 Years* $1,445 $1,506 $1,506 $1,872 $1,872
- --------
+ 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 pro forma combined Examples detailed above assume that both Acquisitions
occur. The tables below present the pro forma combined Examples assuming in
each case that only one of the Acquired Portfolios approved the Acquisition.
33
If only the Acquisition of National II were to occur, the Examples of
National on a pro forma combined basis would be as follows:
National (pro forma)
Class A Class B+ Class B++ Class C+ Class C++
------- -------- --------- -------- ---------
After 1 Year $ 504 $ 454 $ 154 $ 253 $ 153
After 3 Years* $ 689 $ 598 $ 498 $ 496 $ 496
After 5 Years* $ 889 $ 867 $ 867 $ 862 $ 862
After 10 Years* $1,467 $1,528 $1,528 $1,892 $1,892
- --------
+ 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.
If only the Acquisition of Florida were to occur, the Examples of National
on a pro forma combined basis would be as follows:
National (pro forma)
Class A Class B+ Class B++ Class C+ Class C++
------- -------- --------- -------- ---------
After 1 Year $ 572 $ 454 $ 154 $ 253 $ 153
After 3 Years* $ 756 $ 598 $ 498 $ 496 $ 496
After 5 Years* $ 955 $ 867 $ 867 $ 862 $ 862
After 10 Years* $1,529 $1,528 $1,528 $1,892 $1,892
- --------
+ 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 National and the
Adviser.
34
APPENDIX D
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
National II Florida National
----------------------------------- ----------------------------------- -----------------------------------
Investment The investment objective of the The investment objective of the Same./1/
Objective Portfolio is to earn the highest Portfolio is to earn the highest
level of current income, exempt level of current income, exempt
from Federal taxation, that is from Federal taxation and State
available without assuming what of Florida taxation, that is
the Adviser considers to be available without assuming what
undue risk. the Adviser considers to be
undue risk.
Investment Policies/2/
-----------------------------------------------------------------------------------------------------------
Status The Portfolio is a series of an Same. Same.
open-end management
investment company that is
diversified. (F)
Rule The Portfolio invests, under The Portfolio invests, under The Portfolio invests, under
35d-1/80% normal circumstances, at least normal circumstances, at least normal circumstances, at least
Policy 80% of its net assets in 80% of its net assets in 80% of its net assets in
municipal securities with interest municipal securities with interest municipal securities with interest
that is exempt from federal which is exempt from federal that is exempt from federal
income tax, including the income tax and at least 80% of income tax. (F)
Alternative Minimum Tax its net assets in municipal
("AMT"). (F) securities issued by the State of
Florida or municipal securities
with interest that is otherwise
exempt from Florida income
tax. (F)
Issuer The Portfolio may invest 25% or None. Same.
Geography more of its total assets in
Concentration municipal securities whose
issuers are located in the same
state.
AMT Subject The Portfolio does not, and is The Portfolio invests, and is Same as Florida.
Bonds not permitted to, invest in AMT- permitted to invest without limit,
subject bonds. in AMT-subject bonds.
Insured The Portfolio may purchase Same Same.
Securities municipal securities that are
insured under policies issued by
certain insurance companies.
- --------
/1/ "Same" means the same as National II, unless otherwise noted
/2/ Policies with the notation "F" are fundamental policies.
35
National II Florida National
----------------------------------- ------- --------
Investment The Portfolio pursues its Same. Same.
Quality objective by investing
principally in high-yielding,
predominantly investment grade,
municipal securities.
The high tax-free yields sought Same. Same.
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.
Investment It is expected that normally the Same. Same.
Quality- Portfolio will not retain a
Downgrades municipal security downgraded
below Caa by Moody's and
CCC by S&P and Fitch, an
unrated municipal security,
determined by the Adviser to
have undergone similar credit
quality deterioration or a
defaulted municipal security.
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
downgraded or defaulted
municipal securities will at no
time comprise more than 10% of
the Portfolio's net assets.
Unrated Unrated municipal securities Same. Same.
Securities may be purchased by the
Portfolio when the Adviser
believes that the financial
condition of the issuers of such
obligations or the protections
afforded by their terms limit risk
to a level comparable to that of
rated securities that are
consistent with the Portfolio's
investment policies.
Maturity The average dollar weighted Same. Same.
maturity of securities in the
Portfolio will normally range
between 10 and 30 years.
36
National II Florida National
------------------------------------ ------- --------
Illiquid The Portfolio will limit its Same. Same.
Securities 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 The Portfolio may invest in zero Same. Same.
Securities coupon securities.
Forward The Portfolio may purchase or Same. Same.
Commitments sell municipal securities on a
forward commitment basis.
Variable and The Portfolio may invest in Same. Same.
Floating Rate municipal securities that have
Instruments fixed, variable, floating or
inverse floating rates of interest.
Revenue The Portfolio may invest more Same. Same.
Bonds than 25% of its net assets in
revenue bonds.
The Portfolio may invest more Same. Same.
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 The Portfolio may invest in Same. Same.
Lease municipal lease obligations.
Obligations
37
National II Florida National
------------------------------------ ------------------------------------ --------
Other For temporary defensive For temporary defensive Same.
Municipal purposes to attempt to respond purposes to attempt to respond
Securities/ to adverse market, economic, to adverse market, economic,
Municipal political, or other conditions, the political, or other conditions, the
Notes/Taxable Portfolio may invest without Portfolio may invest without
Cash limit in other municipal limit in other municipal
Investments securities that are in all other securities that are in all other
respects consistent with the respects consistent with the
Portfolio's investment policies. Portfolio's investment policies.
For temporary defensive For temporary defensive
purposes, the Portfolio also may purposes, the Portfolio also may
invest without limit in high- invest without limit in high-
quality municipal notes or quality municipal notes or
variable rate demand variable rate demand
obligations, or in taxable cash obligations, or in taxable cash
equivalents. equivalents (limited to short-
term U.S. Government securities
or repurchase agreements).
Derivatives- The Portfolio may, but is not Same. Same.
General required to, use derivates for risk
management purposes or as part
of its investment strategies.
The Portfolio may use Same. Same.
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 Same. Same.
derivatives in which the
Portfolios invest are options,
futures, forwards and swaps.
38
National II Florida National
------------------------------------ ------- --------
Swaps The Portfolio may invest in Same. Same.
interest rate swaps, swaptions,
caps, and floor transactions and
credit default swaps.
Each Portfolio that may enter Same. Same.
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 do not intend to use
these transactions in a
speculative manner.
There is no limit on the amount Same. Same.
of interest rate transactions that
may be entered into by the
Portfolio.
Options Options on futures contracts Same. Same.
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 Same. Same.
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.
The Portfolio may write covered Same. Same.
straddles.
Short-Term Although the Portfolio typically Same. Same.
Trading 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.
39
National II Florida National
------------------------------------ ------- --------
Structured The Portfolio may invest up to Same. Same.
Instruments 20% of its total assets in
structured instruments.
Repurchase The Portfolio may enter into Same. Same.
Agreements repurchase agreements and buy/
sell back transactions.
Preferred The Portfolio may invest in Same. Same.
Stock preferred stock.
Other The Portfolio may invest in Same. Same.
Investment other investment companies, as
Companies permitted by 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 The Portfolio may lend portfolio Same. Same.
Lending 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 purchase Same. Same.
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.
40
National II Florida National
----------------------------------- ------- --------
Industry The Portfolio may not Same. Same.
Concentration 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 and regulations
thereunder published by
appropriate regulatory
authorities. (F)
Borrowing The Portfolio may not issue any Same. Same.
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 and regulations
thereunder published by
appropriate regulatory
authorities. (F)
For the purposes of this Same. Same.
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.
41
National II Florida National
----------------------------------- ------- --------
Lending The Portfolio may not make Same. Same.
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 as an Same. Same.
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 purchase Same. Same.
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 purchase Same. Same.
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 Same. Same.
the Portfolio from investing in
securities or other instruments
backed by real estate or in
securities of companies engaged
in the real estate business.
42
APPENDIX E
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. 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 Market Risk This is the risk that special factors may adversely
affect 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 any state, they may be 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. The current economic slowdown
has weakened the finances of most borrowers, including
many municipalities. In the fourth quarter of 2008, tax
revenues declined in at least 35 states with 21 states
reporting tax declines in sales, personal income and
corporate income compared to the same time period in
2007. 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 Rate Risk Changes in interest rates will affect the value of a
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. In part due to the
current financial and economic downturns, credit ratings
for many issuers, guarantors and insurers have declined
and are under pressure. 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, which may 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 Rate Risk This is the risk that the value of assets or income from
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.
43
Prepayment Risk Many municipal securities have call features that allow
the issuer of the security to repay principal prior to
the maturity date of the security. The issuer will
typically call a security when interest rates are lower
than the original issue yield of the security. A
Portfolio may lose any premium it has paid for the
called security over its par value and the principal
received by the Portfolio when a security is called is
usually reinvested at lower yield.
Derivatives Risk The Portfolios may use derivative securities. These
investments may be illiquid, difficult to price, and
leveraged, so that small changes may produce
disproportionate losses for a Portfolio, and may be
subject to counterparty risk to a greater degree than
more traditional investments.
Liquidity Risk Liquidity risk exists when particular investments are
difficult to purchase or sell, possibly preventing a
Portfolio from selling out of these illiquid securities
at an advantageous price. Derivatives and securities
involving substantial market and credit risk tend to
involve greater liquidity risk. All of the Portfolios,
particularly the State Portfolios and Intermediate State
Portfolios, are subject to liquidity risk because the
market for municipal securities is generally smaller
than many other markets.
Management Risk Each Portfolio is subject to management risk because it
is an actively managed investment portfolio. The Adviser
will apply its investment techniques and risk analyses
in making investment decisions for the Portfolios, but
there is no guarantee that its techniques will produce
the intended results.
44
APPENDIX F
CERTAIN INFORMATION APPLICABLE TO
CLASS A, CLASS B AND CLASS C SHARES OF NATIONAL
How to Buy Shares
Class A, Class B and Class C Shares
Effective January 31, 2009, sales of Class B shares of the Portfolio to new
investors were suspended. Class B shares are only issued (i) upon the exchange
of Class B shares from another AllianceBernstein Fund, (ii) for purposes of
dividend reinvestment, (iii) through the Portfolio's Automatic Investment
Program for accounts that established the Program prior to January 31, 2009,
and (iv) for purchases of additional Class B shares by Class B shareholders as
of January 31, 2009. The ability to establish a new Automatic Investment
Program for accounts containing Class B shares was suspended as of January 31,
2009.
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 "Retirement Plans, Tax-Deferred Accounts and
Employee Benefit Plans" and "Automatic Investment Program", 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
Your broker or financial advisor must receive your purchase 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 net asset value or NAV, less any applicable
initial sales charge.
If you are an existing Portfolio shareholder and you have completed the
appropriate section of the Mutual Fund Application, you may purchase additional
shares by telephone with payment by electronic funds transfer in amounts not
exceeding $500,000. AllianceBernstein Investor Services, Inc., or ABIS, must
receive and confirm telephone requests before 4:00 p.m., Eastern time, to
receive that day's public offering price. Call 800-221-5672 to arrange a
transfer from your bank account.
Retirement Plans, Tax-Deferred Accounts 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:
. Traditional and Roth IRAs (the minimums listed in the table above apply);
. SEPs, SAR-SEPs, SIMPLE IRAs, and individual 403(b) plans;
45
. 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;
. AllianceBernstein-sponsored Coverdell Education Savings Accounts ($2,000
initial investment minimum, $150 automatic investment program monthly
minimum);
. AllianceBernstein-sponsored group retirement plans;
. AllianceBernstein Link, AllianceBernstein Individual 401(k), and
AllianceBernstein SIMPLE IRA plans; and
. Certain defined contribution retirement plans that do not have plan level
or omnibus accounts on the books of the Portfolio.
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 individual 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 (Rule 12b-1) fees, initial sales charges
and/or CDSCs. Please see below for a discussion of how CDSCs are calculated.
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 Rule 12b-1 fee, if any,
is disclosed below and in the Portfolio's fee table near the front of its
Prospectus.
46
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 up to:
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%
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.
Furthermore, when a group retirement plan ceases to participate in an
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
Effective January 31, 2009, sales of Class B shares of the Portfolio to new
investors were suspended. Class B shares are only issued (i) upon the exchange
of Class B shares from another AllianceBernstein Fund, (ii) for purposes of
dividend reinvestment, (iii) through the Portfolio's Automatic Investment
Program for accounts that established the Program prior to January 31, 2009,
and (iv) for purchases of additional Class B shares by Class B shareholders as
of January 31, 2009. The ability to establish a new Automatic Investment
Program for accounts containing Class B shares was suspended as of January 31,
2009.
You can purchase Class B shares at NAV (subject to the limitations on the
sale of Class B shares described above) without an initial sales charge. This
means that the full amount of your purchase is invested in the Portfolio. 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
47
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. This
means that the full amount of your purchase is invested in the Portfolio. Your
investment, however, is subject to a 1% CDSC if you redeem your shares within 1
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 1-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.
Special 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 the Portfolio's 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 may employ financial advisors who deal with you
and other investors on an individual basis.
In the case of Class A shares, all or a portion of the initial sales charge
that you pay may be paid by ABI to financial intermediaries selling Class A
shares. ABI may also pay these financial intermediaries a fee of up to 1% on
purchases of $1,000,000 or more. 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.
48
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.
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:
. upfront sales commissions;
. Rule 12b-1 fees;
. additional distribution support;
. defrayal of costs for educational seminars and training; and
. 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 2009, ABI's additional payments to these firms for educational support
and distribution assistance related to the AllianceBernstein Mutual Funds is
expected to be approximately $21 million. In 2008, ABI paid additional payments
of approximately $21 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, your financial advisor and his or her firm may have an
incentive to recommend one fund complex over another. Similarly, if
your financial advisor or his or her firm receives more distribution
assistance for one share class versus another, then they 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.
49
ABI anticipates that the firms that will receive additional payments for
distribution services and/or educational support include:
AIG Advisor Group
Ameriprise Financial Services
AXA Advisors
Bank of America
Cadaret, Grant & Co.
CCO Investment Services Corp.
Chase Investment Services
Citigroup Global Markets
Commonwealth Financial Network
Donegal Securities
ING Advisors Network
LPL Financial Corporation
Merrill Lynch
Morgan Stanley
Raymond James
RBC Capital Markets Corporation
Robert W. Baird
UBS AG
UBS Financial Services
Wachovia Securities
Wells Fargo Investments
Although the Portfolio may use brokers or other financial intermediaries
that 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 Funds (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). 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
Muni Income's Board of Directors (the "Board") 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
50
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 the 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 Portfolio may be adversely affected by price
arbitrage.
Policy Regarding Short-Term Trading
Purchases and exchanges of shares of the Portfolio should be made for
investment purposes only. The Portfolio seeks to prevent patterns of excessive
purchases and sales or exchanges of Portfolio shares. The Portfolio will seek
to prevent such practices to the extent they are detected by the procedures
described below. The Portfolio reserves 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. The Portfolio, through its agents, ABI
and ABIS, maintains surveillance procedures to detect excessive or short-term
trading in Portfolio shares. This surveillance process involves several
factors, which include scrutinizing transactions in Portfolio shares that
exceed certain monetary thresholds or numerical limits within a specified
period of time. Generally, more than two exchanges of Portfolio shares during
any 90-day period or purchases of shares followed by a sale within 90 days will
be identified by these surveillance procedures. For purposes of these
transaction surveillance procedures, the Portfolio may consider trading
activity in multiple accounts under common ownership, control or influence.
Trading activity identified by either, or a combination, of these factors, or
as a result of any other information available at the time, will be evaluated
to determine whether such activity might constitute excessive or short-term
trading. These
51
surveillance procedures may be modified from time to time, as necessary or
appropriate to improve the detection of excessive or short-term trading or to
address specific circumstances, such as for certain retirement plans, to
conform to plan exchange limits or U.S. Department of Labor regulations, or for
certain automated or pre-established exchange, asset allocation or dollar cost
averaging programs, or omnibus account arrangements.
Account Blocking 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.
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 shareholder recently paid an initial sales charge, 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.
52
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 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.
Dividends, Distributions and Taxes
Dividends and Distributions
The Portfolio declares dividends on its shares on each business day from the
Portfolio's net investment income. Dividends on shares for Saturdays, Sundays
and holidays will be declared on the previous business day. The Portfolio pays
dividends on its shares after the close of business on the twentieth day of
each month or, if such day is not a business day, the first business day after
that day. At your election (which you may change at least 30 days prior to the
record date for a particular dividend or distribution), dividends and
distributions are paid in cash or reinvested without charge in additional
shares of the same class having an aggregate NAV as of the payment date of the
dividend or distribution equal to the cash amount thereof.
If you receive an income dividend or capital gains distribution in cash, you
may, within 120 days following the date of its payment, reinvest the dividend
or distribution in additional shares of the Portfolio without charge by
returning to the Adviser, with appropriate instructions, the check representing
the dividend or distribution. Thereafter, unless you otherwise specify, you
will be deemed to have elected to reinvest all subsequent dividends and
distributions in shares of the Portfolio.
53
There is no fixed dividend rate and there can be no assurance that the
Portfolio will pay any dividends. The amount of any dividend distribution paid
on shares of the Portfolio must necessarily depend upon the realization of
income and capital gains from the Portfolio's investments.
Taxes - General
Distributions to shareholders out of tax-exempt interest income earned by
the Portfolio are not subject to federal income tax. Under current tax law,
some individuals and corporations may be subject to the AMT on distributions to
shareholders out of income from the private activity bonds ("AMT-Subject
bonds"), in which the Portfolio invests. Further, under current tax law,
certain corporate taxpayers may be subject to the AMT based on their "adjusted
current earnings." Distributions from the Portfolio that are excluded from
gross income will be included in such corporation's "adjusted current earnings"
for purposes of computation of the AMT. Distributions out of taxable interest,
other investment income, and net realized short-term capital gains are taxable
to shareholders as ordinary income. Any distributions of long-term capital
gains generally will be taxable to you as long-term capital gains regardless of
how long you have held your shares. Since the Portfolio's investment income is
derived from interest rather than dividends, no portion of its distributions
will be eligible for the dividends-received deduction available to
corporations, and for non-corporate shareholders no portion of such
distributions will be treated as "qualified dividend income" taxable at a
maximum rate of 15% (5% for non-corporate shareholders in lower tax brackets).
Interest on indebtedness incurred by shareholders to purchase or carry
shares of the Portfolio is not deductible for federal income tax purposes.
Further, persons who are "substantial users" (or related persons) of facilities
financed by AMT-Subject bonds, as defined below, should consult their tax
advisers before purchasing shares of the Portfolio.
If you buy shares just before the Portfolio deducts a distribution from its
NAV, you will pay the full price for the shares and then receive a portion of
the price back as a distribution, which may be taxable.
For tax purposes, an exchange is treated as a sale of Portfolio shares. The
sale or exchange of Portfolio shares is a taxable transaction for federal
income tax purposes.
The Portfolio anticipates that substantially all of its dividends will be
exempt from regular federal income taxes. Shareholders may be subject to state
and local taxes on distributions from the Portfolio, including distributions
that are exempt from federal income taxes. The Portfolio will report annually
to shareholders the percentage and source of interest earned by the Portfolio
that is exempt from federal income tax and relevant state and local personal
income taxes.
Each investor should consult his or her own tax adviser to determine the tax
status, with regard to his or her tax situation, of distributions from the
Portfolio.
Alternative Minimum Tax
Under current federal income tax law, (1) interest on tax-exempt municipal
securities issued after August 7, 1986 which are "specified private activity
bonds," and the proportionate share of any exempt-interest dividend paid by a
regulated investment company which receives interest from such specified
private activity bonds, will be treated as an item of tax preference for
purposes of the AMT imposed on individuals and corporations, though for regular
Federal income tax purposes such interest will remain fully tax-exempt, and
(2) interest on all tax-exempt obligations will be included in "adjusted
current earnings" of corporations for AMT purposes. Such AMT-Subject bonds,
which include industrial development bonds and bonds issued to finance such
projects as airports, housing projects, solid waste disposal facilities,
student loan programs and water and sewage projects, have provided, and may
continue to provide, somewhat higher yields than other comparable municipal
securities.
Investors should consider that, in most instances, no state, municipality or
other governmental unit with taxing power will be obligated with respect to
AMT-Subject bonds. AMT-Subject bonds are in most cases revenue bonds and do not
generally have the pledge of the credit or the taxing power, if any, of the
issuer of such bonds. AMT-Subject bonds are generally limited obligations of
the issuer supported by payments from private business
54
entities and not by the full faith and credit of a state or any governmental
subdivision. Typically the obligation of the issuer of AMT-Subject bonds is to
make payments to bond holders only out of, and to the extent of, payments made
by the private business entity for whose benefit the AMT-Subject bonds were
issued. Payment of the principal and interest on such revenue bonds depends
solely on the ability of the user of the facilities financed by the bonds to
meet its financial obligations and the pledge, if any, of real and personal
property so financed as security for such payment. It is not possible to
provide specific detail on each of these obligations in which Portfolio assets
may be invested.
55
APPENDIX G
OTHER INFORMATION
The following information provides only a summary of the key features of the
organizational structure and governing documents of the Portfolios. National II
and National are each organized as a series of Muni Income, a Maryland
corporation. The Charter and Bylaw provisions that govern Muni Income apply to
National II and National. Accordingly, there are no differences between
National II and National in terms of their corporate organizational structures.
Florida is organized as a series of Muni Income II, a Massachusetts business
trust. The Agreement and Declaration of Trust ("Declaration") and Bylaw
provisions that govern Muni Income II apply to Florida. The differences in the
Charter and Bylaw provisions of Muni Income and the Declaration and Bylaw
provisions of Muni Income II, and their respective corporate organizational
structures are noted below.
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 Muni Income'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 of Muni Income, 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.
Under the Declaration of Muni Income II, a trustee 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 holder of two-thirds of the votes
entitled to be cast for the election of trustees. Under the Bylaws of Muni
Income II, shareholder-requested special meeting of shareholders for any other
purpose shall be called by the Fund's Directors only upon the written request
of shareholders holding at least ten percent (10%) of the shares then
outstanding. If the Directors fail to call or give notice of any such meeting
for a period of thirty (30) days after written request by shareholders, then
shareholders holding at least ten percent (10%) of the shares then outstanding
may call and give notice of such meeting.
For each of National II and National, 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. For
Florida, the presence in person or by proxy of the holders of a majority of the
shares entitled to be cast constitutes a quorum at any meeting of shareholders
of the Portfolio. For each of National II, National and Florida, 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.
National II and National are each organized as a series of the same Maryland
corporation and thus their shareholders have the same rights due to them under
Maryland law. Florida is organized as a series of a Massachusetts business
trust and thus its shareholders have the rights due to them under the
Massachusettts 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, the Portfolios are
required to hold a shareholder meeting if, among other
56
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 Muni Income 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.
The Declaration of Muni Income II provides for the indemnification of
officers and directors, as applicable, against all liabilities, including but
not limited to amounts paid in satisfaction of judgments, in compromise or as
fines and penalties, and expenses, including reasonable accountants' and
counsel fees, incurred by any officers or directors in connection with the
defense or disposition of any action, suit or other proceeding, whether civil
or criminal, before any court or administrative or legislative body, in which
such person may be or may have been involved as a party or otherwise or with
which such person may be or may have been threatened, while in office or
thereafter, by reason of being or having been such a director or officer. 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.
57
APPENDIX H
FORM OF PLAN OF ACQUISITION AND LIQUIDATION
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND, INC.
WITH RESPECT TO ITS SERIES NATIONAL PORTFOLIO II
AND NATIONAL PORTFOLIO
As of
[ ], 2009
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 [ ],
2009, to provide for the reorganization of National Portfolio II (the "Acquired
Portfolio") into National 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
interests 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
58
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 Statements The audited financial statements of the relevant
Portfolio for 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 Registration
Statement The Registration Statement of the Acquiring Portfolio on
Form N-14 under the 1940 Act that will register the
Acquisition Shares to be issued in the Acquisition.
Valuation Time The close of regular session trading on the New York
Stock 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. Stockholder Action
As soon as practicable after the effective date of the N-14 Registration
Statement, the Acquired Portfolio shall hold a Stockholders meeting to consider
and approve the Acquisition and this Plan and such other matters as the Board
may determine. Such approval by the Stockholders of the Acquired Portfolio
shall, to the extent necessary to permit the consummation of the transactions
contemplated herein without violating any investment objective, policy or
restriction of the Acquired Portfolio, be deemed to constitute approval by the
Stockholders of a temporary amendment of any investment objective, policy or
restriction that would otherwise be inconsistent with or violated upon the
consummation of such transactions solely for the purpose of consummating such
transactions.
4. 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)
59
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, 2008 and for the short
taxable year beginning on January 1, 2009, 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 State Street Bank and Trust
Company, as custodian for the Acquiring Portfolio (the
60
"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.
5. 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 4(e)(1) of this Plan, to its
Class B Stockholders of record Class B Acquisition Shares received by
the Acquired Portfolio pursuant to Section 4(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 4(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.
6. Conditions to Consummation of the Acquisition
The consummation of the Acquisition shall be subject to the following
conditions precedent:
(a)The Stockholders of the Acquired Portfolio shall have approved the
Acquisition in the manner required by the Charter of the Corporation,
its Bylaws and applicable law. If Stockholders of the Acquired
61
Portfolio fail to approve the Acquisition as required, that failure
shall release the Portfolios of their obligations under this Plan.
(b)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.
(c)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 (c), 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 (c).
(d)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.
62
(e)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.
(f)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.
(g)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.
(h)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.
7. 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.
8. 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.
9. 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.
10.Expenses
The Acquisition expenses shall be borne by the Acquired Portfolio.
63
APPENDIX I
FORM OF AGREEMENT AND PLAN OF ACQUISITION BETWEEN
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND, INC.
AND ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
RELATING TO THE ACQUISITION OF THE ASSETS AND LIABILITIES OF
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II-FLORIDA PORTFOLIO
As of
[ ], 2009
This Agreement and Plan of Acquisition (the "Acquisition Plan") is made as
of this [ ] day of [ ] 2009, by and between National Portfolio
("Acquiring Portfolio"), a series of AllianceBernstein Municipal Income Fund,
Inc., a Maryland corporation ("Muni Income"), and Florida Portfolio (the
"Acquired Portfolio"), a series of AllianceBernstein Municipal Income Fund II,
a Massachusetts business trust ("Muni Income II").
WHEREAS, Acquiring Portfolio and the Acquired Portfolio (together, the
"Portfolios") are each a series of 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");
WHEREAS, the parties desire that the Acquired Portfolio transfer all of the
assets attributable to its Class A shares held by stockholders ("Stockholders")
in exchange for Class A shares of equal net asset value of Acquiring Portfolio
("Class A Acquisition Shares"), transfer all of the assets attributable to its
Class B shares held by Stockholders in exchange for Class B shares of equal net
asset value of Acquiring Portfolio ("Class B Acquisition Shares") and transfer
all of the assets attributable to its Class C shares held by Stockholders in
exchange for Class C shares of equal net asset value of Acquiring Portfolio
("Class C Acquisition Shares" and together with the Class A Acquisition Shares
and Class B Acquisition Shares, the "Acquisition Shares") and distribute the
Class A Acquisition Shares, Class B Acquisition Shares and Class C Acquisition
Shares to Stockholders of Class A, Class B and Class C, respectively, of the
Acquired Portfolio (the "Acquisition"); and
WHEREAS, the parties intend 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, Acquiring Portfolio and
the Acquired Portfolio will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code;
Now, therefore, Acquiring Portfolio and the Acquired Portfolio agree as
follows:
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 appropriate Effective Time 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
64
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 parties may agree.
Effective Time 5:00 p.m., Eastern time on the Closing Date, or such
other time as the parties may agree to in writing.
Financial Statement The audited financial statements of the relevant
Portfolio for its most recently completed fiscal year
and, if applicable, the unaudited financial statements
of that Portfolio for its most recently completed
semi-annual period.
Portfolio Acquiring Portfolio and/or the Acquired Portfolio, as
the case may be.
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 Registration
Statement The Registration Statement of Acquiring Portfolio on
Form N-14 under the 1940 Act that will register the
Acquisition Shares to be issued in the Acquisition and
will include the proxy materials necessary for the
Stockholders of the Acquired Portfolio to approve the
Acquisition.
Valuation Time The close of regular session trading on the New York
Stock Exchange ("NYSE") on the Closing Date, when for
purposes of the Acquisition Plan, Acquiring Portfolio
determines its net asset value per Acquisition Share and
the Acquired Portfolio determines the net value of the
Assets.
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
Acquiring Portfolio shall promptly prepare and file the N-14 Registration
Statement with the SEC, and Acquiring Portfolio and the Acquired Portfolio also
shall make any other required or appropriate filings with respect to the
actions contemplated hereby.
3. Stockholder Action
As soon as practicable after the effective date of the N-14 Registration
Statement, the Acquired Portfolio shall hold a Stockholders meeting to consider
and approve the Acquisition and this Acquisition Plan and such other matters as
the Board of Trustees may determine. Such approval by the Stockholders of the
Acquired Portfolio shall, to the extent necessary to permit the consummation of
the transactions contemplated herein without violating any investment
objective, policy or restriction of the Acquired Portfolio, be deemed to
constitute approval by the Stockholders of a temporary amendment of any
investment objective, policy or restriction that would otherwise be
inconsistent with, or violated upon, the consummation of such transactions
solely for the purpose of consummating such transactions.
4. Transfer of the Acquired Portfolio's Assets
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
65
which, together with all previous such dividends, shall have the effect
of distributing (i) all the excess of (A) Acquired Portfolio's
investment income excludable from gross income under Section 103(a) of
the Code over (B) Acquired Portfolio's deductions disallowed under
Sections 265 and 171(a)(2) of the Code, (ii) all of 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 (iii) all of Acquired Portfolio's net realized capital gain
(as defined in Code Section 1222), if any (after reduction for any
capital loss carryover), in each case for both the taxable year ending
on September 30, 2008, and for the short taxable year beginning on
October 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, pursuant to Articles of Transfer accepted for
record by the Secretary of the Commonwealth of Massachusetts, the
Acquired Portfolio shall assign, transfer, deliver and convey the Assets
to Acquiring Portfolio, subject to the Liabilities. 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 Acquiring Portfolio, and (ii) the
Liabilities at the Effective Time shall attach to Acquiring Portfolio,
and shall be enforceable against Acquiring Portfolio to the same extent
as if initially incurred by Acquiring Portfolio.
(d)Within a reasonable time prior to the Closing Date, the Acquired
Portfolio shall provide, if requested, a list of the Assets to 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 Acquiring Portfolio.
Within a reasonable time after receipt of the list and prior to the
Closing Date, Acquiring Portfolio will advise the Acquired Portfolio in
writing of any investments shown on the list that 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 Acquiring Portfolio determines that, as a result of the
Acquisition, Acquiring Portfolio would own an aggregate amount of an
investment that would exceed a percentage limitation applicable to
Acquiring Portfolio, 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 Acquiring Portfolio at the Effective Time on the following
basis:
(i)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, 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 parties may agree to in writing;
(ii)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 Acquiring Portfolio's then
applicable valuation procedures, and the net value of the Assets to
be conveyed to Acquiring Portfolio shall be determined as of the
Valuation Time in accordance with the then applicable valuation
procedures of the Acquired Portfolio; and
66
(iii)The portfolio securities of the Acquired Portfolio shall be made
available by the Acquired Portfolio to State Street Bank and Trust
Company, as custodian for 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 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 Acquiring Portfolio.
(f)Promptly after the Closing Date, the Acquired Portfolio will deliver to
Acquiring Portfolio a Statement of Assets and Liabilities of the
Acquired Portfolio as of the Closing Date.
5. Termination of the Acquired Portfolio, Registration of Acquisition Shares
and Access to Records
The Acquired Portfolio and 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
Stockholders of Class A of record Class A Acquisition Shares received by
the Acquired Portfolio pursuant to Section 4(e)(i) of this Acquisition
Plan; to its Stockholders of Class B of record Class B Acquisition
Shares received by the Acquired Portfolio pursuant to Section 4(e)(i) of
this Acquisition Plan; and to its Stockholders of Class C of record
Class C Acquisition Shares received by the Acquired Portfolio pursuant
to Section 4(e)(i) of this Acquisition Plan. 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 Acquisition Shares that former Acquired Portfolio
Stockholders are due based on their respective holdings of shares of the
Acquired Portfolio as of the close of business on the Closing Date.
Fractional Acquisition Shares shall be carried to the second decimal
place. Acquiring Portfolio shall not issue certificates representing the
Acquisition Shares in connection with such exchange. All issued and
outstanding Acquired Portfolio shares in connection with such exchange
will be simultaneously redeemed and cancelled on the books of the
Acquired Portfolio. Ownership of Acquisition Shares will be shown on the
books of 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
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.
67
6. Certain Representations and Warranties of the Acquired Portfolio
The Acquired Portfolio represents and warrants to Acquiring Portfolio as
follows:
(a)The Acquired Portfolio is a series of a business trust duly
incorporated, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts. The Acquired Portfolio is a series of
a business trust registered with the SEC as an open-end management
investment company under the 1940 Act and such registration will be in
full force and effect as of the Effective Time.
(b)The Acquired Portfolio has the power and all necessary federal, state
and local qualifications and authorizations to own all of the Assets, to
carry on its business, to enter into this Acquisition Plan and to
consummate the transactions contemplated herein.
(c)The Board of Trustees of the Acquired Portfolio has duly authorized the
execution and delivery of this Acquisition Plan and the transactions
contemplated herein. Duly authorized officers of the Acquired Portfolio
have executed and delivered this Acquisition Plan. This Acquisition Plan
represents a valid and binding contract, enforceable in accordance with
its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, arrangement, moratorium, and other similar laws of
general applicability relating to or affecting creditors' rights and to
general equity principles. The execution and delivery of this
Acquisition Plan does not, and, subject to the approval of Stockholders
referred to in Section 3 hereof, the consummation of the transactions
contemplated by this Acquisition Plan will not, violate Muni Income II's
Agreement and Declaration of Trust ("Declaration"), its Bylaws or any
material agreement to which the Acquired Portfolio is subject. Except
for the approval of its Stockholders, the Acquired Portfolio does not
need to take any other action to authorize its officers to effectuate
this Acquisition Plan and the transactions contemplated herein.
(d)The Acquired Portfolio has qualified as a regulated investment company
under Part I of Subchapter M of Subtitle A, Chapter 1, of the Code, in
respect of each taxable year since the commencement of its operations
and intends to continue to qualify as a regulated investment company for
its taxable year ending upon its liquidation.
(e)The information pertaining to the Acquired Portfolio included within the
N-14 Registration Statement when filed with the SEC, when Part A of the
N-14 Registration Statement is distributed to Stockholders at the time
of the Stockholder meeting of the Acquired Portfolio for approval of the
Acquisition and at the Effective Time, insofar as it relates to the
Acquired Portfolio, shall (i) comply in all material respects with the
applicable provisions of the 1933 Act and the 1940 Act, and the rules
and regulations thereunder and applicable state securities laws, and
(ii) not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements made therein not misleading.
(f)The Acquired Portfolio has duly authorized and validly issued all of its
issued and outstanding shares of common stock, and all such shares are
fully paid and non-assessable and were offered for sale and sold in
conformity with the registration requirements of all applicable federal
and state securities laws. There are no outstanding options, warrants or
other rights to subscribe for or purchase any of the shares of the
Acquired Portfolio, nor are there any securities convertible into shares
of the Acquired Portfolio.
(g)The Acquired Portfolio shall operate its business in the ordinary course
between the date hereof and the Effective Time. Such ordinary course of
business will include the declaration and payment of customary dividends
and distributions and any other dividends and distributions referred to
in Section 4(b) hereof.
(h)At the Effective Time, the Acquired Portfolio will have good and
marketable title to the Assets and full right, power and authority to
assign, transfer, deliver and convey the Assets.
(i)The Financial Statements of the Acquired Portfolio, a copy of which has
been previously delivered to Acquiring Portfolio, fairly present the
financial position of the Acquired Portfolio as of the Acquired
Portfolio's most recent fiscal year-end and the results of the Acquired
Portfolio's operations and changes in the Acquired Portfolio's net
assets for the periods indicated.
68
(j)To the knowledge of the Acquired Portfolio, the Acquired Portfolio has
no liabilities, whether or not determined or determinable, other than
the Liabilities disclosed or provided for in its Financial Statements or
Liabilities incurred in the ordinary course of business subsequent to
the date of the most recent Financial Statement referencing Liabilities.
(k)To the knowledge of the Acquired Portfolio, except as has been disclosed
in writing to Acquiring Portfolio, no claims, actions, suits,
investigations or proceedings of any type are pending or threatened
against the Acquired Portfolio or any of its properties or assets or any
person whom the Acquired Portfolio may be obligated to indemnify in
connection with such litigation, proceeding or investigation. Subject to
the foregoing, there are no facts that the Acquired Portfolio has reason
to believe are likely to form the basis for the institution of any such
claim, action, suit, investigation or proceeding against the Acquired
Portfolio. The Acquired Portfolio is not a party to nor subject to the
provisions of any order, decree or judgment of any court or governmental
body that adversely affects, or is reasonably likely to adversely
affect, its financial condition, results of operations, or the Assets or
its ability to consummate the transactions contemplated by the
Acquisition Plan.
(l)Except for agreements entered into or granted in the ordinary course of
its business, in each case under which no material default exists, and
this Acquisition Plan, the Acquired Portfolio is not a party to or
subject to any material contract or other commitments that, if
terminated, may result in material liability to the Acquired Portfolio
or under which (whether or not terminated) any material payment for
periods subsequent to the Closing Date will be due from the Acquired
Portfolio.
(m)The Acquired Portfolio has filed its federal income tax returns, copies
of which have been previously made available to Acquiring Portfolio, for
all taxable years for which such returns are due and has paid all taxes
payable pursuant to such returns. All of the Acquired Portfolio's tax
liabilities will have been adequately provided for on its books. No such
return is currently under audit and no unpaid assessment has been
asserted with respect to such returns. To the best of the Acquired
Portfolio's knowledge, it will not have any tax deficiency or liability
asserted against it or question with respect thereto raised, and it will
not be under audit by the Internal Revenue Service or by any state or
local tax authority for taxes in excess of those already paid. The
Acquired Portfolio will timely file its federal income tax return for
each subsequent taxable year including its current taxable year.
(n)For federal income tax purposes, the Acquired Portfolio qualifies as a
"regulated investment company," and the provisions of Sections 851
through 855 of the Code apply to the Acquired Portfolio for the
remainder of its current taxable year beginning October 1, 2008, and
will continue to apply through the Closing Date.
(o)Since the date of the Financial Statements of the Acquired Portfolio,
there has been no material adverse change in its financial condition,
results of operations, business, or Assets. For this purpose, negative
investment performance shall not be considered a material adverse change.
(p)The Acquired Portfolio's investment operations from inception to the
date hereof have been in compliance in all material respects with the
investment policies and investment restrictions set forth in its
prospectus or prospectuses and statement or statements of additional
information as in effect from time to time, except as previously
disclosed in writing to Acquiring Portfolio.
(q)The Acquisition Shares to be issued to the Acquired Portfolio pursuant
to Section 4(e)(i) will not be acquired for the purpose of making any
distribution thereof other than to the Acquired Portfolio Stockholders
as provided in Section 4(e)(i).
(r)The Acquired Portfolio, or its agents, (i) holds a valid Form W-8Ben,
Certificate of Foreign Status of Beneficial Owner for United States
Withholding (or other appropriate series of Form W-8, as the case may
be) or Form W-9, Request for Taxpayer Identification Number and
Certification, for each Acquired Portfolio Stockholder of record, which
Form W-8 or Form W-9 can be associated with reportable payments made by
the Acquired Portfolio to such Stockholder, and/or (ii) has otherwise
timely instituted the appropriate backup withholding procedures with
respect to such Stockholder as provided by Section 3406 of the Code and
the regulations thereunder.
69
7. Certain Representations and Warranties of Acquiring Portfolio
Acquiring Portfolio represents and warrants to the Acquired Portfolio as
follows:
(a)Acquiring Portfolio is a series of a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Maryland. Acquiring Portfolio is a series of a corporation registered
with the SEC as an open-end management investment company under the 1940
Act and such registration will be in full force and effect as of the
Effective Time.
(b)Acquiring Portfolio shall operate its business in the ordinary course
between the date hereof and the Effective Time. Such ordinary course of
business will include the declaration and payment of customary dividends
and distributions.
(c)Acquiring Portfolio has the power and all necessary federal, state and
local qualifications and authorizations to own all of its assets, to
carry on its business, to enter into this Acquisition Plan and to
consummate the transactions contemplated herein.
(d)The Board of Directors of Muni Income has duly authorized execution and
delivery of this Acquisition Plan and the transactions contemplated
herein. Duly authorized officers of Acquiring Portfolio have executed
and delivered the Acquisition Plan. The Acquisition Plan represents a
valid and binding contract, enforceable in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency, reorganization,
arrangement, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles. The execution and delivery of this Acquisition Plan does
not, and the consummation of the transactions contemplated by this
Acquisition Plan will not, violate the Charter of Muni Income, its
Bylaws or any material agreement to which Acquiring Portfolio is
subject. Except for the approval of its Board, Acquiring Portfolio does
not need to take any other action to authorize its officers to
effectuate the Acquisition Plan and the transactions contemplated herein.
(e)Acquiring Portfolio has qualified as a regulated investment company
under Part I of Subchapter M of Subtitle A, Chapter 1, of the Code in
respect of each taxable year since the commencement of its operations
and qualifies and intends to continue to qualify as a regulated
investment company for its current taxable year.
(f)The N-14 Registration Statement, when filed with the SEC, when Part A of
the N-14 Registration Statement is distributed to Stockholders at the
time of the Stockholder meeting of the Acquired Portfolio for approval
of the Acquisition and at the Effective Time, insofar as it relates to
Acquiring Portfolio, shall (i) comply in all material respects with the
applicable provisions of the 1933 Act and the 1940 Act, and the rules
and regulations thereunder and applicable state securities laws and
(ii) not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which
they were made, not misleading.
(g)Acquiring Portfolio has duly authorized and validly issued all issued
and outstanding shares of common stock of Acquiring Portfolio, and all
such shares are fully paid and non-assessable and were offered for sale
and sold in conformity with the registration requirements of all
applicable federal and state securities laws. Acquiring Portfolio has
duly authorized the Class A, Class B and Class C shares of Acquiring
Portfolio referred to in Section 4(e) hereof to be issued and delivered
to the Acquired Portfolio as of the Effective Time. When issued and
delivered, such Class A, Class B and Class C shares of Acquiring
Portfolio shall be validly issued, fully paid and non-assessable, and no
Stockholder of Acquiring Portfolio shall have any preemptive right of
subscription or purchase in respect of any such share. There are no
outstanding options, warrants or other rights to subscribe for or
purchase any Acquisition Shares, nor are there any securities
convertible into Acquisition Shares.
(h)To the knowledge of Acquiring Portfolio, except as has been disclosed in
writing to the Acquired Portfolio, no claims, actions, suits,
investigations or proceedings of any type are pending or threatened
70
against Acquiring Portfolio or any of its properties or assets or any
person whom Acquiring Portfolio may be obligated to indemnify in
connection with such litigation, proceeding or investigation. Subject to
the foregoing, there are no facts that Acquiring Portfolio currently has
reason to believe are likely to form the basis for the institution of
any such claim, action, suit, investigation or proceeding against
Acquiring Portfolio. Acquiring Portfolio is not a party to or subject to
the provisions of any order, decree or judgment of any court or
governmental body that adversely affects, or is reasonably likely to
adversely affect its financial condition, results of operations, its
assets or its ability to consummate the transactions contemplated by
this Acquisition Plan.
(i)Except for agreements entered into or granted in the ordinary course of
its business, in each case under which no material default exists,
Acquiring Portfolio is not a party to or subject to any material
contract, debt instrument, employee benefit plan, lease, franchise,
license or permit of any kind or nature whatsoever.
(j)Acquiring Portfolio has filed its federal income tax returns, copies of
which have been previously made available to the Acquired Portfolio, for
all taxable years for which such returns are due and has paid all taxes
payable pursuant to such returns. All of Acquiring Portfolio's tax
liabilities will have been adequately provided for on its books. No such
return is currently under audit and no unpaid assessment has been
asserted with respect to such returns. To the best of Acquiring
Portfolio's knowledge, it will not have any tax deficiency or liability
asserted against it or question with respect thereto raised, and it will
not be under audit by the Internal Revenue Service or by any state or
local tax authority for taxes in excess of those already paid. Acquiring
Portfolio will timely file its federal income tax return for each
subsequent taxable year including its current taxable year.
(k)For federal income tax purposes, Acquiring Portfolio qualifies as a
"regulated investment company," and the provisions of Sections 851
through 855 of the Code apply to Acquiring Portfolio for the remainder
of its current taxable year beginning August 1, 2007, and will continue
to apply through the Closing Date.
(l)The Financial Statements of Acquiring Portfolio, a copy of which has
been previously delivered to the Acquired Portfolio, fairly present the
financial position of Acquiring Portfolio at its most recent fiscal
year-end and the results of Acquiring Portfolio's operations and changes
in Acquiring Portfolio's net assets for the period indicated.
(m)Since the date of the Financial Statements of Acquiring Portfolio, there
has been no material adverse change in its financial condition, results
of operations, business or assets. Negative investment performance shall
not be considered a material adverse change.
(n)Acquiring Portfolio's investment operations from inception to the date
hereof have been in compliance in all material respects with the
investment policies and investment restrictions set forth in its
prospectus or prospectuses and statement or statements of additional
information as in effect from time to time, except as previously
disclosed in writing to the Acquired Portfolio.
(o)Acquiring Portfolio will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and
such other state securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.
8. Conditions to the Obligations of Acquiring Portfolio and the Acquired
Portfolio
The obligations of Acquiring Portfolio and the Acquired Portfolio with
respect to the Acquisition shall be subject to the following conditions
precedent:
(a)The Stockholders of the Acquired Portfolio shall have approved the
Acquisition in the manner required by the Charter of the Acquired
Portfolio, its Bylaws and applicable law. If Stockholders of the
Acquired Portfolio fail to approve the Acquisition as required, that
failure shall release the Portfolios of their obligations under this
Acquisition Plan.
71
(b)Acquiring Portfolio and the Acquired Portfolio shall have delivered to
the other party a certificate dated as of the Closing Date and executed
in its name by its Secretary or an Assistant Secretary, in a form
reasonably satisfactory to the receiving party, stating that the
representations and warranties of Acquiring Portfolio or the Acquired
Portfolio, as applicable, in this Acquisition Plan that apply to the
Acquisition are true and correct in all material respects at and as of
the Valuation Time.
(c)Acquiring Portfolio and the Acquired Portfolio shall have performed and
complied in all material respects with each of its representations and
warranties required by this Acquisition Plan to be performed or complied
with by it prior to or at the Valuation Time and the Effective Time.
(d)There shall have been no material adverse change in the financial
condition, results of operations, business, properties or assets of
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.
(e)Acquiring Portfolio and the Acquired Portfolio shall have received an
opinion of Seward & Kissel LLP reasonably satisfactory to each of them,
substantially to the effect that for federal income tax purposes:
(i)the Acquisition will constitute a "reorganization" within the meaning
of Section 368(a) of the Code and that Acquiring Portfolio and the
Acquired Portfolio will each be "a party to a reorganization" within
the meaning of Section 368(b) of the Code;
(ii)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;
(iii)neither the Acquired Portfolio nor Acquiring Portfolio will recognize
any gain or loss upon the transfer of all of the Assets to Acquiring
Portfolio in exchange for Acquisition Shares and the assumption by
Acquiring Portfolio of the Liabilities pursuant to this Acquisition
Plan or upon the distribution of Acquisition Shares to Stockholders
of the Acquired Portfolio in exchange for their respective shares of
the Acquired Portfolio;
(iv)the holding period and tax basis of the Assets acquired by 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;
(v)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;
(vi)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
(vii)Acquiring Portfolio will succeed to the capital loss carryovers of
the Acquired Portfolio, if any, under Section 381 of the Code, but
the use by Acquiring Portfolio of any such capital loss carryovers
(and of capital loss carryovers of Acquiring Portfolio) may be
subject to limitation under Section 383 of the Code.
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 (e), 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
72
income tax principles. Each Portfolio shall agree to make and 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
Acquisition Plan to the contrary, neither Portfolio may waive in any
material respect the conditions set forth under this subparagraph (e).
(f)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 Acquiring Portfolio, is not
contemplating instituting any stop order suspending the effectiveness of
the N-14 Registration Statement.
(g)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.
(h)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.
(i)Neither party shall have terminated this Acquisition Plan with respect
to the Acquisition pursuant to Section 13 of this Acquisition Plan.
9. Conditions to the Obligations of the Acquired Portfolio
The obligations of the Acquired Portfolio with respect to the Acquisition
shall be subject to the following conditions precedent:
(a)The Acquired Portfolio shall have received an opinion of Seward & Kissel
LLP, counsel to Acquiring Portfolio, in form and substance reasonably
satisfactory to the Acquired Portfolio and dated as of the Closing Date,
substantially to the effect that:
(i)Acquiring Portfolio is a series of a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Maryland and is a series of an open-end, management investment
company registered under the 1940 Act;
(ii)This Acquisition Plan has been duly authorized, executed and
delivered by Acquiring Portfolio and, assuming the N-14 Registration
Statement referred to in Section 2 of this Acquisition Plan does not
contain any material misstatements or omissions, and assuming due
authorization, execution and delivery of this Acquisition Plan by the
Acquired Portfolio, represents a legal, valid and binding contract,
enforceable in accordance with its terms, subject to the effect of
bankruptcy, insolvency, moratorium, fraudulent conveyance and
transfer and similar laws relating to or affecting creditors' rights
generally and court decisions with respect thereto, and further
subject to the application of equitable principles in any proceeding,
whether at law or in equity or with respect to the enforcement of
provisions of this Acquisition Plan and the effect of judicial
decisions which have held that certain provisions are unenforceable
when their enforcement would violate an implied covenant of good
faith and fair dealing or would be commercially unreasonable or when
default under this Acquisition Plan is not material;
(iii)The Class A, Class B and Class C Acquisition Shares to be delivered
as provided for by this Acquisition Plan are duly authorized and upon
delivery will be validly issued, fully paid and non-assessable by
Acquiring Portfolio;
(iv)The execution and delivery of this Acquisition Plan did not, and the
consummation of the Acquisition will not, violate the Charter of Muni
Income, its Bylaws or any agreement of Acquiring Portfolio known to
such counsel, after reasonable inquiry, and no approval of the
Acquisition Plan by the Stockholders of Acquiring Portfolio is
required under Muni Income's Charter, Bylaws or applicable law; and
73
(v)To the knowledge of such counsel, no consent, approval, authorization
or order of any federal or state court or administrative or
regulatory agency, other than the acceptance of record of Articles of
Transfer by the Secretary of the Commonwealth of Massachusetts, is
required for Acquiring Portfolio to enter into this Acquisition Plan
or carry out its terms, except those that have been obtained under
the 1933 Act, the 1940 Act and the rules and regulations under those
Acts or that may be required under state securities laws or
subsequent to the Effective Time or when the failure to obtain the
consent, approval, authorization or order would not have a material
adverse effect on the operation of Acquiring Portfolio.
In rendering such opinion, Seward & Kissel LLP may (i) rely on the
opinion of Venable LLP as to matters of Maryland law to the extent set
forth in such opinion, (ii) make assumptions regarding the authenticity,
genuineness and/or conformity of documents and copies thereof without
independent verification thereof, (iii) limit such opinion to applicable
federal and state law, (iv) define the word "knowledge" and related
terms to mean the knowledge of attorneys then with such firm who have
devoted substantive attention to matters directly related to this
Acquisition Plan and (v) rely on certificates of officers or directors
of Acquiring Portfolio as to factual matters.
(b)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.
10.Conditions to the Obligations of Acquiring Portfolio
The obligations of Acquiring Portfolio with respect to the Acquisition shall
be subject to the following conditions precedent:
(a)Acquiring Portfolio shall have received an opinion of Seward & Kissel
LLP, counsel to the Acquired Portfolio, in form and substance reasonably
satisfactory to Acquiring Portfolio and dated as of the Closing Date,
substantially to the effect that:
(i)The Acquired Portfolio is a series of a business trust duly
incorporated, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts and is a series of an open-end
management investment company registered under the 1940 Act;
(ii)This Acquisition Plan has been duly authorized, executed and
delivered by the Acquired Portfolio and, assuming the N-14
Registration Statement referred to in Section 2 of this Acquisition
Plan does not contain any material misstatements or omissions, and
assuming due authorization, execution and delivery of this
Acquisition Plan by Acquiring Portfolio, represents a legal, valid
and binding contract, enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, moratorium,
fraudulent conveyance and transfer and similar laws relating to or
affecting creditors' rights generally and court decisions with
respect thereto, and further subject to the application of equitable
principles in any proceeding, whether at law or in equity or with
respect to the enforcement of provisions of this Acquisition Plan and
the effect of judicial decisions which have held that certain
provisions are unenforceable when their enforcement would violate an
implied covenant of good faith and fair dealing or would be
commercially unreasonable or when default under this Acquisition Plan
is not material;
(iii)The execution and delivery of this Acquisition Plan did not, and the
consummation of the Acquisition will not, violate the Agreement and
Declaration of Trust ("Declaration") of Muni Income II, its Bylaws or
any agreement of the Acquired Portfolio known to such counsel, after
reasonable inquiry; and
(iv)To the knowledge of such counsel, no consent, approval, authorization
or order of any federal or state court or administrative or
regulatory agency, other than the acceptance of record of Articles of
Transfer by the Secretary of the Commonwealth of Massachusetts, is
required for the Acquired Portfolio to enter into this Acquisition
Plan or carry out its terms, except those that have been obtained
under the 1933 Act, the 1940 Act and the rules and regulations under
those Acts or that
74
may be required under state securities laws or subsequent to the
Effective Time or when the failure to obtain the consent, approval,
authorization or order would not have a material adverse effect on
the operation of the Acquired Portfolio.
In rendering such opinion, Seward & Kissel LLP may (i) make assumptions
regarding the authenticity, genuineness and/or conformity of documents
and copies thereof without independent verification thereof, (ii) limit
such opinion to applicable federal and state law, (iii) define the word
"knowledge" and related terms to mean the knowledge of attorneys then
with such firm who have devoted substantive attention to matters
directly related to this Acquisition Plan and (iv) rely on certificates
of officers or directors of the Acquired Portfolio as to factual matters.
(b)Acquiring Portfolio shall have received a letter from the Adviser
agreeing to indemnify Acquiring Portfolio in respect of certain
liabilities of the Acquired Portfolio in form and substance satisfactory
to Acquiring Portfolio.
11.Closing
(a)The Closing shall be held at the offices of the Portfolios, 1345 Avenue
of the Americas, New York, New York 10105, or at such other time or
place as the parties may agree.
(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 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 Acquisition Plan may be terminated by either the Acquired Portfolio
or Acquiring Portfolio upon the giving of written notice to the other
party.
(c)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 Acquiring Portfolio. After the
Closing Date, 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 the
Acquisition Plan.
12.Survival of Representations and Warranties
No representations, warranties or covenants in or pursuant to this
Acquisition Plan (including certificates of officers) hereto shall survive the
completion of the transactions contemplated herein.
13.Termination of Acquisition Plan
A majority of either Muni Income's Board of Directors or Muni Income II's
Board of Trustees may terminate this Acquisition Plan with respect to that
Portfolio at any time before the applicable Effective Time if: (a) the
Portfolio's conditions precedent set forth in Sections 8, 9 or 10 as
appropriate, are not satisfied; or (b) the Board of Directors determines that
the consummation of the Acquisition is not in the best interests of the
Portfolio or its Stockholders and gives notice of such termination to the other
party.
14.Governing Law
This Acquisition Plan and the transactions contemplated hereby shall be
governed, construed and enforced in accordance with the laws of the State of
New York, except to the extent preempted by federal law, without regard to
conflicts of law principles.
75
15.Brokerage Fees
Each party represents and warrants that there are no brokers or finders
entitled to receive any payments in connection with the transactions provided
for in this Acquisition Plan.
16.Amendments
The parties may, by agreement in writing authorized by their respective
Board of Directors, amend this Acquisition Plan at any time before or after the
Stockholders of the Acquired Portfolio approve the Acquisition. However, after
Stockholders of the Acquired Portfolio approve the Acquisition, the parties may
not amend this Acquisition Plan in a manner that materially alters the
obligations of the other party. This Section shall not preclude the parties
from changing the Closing Date or the Effective Time by mutual agreement.
17.Waivers
At any time prior to the Closing Date, either party may by written
instrument signed by it (a) waive the effect of any inaccuracies in the
representations and warranties made to it contained herein and (b) waive
compliance with any of the agreements, covenants or conditions made for its
benefit contained herein. Any waiver shall apply only to the particular
inaccuracy or requirement for compliance waived, and not any other or future
inaccuracy or lack of compliance.
18.Indemnification of Directors
Acquiring Portfolio agrees that all rights to indemnification and all
limitations of liability existing in favor of the Acquired Portfolio's current
and former Directors and officers, acting in their capacities as such, under
the Acquired Portfolio's Charter and Bylaws as in effect as of the date of this
Acquisition Plan shall survive the Acquisition as obligations of Acquiring
Portfolio and shall continue in full force and effect, without any amendment
thereto, and shall constitute rights which may be asserted against Acquiring
Portfolio, its successors or assigns.
19.Cooperation and Further Assurances
Each party will cooperate with the other in fulfilling its obligations under
this Acquisition Plan and will provide such information and documentation as is
reasonably requested by the other in carrying out this Acquisition Plan's
terms. Each party will provide such further assurances concerning the
performance of its obligations hereunder and execute all documents for or in
connection with the consummation of the Acquisition as, with respect to such
assurances or documents, the other shall deem necessary or appropriate.
20.Updating of N-14 Registration Statement
If at any time prior to the Effective Time, a party becomes aware of any
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements made not
misleading in the N-14 Registration Statement, the party discovering the item
shall notify the other party and the parties shall cooperate in promptly
preparing, filing and clearing with the SEC and, if appropriate, distributing
to Stockholders appropriate disclosure with respect to the item.
21.Limitation on Liabilities
The obligations of the Acquired Portfolio and Acquiring Portfolio shall not
bind any of the directors or trustees, Stockholders, nominees, officers,
agents, employees or agents of the Acquired Portfolio or Acquiring Portfolio
personally, but shall bind only the Acquired Portfolio or Acquiring Portfolio,
as appropriate. The execution and delivery of this Acquisition Plan by an
officer of either party shall not be deemed to have been made by the officer
individually or to impose any liability on the officer personally, but shall
bind only the Acquired Portfolio or Acquiring Portfolio, as appropriate.
76
22.Termination of the Acquired Portfolio
If the parties complete the Acquisition, the Acquired Portfolio shall
terminate its registration under the 1940 Act and the 1933 Act and will
terminate.
23.Notices
Any notice, report, statement, certificate or demand required or permitted
by any provision of this Acquisition Plan shall be in writing and shall be
given in person or by telecopy, certified mail or overnight express courier to:
For the Acquired Portfolio:
AllianceBernstein Municipal Income Fund II - Florida Portfolio
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
For Acquiring Portfolio:
AllianceBernstein Municipal Income Fund, Inc. - National Portfolio
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
24.Expenses
The Acquisition expenses shall be paid by the Acquired Portfolio.
25.General
This Acquisition Plan supersedes all prior agreements between the parties
with respect to the subject matter hereof and may be amended only in writing
signed by both parties. The headings contained in this Acquisition Plan are for
reference only and shall not affect in any way the meaning or interpretation of
this Acquisition Plan. Whenever the context so requires, the use in this
Acquisition Plan of the singular will be deemed to include the plural and vice
versa. Nothing in this Acquisition Plan, expressed or implied, confers upon any
other person any rights or remedies under or by reason of this Acquisition
Plan. Neither party may assign or transfer any right or obligation under this
Acquisition Plan without the written consent of the other party.
In Witness Whereof, the parties hereto have executed this Acquisition Plan
as of the day and year first above written.
AllianceBernstein Municipal Income Fund II - Florida Portfolio
Attest:
By:
- --------------------------------------------- -------------------------------------------
Name: Name:
------------------------------------ -----------------------------------
Title: Title:
------------------------------------ -----------------------------------
77
AllianceBernstein Municipal Income Fund, Inc. - National Portfolio
Attest:
By:
- --------------------------------------------- -------------------------------------------
Name: Name:
------------------------------------ -----------------------------------
Title: Title:
------------------------------------ -----------------------------------
78
APPENDIX J
CAPITALIZATION
The following table shows on an unaudited basis the capitalization of each
Portfolio as of February 6, 2009 and on a pro forma combined basis, giving
effect to the acquisition of the assets and liabilities of National II by
National, of Florida by National, and of both National II and Florida by
National, in each case, at net asset value as of February 6, 2009.
Pro Forma
Combined of
National II
Pro Forma into Pro Forma
National II Florida National Adjustments National/(1)/ Adjustments
------------ ------------ ------------ ----------- ------------ -----------
Class A
- -------
Net Asset Value $128,492,989 $110,109,101 $390,375,523 -- $518,868,512 --
Shares outstanding 13,277,854 11,997,535 43,258,781 971,550/(2)/ 57,508,185 212,817/(3)/
Net asset value per share $ 9.68/(4)/ $ 9.18/(4)/ $ 9.02 -- $ 9.02 --
Class B
- -------
Net Asset Value $ 3,717,937 $ 9,435,211 $ 13,911,433 -- $ 17,629,370 --
Shares outstanding 385,169 1,027,679 1,543,253 27,359/(2)/ 1,955,781 19,390/(3)/
Net asset value per share $ 9.65/(4)/ $ 9.18/(4)/ $ 9.01 -- $ 9.01 --
Class C
- -------
Net Asset Value $ 18,472,250 $ 26,886,539 $ 70,695,267 -- $ 89,167,517 --
Shares outstanding 1,913,280 2,927,897 7,840,383 133,633/(2)/ 9,887,296 51,936/(3)/
Net asset value per share $ 9.65/(4)/ $ 9.18/(4)/ $ 9.02 -- $ 9.02 --
Advisor Class
- -------------
Net Asset Value N/A/(5)/ N/A/(5)/ $ 2,016,201 -- $ 2,016,201 $ --
Shares outstanding N/A/(5)/ N/A/(5)/ 223,516 0 223,516 0
Net asset value per share N/A/(5)/ N/A/(5)/ $ 9.02 -- $ 9.02
Pro Forma Total
Combined of Pro Forma
Florida Combined of
into Pro Forma All
National/(1)/ Adjustments Portfolios/(1)/
------------ ----------- --------------
Class A
- -------
Net Asset Value $500,484,624 -- $628,977,613
Shares outstanding 55,469,133 1,184,367/(2)(3)/ 69,718,537
Net asset value per share $ 9.02 -- $ 9.02
Class B
- -------
Net Asset Value $ 23,346,644 -- $ 27,064,581
Shares outstanding 2,590,322 46,750/(2)(3)/ 3,002,851
Net asset value per share $ 9.01 -- $ 9.01
Class C
- -------
Net Asset Value $ 97,581,806 -- $116,054,056
Shares outstanding 10,820,216 185,569/(2)(3)/ 12,867,129
Net asset value per share $ 9.02 -- $ 9.02
Advisor Class
- -------------
Net Asset Value $ 2,016,201 $ -- $ 2,016,201
Shares outstanding 223,516 0 223,516
Net asset value per share $ 9.02 $ 9.02
- --------
(1)Assumes the Acquisition was consummated on February 6, 2009 and is for
information purposes only. No assurance can be given as to how many shares
of National will be received by the shareholders of National II and Florida
on the date the Acquisition takes place, and the foregoing should not be
relied upon to reflect the number of shares of National that actually will
be received on or after such date.
(2)In connection with the Acquisition, shares of National will be issued to the
shareholders of National II. The number of shares assumed to be issued is
equal to the net asset value of National II divided by the net asset value
per share of National as of February 6, 2009.
(3)In connection with the Acquisition, shares of National will be issued to the
shareholders of Florida. The number of shares assumed to be issued is equal
to the net asset value of Florida divided by the net asset value per share
of National as of February 6, 2009.
(4)Costs associated with the Acquisitions in the amounts of $137,000 and
$139,000 were borne by National II and Florida, respectively, and are
reflected in the NAV of National II and Florida as of February 6, 2009.
(5)There are currently no Advisory Class Shares offered on National II and
Florida.
79
APPENDIX K
LEGAL PROCEEDINGS
On October 2, 2003, a purported class action complaint entitled Hindo et al.
v. AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was
filed against the Adviser; AllianceBernstein Holding L.P. ("Holding");
AllianceBernstein Corporation; AXA Financial, Inc.; certain of the
AllianceBernstein Mutual 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, Sections
10(b) and 20(a) of the Securities Exchange Act of 1934, and Sections 206 and
215 of the Investment Advisers Act of 1940. 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. 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
Commission dated December 18, 2003 as amended and restated January 15, 2004 and
the New York State Attorney General Assurance of Discontinuation dated
September 1, 2004.
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 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 the Adviser 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 a Portfolio's shares or
other adverse consequences to a Portfolio. This may require the Portfolios to
sell investments to provide for sufficient liquidity and could also have an
adverse effect on the investment performance of the Portfolios. However, the
Adviser believes that these matters are not likely to have a material adverse
effect on its ability to perform advisory services relating to the Portfolios.
80
APPENDIX L
SHARE OWNERSHIP INFORMATION
Shares Outstanding
As of February 6, 2009, each Portfolio had the following number of shares of
common stock outstanding.
Number of Outstanding
Shares of
Fund Class Common Stock
---- ------- ---------------------
National II A 13,250,318.664
B 385,168.852
C 1,893,974.874
Florida A 11,997,643.787
B 1,027,678.939
C 2,925,395.296
National A 43,251,521.764
B 1,548,247.542
C 7,816,744.906
Advisor 220,570.343
Ownership of Shares
As of February 6, 2009, the Directors and officers of Muni Income as a group
beneficially owned approximately 1.19% of the outstanding shares of common
stock of National and less than 1% of the outstanding shares of common stock of
National II. As of February 6, 2009, the Trustees and officers of Muni Income
II as a group beneficially owned less than 1% of the outstanding shares of
common stock of Florida. To the knowledge of each Portfolio, the following
table shows the persons owning, as of As of February 6, 2009, 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
Acquisitions had been consummated as of that date.
Percentage of
Number of Percentage of Outstanding
Outstanding Outstanding Shares of
Portfolio and Name and Address Shares of Shares of Combined Portfolio
Class of Shareholder Class Owned Class Owned Class Owned
- ------------- ----------------------------------------------- ----------- ------------- ------------------
National II
Class A First Clearing, LLC 838,482 6.31% 1.29%
Special Custody Acct for the Exclusive Benefit
of Customer
10750 Wheat First Dr.
Glen Allen, VA 23060-9243
Pershing LLC 948,091 7.14% 1.46%
P.O. Box 2052
Jersey City, NJ 07303-2052
MLPF&S 1,147,675 8.64% 1.77%
For the Sole Benefit of its Customers
Attn: Fund Admin.
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
81
Percentage of
Number of Percentage of Outstanding
Outstanding Outstanding Shares of
Portfolio and Name and Address Shares of Shares of Combined Portfolio
Class of Shareholder Class Owned Class Owned Class Owned
- ------------- ----------------------------------------------- ----------- ------------- ------------------
Class B First Clearing, LLC 33,573 8.72% 1.20%
Special Custody Acct for the Exclusive Benefit
of Customer
10750 Wheat First Dr.
Glen Allen, VA 23060-9243
MLPF&S 64,319 16.70% 2.29%
For the Sole Benefit of its Customers
Attn: Fund Admin.
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Citigroup Global Markets 43,159 11.21% 1.54%
House Account
Attn: Cindy Tempesta
333 W. 34th St., FL 3
New York, NY 10001-2402
Pershing LLC 28,069 7.29% 1.00%
P.O. Box 2052
Jersey City, NJ 07303-2052
Edward D Jones & Co. 19,375 5.03% 0.69%
Attn: Mutual Fund Shareholder Acctg.
201 Progress Pkwy.
Maryland Hts, MO 63043-3009
Class C MLPF&S 828,010 43.43% 6.91%
For the Sole Benefit of its Customers
Attn: Fund Admin.
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Citigroup Global Markets 110,234 5.78% 0.92%
House Account
Attn: Cindy Tempesta
333 W. 34th St., FL 3
New York, NY 10001-2402
Pershing LLC 95,524 5.01% 0.80%
P.O. Box 2052
Jersey City, NJ 07303-2052
Florida
Class A First Clearing, 1,474,356 12.28% 2.15%
LLC Special Custody Acct for the Exclusive
Benefit of Customer
10750 Wheat First Dr.
Glen Allen, VA 23060-9243
82
Percentage of
Number of Percentage of Outstanding
Outstanding Outstanding Shares of
Portfolio and Name and Address Shares of Shares of Combined Portfolio
Class of Shareholder Class Owned Class Owned Class Owned
- ------------- ----------------------------------------------- ----------- ------------- ------------------
Citigroup Global Markets 952,890 7.94% 1.39%
House Account
Attn: Cindy Tempesta
333 W. 34th St., FL 3
New York, NY 10001-2402
MLPF&S 1,081,766 9.01% 1.58%
For the Sole Benefit of its Customers
Attn: Fund Admin.
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Class B First Clearing, LLC 160,411 15.61% 5.43%
Special Custody Acct for the Exclusive Benefit
of Customer
10750 Wheat First Dr.
Glen Allen, VA 23060-9243
MLPF&S 98,098 9.55% 3.32%
For the Sole Benefit of its Customers
Attn: Fund Admin.
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Citigroup Global Markets 74,379 7.24% 2.52%
House Account
Attn: Cindy Tempesta
333 W. 34th St., FL 3
New York, NY 10001-2402
Pershing LLC 107,002 10.41% 3.62%
P.O. Box 2052
Jersey City, NJ 07303-2052
Class C First Clearing, LLC 178,148 6.08% 1.41%
Special Custody Acct for the Exclusive Benefit
of Customer
10750 Wheat First Dr.
Glen Allen, VA 23060-9243
MLPF&S 854,586 29.17% 6.78%
For the Sole Benefit of its Customers
Attn: Fund Admin.
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Pershing LLC 300,621 10.26% 2.39%
P.O. Box 2052
Jersey City, NJ 07303-2052
Morgan Stanley & Co. 247,765 8.46% 1.97%
Harborside Financial Center
Plaza II 3rd FL
Jersey City, NJ 07311
83
Percentage of
Number of Percentage of Outstanding
Outstanding Outstanding Shares of
Portfolio and Name and Address Shares of Shares of Combined Portfolio
Class of Shareholder Class Owned Class Owned Class Owned
- ------------- ----------------------------------------------- ----------- ------------- ------------------
AG Edwards & Sons Inc. 264,317 9.02% 2.10%
Omnibus Account
One North Jefferson
St Louis, MO 63103
National
Class A Pershing LLC 2,962,131 6.85% 4.25%
P.O. Box 2052
Jersey City, NJ 07303-2052
MLPF&S 3,957,034 9.15% 5.68%
For the Sole Benefit of its Customers
Attn: Fund Admin.
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Class B First Clearing, LLC 199,773 12.90% 6.64%
Special Custody Acct for the Exclusive Benefit
of Customer
10750 Wheat First Dr.
Glen Allen, VA 23060-9243
MLPF&S 282,073 18.21% 9.38%
For the Sole Benefit of its Customers
Attn: Fund Admin.
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Pershing LLC 180,163 11.63% 5.99%
P.O. Box 2052
Jersey City, NJ 07303-2052
Class C First Clearing, LLC 627,887 8.00% 4.90%
Special Custody Acct for the Exclusive Benefit
of Customer
10750 Wheat First Dr.
Glen Allen, VA 23060-9243
MLPF&S 2,834,076 36.12% 22.11%
For the Sole Benefit of its Customers
Attn: Fund Admin.
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Pershing LLC 564,778 7.20% 4.41%
P.O. Box 2052
Jersey City, NJ 07303-2052
Advisor Citigroup Global Markets 83,931 37.03% 37.03%
Class House Account
333 W. 34th St., 3rd FL
New York, NY 10001-2402
84
Percentage of
Number of Percentage of Outstanding
Outstanding Outstanding Shares of
Portfolio and Name and Address Shares of Shares of Combined Portfolio
Class of Shareholder Class Owned Class Owned Class Owned
- ------------- --------------------------- ----------- ------------- ------------------
Pershing LLC 90,342 39.86% 39.86%
P.O. Box 2052
Jersey City, NJ 07303-2052
LPL Financial 41,152 18.16% 18.16%
9785 Towne Centre Dr.
San Diego, CA 92121-1968
85
APPENDIX M
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 the Portfolios 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 are available upon request.
National II - Class A
Year Ended October 31,
---------------------------------------------------------------
2008 2007 2006 2005 2004**
---------------------------------------------------------------
Fiscal Year or Period
Net asset value, beginning of period.................. $ 10.11 $ 10.27 $ 10.18 $ 10.29 $ 10.11
-------- -------- -------- -------- --------
Income From Investment Operations
Net investment income+(a)............................. .39 .41 .41 .42 .44
Net gains or losses on investments (both realized and
unrealized).......................................... (.59) (.17) .09 (.11) .20
-------- -------- -------- -------- --------
Total from investment operations...................... (.20) .24 .50 .31 .64
-------- -------- -------- -------- --------
Less Dividends and Distributions
Dividends from net investment income.................. (.38) (.40) (.41) (.42) (.46)
Distributions from capital gains...................... 0.00 0.00 0.00 0.00 0.00
Less Distributions
Total dividends and distributions..................... (.38) (.40) (.41) (.42) (.46)
-------- -------- -------- -------- --------
Net asset value, end of period........................ $ 9.53 $ 10.11 $ 10.27 $ 10.18 $ 10.29
======== ======== ======== ======== ========
Total return(b)....................................... (2.05)% 2.42% 4.98% 3.05% 6.42%
Net assets, end of period (000s omitted).............. $125,910 $116,843 $124,967 $124,957 $129,888
Ratios/Supplemental Data
Ratio of expenses to average net assets*............ 1.04%(c) 1.04%(c) 1.04%(c)(d) 1.04%(c) 1.03%(c)
Ratio of net income (loss) to average net assets+... 3.87% 4.00% 4.00%(d) 4.07% 4.28%
Portfolio turnover rate............................... 29% 12% 10% 17% 12%
- --------
Please refer to the footnotes on page 90 through 91.
86
National II - Class B
Year Ended October 31,
--------------------------------------------------------
2008 2007 2006 2005 2004**
--------------------------------------------------------
Fiscal Year or Period
Net asset value, beginning of period.................. $10.09 $10.25 $ 10.15 $ 10.26 $ 10.09
------ ------ ------- ------- -------
Income From Investment Operations
Net investment income+(a)............................. .31 .34 .34 .35 .36
Net gains or losses on investments (both realized and
unrealized).......................................... (.58) (.17) .10 (.11) .19
------ ------ ------- ------- -------
Total from investment operations...................... (.27) .17 .44 .24 .55
------ ------ ------- ------- -------
Less Dividends and Distributions
Dividends from net investment income.................. (.31) (.33) (.34) (.35) (.38)
Distributions from capital gains...................... 0.00 0.00 0.00 0.00 0.00
Less Distributions
Total dividends and distributions..................... (.31) (.33) (.34) (.35) (.38)
------ ------ ------- ------- -------
Net asset value, end of period........................ $ 9.51 $10.09 $ 10.25 $ 10.15 $ 10.26
====== ====== ======= ======= =======
Total return(b)....................................... (2.72)% 1.72% 4.36% 2.34% 5.60%
Net assets, end of period (000s omitted).............. $3,450 $6,449 $11,477 $16,375 $22,968
Ratios/Supplemental Data
Ratio of expenses to average net assets*............ 1.74%(c) 1.74%(c) 1.74%(c)(d) 1.74%(c) 1.74%(c)
Ratio of net income (loss) to average net assets+... 3.17% 3.31% 3.32%(d) 3.39% 3.58%
Portfolio turnover rate............................... 29% 12% 10% 17% 12%
National II - Class C
Year Ended October 31,
----------------------------------------------------------
2008 2007 2006 2005 2004**
----------------------------------------------------------
Fiscal Year or Period
Net asset value, beginning of period.................. $ 10.09 $ 10.25 $ 10.16 $ 10.27 $ 10.09
------- ------- ------- ------- -------
Income From Investment Operations
Net investment income+(a)............................. .32 .34 .34 .35 .37
Net gains or losses on investments (both realized and
unrealized).......................................... (.59) (.17) .09 (.11) .19
------- ------- ------- ------- -------
Total from investment operations...................... (.27) .17 .43 .24 .56
------- ------- ------- ------- -------
Less Dividends and Distributions
Dividends from net investment income.................. (.31) (.33) (.34) (.35) (.38)
Distributions from capital gains...................... 0.00 0.00 0.00 0.00 0.00
Less Distributions
Total dividends and distributions..................... (.31) (.33) (.34) (.35) (.38)
------- ------- ------- ------- -------
Net asset value, end of period........................ $ 9.51 $ 10.09 $ 10.25 $ 10.16 $ 10.27
======= ======= ======= ======= =======
Total return(b)....................................... (2.74)% 1.71% 4.26% 2.34% 5.71%
Net assets, end of period (000s omitted).............. $12,932 $10,872 $11,277 $11,732 $12,198
Ratios/Supplemental Data
Ratio of expenses to average net assets*............ 1.74%(c) 1.74%(c) 1.74%(c)(d) 1.74%(c) 1.73%(c)
Ratio of net income (loss) to average net assets+... 3.17% 3.31% 3.31%(d) 3.38% 3.59%
Portfolio turnover rate............................... 29% 12% 10% 17% 12%
- --------
Please refer to the footnotes on page 90 through 91.
87
Florida - Class A
Year Ended September 30,
---------------------------------------------------------------
2008 2007 2006 2005 2004**
---------------------------------------------------------------
Fiscal Year or Period
Net asset value, beginning of period.................. $ 10.15 $ 10.32 $ 10.28 $ 10.25 $ 10.17
-------- -------- -------- -------- --------
Income From Investment Operations
Net investment income+(a)............................. .44 .45 .46 .47 .49
Net gains or losses on investments (both realized and
unrealized).......................................... (.84) (.17) .04 .03 .08
-------- -------- -------- -------- --------
Total from investment operations...................... (.40) .28 .50 .50 .57
-------- -------- -------- -------- --------
Less Dividends and Distributions
Dividends from net investment income.................. (.45) (.45) (.46) (.47) (.49)
Distributions from capital gains...................... 0.00 0.00 0.00 0.00 0.00
Less Distributions
Total dividends and distributions..................... (.45) (.45) (.46) (.47) (.49)
-------- -------- -------- -------- --------
Net asset value, end of period........................ $ 9.30 $ 10.15 $ 10.32 $ 10.28 $ 10.25
======== ======== ======== ======== ========
Total return(b)....................................... (4.16)% 2.80% 5.00% 5.01% 5.78%
Net assets, end of period (000s omitted).............. $118,868 $134,989 $138,307 $127,541 $101,529
Ratios/Supplemental Data
Ratio of expenses to average net assets*............ .78%(e) .78%(e) .78%(d)(e) .78%(e) .78%(e)
Ratio of net income (loss) to average net assets+... 4. 44% 4.43% 4.51%(d) 4.60% 4.83%
Portfolio turnover rate............................... 29% 23% 27% 23% 22%
Florida - Class B
Year Ended September 30,
----------------------------------------------------------
2008 2007 2006 2005 2004**
------- ------- ------- ------- -------
Fiscal Year or Period
Net asset value, beginning of period.................. $ 10.16 $ 10.32 $ 10.29 $ 10.26 $ 10.18
------- ------- ------- ------- -------
Income From Investment Operations
Net investment income+(a)............................. .37 .38 .39 .40 .42
Net gains or losses on investments (both realized and
unrealized).......................................... (.84) (.16) .03 .03 .08
------- ------- ------- ------- -------
Total from investment operations...................... (.47) .22 .42 .43 .50
------- ------- ------- ------- -------
Less Dividends and Distributions
Dividends from net investment income.................. (.38) (.38) (.39) (.40) (.42)
Distributions from capital gains...................... 0.00 0.00 0.00 0.00 0.00
Less Distributions
Total dividends and distributions..................... (.38) (.38) (.39) (.40) (.42)
------- ------- ------- ------- -------
Net asset value, end of period........................ $ 9.31 $ 10.16 $ 10.32 $ 10.29 $ 10.26
======= ======= ======= ======= =======
Total return(b)....................................... (4.82)% 2.18% 4.17% 4.29% 4.96%
Net assets, end of period (000s omitted).............. $12,628 $23,646 $38,045 $53,996 $79,266
Ratios/Supplemental Data
Ratio of expenses to average net assets*............ 1.48%(e) 1.48%(e) 1.48%(d)(e) 1.48%(e) 1.48%(e)
Ratio of net income (loss) to average net assets+... 3.72% 3.73% 3.80%(d) 3.91% 4.12%
Portfolio turnover rate............................... 29% 23% 27% 23% 22%
- --------
Please refer to the footnotes on page 90 through 91.
88
Florida - Class C
Year Ended September 30,
----------------------------------------------------------
2008 2007 2006 2005 2004**
------- ------- ------- ------- -------
Fiscal Year or Period
Net asset value, beginning of period.................. $ 10.16 $ 10.32 $ 10.29 $ 10.25 $ 10.18
------- ------- ------- ------- -------
Income From Investment Operations
Net investment income+(a)............................. .37 .38 .39 .40 .42
Net gains or losses on investments (both realized and
unrealized).......................................... (.84) (.16) .03 .04 .07
------- ------- ------- ------- -------
Total from investment operations...................... (.47) .22 .42 .44 .49
------- ------- ------- ------- -------
Less Dividends and Distributions
Dividends from net investment income.................. (.38) (.38) (.39) (.40) (.42)
Distributions from capital gains...................... 0.00 0.00 0.00 0.00 0.00
Less Distributions
Total dividends and distributions..................... (.38) (.38) (.39) (.40) (.42)
------- ------- ------- ------- -------
Net asset value, end of period........................ $ 9.31 $ 10.16 $ 10.32 $ 10.29 $ 10.25
======= ======= ======= ======= =======
Total return(b)....................................... (4.82)% 2.18% 4.17% 4.38% 4.96%
Net assets, end of period (000s omitted).............. $28,989 $35,540 $39,042 $39,950 $39,170
Ratios/Supplemental Data
Ratio of expenses to average net assets*............ 1.48%(e) 1.48%(e) 1.48%(d)(e) 1.48%(e) 1.48%(e)
Ratio of net income (loss) to average net assets+... 3.73% 3.73% 3.80%(d) 3.90% 4.13%
Portfolio turnover rate............................... 29% 23% 27% 23% 22%
National - Class A
Year Ended October 31,
---------------------------------------------------------------
2008 2007 2006 2005 2004**
-------- -------- -------- -------- --------
Fiscal Year or Period
Net asset value, beginning of period.................. $ 10.03 $ 10.22 $ 10.05 $ 10.13 $ 9.96
-------- -------- -------- -------- --------
Income From Investment Operations
Net investment income+(a)............................. .42 .44 .46 .47 .50
Net gains or losses on investments (both realized and
unrealized).......................................... (1.13) (.19) .17 (.07) .17
-------- -------- -------- -------- --------
Total from investment operations...................... (.71) .25 .63 .40 .67
-------- -------- -------- -------- --------
Less Dividends and Distributions
Dividends from net investment income.................. (.42) (.44) (.46) (.48) (.50)
Distributions from capital gains...................... 0.00 0.00 0.00 0.00 0.00
Less Distributions
Total dividends and distributions..................... (.42) (.44) (.46) (.48) (.50)
-------- -------- -------- -------- --------
Net asset value, end of period........................ $ 8.90 $ 10.03 $ 10.22 $ 10.05 $ 10.13
======== ======== ======== ======== ========
Total return(b)....................................... (7.32)% 2.52% 6.43% 3.95% 6.92%
Net assets, end of period (000s omitted).............. $401,886 $361,701 $349,884 $337,201 $344,557
Ratios/Supplemental Data
Ratio of expenses to average net assets*............ .68%(f) .68%(f) .68%(d)(f) .68%(f) .68%(f)
Ratio of net income (loss) to average net assets+... 4.31% 4.38% 4.56%(d) 4.65% 4.94%
Portfolio turnover rate............................... 24% 15% 22% 25% 47%
- --------
Please refer to the footnotes on page 90 through 91.
89
National - Class B
Year Ended October 31,
----------------------------------------------------------
2008 2007 2006 2005 2004**
------- ------- ------- ------- -------
Fiscal Year or Period
Net asset value, beginning of period.................. $ 10.02 $ 10.21 $ 10.04 $ 10.12 $ 9.95
------- ------- ------- ------- -------
Income From Investment Operations
Net investment income+(a)............................. .35 .37 .39 .40 .43
Net gains or losses on investments (both realized and
unrealized).......................................... (1.13) (.19) .17 (.07) .17
------- ------- ------- ------- -------
Total from investment operations...................... (.78) .18 .56 .33 .60
------- ------- ------- ------- -------
Less Dividends and Distributions
Dividends from net investment income.................. (.35) (.37) (.39) (.41) (.43)
Distributions from capital gains...................... 0.00 0.00 0.00 0.00 0.00
Less Distributions
Total dividends and distributions..................... (.35) (.37) (.39) (.41) (.43)
------- ------- ------- ------- -------
Net asset value, end of period........................ $ 8.89 $ 10.02 $ 10.21 $ 10.04 $ 10.12
======= ======= ======= ======= =======
Total return(b)....................................... (7.97)% 1.81% 5.70% 3.25% 6.18%
Net assets, end of period (000s omitted).............. $14,988 $25,332 $37,399 $49,801 $72,264
Ratios/Supplemental Data
Ratio of expenses to average net assets*............ 1.38%(f) 1.38%(f) 1.38%(d)(f) 1.38%(f) 1.39%(f)
Ratio of net income (loss) to average net assets+... 3.61% 3.69% 3.89%(d) 3.96% 4.24%
Portfolio turnover rate............................... 24% 15% 22% 25% 47%
National - Class C
Year Ended October 31,
----------------------------------------------------------
2008 2007 2006 2005 2004**
----------------------------------------------------------
Fiscal Year or Period
Net asset value, beginning of period.................. $ 10.02 $ 10.21 $ 10.05 $ 10.13 $ 9.95
------- ------- ------- ------- -------
Income From Investment Operations
Net investment income+(a)............................. .35 .37 .39 .40 .43
Net gains or losses on investments (both realized and
unrealized).......................................... (1.13) (.19) .16 (.07) .18
------- ------- ------- ------- -------
Total from investment operations...................... (.78) .18 .55 .33 .61
------- ------- ------- ------- -------
Less Dividends and Distributions
Dividends from net investment income.................. (.35) (.37) (.39) (.41) (.43)
Distributions from capital gains...................... 0.00 0.00 0.00 0.00 0.00
Less Distributions
Total dividends and distributions..................... (.35) (.37) (.39) (.41) (.43)
------- ------- ------- ------- -------
Net asset value, end of period........................ $ 8.89 $ 10.02 $ 10.21 $ 10.05 $ 10.13
======= ======= ======= ======= =======
Total return(b)....................................... (7.98)% 1.81% 5.59% 3.24% 6.28%
Net assets, end of period (000s omitted).............. $63,704 $60,613 $62,447 $61,622 $68,769
Ratios/Supplemental Data
Ratio of expenses to average net assets*............ 1.38%(f) 1.38%(f) 1.38%(d)(f) 1.38%(f) 1.38%(f)
Ratio of net income (loss) to average net assets+... 3.61% 3.68% 3.87%(d) 3.96% 4.24%
Portfolio turnover rate............................... 24% 15% 22% 25% 47%
- --------
* Net of any waivers/reimbursements and interest expense.
** As of October 1, 2003 (as of November 1, 2003 with respect to National,
National II, New York and California) 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
90
to October 1, 2003 (November 1, 2003 with respect to National, National II,
New York and California), these interim payments were reflected within
interest income/expense on the statement of operations. For the year ended
September 30, 2004 (October 31, 2004 with respect to National, National II,
New York and California), 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:
+ Net of expenses assumed and/or waived by the Adviser for all fiscal periods.
(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 net asset value during the period, and
redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are not reflected in the calculation of
total investment returns. Total return does not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the
redemption of Portfolio shares. Total investment return calculated for a
period of less than one year is not annualized.
(c)If National II had borne all expenses, the respective expense ratios
(beginning with those of the most recent fiscal period) would have been
1.07%, 1.06%, 1.04%, 1.04% and 1.18% for Class A shares, 1.79%, 1.77%,1.75%,
1.75% and 1.89% for Class B shares and 1.78%, 1.77%, 1.74%, 1.75% and 1.88%
for Class C shares.
(d)The ratio includes expenses attributable to the costs of proxy solicitation.
(e)If Florida had borne all expenses, the respective expense ratios (beginning
with those of the most recent fiscal period) would have been 0.96%, .96%,
.98%, 1.08% and 1.12% for Class A shares, 1.69%, 1.68%, 1.69%, 1.78% and
1.83% for Class B shares and 1.67%, 1.67%, 1.68%, 1.78% and 1.83% for Class
C shares.
(f)If National had borne all expenses, the respective expense ratios (beginning
with those of the most recent fiscal period) would have been 0.91%, 0.92%,
1.01%, .93% and 1.08% for Class A shares, 1.63%, 1.63%, 1.73%, 1.64% and
1.79% for Class B shares, 1.61%, 1.62%, 1.72%, 1.64% and 1.78% for Class C
shares and 0.69% for Advisor Class shares.
91
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND INC. -
NATIONAL PORTFOLIO
1345 Avenue of the Americas
New York, New York
Toll Free (800) 221-5672
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
[_____________], 2009
This Statement of Additional Information (the "SAI") relates to the
acquisitions (the "Acquisitions") of all of the assets and liabilities of
National Portfolio II ("National II"), a series of AllianceBernstein Municipal
Income Fund, Inc., and Florida Portfolio ("Florida"), a series of
AllianceBernstein Municipal Income Fund II, by National Portfolio ("National"),
another series of AllianceBernstein Municipal Income Fund, Inc. (National II and
Florida are each an "Acquired Portfolio" and collectively, the "Acquired
Portfolios." National and the Acquired Portfolios 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/Proxy Statement dated [_________], 2009
(the "Prospectus/Proxy Statement") of National which relates to the
Acquisitions. As described in the Prospectus/Proxy Statement, the Acquisitions
would involve the transfer of all the assets of each of the Acquired Portfolios
in exchange for shares of National and the assumption by National of all the
liabilities of each of the Acquired Portfolios. Each of the Acquired Portfolios
would distribute the National shares it receives to its shareholders in complete
liquidation of the Portfolio. National will be the survivor for accounting
purposes.
This SAI is not a prospectus and should be read in conjunction with the
Prospectus/Proxy Statement. The Prospectus/Proxy Statement 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 National, National II and Florida is contained in
their Statements of Additional Information each dated January 30, 2009, as
supplemented, 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, 2008, of National and National II, which report contains historical
financial information regarding the Portfolios, 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 financial statements and Report of Independent Registered Public
Accounting Firm contained in the Annual Report for the twelve months ended
September 30, 2008, of Florida, which report contains historical financial
information regarding the Portfolio, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The Portfolio's
Semi-Annual Report for the six-month period ended March 31, 2008 is also
incorporated herein by reference.
The following represents the pro forma financial information. The pro forma
financial statements give effect to the Acquisitions of the assets and
liabilities of National II and Florida by National in exchange for shares of
National pursuant to the Plan of Acquisition and Liquidation and the Agreement
and Plan of Acquisition and Liquidation, respectively. National's unaudited pro
forma Portfolio of Investments, Statement of Assets and Liabilities and
Statement of Operations are prepared as though the Acquisitions were effective
for the period November 1, 2007 - October 31, 2008.
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
- NATIONAL PORTFOLIO AllianceBernstein Municipal Income Fund - National II Portfolio***
October 31, 2008 (unaudited) AllianceBernstein Municipal Income Fund - National Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance- Alliance- Pro Forma Pro Forma
Alliance- Alliance- Bernstein Bernstein Alliance- Alliance-
Bernstein Bernstein Municipal Municipal Bernstein Bernstein
Municipal Municipal Income Income Municipal Municipal
Income Fund Income Fund Fund Fund Income Fund Income Fund
National National National II National II National National
Portfolio Portfolio Portfolio*** Portfolio*** Portfolio Portfolio
Principal (U.S. Principal (U.S. Principal (U.S.
Amount (000) $ Value) Amount (000) $ Value) Adjustments+++ Amount (000) $ Value)
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL OBLIGATIONS - 98.5%
Long-Term Municipal Bonds -
97.6%
Alabama - 1.7%
Jefferson Cnty Ltd Oblig Sch
Warrants
FSA Series 2004
5.50%, 1/01/21 $ 1,000 $ 895,480 $ -0- $ -0- $ -0- $ 1,000 $ 895,480
Series 04A
5.25%, 1/01/18 - 1/01/23 3,900 3,232,695 -0- -0- -0- 3,900 3,232,695
Jefferson Cnty Swr Rev
(Capital Impr Warrants)
FGIC Series 02
5.00%, 2/01/41 -0- -0- 375 391,721 -0- 375 391,721
FGIC Series 02B
5.00%, 2/01/41 -0- -0- 625 658,450 -0- 625 658,450
Montgomery Spl Care Fac Fin
Auth
(Baptist Hlth)
(Prerefunded)
Series 04C
5.25%, 11/15/29 2,190 2,368,200 -0- -0- -0- 2,190 2,368,200
Univ of Alabama Brd of
Trustees
(Univ of Alabama Hosp)
Series 08A
5.75%, 9/01/22 (a) 3,000 2,876,010 -0- -0- -0- 3,000 2,876,010
------------ ------------ ------------
9,372,385 1,050,171 10,422,556
------------ ------------ ------------
Arizona - 2.0%
Arizona Hlth Fac Auth
(Phoenix Children's Hosp)
2.82%, 2/01/42 (b) 2,600 2,283,814 -0- -0- -0- 2,600 2,283,814
Estrella Mtn Ranch CFD
(Desert Village)
7.375%, 7/01/27 2,594 2,325,132 -0- -0- -0- 2,594 2,325,132
Phoenix Civic Impr Corp.
Wastewtr Sys
MBIA Series 04
5.00%, 7/01/23 1,750 1,731,975 -0- -0- -0- 1,750 1,731,975
Pima Cnty IDA
(Horizon Comnty Learning
Ctr)
Series 05
5.125%, 6/01/20 3,310 2,753,754 -0- -0- -0- 3,310 2,753,754
Queen Creek Impr Dist No 1
5.00%, 1/01/26 1,300 1,020,695 -0- -0- -0- 1,300 1,020,695
Salt Verde Fin Corp.
(Prepaid Gas)
5.25%, 12/01/23 2,560 1,874,509 -0- -0- -0- 2,560 1,874,509
Sundance CFD No 1
Series 02
7.75%, 7/01/22 600 564,402 -0- -0- -0- 600 564,402
------------ ------------ ------------
12,554,281 -0- 12,554,281
------------ ------------ ------------
California - 3.8%
California
(Prerefunded)
5.25%, 4/01/30 810 873,463 -0- -0- -0- 810 873,463
AMBAC
5.00%, 4/01/27 910 973,964 -0- -0- -0- 910 973,964
California
(Unrefunded)
5.25%, 4/01/30 15 14,224 -0- -0- -0- 15 14,224
AMBAC
5.00%, 4/01/27 1,740 1,626,621 -0- -0- -0- 1,740 1,626,621
California Dept of Wtr Res
(Pwr Sup Rev)
(Prerefunded)
Series 02A
5.375%, 5/01/22 2,000 2,186,800 -0- -0- -0- 2,000 2,186,800
California
FSA Series 03
5.00%, 2/01/29 -0- -0- 1,445 1,355,367 -0- 1,445 1,355,367
California
(Prerefunded)
5.125%, 2/01/28 -0- -0- 1,500 1,635,915 -0- 1,500 1,635,915
AMBAC
5.00%, 4/01/27 -0- -0- 1,035 1,107,750 -0- 1,035 1,107,750
California
(Unrefunded)
AMBAC
5.00%, 4/01/27 -0- -0- 1,965 1,836,960 -0- 1,965 1,836,960
Chula Vista IDR
(San Diego Gas)
Series 96A
5.30%, 7/01/21 4,000 3,540,560 -0- -0- -0- 4,000 3,540,560
Golden St Tobacco
Securitization Corp.
(Prerefunded)
XLCA Series 03B
5.50%, 6/01/33 -0- -0- 2,000 2,137,180 -0- 2,000 2,137,180
Manteca Uni Sch Dist
MBIA Series 01
Zero Coupon, 9/01/31 11,910 2,803,257 -0- -0- -0- 11,910 2,803,257
San Bernardino Cnty Redev ETM
(Ontario Proj #1)
MBIA Series 93
5.80%, 8/01/23 -0- -0- 1,000 1,024,290 -0- 1,000 1,024,290
San Diego Cnty Wtr Auth
FSA Series 08A
5.00%, 5/01/25 3,000 2,914,680 -0- -0- -0- 3,000 2,914,680
------------ ------------ ------------
14,933,569 9,097,462 24,031,031
------------ ------------ ------------
Colorado - 2.6%
Colorado Ed & Cultural Fac
Auth
(Knowledge Quest Charter
Sch)
Series 05
6.50%, 5/01/36 495 381,868 -0- -0- -0- 495 381,868
Colorado HFA SFMR
(Mtg Rev) AMT
Series 99A-2
6.45%, 4/01/30 485 439,230 -0- -0- -0- 485 439,230
Colorado Hlth Fac Auth
(Evangelical Lutheran Proj)
5.25%, 6/01/19 1,500 1,344,195 -0- -0- -0- 1,500 1,344,195
Colorado Hlth Fac Auth
(Parkview Med Ctr)
Series 04
5.00%, 9/01/25 690 545,983 -0- -0- -0- 690 545,983
Northwest Parkway Toll Rev
(Prerefunded)
FSA Series 01C
Zero Coupon, 6/15/25 (c) -0- -0- 9,000 8,335,620 -0- 9,000 8,335,620
Park Creek Metro Dist Rev Ltd
(Ref-Sr-Ltd Tax Ppty Tax)
Series 05
5.50%, 12/01/30 1,900 1,510,158 -0- -0- -0- 1,900 1,510,158
PV Wtr & Sanitation Metro Dist
Capital Appreciation
Series 06
Zero Coupon, 12/15/17 3,672 1,953,798 -0- -0- -0- 3,672 1,953,798
Todd Creek Farms Metro Dist
No 1
6.125%, 12/01/22 1,210 992,055 -0- -0- -0- 1,210 992,055
Series 04
6.125%, 12/01/19 820 707,849 -0- -0- -0- 820 707,849
------------ ------------ ------------
7,875,136 8,335,620 16,210,756
------------ ------------ ------------
Connecticut - 0.1%
Connecticut HEFA
(Griffin Hosp)
RADIAN Series 05B
5.00%, 7/01/23 750 616,785 -0- -0- -0- 750 616,785
------------ ------------ ------------
District Of Columbia - 2.0%
Dist of Columbia
ACA
5.00%, 6/01/26 1,000 721,670 -0- -0- -0- 1,000 721,670
FSA Series 2007C
5.00%, 6/01/23 7,775 7,578,448 -0- -0- -0- 7,775 7,578,448
Dist of Columbia
(Georgetown Univ)
AMBAC Series C-1
15.00%, 4/01/41 (a) + -0- -0- 25 25,000 -0- 25 25,000
Dist of Columbia Wtr & Swr
Auth
ASSURED GTY Series 2008A
5.00%, 10/01/23 3,220 3,117,926 905 876,311 -0- 4,125 3,994,237
------------ ------------ ------------
11,418,044 901,311 12,319,355
------------ ------------ ------------
Florida - 7.9%
Beacon Tradeport CDD
Series 02B
7.25%, 5/01/33 150 131,364 -0- -0- -0- 150 131,364
Bonnet Creek Resort CDD
Series 02
7.25%, 5/01/18 2,000 1,868,880 -0- -0- -0- 2,000 1,868,880
Collier Cnty CFD
(Fiddler's Creek)
Series 02A
6.875%, 5/01/33 1,120 941,741 -0- -0- -0- 1,120 941,741
Series 02B
6.625%, 5/01/33 480 391,243 -0- -0- -0- 480 391,243
Collier Cnty IDA
(Southern St Util) AMT
Series 96
6.50%, 10/01/25 705 705,056 -0- -0- -0- 705 705,056
Crossings At Fleming Island
CDD
Series 00C
7.05%, 5/01/15 1,550 1,471,322 -0- -0- -0- 1,550 1,471,322
Gateway CDD
(Sun City Ctr)
Series 03B
5.50%, 5/01/10 255 255,000 -0- -0- -0- 255 255,000
Hollywood Comnty Redev Agy
XLCA
5.00%, 3/01/24 -0- -0- 5,000 4,534,650 -0- 5,000 4,534,650
Indian Trace Dev Dist
(Wtr Mgmt Spl Benefit)
MBIA Series 05
5.00%, 5/01/22 320 310,230 -0- -0- -0- 320 310,230
Indian Trace Dev Dist Spl
Assmt
(Wtr Mgmt Spl Benefit)
MBIA Series 05
5.00%, 5/01/23 1,480 1,413,311 -0- -0- -0- 1,480 1,413,311
Jacksonville Hosp Rev
(Mayo Clinic)
Series 01C
5.50%, 11/15/36 6,750 5,806,823 -0- -0- -0- 6,750 5,806,823
Lee Cnty CFD
(Herons Glen)
(Prerefunded)
Series 99
6.00%, 5/01/29 6,090 6,280,373 -0- -0- -0- 6,090 6,280,373
Lee Cnty HFA SFMR
(Mtg Rev) AMT
GNMA/ FNMA Series 00A-1
7.20%, 3/01/33 70 69,957 -0- -0- -0- 70 69,957
Marshall Creek CDD
Series 02A
6.625%, 5/01/32 1,645 1,405,504 -0- -0- -0- 1,645 1,405,504
Miami Beach Hlth Fac Auth
(Mt Sinai Med Ctr)
Series 01A
6.80%, 11/15/31 3,500 2,729,195 -0- -0- -0- 3,500 2,729,195
Miami-Dade Cnty Ed Fac Auth
(Univ of Miami)
Series 08A
5.20%, 4/01/24 2,500 2,339,925 -0- -0- -0- 2,500 2,339,925
Miromar Lakes CDD
Series 00A
7.25%, 5/01/12 3,195 3,050,746 -0- -0- -0- 3,195 3,050,746
(Seminole Proj) AMT
Series 99L
5.80%, 6/01/32 4,990 3,847,041 -0- -0- -0- 4,990 3,847,041
Orlando Assess Dist
(Conroy Rd Proj)
Series 98A
5.80%, 5/01/26 3,250 2,562,365 -0- -0- -0- 3,250 2,562,365
Pasco Cnty HFA MFHR
(Pasco Woods Apts) AMT
Series 99A
5.90%, 8/01/39 3,690 3,062,885 -0- -0- -0- 3,690 3,062,885
Pier Park CDD
Series 02-1
7.15%, 5/01/34 3,245 2,842,685 -0- -0- -0- 3,245 2,842,685
Series 02B
6.20%, 11/01/08 25 25,000 -0- -0- -0- 25 25,000
Tara CDD No 1
Series 00A
7.15%, 5/01/31 1,755 1,575,358 -0- -0- -0- 1,755 1,575,358
Volusia Cnty Hlth Fac
(John Knox Village)
RADIAN Series 96A
6.00%, 6/01/17 -0- -0- 1,905 1,907,496 -0- 1,905 1,907,496
------------ ------------ ------------
43,086,004 6,442,146 49,528,150
------------ ------------ ------------
Illinois - 8.9%
Chicago
Series 08A
5.25%, 1/01/23 10,000 10,093,400 -0- -0- -0- 10,000 10,093,400
Chicago Arpt Rev
(O'Hare Int'l Arpt)
XLCA Series 03B-1
5.25%, 1/01/34 3,400 2,975,136 1,700 $ 1,487,568 -0- 5,100 4,462,704
Chicago Brd of Ed
Series 07
5.00%, 12/01/24 15,000 14,852,400 -0- -0- -0- 15,000 14,852,400
Chicago HFA SFMR
(Mtg Rev)
GNMA/ FNMA/ FHLMC Series
99C
7.05%, 10/01/30 45 45,144 -0- -0- -0- 45 45,144
Chicago HFA SFMR
(Mtg Rev) AMT
GNMA/ FNMA/ FHLMC Series
98A
6.45%, 9/01/29 225 221,546 -0- -0- -0- 225 221,546
GNMA/ FNMA/ FHLMC Series
98C-1
6.30%, 9/01/29 165 164,543 -0- -0- -0- 165 164,543
GNMA/ FNMA/ FHLMC Series
99 A
6.35%, 10/01/30 230 196,266 -0- -0- -0- 230 196,266
Chicago Incr Alloc
(Diversey/Narragansett
Redev Proj)
7.46%, 2/15/26 1,770 1,696,952 -0- -0- -0- 1,770 1,696,952
Chicago Sales Tax Rev
FSA Series 05
5.00%, 1/01/25 6,905 6,534,201 -0- -0- -0- 6,905 6,534,201
Chicago Spec Assess
(Lake Shore East)
Series 03
6.75%, 12/01/32 3,500 2,970,240 -0- -0- -0- 3,500 2,970,240
Gilberts Spl Svc Area No 15
Spl Tax
(Gilberts Town Ctr Proj)
Series 03
6.00%, 3/01/28 2,430 1,876,956 -0- -0- -0- 2,430 1,876,956
Hampshire Spl Svc Area No 14
5.80%, 3/01/26 1,595 1,234,227 -0- -0- -0- 1,595 1,234,227
Illinois Fin Auth
(Illinois Inst of
Technology)
Series 06A
5.00%, 4/01/31 750 567,757 -0- -0- -0- 750 567,757
Illionois Sport Fac Rev
(Chicago Stadium Soldier
Field)
AMBAC Series 01
Zero Coupon, 6/15/30 (c) -0- -0- 7,000 6,259,470 -0- 7,000 6,259,470
Manhattan
(No 04-1 Brookstone Springs
Proj)
Series 05
5.875%, 3/01/28 1,667 1,307,595 -0- -0- -0- 1,667 1,307,595
Metro Pier & Expo Auth
(McCormick Place)
MBIA Series 02A
5.25%, 6/15/42 1,750 1,670,323 1,750 1,670,322 -0- 3,500 3,340,645
------------ ------------ ------------
46,406,686 9,417,360 55,824,046
------------ ------------ ------------
Indiana - 0.5%
Hendricks Cnty Bldg Fac Corp.
5.50%, 7/15/23 1,165 1,191,154 -0- -0- -0- 1,165 1,191,154
Indiana Dev Fin Auth
(Inland Steel)
Series 97
5.75%, 10/01/11 1,825 1,762,567 -0- -0- -0- 1,825 1,762,567
------------ ------------ ------------
2,953,721 -0- 2,953,721
------------ ------------ ------------
Iowa - 0.0%
Coralville Urban Rev Tax Incr
Series 07C
5.00%, 6/01/18 140 133,886 -0- -0- -0- 140 133,886
------------ ------------ ------------
Kansas - 0.1%
Lenexa Hlth Care Fac
(Lakeview Village Inc.)
5.25%, 5/15/22 870 637,327 -0- -0- -0- 870 637,327
------------ ------------ ------------
Louisiana - 3.2%
De Soto Parish PCR
(Int'l Paper Co)
Series A-2
5.00%, 10/01/12 2,200 1,995,092 -0- -0- -0- 2,200 1,995,092
Lafayette
(Communications Sys Rev)
XLCA
5.25%, 11/01/20 1,550 1,545,892 -0- -0- -0- 1,550 1,545,892
Lafayette LA Communications
(Communications Sys Rev)
XLCA
5.25%, 11/01/21 - 11/01/23 3,450 3,397,731 1,550 1,513,869 $ -0- 5,000 4,911,600
Louisiana Arpt Fac
(Cargo ACQ Grp) AMT
Series 02
6.65%, 1/01/25 800 667,464 -0- -0- -0- 800 667,464
New Orleans
MBIA Series 05
5.00%, 12/01/29 3,420 2,937,130 570 489,522 -0- 3,990 3,426,652
5.25%, 12/01/21 3,360 3,111,058 1,135 1,050,908 -0- 4,495 4,161,966
RADIAN
5.00%, 12/01/18 - 12/01/19 2,590 2,309,011 -0- -0- -0- 2,590 2,309,011
RADIAN Series A
5.00%, 12/01/22 1,060 885,895 -0- -0- -0- 1,060 885,895
------------ ------------ ------------
16,849,273 3,054,299 19,903,572
------------ ------------ ------------
Maryland - 1.0%
Maryland CDA SFMR
(Mtg Rev) AMT
Series 00A
6.10%, 7/01/38 6,285 5,415,408 -0- -0- -0- 6,285 5,415,408
Maryland IDR
(Med Waste Assoc) AMT
Series 89
8.75%, 11/15/10 (d)(e) 1,225 1,059,196 -0- -0- -0- 1,225 1,059,196
------------ ------------ ------------
6,474,604 -0- 6,474,604
------------ ------------ ------------
Massachusetts - 4.1%
Massachusetts
(Prerefunded)
Series 02C
5.25%, 11/01/30 5,000 5,319,300 -0- -0- -0- 5,000 5,319,300
Massachusetts Dev Fin Agy
(Seven Hills Fndtn)
RADIAN Series 99
5.15%, 9/01/28 6,035 5,128,603 -0- -0- -0- 6,035 5,128,603
Massachusetts HEFA
(Berkshire Hlth Sys)
RADIAN Series 01E
5.70%, 10/01/25 -0- -0- 5,800 5,232,934 -0- 5,800 5,232,934
Massachusetts HEFA
(Cape Cod Hlthcare)
RADIAN Series 01C
5.25%, 11/15/31 -0- -0- 1,600 1,288,640 -0- 1,600 1,288,640
Massachusetts HEFA
(Care Group Inc.)
MBIA Series 08
5.375%, 2/01/26 -0- -0- 1,250 1,199,037 -0- 1,250 1,199,037
Massachusetts Port Auth AMT
Series 99D
6.00%, 7/01/29 7,500 7,394,550 -0- -0- -0- 7,500 7,394,550
------------ ------------ ------------
17,842,453 7,720,611 25,563,064
------------ ------------ ------------
Michigan - 4.5%
Detroit Wtr Sup Sys
(Prerefunded)
FGIC Series 01B
5.50%, 7/01/33 (f) -0- -0- 1,450 1,557,126 -0- 1,450 1,557,126
FSA Series 2006A
5.00%, 7/01/24 7,005 6,496,017 -0- -0- -0- 7,005 6,496,017
Kalamazoo Hosp Fin Auth
(Borgess Med Ctr) ETM
FGIC Series 94A
0.208%, 6/01/11 (g) -0- -0- 3,440 3,446,536 -0- 3,440 3,446,536
Kent Hosp Fin Auth
(Metro Hosp Proj)
Series 05A
5.75%, 7/01/25 710 576,619 -0- -0- -0- 710 576,619
Michigan
(Trunk Line Fund)
(Prerefunded)
FSA Series 01A
5.25%, 11/01/30 -0- -0- 1,000 1,069,780 -0- 1,000 1,069,780
Michigan HDA MFHR
(Rental Rev) AMT
AMBAC Series 97A
6.10%, 10/01/33 330 286,968 -0- -0- -0- 330 286,968
Michigan Hosp Fin Auth
(Sparrow Med Ctr)
(Prerefunded)
Series 01
5.625%, 11/15/36 2,650 2,858,078 -0- -0- -0- 2,650 2,858,078
Michigan Hosp Fin Auth
(Trinity Hlth)
Series 00A
6.00%, 12/01/27 4,515 4,336,071 -0- -0- -0- 4,515 4,336,071
Plymouth Ed Ctr Charter Sch
Pub
Academy Rev
Series 05
5.375%, 11/01/30 2,000 1,480,400 -0- -0- -0- 2,000 1,480,400
Saginaw Hosp Fin Auth
(Covenant Med Ctr)
Series 00F
6.50%, 7/01/30 6,125 6,082,125 -0- -0- -0- 6,125 6,082,125
------------ ------------ ------------
22,116,278 6,073,442 28,189,720
------------ ------------ ------------
Minnesota - 2.2%
Minneapolis & St. Paul Arpt
AMT
FGIC Series 00B
6.00%, 1/01/21 3,520 3,454,282 -0- -0- -0- 3,520 3,454,282
Shakopee Hlth Care Fac
(St Francis Regl Med Ctr)
Series 04
5.10%, 9/01/25 2,700 2,069,037 -0- -0- -0- 2,700 2,069,037
St. Paul Hsg & Redev Auth
(Hltheast Proj)
Series 05
6.00%, 11/15/25 500 431,540 -0- -0- -0- 500 431,540
Waconia Hlth Care Fac
(Ridgeview Med Ctr)
(Prerefunded)
RADIAN Series 99A
6.125%, 1/01/29 -0- -0- 6,095 6,335,631 -0- 6,095 6,335,631
Western Minnesota Muni Pwr Agy
FSA
5.00%, 1/01/17 1,400 1,469,678 -0- -0- -0- 1,400 1,469,678
------------ ------------ ------------
7,424,537 6,335,631 13,760,168
------------ ------------ ------------
Missouri - 2.0%
Kansas City
(Downtown Arena Proj)
Series 08C
5.00%, 4/01/28 10,500 9,421,125 -0- -0- -0- 10,500 9,421,125
Kansas City Arpt Fac Rev
(Cargo ACQ Grp)
Series 02
6.25%, 1/01/30 1,965 1,519,770 -0- -0- -0- 1,965 1,519,770
Missouri Dev Fin Brd
(Crackerneck Creek Proj)
Series 05C
5.00%, 3/01/26 1,000 891,500 -0- -0- -0- 1,000 891,500
Riverside IDA
(Riverside Horizons Proj)
ACA Series 07A
5.00%, 5/01/27 370 299,933 120 97,276 -0- 490 397,209
------------ ------------ ------------
12,132,328 97,276 12,229,604
------------ ------------ ------------
Nevada - 7.5%
Carson City Hosp Rev
(Carson-Tahoe Hosp Proj)
RADIAN Series 03A
5.125%, 9/01/29 2,700 2,205,306 2,100 1,715,238 -0- 4,800 3,920,544
Clark Cnty
AMBAC Series 2006
5.00%, 11/01/23 6,000 5,845,620 5,000 4,871,350 -0- 11,000 10,716,970
Clark Cnty Passenger Fac
5.25%, 7/01/18 9,090 8,981,011 -0- -0- -0- 9,090 8,981,011
Clark Cnty Sch Dist
FGIC
5.00%, 6/15/22 5,720 5,653,019 -0- -0- -0- 5,720 5,653,019
Las Vegas Valley Wtr Dist
FGIC Series 05
5.00%, 6/01/27 5,000 4,795,400 -0- -0- -0- 5,000 4,795,400
Nevada Sys of Hgr Ed
AMBAC
5.00%, 7/01/25 6,985 6,587,414 -0- -0- -0- 6,985 6,587,414
AMBAC Series 2005B
5.00%, 7/01/26 -0- -0- 6,715 6,297,394 -0- 6,715 6,297,394
------------ ------------ ------------
34,067,770 12,883,982 46,951,752
------------ ------------ ------------
New Hampshire - 1.2%
New Hampshire Bus Fin Auth PCR
(Public Svc Co) AMT
Series 93E
6.00%, 5/01/21 4,000 3,768,880 -0- -0- -0- 4,000 3,768,880
New Hampshire HEFA
(Covenant Hlth)
Series 04
5.375%, 7/01/24 1,680 1,468,790 -0- -0- -0- 1,680 1,468,790
(Mary Hitchcock Hosp)
FSA Series 02
5.50%, 8/01/27 -0- -0- 2,250 2,193,323 -0- 2,250 2,193,323
------------ ------------ ------------
5,237,670 2,193,323 7,430,993
------------ ------------ ------------
New Jersey - 3.5%
Morris-Union Jointure COP
RADIAN Series 04
5.00%, 5/01/27 5,175 4,247,692 -0- -0- -0- 5,175 4,247,692
New Jersey Ed Fac Auth
(Prerefunded)
AMBAC Series 02A
5.25%, 9/01/21 $ 8,005 $ 8,599,531 $ -0- $ -0- $ -0- $ 8,005 $ 8,599,531
(Hgr Ed Cap Impt)
(Prerefunded)
AMBAC Series 02A
5.125%, 9/01/22 -0- -0- 2,500 2,674,525 -0- 2,500 2,674,525
New Jersey EDA
(New Jersey St Contract)
Series 05
5.25%, 3/01/25 6,200 6,086,292 -0- -0- -0- 6,200 6,086,292
------------ ------------ ------------
18,933,515 2,674,525 21,608,040
------------ ------------ ------------
New Mexico - 1.1.%
Clayton Jail Proj Rev
CIFG
5.00%, 11/01/25 - 11/01/27 8,475 6,843,254 -0- -0- -0- 8,475 6,843,254
------------ ------------ ------------
New York - 4.7%
Erie Cnty IDA
(Buffalo Sch Dist Proj)
FSA Series 04
5.75%, 5/01/25 - 5/01/26 3,800 3,822,793 1,300 1,307,267 -0- 5,100 5,130,060
Nassau Cnty Hlth Fac
(Nassau Hlth Sys Rev)
(Prerefunded)
FSA Series 99
5.75%, 8/01/29 -0- -0- 7,600 7,957,504 -0- 7,600 7,957,504
New York City
5.25%, 9/01/23 5,000 4,923,750 -0- -0- -0- 5,000 4,923,750
Series 03A
5.50%, 8/01/21 5,000 5,053,500 -0- -0- -0- 5,000 5,053,500
Series 04G
5.00%, 12/01/23 895 851,709 -0- -0- -0- 895 851,709
New York City
(Unrefunded)
Series 1
5.75%, 3/01/17 420 436,703 -0- -0- -0- 420 436,703
New York City IDA
(Lycee Francais)
ACA Series 02C
6.80%, 6/01/28 2,500 2,255,600 -0- -0- -0- 2,500 2,255,600
New York Liberty Dev Corp.
(National Sports Museum
Proj)
6.125%, 2/15/19 (e)* 850 127,500 -0- -0- -0- 850 127,500
New York St Dorm Auth
(Orange Regl Med Ctr)
Series 2008
6.50%, 12/01/21 1,300 1,164,878 -0- -0- -0- 1,300 1,164,878
New York St HFA
(Econ Dev & Hsg)
FGIC Series 05A
5.00%, 9/15/25 1,200 1,160,112 -0- -0- -0- 1,200 1,160,112
------------ ------------ ------------
19,796,545 9,264,771 29,061,316
------------ ------------ ------------
North Carolina - 0.3%
Iredell Cnty COP
FSA Series 08
5.25%, 6/01/22 720 728,071 200 202,242 -0- 920 930,313
North Carolina Eastern Muni
Pwr Agy
AMBAC Series 05A
5.25%, 1/01/20 -0- -0- 1,000 939,500 -0- 1,000 939,500
------------ ------------ ------------
728,071 1,141,742 1,869,813
------------ ------------ ------------
North Dakota - 0.2%
Ward Cnty Hlth Care Fac
(Trinity Hlth)
5.125%, 7/01/18 - 7/01/20 1,380 1,141,114 -0- -0- -0- 1,380 1,141,114
------------ ------------ ------------
Ohio - 3.5%
Cleveland Cuyahoga Port Auth
(Univ Heights Ohio-Pub
Parking Proj)
Series 01
7.35%, 12/01/31 5,400 4,810,644 -0- -0- -0- 5,400 4,810,644
Cleveland Pub Pwr Sys
FGIC Series 06A
5.00%, 11/15/18 2,335 2,316,810 500 496,105 -0- 2,835 2,812,915
Hamilton Cnty
(Prerefunded)
AMBAC Series B
5.25%, 12/01/32 -0- -0- 5,660 5,974,696 -0- 5,660 5,974,696
Hamilton Cnty
(Unrefunded)
AMBAC Series B
5.25%, 12/01/32 -0- -0- 1,440 1,401,581 -0- 1,440 1,401,581
Franklin Cnty
(OCLC Online Computer
Library Ctr)
Series 98A
5.20%, 10/01/20 1,200 1,199,940 -0- -0- -0- 1,200 1,199,940
Toledo Lucas Cnty Port Auth
(CSX Transp)
Series 92
6.45%, 12/15/21 6,730 5,827,709 -0- -0- -0- 6,730 5,827,709
------------ ------------ ------------
14,155,103 7,872,382 22,027,485
------------ ------------ ------------
Oregon - 0.7%
Forest Grove Rev
(Ref & Campus Impr Pacific
Proj A)
RADIAN Series 05A
5.00%, 5/01/28 2,995 2,468,030 -0- -0- -0- 2,995 2,468,030
Oregon Hsg Dev Agy SFMR
(Mtg Rev) AMT
Series 02B
5.45%, 7/01/32 2,200 1,724,580 -0- -0- -0- 2,200 1,724,580
------------ ------------ ------------
4,192,610 -0- 4,192,610
------------ ------------ ------------
Pennsylvania - 5.3%
Allegheny Cnty Hgr Ed Bldg
Auth
(Carnegie Mellon Univ)
Series 02
5.50%, 3/01/28 -0- -0- 5,665 5,708,904 -0- 5,665 5,708,904
Allegheny Cnty Hosp Dev Auth
(West Pennsylvania Hlth
Sys)
Series 07A
5.00%, 11/15/17 2,900 2,312,866 -0- -0- -0- 2,900 2,312,866
Ephrata Area Sch Dist
(Prerefunded)
FGIC Series 05
5.00%, 3/01/22 2,565 2,740,882 -0- -0- -0- 2,565 2,740,882
Harrisburg Arpt Auth
(Susquehanna Arpt Proj) AMT
Series 99
5.50%, 1/01/24 500 369,670 -0- -0- -0- 500 369,670
Montgomery Cnty Hosp
(Abington Mem Hosp)
Series 02A
5.125%, 6/01/32 2,000 1,523,920 -0- -0- -0- 2,000 1,523,920
Montgomery Cnty IDA
(Whitemarsh Continuing Care
Ret Comnty)
6.00%, 2/01/21 1,210 985,593 -0- -0- -0- 1,210 985,593
Pennsylvania Hgr Ed Fac Auth
(UPMC Hlth Sys)
Series 01A
6.00%, 1/15/31 3,845 3,659,248 -0- -0- -0- 3,845 3,659,248
Pennsylvania IDA
(St Revolving Fd)
Series 08A
5.50%, 7/01/23 3,940 3,824,046 -0- -0- -0- 3,940 3,824,046
Philadelphia IDA
(Leadership Learning
Partners)
Series 05A
5.25%, 7/01/24 1,030 784,819 -0- -0- -0- 1,030 784,819
Pennsylvania Trpk Transp Rev
(Prerefunded)
AMBAC Series 01
5.25%, 7/15/41 -0- -0- 6,500 6,961,760 -0- 6,500 6,961,760
South Ctr Gen Auth
(Wellspan Hlth)
MBIA Series 01
5.25%, 5/15/31 685 689,583 -0- -0- -0- 685 689,583
South Ctr Gen Auth
(Wellspan Hlth)
(Prerefunded)
MBIA Series 01
5.25%, 5/15/31 3,115 3,344,856 -0- -0- -0- 3,115 3,344,856
------------ ------------ ------------
20,235,483 12,670,664 32,906,147
------------ ------------ ------------
Puerto Rico - 2.5%
Puerto Rico
(Pub Impr)
5.25%, 7/01/23 1,100 968,198 -0- -0- -0- 1,100 968,198
Series 01A
5.50%, 7/01/19 500 475,175 -0- -0- -0- 500 475,175
Series 03A
5.25%, 7/01/23 500 440,090 -0- -0- -0- 500 440,090
Series 04A
5.25%, 7/01/19 1,920 1,778,765 -0- -0- -0- 1,920 1,778,765
Puerto Rico Elec Pwr Auth
(Prerefunded)
XLCA Series 02-1
5.25%, 7/01/22 -0- -0- 6,935 7,515,737 -0- 6,935 7,515,737
Puerto Rico Govt Dev Bank
(Sr Notes)
Series 06B
5.00%, 12/01/15 500 484,015 -0- -0- -0- 500 484,015
Puerto Rico HFA
5.125%, 12/01/27 370 348,307 -0- -0- -0- 370 348,307
Univ of Puerto Rico
Series 06Q
5.00%, 6/01/19 - 6/01/20 3,730 3,381,421 -0- -0- -0- 3,730 3,381,421
------------ ------------ ------------
7,875,971 7,515,737 15,391,708
------------ ------------ ------------
Rhode Island - 0.9%
Rhode Island EDA
(Providence Place Mall
Proj)
ASSET GTY Series 00
6.125%, 7/01/20 -0- -0- 5,500 5,572,050 -0- 5,500 5,572,050
------------ ------------ ------------
South Carolina - 2.6%
Dorchester Cnty Sch Dist No 2
(Installment Pur Rev)
Series 06
5.00%, 12/01/30 1,500 1,284,555 -0- -0- -0- 1,500 1,284,555
ASSURED GTY
5.00%, 12/01/29 -0- -0- 400 365,404 -0- 400 365,404
Newberry Investing in
Childrens Ed
(Newberry Cnty Sch Dist
Proj)
ASSURED GTY Series 05
5.00%, 12/01/27 3,890 3,533,443 2,335 2,120,974 -0- 6,225 5,654,417
Series 05
5.00%, 12/01/30 335 277,306 115 95,195 -0- 450 372,501
Scago Ed Fac Corp.
(Calhoun Sch Dist)
RADIAN
5.00%, 12/01/21 4,300 3,943,788 -0- -0- -0- 4,300 3,943,788
South Carolina Pub Svc Auth
AMBAC Series 2007A
5.00%, 1/01/25 5,000 4,923,450 -0- -0- -0- 5,000 4,923,450
------------ ------------ ------------
9,039,092 7,505,023 16,544,115
------------ ------------ ------------
Tennessee - 0.2%
Sullivan Cnty Hlth Ed
(Wellmont Hlth Sys)
Series 06C
5.00%, 9/01/22 1,265 916,189 -0- -0- -0- 1,265 916,189
5.25%, 9/01/26 275 193,083 -0- -0- -0- 275 193,083
------------ ------------ ------------
1,109,272 -0- 1,109,272
------------ ------------ ------------
Texas - 10.5%
Bexar Cnty Hlth Fac Dev Corp.
5.00%, 7/01/27 325 222,176 -0- -0- -0- 325 222,176
Camino Real Regl Mobility Auth
5.00%, 2/15/21 3,000 2,829,240 -0- -0- -0- 3,000 2,829,240
Series 2008
5.00%, 8/15/21 1,790 1,674,617 -0- -0- -0- 1,790 1,674,617
Corpus Christi Arpt Rev
(Corpus Christi Int'l)
FSA Series 00B
5.375%, 2/15/30 7,100 6,910,785 -0- -0- -0- 7,100 6,910,785
Dallas-Fort Worth Arpt Rev
(Int'l Arpt)
FGIC Series 01
5.50%, 11/01/35 13,400 10,609,718 -0- -0- -0- 13,400 10,609,718
Ector Cnty ISD
5.25%, 8/15/27 160 161,061 -0- -0- -0- 160 161,061
Ector Cnty ISD
(Prerefunded)
5.25%, 8/15/27 2,840 3,077,566 -0- -0- -0- 2,840 3,077,566
El Paso Cnty Hosp Dist
ASSURED GTY Series 2008A
5.00%, 8/15/23 5,000 4,922,650 -0- -0- -0- 5,000 4,922,650
Garza Cnty Pub Fac Corp.
5.50%, 10/01/19 535 478,589 -0- -0- -0- 535 478,589
Grapevine Arpt Rev
6.50%, 1/01/24 995 829,999 -0- -0- -0- 995 829,999
Guadalupe-Blanco River Auth
(Contract & Sub Wtr Res)
MBIA Series 04A
5.00%, 8/15/24 1,440 1,344,931 455 424,961 -0- 1,895 1,769,892
Hidalgo Cnty Hlth Svc
(Mission Hosp Inc Proj)
Series 05
5.00%, 8/15/14 - 8/15/19 730 645,560 -0- -0- -0- 730 645,560
Houston Arpt Rev
(Cargo ACQ Grp) AMT
Series 02
6.375%, 1/01/23 3,000 2,497,650 -0- -0- -0- 3,000 2,497,650
Laredo ISD
AMBAC Series 04A
5.00%, 8/01/24 1,000 968,160 -0- -0- -0- 1,000 968,160
North Texas Hlth Fac Dev Corp
(United Regl Hlth Care Sys)
FSA Series 07
5.00%, 9/01/24 570 515,508 180 162,792 -0- 750 678,300
Richardson Hosp Auth
(Richardson Regl Med Ctr)
FSA Series 04
5.875%, 12/01/24 2,310 1,911,941 -0- -0- -0- 2,310 1,911,941
San Antonio
(Elec & Gas Rev)
Series 08
5.00%, 2/01/26 6,830 6,629,813 -0- -0- -0- 6,830 6,629,813
San Antonio
(Unrefunded)
Series 02
5.00%, 2/01/22 3,060 3,066,120 -0- -0- -0- 3,060 3,066,120
Series 02
5.00%, 2/01/23 -0- -0- 1,485 1,483,381 -0- 1,485 1,483,381
Seguin Hgr Ed Auth
(Texas Lutheran Univ Proj)
Series 04
5.25%, 9/01/28 1,000 794,820 -0- -0- -0- 1,000 794,820
Texas Trpk Auth
AMBAC Series 02A
5.50%, 8/15/39 7,500 6,965,700 2,000 1,857,520 -0- 9,500 8,823,220
Tyler Hosp Rev
(Mother Francis Regl Hlth)
(Prerefunded)
Series 01
6.00%, 7/01/31 3,900 4,270,890 -0- -0- -0- 3,900 4,270,890
------------ ------------ ------------
61,327,494 3,928,654 65,256,148
------------ ------------ ------------
Utah - 0.5%
Intermountain Pwr Agy
Series 2008A
5.25%, 7/01/23 2,750 2,708,392 -0- -0- -0- 2,750 2,708,392
Spanish Fork City Charter Sch
Rev
5.55%, 11/15/21 860 710,197 -0- -0- -0- 860 710,197
------------ ------------ ------------
3,418,589 -0- 3,418,589
------------ ------------ ------------
Virgin Islands - 1.2%
Virgin Islands Pub Fin Auth
(Virgin Islands Gross
Receipts Taxes Loan Note)
FSA Series 03
5.00%, 10/01/13 - 10/01/14 2,025 2,069,888 -0- -0- -0- 2,025 2,069,888
5.25%, 10/01/15 - 10/01/17 5,460 5,526,999 -0- -0- -0- 5,460 5,526,999
------------ ------------ ------------
7,596,887 -0- 7,596,887
------------ ------------ ------------
Virginia - 0.7%
Arlington IDA
(Arlington Hlth Sys)
(Prerefunded)
Series 01
5.25%, 7/01/31 (f) 1,000 1,070,200 -0- -0- -0- 1,000 1,070,200
Bell Creek CDD
Series 03A
6.75%, 3/01/22 602 592,789 -0- -0- -0- 602 592,789
Broad Street CDD
(Parking Fac)
Series 03
7.50%, 6/01/33 3,000 2,770,290 -0- -0- -0- 3,000 2,770,290
------------ ------------ ------------
4,433,279 -0- 4,433,279
------------ ------------ ------------
Washington - 2.6%
Energy Northwest Wind
AMBAC
5.00%, 7/01/21 7,845 7,507,273 -0- -0- -0- 7,845 7,507,273
Spokane
AMBAC
5.00%, 12/01/22 5,550 5,290,870 -0- -0- -0- 5,550 5,290,870
Tacoma SWFR
XLCA Series 06
5.00%, 12/01/18 2,750 2,717,798 865 854,871 -0- 3,615 3,572,669
------------ ------------ ------------
15,515,941 854,871 16,370,812
------------ ------------ ------------
West Virginia - 0.4%
Fairmont Hgr Ed
(Fairmont St Coll)
FGIC Series 02A
5.375%, 6/01/27 -0- -0- 2,500 2,393,725 -0- 2,500 2,393,725
------------ ------------ ------------
Wisconsin - 0.9%
Milwaukee Arpt Rev
(Cargo ACQ Corp) AMT
Series 02
6.50%, 1/01/25 2,315 1,875,428 -0- -0- -0- 2,315 1,875,428
Wisconsin HEFA
(Bell Tower Residence Proj)
FHLB Series 05
5.00%, 7/01/25 1,270 1,098,436 -0- -0- -0- 1,270 1,098,436
Wisconsin HEFA
(Wheaton Franciscan)
MBIA
5.25%, 8/15/20 3,400 2,655,332 -0- -0- -0- 3,400 2,655,332
------------ ------------ ------------
5,629,196 -0- 5,629,196
------------ ------------ ------------
Total Long-Term Municipal
Bonds
(cost $658,763,934) 474,104,153 134,996,778 609,100,931
------------ ------------ ------------
Short-Term Municipal Notes -
0.9%
Alaska - 0.1%
Valdez Marine Term Rev
0.80%, 12/01/33 (h) -0- -0- 700 700,000 -0- 700 700,000
------------ ------------ ------------
Florida - 0.4%
Orange Cnty IDA
(Lake Highland Prep Sch)
1.50%, 8/01/32 (h) -0- -0- 2,700 2,700,000 -0- 2,700 2,700,000
------------ ------------ ------------
Kentucky - 0.2%
Shelby Cnty
1.20%, 9/01/34 (h) -0- -0- 1,100 1,100,000 -0- 1,100 1,100,000
------------ ------------ ------------
Ohio - 0.1%
Allen Cnty
(Catholic Hlthcare
Partners)
Series A
0.70%, 10/01/31 (h) -0- -0- 700 700,000 -0- 700 700,000
------------ ------------ ------------
South Carolina - 0.1%
Charleston Cnty
0.85%, 8/15/30 (h) -0- -0- 500 500,000 -0- 500 500,000
------------ ------------ ------------
Total Short-Term Municipal
Notes
(cost $5,700,000) -0- 5,700,000 5,700,000
------------ ------------ ------------
Total Investments - 98.5%
(cost $664,463,934) 474,104,153 140,696,778 614,800,931
------------ ------------
Other assets less liabilities
- - 1.5% 7,955,685 1,595,244 (137,000)++ 9,413,929
------------ ------------ ------------ ------------
Net Assets - 100.0% $482,059,838 $142,292,022 $ (137,000) $624,214,860
------------ ------------ ------------ ------------
INTEREST RATE SWAP
TRANSACTIONS
Pro-Forma
Alliance- Alliance- Alliance- Alliance- Pro-Forma
Bernstein Bernstein Bernstein Alliance- Bernstein Alliance-
Municipal Municipal Municipal Bernstein Municipal Bernstein
Income Income Income Municipal Income Municipal
Fund Fund Fund Rate Type Income Fund Fund Income Fund
National National II National ------------------- National National II National
Portfolio Portfolio*** Portfolio Payments Payments Portfolio Portfolio*** Portfolio
Notional Notional Notional made by received Unrealized Unrealized Unrealized
Swap Amount Amount Amount Termination the by the Appreciation/ Appreciation/ Appreciation/
Counterparty (000) (000) (000) Date Portfolio Portfolio (Depreciation) (Depreciation) (Depreciation)
- -----------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch $ 3,205 $ -0- $ 3,205 2/12/2012 SIFMA** 3.548% $ 105,575 $ -0- $ 105,575
Merrill Lynch -0- 1,000 1,000 10/21/2016 SIFMA* 4.128% -0- 53,254 53,254
Merrill Lynch -0- 2,500 2,500 7/30/2026 4.090% SIFMA** -0- (110,192) (110,192)
Merrill Lynch -0- 2,500 2,500 11/15/2026 4.377% SIFMA** -0- (203,000) (203,000)
- ----------
(a) Variable rate coupon, rate shown as of October 31, 2008.
(b) Floating Rate Security. Stated interest rate was in effect at October 31,
2008.
(c) Indicates a security that has a zero coupon that remains in effect until a
predetermined date at which time the stated coupon rate becomes effective
until final maturity.
(d) Security is in default and is non-income producing.
(e) Illiquid security, valued at fair value.
(f) Position, or a portion thereof, has been segregated to collateralize
interest rate swaps.
(g) Inverse Floater Security - Security with variable or floating interest rate
that moves in the opposite direction of short-term interest rates.
(h) 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.
* The obligor of this holding, which represents 0.02% of the Portfolio's net
assets, has disclosed that it is in default of certain payments under the
loan agreement, and is in early discussions with bond holders with respect
to a restructuring of the terms of the bonds, and with equity holders with
respect to additional equity contributions.
** Variable interest rate based on the Securities Industry & Financial Markets
Association (SIFMA).
*** Prior to December 1, 2008, known as Insured National Portfolio.
+ 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
October 31, 2008 and the aggregate market value of this security amounted
to $25,000 or 0.00% of net assets.
As of October 31, 2008, the Portfolio held 52% of net assets in insured
bonds (of this amount 12% represents the Portfolio's holding in
pre-refunded insured bonds).
++ Includes adjustment for estimated merger costs of $137,000.
+++ All holdings of National II comply with the investment strategies and
restrictions of National Portfolio.
ACA - ACA Capital
AMBAC - American Bond Assurance Corporation
AMT - Alternative Minimum Tax (subject to)
ASSET GTY - Asset Guaranty Insurance Company AKA Radian
ASSURED GTY - Assured Guaranty
CDA - Community Development Administration
CDD - Community Development District
CFD - Community Facilities District
CIFG - CIFG Assurance North America, Inc.
COP - Certificate of Participation
EDA - Economic Development Agency
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Company
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance Inc.
GNMA - Government National Mortgage Association
HDA - Housing Development Authority
HEFA - Health & Education Facility Authority
HFA - Housing Finance Authority
HFC - Housing Finance Corporation
IDA - Industrial Development Authority/Agency
IDR - Industrial Development Revenue
ISD - Independent School District
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-Family Housing Revenue
PCR - Pollution Control Revenue Bond
RADIAN - Radian Group, Inc.
SFMR - Single Family Mortgage Revenue
SWFR - Solid Waste Facility Revenue
XLCA - XL Capital Assurance Inc.
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL AllianceBernstein Municipal Income Fund - National II Portfolio***
INCOME FUND - NATIONAL PORTFOLIO AllianceBernstein Municipal Income Fund II - Florida Portfolio
October 31, 2008 (unaudited) AllianceBernstein Municipal Income Fund - National Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma
Alliance- Alliance- Alliance- Alliance- Pro Forma
Bernstein Alliance- Bernstein Alliance- Bernstein Alliance- Bernstein Alliance-
Municipal Bernstein Municipal Bernstein Municipal Bernstein Municipal Bernstein
Income Municipal Income Municipal Income Municipal Income Municipal
Fund Income Fund Income Fund II Income Fund Income
National Fund National II Fund Florida Fund II National Fund
Portfolio National Portfolio*** National II Portfolio Florida Portfolio National
Principal Portfolio Principal Portfolio*** Principal Portfolio Principal Portfolio
Amount (U.S. Amount (U.S. Amount (U.S. Amount (U.S.
(000) $ Value) (000) $ Value) (000) $ Value) Adjustments+++ (000) $ Value)
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL
OBLIGATIONS -
98.6%
Long-Term
Municipal Bonds -
97.9%
Alabama - 1.3%
Jefferson Cnty
Ltd Oblig Sch
Warrants
FSA Series
2004
5.50%, 1/01/21 $ 1,000 $ 895,480 $ -0- $ -0- $ -0- $ -0- $ -0- $ 1,000 $ 895,480
Series 04A
5.25%, 1/01/18
- 1/01/23 3,900 3,232,695 -0- -0- -0- -0- -0- 3,900 3,232,695
Jefferson Cnty
Swr Rev
(Capital Impr
Warrants)
FGIC Series 02
5.00%, 2/01/41 -0- -0- 375 391,721 -0- -0- -0- 375 391,721
FGIC Series 02B
5.00%, 2/01/41 -0- -0- 625 658,450 -0- -0- -0- 625 658,450
Montgomery Spl
Care Fac Fin Auth
(Baptist Hlth)
(Prerefunded)
Series 04C
5.25%, 11/15/29 2,190 2,368,200 -0- -0- -0- -0- -0- 2,190 2,368,200
Univ of Alabama
Brd of Trustees
(Univ of
Alabama Hosp)
Series 08A
5.75%, 9/01/22
(a) 3,000 2,876,010 -0- -0- -0- -0- -0- 3,000 2,876,010
------------ ------------ ------------ ------------
9,372,385 1,050,171 -0- 10,422,556
------------ ------------ ------------ ------------
Arizona - 1.9%
Arizona Hlth Fac
Auth
(Phoenix
Children's
Hosp)
2.82%, 2/01/42
(b) 2,600 2,283,814 -0- -0- 1,250 1,097,987 -0- 3,850 3,381,801
Estrella Mtn
Ranch CFD
(Desert
Village)
7.375%, 7/01/27 2,594 2,325,132 -0- -0- -0- -0- -0- 2,594 2,325,132
Phoenix Civic
Impr Corp.
Wastewtr Sys
MBIA Series 04
5.00%, 7/01/23 1,750 1,731,975 -0- -0- -0- -0- -0- 1,750 1,731,975
Pima Cnty IDA
(Horizon
Comnty
Learning Ctr)
Series 05
5.125%, 6/01/20 3,310 2,753,754 -0- -0- -0- -0- -0- 3,310 2,753,754
Queen Creek Impr
Dist No 1
5.00%, 1/01/26 1,300 1,020,695 -0- -0- 600 471,090 -0- 1,900 1,491,785
Salt Verde Fin
Corp.
(Prepaid Gas)
5.25%, 12/01/23 2,560 1,874,509 -0- -0- 1,125 823,759 -0- 3,685 2,698,268
Sundance CFD No 1
Series 02
7.75%, 7/01/22 600 564,402 -0- -0- -0- -0- -0- 600 564,402
------------ ------------ ------------ ------------
12,554,281 -0- 2,392,836 14,947,117
------------ ------------ ------------ ------------
California - 3.4%
California
(Prerefunded)
5.25%, 4/01/30 810 873,463 -0- -0- -0- -0- -0- 810 873,463
AMBAC
5.00%, 4/01/27 910 973,964 -0- -0- -0- -0- -0- 910 973,964
California
(Unrefunded)
5.25%, 4/01/30 15 14,224 -0- -0- -0- -0- -0- 15 14,224
AMBAC
5.00%, 4/01/27 1,740 1,626,621 -0- -0- -0- -0- -0- 1,740 1,626,621
California Dept
of Wtr Res
(Pwr Sup Rev)
(Prerefunded)
Series 02A
5.375%, 5/01/22 2,000 2,186,800 -0- -0- -0- -0- -0- 2,000 2,186,800
California
FSA Series 03
5.00%, 2/01/29 -0- -0- 1,445 1,355,367 -0- -0- -0- 1,445 1,355,367
California
(Prerefunded)
5.125%, 2/01/28 -0- -0- 1,500 1,635,915 -0- -0- -0- 1,500 1,635,915
AMBAC
5.00%, 4/01/27 -0- -0- 1,035 1,107,750 -0- -0- -0- 1,035 1,107,750
California
(Unrefunded)
AMBAC
5.00%, 4/01/27 -0- -0- 1,965 1,836,960 -0- -0- -0- 1,965 1,836,960
California
Statewide Comnty
Dev Auth
(Enloe Med Ctr)
5.50%, 8/15/23 -0- -0- -0- -0- 80 76,942 -0- 80 76,942
6.25%, 8/15/28 -0- -0- -0- -0- 1,715 1,737,312 -0- 1,715 1,737,312
Series A
5.375%, 8/15/20 -0- -0- -0- -0- 510 501,014 -0- 510 501,014
Chula Vista IDR
(San Diego Gas)
Series 96A
5.30%, 7/01/21 4,000 3,540,560 -0- -0- -0- -0- -0- 4,000 3,540,560
Golden St Tobacco
Securitization
Corp.
(Prerefunded)
XLCA Series 03B
5.50%, 6/01/33 -0- -0- 2,000 2,137,180 -0- -0- -0- 2,000 2,137,180
Manteca Uni Sch
Dist
MBIA Series 01
Zero Coupon,
9/01/31 11,910 2,803,257 -0- -0- -0- -0- -0- 11,910 2,803,257
San Bernardino
Cnty Redev ETM
(Ontario Proj
#1)
MBIA Series 93
5.80%, 8/01/23 -0- -0- 1,000 1,024,290 -0- -0- -0- 1,000 1,024,290
San Diego Cnty
Wtr Auth
FSA Series 08A
5.00%, 5/01/25 3,000 2,914,680 -0- -0- -0- -0- -0- 3,000 2,914,680
------------ ------------ ------------ ------------
14,933,569 9,097,462 2,315,268 26,346,299
------------ ------------ ------------ ------------
Colorado - 2.2%
Colorado Ed &
Cultural Fac Auth
(Knowledge
Quest Charter
Sch)
Series 05
6.50%, 5/01/36 495 381,868 -0- -0- -0- -0- -0- 495 381,868
Colorado HFA SFMR
(Mtg Rev) AMT
Series 99A-2
6.45%, 4/01/30 485 439,230 -0- -0- -0- -0- -0- 485 439,230
Colorado Hlth Fac
Auth
(Evangelical
Lutheran Proj)
5.25%, 6/01/19 1,500 1,344,195 -0- -0- 700 608,171 -0- 2,200 1,952,366
Colorado Hlth Fac
Auth
(Parkview Med
Ctr)
Series 04
5.00%, 9/01/25 690 545,983 -0- -0- -0- -0- -0- 690 545,983
Northwest Parkway
Toll Rev
(Prerefunded)
FSA Series 01C
Zero Coupon,
6/15/25 (c) -0- -0- 9,000 8,335,620 -0- -0- -0- 9,000 8,335,620
Park Creek Metro
Dist Rev Ltd
(Ref-Sr-Ltd
Tax Ppty Tax)
Series 05
5.50%, 12/01/30 1,900 1,510,158 -0- -0- -0- -0- -0- 1,900 1,510,158
PV Wtr &
Sanitation Metro
Dist Capital
Appreciation
Series 06
Zero Coupon,
12/15/17 3,672 1,953,798 -0- -0- -0- -0- -0- 3,672 1,953,798
Todd Creek Farms
Metro Dist No 1
6.125%,
12/01/22 1,210 992,055 -0- -0- -0- -0- -0- 1,210 992,055
Series 04
6.125%,
12/01/19 820 707,849 -0- -0- -0- -0- -0- 820 707,849
------------ ------------ ------------ ------------
7,875,136 8,335,620 608,171 16,818,927
------------ ------------ ------------ ------------
Connecticut -
0.1%
Connecticut HEFA
(Griffin Hosp)
RADIAN Series
05B
5.00%, 7/01/23 750 616,785 -0- -0- -0- -0- -0- 750 616,785
------------ ------------ ------------ ------------
District Of
Columbia - 2.6%
Dist of Columbia
ACA
5.00%, 6/01/26 1,000 721,670 -0- -0- -0- -0- -0- 1,000 721,670
FSA Series
2007C
5.00%, 6/01/23 7,775 7,578,448 -0- -0- 3,205 3,123,978 -0- 10,980 10,702,426
Dist of Columbia
(Georgetown
Univ)
AMBAC Series
C-1
15.00%,
4/01/41 (a) + -0- -0- 25 25,000 -0- -0- -0- 25 25,000
Dist of Columbia
Wtr & Swr Auth
ASSURED GTY
Series 2008A
5.00%,
10/01/23 3,220 3,117,926 905 876,311 -0- -0- -0- 4,125 3,994,237
Washington Conv
Ctr Auth
AMBAC
5.00%, 10/01/23 -0- -0- -0- -0- 5,000 4,595,500 -0- 5,000 4,595,500
------------ ------------ ------------ ------------
11,418,044 901,311 7,719,478 20,038,833
------------ ------------ ------------ ------------
Florida - 15.9%
Beacon Tradeport
CDD
Series 02B
7.25%, 5/01/33 150 131,364 -0- -0- 855 748,775 -0- 1,005 880,139
Bonnet Creek
Resort CDD
Series 02
7.25%, 5/01/18 2,000 1,868,880 -0- -0- 2,000 1,868,880 -0- 4,000 3,737,760
Capital Trust Agy
Arpt Fac
(Cargo Acq
Grp) AMT
Series 02
6.25%, 1/01/19 -0- -0- -0- -0- 490 432,317 -0- 490 432,317
Series 03
5.75%, 1/01/32 -0- -0- -0- -0- 2,000 1,405,400 -0- 2,000 1,405,400
Collier Cnty CFD
(Fiddler's
Creek)
Series 02A
6.875%, 5/01/33 1,120 941,741 -0- -0- 350 264,562 -0- 1,470 1,206,303
Series 02B
6.625%, 5/01/33 480 391,243 -0- -0- 150 109,829 -0- 630 501,072
Collier Cnty IDA
(Southern St
Util) AMT
Series 96
6.50%, 10/01/25 705 705,056 -0- -0- -0- -0- -0- 705 705,056
Concorde Estates
CDD
Series 04B
5.00%, 5/01/11 -0- -0- -0- -0- 700 651,952 -0- 700 651,952
Crossings At
Fleming Island
CDD
Series 00C
7.05%, 5/01/15 1,550 1,471,322 -0- -0- -0- -0- -0- 1,550 1,471,322
Crossings at
Fleming Island
CDD
(Eagle Harbor)
Series 00C
7.10%, 5/01/30 -0- -0- -0- -0- 2,240 1,999,088 -0- 2,240 1,999,088
Dade Cnty HFA
MFHR
(Golden Lakes
Apts) AMT
Series 97A
6.00%, 11/01/32 -0- -0- -0- -0- 250 214,213 -0- 250 214,213
6.05%, 11/01/39 -0- -0- -0- -0- 750 636,825 -0- 750 636,825
Florida HFA MFHR
(Turtle Creek
Apts) AMT
AMBAC Series
96C
6.20%, 5/01/36 -0- -0- -0- -0- 3,245 2,785,346 -0- 3,245 2,785,346
Florida HFC MFHR
(Mystic Pointe
II) AMT
GNMA Series 00
6.30%, 12/01/41 -0- -0- -0- -0- 1,165 1,035,673 -0- 1,165 1,035,673
Florida HFC MFHR
(Sabal Chase
Apts) AMT
FSA Series 00
6.00%, 5/01/40 -0- -0- -0- -0- 3,650 3,058,554 -0- 3,650 3,058,554
Florida HFC MFHR
(Spring Harbor
Apts) AMT
Series 99C-1
5.90%, 8/01/39 -0- -0- -0- -0- 2,540 2,127,809 -0- 2,540 2,127,809
Florida HFC MFHR
(Walker Ave
Club) AMT
FSA Series 00L-1
6.00%, 12/01/38 -0- -0- -0- -0- 3,435 2,910,063 -0- 3,435 2,910,063
Florida HFC MFHR
(Waverly Apts)
AMT
FSA Series
00C-1
6.50%, 7/01/40 -0- -0- -0- -0- 2,790 2,516,887 -0- 2,790 2,516,887
Gateway CDD
(Sun City Ctr)
Series 03B
5.50%, 5/01/10 255 255,000 -0- -0- -0- -0- -0- 255 255,000
Hamal CDD
(Prerefunded)
Series 01
6.65%, 5/01/21 -0- -0- -0- -0- 1,100 1,209,989 -0- 1,100 1,209,989
Herons Glen
Recreation Dist
(Prerefunded)
Series 99
5.90%, 5/01/19 -0- -0- -0- -0- 2,385 2,452,448 -0- 2,385 2,452,448
Highlands Cnty
Hlth Fac Auth
(Adventist/
Sunbelt Hosp)
(Prerefunded)
Series 01A
6.00%, 11/15/31 -0- -0- -0- -0- 2,000 2,178,520 -0- 2,000 2,178,520
Hollywood Comnty
Redev Agy
XLCA
5.00%, 3/01/24 -0- -0- 5,000 4,534,650 -0- -0- -0- 5,000 4,534,650
Indian Trace Dev
Dist
(Wtr Mgmt Spl
Benefit)
MBIA Series 05
5.00%, 5/01/22 320 310,230 -0- -0- 680 659,240 -0- 1,000 969,470
Indian Trace Dev
Dist Spl Assmt
(Wtr Mgmt Spl
Benefit)
MBIA Series 05
5.00%, 5/01/23 1,480 1,413,311 -0- -0- -0- -0- -0- 1,480 1,413,311
Jacksonville
(Excise Taxes
Rev)
AMBAC Series
02B
5.00%, 10/01/26 -0- -0- -0- -0- 3,925 3,780,913 -0- 3,925 3,780,913
Jacksonville Hosp
Rev
(Mayo Clinic)
Series 01C
5.50%, 11/15/36 6,750 5,806,823 -0- -0- -0- -0- -0- 6,750 5,806,823
Lee Cnty Arpt
(Southwest
Int'l Arpt)
AMT
FSA Series 00A
6.00%, 10/01/32 -0- -0- -0- -0- 13,500 12,390,840 -0- 13,500 12,390,840
Lee Cnty CFD
(Herons Glen)
(Prerefunded)
Series 99
6.00%, 5/01/29 6,090 6,280,373 -0- -0- -0- -0- -0- 6,090 6,280,373
Lee Cnty HFA SFMR
(Mtg Rev) AMT
GNMA/ FNMA
Series 00A-1
7.20%, 3/01/33 70 69,957 -0- -0- -0- -0- -0- 70 69,957
Manatee Cnty HFA
SFMR
(Mtg Rev) AMT
GNMA Series 99
6.25%, 11/01/28 -0- -0- -0- -0- 270 269,808 -0- 270 269,808
Marshall Creek
CDD
Series 02A
6.625%, 5/01/32 1,645 1,405,504 -0- -0- 900 768,969 -0- 2,545 2,174,473
Miami Beach Hlth
Fac Auth
(Mt Sinai Med
Ctr)
Series 01A
6.80%, 11/15/31 3,500 2,729,195 -0- -0- 1,600 1,247,632 -0- 5,100 3,976,827
Miami-Dade Cnty
Ed Fac Auth
(Univ of
Miami)
Series 08A
5.20%, 4/01/24 2,500 2,339,925 -0- -0- -0- -0- -0- 2,500 2,339,925
Miami-Dade Cnty
HFA SFMR
(Home Ownship
Mtg) AMT
GNMA/ FNMA
Series 00A-1
6.00%, 10/01/32 -0- -0- -0- -0- 710 699,300 -0- 710 699,300
Miromar Lakes CDD
Series 00A
7.25%, 5/01/12 3,195 3,050,746 -0- -0- 2,450 2,339,382 -0- 5,645 5,390,128
North Broward
Hosp Dist
(Prerefunded)
Series 01
6.00%, 1/15/31 -0- -0- -0- -0- 1,700 1,830,917 -0- 1,700 1,830,917
Northern Palm
Beach Cnty Impr
Dist
(Mirasol Unit
#43)
(Prerefunded)
6.125%, 8/01/31 -0- -0- -0- -0- 1,000 1,093,510 -0- 1,000 1,093,510
Northern Palm
Beach Cnty Impr
Dist
(Unit Dev #43)
6.10%, 8/01/21 $ -0- $ -0- $ -0- $ -0- $ 75 $ 63,681 $ -0- $ 75 $ 63,681
Northern Palm
Beach Cnty Impr
Dist
(Unit Dev #43)
(Prerefunded)
6.10%, 8/01/21 -0- -0- -0- -0- 510 557,359 -0- 510 557,359
Northern Palm
Beach Cnty Impr
Dist
(Unit Dev 27B)
Series 02
6.40%, 8/01/32 -0- -0- -0- -0- 1,075 886,380 -0- 1,075 886,380
Orange Cnty HFA
MFHR
(Loma Vista
Proj) AMT
Series 99G
5.50%, 3/01/32 -0- -0- -0- -0- 2,000 1,577,280 -0- 2,000 1,577,280
(Seminole
Proj) AMT
Series 99L
5.80%, 6/01/32 4,990 3,847,041 -0- -0- -0- -0- -0- 4,990 3,847,041
Orange Cnty Hosp
(Orlando Regl)
(Prerefunded)
Series 02
5.75%, 12/01/32 -0- -0- -0- -0- 1,320 1,441,202 -0- 1,320 1,441,202
Orlando Assess
Dist
(Conroy Rd
Proj)
Series 98A
5.80%, 5/01/26 3,250 2,562,365 -0- -0- -0- -0- -0- 3,250 2,562,365
Pasco Cnty HFA
MFHR
(Pasco Woods
Apts) AMT
Series 99A
5.90%, 8/01/39 3,690 3,062,885 -0- -0- -0- -0- -0- 3,690 3,062,885
Pier Park CDD
Series 02-1
7.15%, 5/01/34 3,245 2,842,685 -0- -0- -0- -0- -0- 3,245 2,842,685
Preserve at
Wildnerness Lake
CDD
Series 02A
7.10%, 5/01/33
Series 02B
6.20%, 11/01/08 25 25,000 -0- -0- 1,425 1,284,224 -0- 1,450 1,309,224
South Miami Hlth
Fac Hosp
(Baptist Hlth)
(Prerefunded)
5.25%, 11/15/33 -0- -0- -0- -0- 2,000 2,149,720 -0- 2,000 2,149,720
Tallahassee Hosp
(Tallahassee
Memorial)
Series 00
6.375%,
12/01/30 -0- -0- -0- -0- 2,750 2,307,442 -0- 2,750 2,307,442
Tampa Hgr Ed
(Tampa Univ
Proj)
RADIAN Series
02
5.625%, 4/01/32 -0- -0- -0- -0- 3,175 2,798,445 -0- 3,175 2,798,445
Tara CDD No 1
Series 00A
7.15%, 5/01/31 1,755 1,575,358 -0- -0- -0- -0- -0- 1,755 1,575,358
Village Ctr CDD
MBIA
5.125%,
10/01/28 -0- -0- -0- -0- 1,000 884,630 -0- 1,000 884,630
Volusia Cnty Ed
Fac Auth
(Embry Riddle
Aero Univ)
Series 99A
5.75%, 10/15/29 -0- -0- -0- -0- 2,000 1,627,660 -0- 2,000 1,627,660
Volusia Cnty Hlth
Fac
(John Knox
Village)
RADIAN Series
96A
6.00%, 6/01/17 -0- -0- 1,905 1,907,496 -0- -0- -0- 1,905 1,907,496
Waterlefe CDD
Series 01
6.95%, 5/01/31 -0- -0- -0- -0- 665 590,148 -0- 665 590,148
West Palm Beach
Comnty Redev Agy
(Northwood-
Pleasant
Comnty Redev)
5.00%, 3/01/25
- 3/01/29 -0- -0- -0- -0- 3,640 2,941,778 -0- 3,640 2,941,778
------------ ------------ ------------ ------------
43,086,004 6,442,146 72,797,590 122,325,740
------------ ------------ ------------ ------------
Illinois - 7.5%
Chicago
Series 08A
5.25%, 1/01/23 10,000 10,093,400 -0- -0- -0- -0- -0- 10,000 10,093,400
Chicago Arpt Rev
(O'Hare Int'l
Arpt)
XLCA Series
03B-1
5.25%, 1/01/34 3,400 2,975,136 1,700 1,487,568 -0- -0- -0- 5,100 4,462,704
Chicago Brd of Ed
Series 07
5.00%, 12/01/24 15,000 14,852,400 -0- -0- -0- -0- -0- 15,000 14,852,400
Chicago HFA SFMR
(Mtg Rev)
GNMA/ FNMA/
FHLMC Series
99C
7.05%, 10/01/30 45 45,144 -0- -0- -0- -0- -0- 45 45,144
Chicago HFA SFMR
(Mtg Rev) AMT
GNMA/ FNMA/
FHLMC Series
98A
6.45%, 9/01/29 225 221,546 -0- -0- -0- -0- -0- 225 221,546
GNMA/ FNMA/
FHLMC Series
98C-1
6.30%, 9/01/29 165 164,543 -0- -0- -0- -0- -0- 165 164,543
GNMA/ FNMA/
FHLMC Series
99 A
6.35%, 10/01/30 230 196,266 -0- -0- -0- -0- -0- 230 196,266
Chicago Incr
Alloc
(Diversey/
Narragansett
Redev Proj)
7.46%, 2/15/26 1,770 1,696,952 -0- -0- 830 795,746 -0- 2,600 2,492,698
Chicago Sales Tax
Rev
FSA Series 05
5.00%, 1/01/25 6,905 6,534,201 -0- -0- -0- -0- -0- 6,905 6,534,201
Chicago Spec
Assess
(Lake Shore
East)
Series 03
6.75%, 12/01/32 3,500 2,970,240 $ -0- -0- -0- -0- -0- 3,500 2,970,240
Gilberts Spl Svc
Area No 15 Spl
Tax
(Gilberts Town
Ctr Proj)
Series 03
6.00%, 3/01/28 2,430 1,876,956 -0- -0- -0- -0- -0- 2,430 1,876,956
Hampshire Spl Svc
Area No 14
5.80%, 3/01/26 1,595 1,234,227 -0- -0- 775 599,703 -0- 2,370 1,833,930
Illinois Fin Auth
(Illinois Inst
of Technology)
Series 06A
5.00%, 4/01/31 750 567,757 -0- -0- -0- -0- -0- 750 567,757
Illionois Sport
Fac Rev
(Chicago
Stadium
Soldier Field)
AMBAC Series 01
Zero Coupon,
6/15/30 (c) -0- -0- 7,000 6,259,470 -0- -0- -0- 7,000 6,259,470
Manhattan
(No 04-1
Brookstone
Springs Proj)
Series 05
5.875%, 3/01/28 1,667 1,307,595 -0- -0- 700 549,080 -0- 2,367 1,856,675
Metro Pier & Expo
Auth
(McCormick
Place)
MBIA Series
02A
5.25%, 6/15/42 1,750 1,670,323 1,750 1,670,322 -0- -0- -0- 3,500 3,340,645
------------ ------------ ------------ ------------
46,406,686 9,417,360 1,944,529 57,768,575
------------ ------------ ------------ ------------
Indiana - 1.2%
Franklin Township
Sch Bldg Corp.
5.00%, 7/15/21
- 7/15/22 -0- -0- -0- -0- 6,625 6,404,921 -0- 6,625 6,404,921
Hendricks Cnty
Bldg Fac Corp.
5.50%, 7/15/23 1,165 1,191,154 -0- -0- -0- -0- -0- 1,165 1,191,154
Indiana Dev Fin
Auth
(Inland Steel)
Series 97
5.75%, 10/01/11 1,825 1,762,567 -0- -0- -0- -0- -0- 1,825 1,762,567
------------ ------------ ------------ ------------
2,953,721 -0- 6,404,921 9,358,642
------------ ------------ ------------ ------------
Iowa - 0.0%
Coralville Urban
Rev Tax Incr
Series 07C
5.00%, 6/01/18 140 133,886 -0- -0- 100 95,633 -0- 240 229,519
------------ ------------ ------------ ------------
Kansas - 0.1%
Lenexa Hlth Care
Fac
(Lakeview
Village Inc.)
5.25%, 5/15/22 870 637,327 -0- -0- 390 285,698 -0- 1,260 923,025
------------ ------------ ------------ ------------
Louisiana - 3.2%
De Soto Parish
PCR
(Int'l Paper
Co)
Series A-2
5.00%, 10/01/12 2,200 1,995,092 -0- -0- -0- -0- -0- 2,200 1,995,092
Lafayette
(Communications
Sys Rev)
XLCA
5.25%, 11/01/20 1,550 1,545,892 -0- -0- 2,215 2,209,130 -0- 3,765 3,755,022
Lafayette LA
Communications
(Communications
Sys Rev)
XLCA
5.25%, 11/01/21
- 11/01/23 3,450 3,397,731 1,550 1,513,869 -0- -0- -0- 5,000 4,911,600
Louisiana
Agriculture Fin
Auth
5.25%, 9/15/17 -0- -0- -0- -0- 1,130 1,026,661 -0- 1,130 1,026,661
Louisiana Arpt
Fac
(Cargo ACQ
Grp) AMT
Series 02
6.65%, 1/01/25 800 667,464 -0- -0- -0- -0- -0- 800 667,464
New Orleans
MBIA Series 05
5.00%, 12/01/29 3,420 2,937,130 570 489,522 -0- -0- -0- 3,990 3,426,652
5.25%, 12/01/21 3,360 3,111,058 1,135 1,050,908 -0- -0- -0- 4,495 4,161,966
RADIAN
5.00%, 12/01/18
- 12/01/19 2,590 2,309,011 -0- -0- 1,550 1,406,548 -0- 4,140 3,715,559
RADIAN Series A
5.00%, 12/01/22 1,060 885,895 -0- -0- -0- -0- -0- 1,060 885,895
------------ ------------ ------------ ------------
16,849,273 3,054,299 4,642,339 24,545,911
------------ ------------ ------------ ------------
Maryland - 0.8%
Maryland CDA SFMR
(Mtg Rev) AMT
Series 00A
6.10%, 7/01/38 6,285 5,415,408 -0- -0- -0- -0- -0- 6,285 5,415,408
Maryland IDR
(Med Waste
Assoc) AMT
Series 89
8.75%,
11/15/10 (d)(e) 1,225 1,059,196 -0- -0- -0- -0- -0- 1,225 1,059,196
------------ ------------ ------------ ------------
6,474,604 -0- -0- 6,474,604
------------ ------------ ------------ ------------
Massachusetts -
3.3%
Massachusetts
(Prerefunded)
Series 02C
5.25%, 11/01/30 5,000 5,319,300 -0- -0- -0- -0- -0- 5,000 5,319,300
Massachusetts Dev
Fin Agy
(Seven Hills
Fndtn)
RADIAN Series
99
5.15%, 9/01/28 6,035 5,128,603 -0- -0- -0- -0- -0- 6,035 5,128,603
Massachusetts
HEFA
(Berkshire
Hlth Sys)
RADIAN Series
01E
5.70%, 10/01/25 -0- -0- 5,800 5,232,934 -0- -0- -0- 5,800 5,232,934
Massachusetts
HEFA
(Cape Cod
Hlthcare)
RADIAN Series
01C
5.25%, 11/15/31 -0- -0- 1,600 1,288,640 -0- -0- -0- 1,600 1,288,640
Massachusetts
HEFA
(Care Group
Inc.)
MBIA Series 08
5.375%, 2/01/26 -0- -0- 1,250 1,199,037 -0- -0- -0- 1,250 1,199,037
Massachusetts
Port Auth AMT
Series 99D
6.00%, 7/01/29 7,500 7,394,550 -0- -0- -0- -0- -0- 7,500 7,394,550
------------ ------------ ------------ ------------
17,842,453 7,720,611 -0- 25,563,064
------------ ------------ ------------ ------------
Michigan - 4.0%
Detroit Wtr Sup
Sys
(Prerefunded)
FGIC Series
01B
5.50%, 7/01/33
(f) -0- -0- 1,450 1,557,126 -0- -0- -0- 1,450 1,557,126
FSA Series
2006A
5.00%, 7/01/24 7,005 6,496,017 -0- -0- 2,975 2,758,837 -0- 9,980 9,254,854
Kalamazoo Hosp
Fin Auth
(Borgess Med
Ctr) ETM
FGIC Series
94A
0.208%,
6/01/11 (g) -0- -0- 3,440 3,446,536 -0- -0- -0- 3,440 3,446,536
Kent Hosp Fin
Auth
(Metro Hosp
Proj)
Series 05A
5.75%, 7/01/25 710 576,619 -0- -0- -0- -0- -0- 710 576,619
Michigan
(Trunk Line
Fund)
(Prerefunded)
FSA Series 01A
5.25%, 11/01/30 -0- -0- 1,000 1,069,780 -0- -0- -0- 1,000 1,069,780
Michigan HDA MFHR
(Rental Rev)
AMT
AMBAC Series
97A
6.10%, 10/01/33 330 286,968 -0- -0- -0- -0- -0- 330 286,968
Michigan Hosp Fin
Auth
(Sparrow Med
Ctr)
(Prerefunded)
Series 01
5.625%,
11/15/36 2,650 2,858,078 -0- -0- -0- -0- -0- 2,650 2,858,078
Michigan Hosp Fin
Auth
(Trinity Hlth)
Series 00A
6.00%, 12/01/27 4,515 4,336,071 -0- -0- -0- -0- -0- 4,515 4,336,071
Plymouth Ed Ctr
Charter Sch Pub
Academy Rev
Series 05
5.375%,
11/01/30 2,000 1,480,400 -0- -0- -0- -0- -0- 2,000 1,480,400
Saginaw Hosp Fin
Auth
(Covenant Med
Ctr)
Series 00F
6.50%, 7/01/30 6,125 6,082,125 -0- -0- -0- -0- -0- 6,125 6,082,125
------------ ------------ ------------ ------------
22,116,278 6,073,442 2,758,837 30,948,557
------------ ------------ ------------ ------------
Minnesota - 2.1%
Maple Grove Hlth
Care
5.00%, 5/01/22 -0- -0- -0- -0- 1,350 1,157,679 -0- 1,350 1,157,679
Minneapolis & St.
Paul Arpt AMT
FGIC Series 00B
6.00%, 1/01/21 3,520 3,454,282 -0- -0- -0- -0- -0- 3,520 3,454,282
Shakopee Hlth
Care Fac
(St Francis
Regl Med Ctr)
Series 04
5.10%, 9/01/25 2,700 2,069,037 -0- -0- -0- -0- -0- 2,700 2,069,037
St. Paul Hsg &
Redev Auth
(Hltheast Proj)
Series 05
6.00%, 11/15/25 500 431,540 -0- -0- 500 431,540 -0- 1,000 863,080
Waconia Hlth Care
Fac
(Ridgeview Med
Ctr)
(Prerefunded)
RADIAN Series
99A
6.125%, 1/01/29 -0- -0- 6,095 6,335,631 -0- -0- -0- 6,095 6,335,631
Western Minnesota
Muni Pwr Agy
FSA
5.00%, 1/01/17 1,400 1,469,678 -0- -0- 900 944,793 -0- 2,300 2,414,471
------------ ------------ ------------ ------------
7,424,537 6,335,631 2,534,012 16,294,180
------------ ------------ ------------ ------------
Missouri - 2.0%
Kansas City
(Downtown Arena
Proj)
Series 08C
5.00%, 4/01/28 10,500 9,421,125 -0- -0- 3,500 3,140,375 -0- 14,000 12,561,500
Kansas City Arpt
Fac Rev
(Cargo ACQ
Grp)
Series 02
6.25%, 1/01/30 1,965 1,519,770 -0- -0- -0- -0- -0- 1,965 1,519,770
Missouri Dev Fin
Brd
(Crackerneck
Creek Proj)
Series 05C
5.00%, 3/01/26 1,000 891,500 -0- -0- -0- -0- -0- 1,000 891,500
Riverside IDA
(Riverside
Horizons Proj)
ACA Series 07A
5.00%, 5/01/27 370 299,933 120 97,276 160 129,701 -0- 650 526,910
------------ ------------ ------------ ------------
12,132,328 97,276 3,270,076 15,499,680
------------ ------------ ------------ ------------
Nevada - 6.3%
Carson City Hosp
Rev
(Carson-Tahoe
Hosp Proj)
RADIAN Series
03A
5.125%, 9/01/29 2,700 2,205,306 2,100 1,715,238 -0- -0- -0- 4,800 3,920,544
Clark Cnty
AMBAC Series
2006
5.00%, 11/01/23 6,000 5,845,620 5,000 4,871,350 2,250 2,192,107 -0- 13,250 12,909,077
Clark Cnty
Passenger Fac
5.25%, 7/01/18 9,090 8,981,011 -0- -0- -0- -0- -0- 9,090 8,981,011
Clark Cnty Sch
Dist
FGIC
5.00%, 6/15/22 5,720 5,653,019 -0- -0- -0- -0- -0- 5,720 5,653,019
Las Vegas Valley
Wtr Dist
FGIC Series 05
5.00%, 6/01/27 5,000 4,795,400 -0- -0- -0- -0- -0- 5,000 4,795,400
Nevada Sys of Hgr
Ed
AMBAC
5.00%, 7/01/25 6,985 6,587,414 $ -0- -0- -0- -0- -0- 6,985 6,587,414
AMBAC Series
2005B
5.00%, 7/01/26 -0- -0- 6,715 6,297,394 -0- -0- -0- 6,715 6,297,394
------------ ------------ ------------ ------------
34,067,770 12,883,982 2,192,107 49,143,859
------------ ------------ ------------ ------------
New Hampshire -
1.0%
New Hampshire Bus
Fin Auth PCR
(Public Svc
Co) AMT
Series 93E
6.00%, 5/01/21 4,000 3,768,880 -0- -0- -0- -0- -0- 4,000 3,768,880
New Hampshire
HEFA
(Covenant
Hlth)
Series 04
5.375%, 7/01/24 1,680 1,468,790 -0- -0- -0- -0- -0- 1,680 1,468,790
(Mary Hitchcock
Hosp)
FSA Series 02
5.50%, 8/01/27 -0- -0- 2,250 2,193,323 -0- -0- -0- 2,250 2,193,323
------------ ------------ ------------ ------------
5,237,670 2,193,323 -0- 7,430,993
------------ ------------ ------------ ------------
New Jersey - 2.8%
Morris-Union
Jointure COP
RADIAN Series
04
5.00%, 5/01/27 5,175 4,247,692 -0- -0- -0- -0- -0- 5,175 4,247,692
New Jersey Ed Fac
Auth
(Prerefunded)
AMBAC Series
02A
5.25%, 9/01/21 8,005 8,599,531 -0- -0- -0- -0- -0- 8,005 8,599,531
(Hgr Ed Cap
Impt)
(Prerefunded)
AMBAC Series
02A
5.125%,
9/01/22 -0- -0- 2,500 2,674,525 -0- -0- -0- 2,500 2,674,525
New Jersey EDA
(New Jersey St
Contract)
Series 05
5.25%, 3/01/25 6,200 6,086,292 -0- -0- -0- -0- -0- 6,200 6,086,292
------------ ------------ ------------ ------------
18,933,515 2,674,525 -0- 21,608,040
------------ ------------ ------------ ------------
New Mexico - 1.4%
Clayton Jail Proj
Rev
CIFG
5.00%,
11/01/25 -
11/01/27 8,475 6,843,254 -0- -0- 4,620 3,731,528 -0- 13,095 10,574,782
------------ ------------ ------------ ------------
New York - 3.8%
Erie Cnty IDA
(Buffalo Sch
Dist Proj)
FSA Series 04
5.75%, 5/01/25
- 5/01/26 3,800 3,822,793 1,300 1,307,267 -0- -0- -0- 5,100 5,130,060
Nassau Cnty Hlth
Fac
(Nassau Hlth
Sys Rev)
(Prerefunded)
FSA Series 99
5.75%, 8/01/29 -0- -0- 7,600 7,957,504 -0- -0- -0- 7,600 7,957,504
New York City
5.25%, 9/01/23 5,000 4,923,750 -0- -0- -0- -0- -0- 5,000 4,923,750
Series 03A
5.50%, 8/01/21 5,000 5,053,500 -0- -0- -0- -0- -0- 5,000 5,053,500
Series 04G
5.00%,
12/01/23 895 851,709 -0- -0- -0- -0- -0- 895 851,709
New York City
(Unrefunded)
Series 1
5.75%, 3/01/17 420 436,703 -0- -0- -0- -0- -0- 420 436,703
New York City IDA
(Lycee
Francais)
ACA Series 02C
6.80%, 6/01/28 2,500 2,255,600 -0- -0- -0- -0- -0- 2,500 2,255,600
New York Liberty
Dev Corp.
(National
Sports Museum
Proj)
6.125%,
2/15/19 (e)* 850 127,500 -0- -0- 500 75,000 -0- 1,350 202,500
New York St Dorm
Auth
(Orange Regl
Med Ctr)
Series 2008
6.50%, 12/01/21 1,300 1,164,878 -0- -0- 460 412,188 -0- 1,760 1,577,066
New York St HFA
(Econ Dev &
Hsg)
FGIC Series
05A
5.00%, 9/15/25 1,200 1,160,112 -0- -0- -0- -0- -0- 1,200 1,160,112
------------ ------------ ------------ ------------
19,796,545 9,264,771 487,188 29,548,504
------------ ------------ ------------ ------------
North Carolina -
0.2%
Iredell Cnty COP
FSA Series 08
5.25%, 6/01/22 720 728,071 200 202,242 -0- -0- -0- 920 930,313
North Carolina
Eastern Muni Pwr
Agy
AMBAC Series
05A
5.25%, 1/01/20 -0- -0- 1,000 939,500 -0- -0- -0- 1,000 939,500
------------ ------------ ------------ ------------
728,071 1,141,742 -0- 1,869,813
------------ ------------ ------------ ------------
North Dakota -
0.2%
Ward Cnty Hlth
Care Fac
(Trinity Hlth)
5.125%,
7/01/18 -
7/01/20 1,380 1,141,114 -0- -0- 685 553,994 -0- 2,065 1,695,108
------------ ------------ ------------ ------------
Ohio - 3.2%
Cleveland
Cuyahoga Port
Auth
(Univ Heights
Ohio-Pub
Parking Proj)
Series 01
7.35%, 12/01/31 5,400 4,810,644 -0- -0- 3,000 2,672,580 -0- 8,400 7,483,224
Cleveland Pub Pwr
Sys
FGIC Series
06A
5.00%, 11/15/18 2,335 2,316,810 500 496,105 -0- -0- -0- 2,835 2,812,915
Hamilton Cnty
(Prerefunded)
AMBAC Series B
5.25%, 12/01/32 -0- -0- 5,660 5,974,696 -0- -0- -0- 5,660 5,974,696
Hamilton Cnty
(Unrefunded)
AMBAC Series B
5.25%, 12/01/32 -0- -0- 1,440 1,401,581 -0- -0- -0- 1,440 1,401,581
Franklin Cnty
(OCLC Online
Computer
Library Ctr)
Series 98A
5.20%, 10/01/20 1,200 1,199,940 -0- -0- -0- -0- -0- 1,200 1,199,940
Toledo Lucas Cnty
Port Auth
(CSX Transp)
Series 92
6.45%, 12/15/21 6,730 5,827,709 -0- -0- -0- -0- -0- 6,730 5,827,709
------------ ------------ ------------ ------------
14,155,103 7,872,382 2,672,580 24,700,065
------------ ------------ ------------ ------------
Oregon - 0.5%
Forest Grove Rev
(Ref & Campus
Impr Pacific
Proj A)
RADIAN Series
05A
5.00%, 5/01/28 2,995 2,468,030 -0- -0- -0- -0- -0- 2,995 2,468,030
Oregon Hsg Dev
Agy SFMR
(Mtg Rev) AMT
Series 02B
5.45%, 7/01/32 2,200 1,724,580 -0- -0- -0- -0- -0- 2,200 1,724,580
------------ ------------ ------------ ------------
4,192,610 -0- -0- 4,192,610
------------ ------------ ------------ ------------
Pennsylvania -
4.4%
Allegheny Cnty
Hgr Ed Bldg Auth
(Carnegie Mellon
Univ)
Series 02
5.50%, 3/01/28 -0- -0- 5,665 5,708,904 -0- -0- -0- 5,665 5,708,904
Allegheny Cnty
Hosp Dev Auth
(West
Pennsylvania
Hlth Sys)
Series 07A
5.00%, 11/15/17 2,900 2,312,866 -0- -0- 1,300 1,036,802 -0- 4,200 3,349,668
Ephrata Area Sch
Dist
(Prerefunded)
FGIC Series 05
5.00%, 3/01/22 2,565 2,740,882 -0- -0- -0- -0- -0- 2,565 2,740,882
Harrisburg Arpt
Auth
(Susquehanna
Arpt Proj) AMT
Series 99
5.50%, 1/01/24 500 369,670 -0- -0- -0- -0- -0- 500 369,670
Montgomery Cnty
Hosp
(Abington Mem
Hosp)
Series 02A
5.125%, 6/01/32 2,000 1,523,920 -0- -0- -0- -0- -0- 2,000 1,523,920
Montgomery Cnty
IDA
(Whitemarsh
Continuing
Care Ret
Comnty)
6.00%, 2/01/21 1,210 985,593 -0- -0- -0- -0- -0- 1,210 985,593
Pennsylvania Hgr
Ed Fac Auth
(UPMC Hlth
Sys)
Series 01A
6.00%, 1/15/31 3,845 3,659,248 -0- -0- -0- -0- -0- 3,845 3,659,248
Pennsylvania IDA
(St Revolving
Fd)
Series 08A
5.50%, 7/01/23 3,940 3,824,046 -0- -0- -0- -0- -0- 3,940 3,824,046
Philadelphia IDA
(Leadership
Learning
Partners)
Series 05A
5.25%, 7/01/24 1,030 784,819 -0- -0- -0- -0- -0- 1,030 784,819
Pennsylvania Trpk
Transp Rev
(Prerefunded)
AMBAC Series 01
5.25%, 7/15/41 -0- -0- 6,500 6,961,760 -0- -0- -0- 6,500 6,961,760
South Ctr Gen
Auth
(Wellspan
Hlth)
MBIA Series 01
5.25%, 5/15/31 685 689,583 -0- -0- -0- -0- -0- 685 689,583
South Ctr Gen
Auth
(Wellspan
Hlth)
(Prerefunded)
MBIA Series 01
5.25%, 5/15/31 3,115 3,344,856 -0- -0- -0- -0- -0- 3,115 3,344,856
------------ ------------ ------------ ------------
20,235,483 12,670,664 1,036,802 33,942,949
------------ ------------ ------------ ------------
Puerto Rico -
2.4%
Puerto Rico
(Pub Impr)
5.25%, 7/01/23 1,100 968,198 -0- -0- 600 528,108 -0- 1,700 1,496,306
Series 01A
5.50%, 7/01/19 500 475,175 -0- -0- 500 475,175 -0- 1,000 950,350
Series 03A
5.25%, 7/01/23 500 440,090 -0- -0- -0- -0- -0- 500 440,090
Series 04A
5.25%, 7/01/19 1,920 1,778,765 -0- -0- 960 889,383 -0- 2,880 2,668,148
Puerto Rico Elec
Pwr Auth
(Prerefunded)
XLCA Series
02-1
5.25%, 7/01/22 -0- -0- 6,935 7,515,737 -0- -0- -0- 6,935 7,515,737
Puerto Rico Govt
Dev Bank
(Sr Notes)
Series 06B
5.00%, 12/01/15 500 484,015 -0- -0- 695 654,252 -0- 1,195 1,138,267
Puerto Rico HFA
5.125%, 12/01/27 370 348,307 -0- -0- -0- -0- -0- 370 348,307
Univ of Puerto
Rico
Series 06Q
5.00%, 6/01/19
- 6/01/20 3,730 3,381,421 -0- -0- 730 668,979 -0- 4,460 4,050,400
------------ ------------ ------------ ------------
7,875,971 7,515,737 3,215,897 18,607,605
------------ ------------ ------------ ------------
Rhode Island -
0.7%
Rhode Island EDA
(Providence
Place Mall
Proj)
ASSET GTY
Series 00
6.125%, 7/01/20 -0- -0- 5,500 5,572,050 -0- -0- -0- 5,500 5,572,050
------------ ------------ ------------ ------------
South Carolina -
2.2%
Dorchester Cnty
Sch Dist No 2
(Installment
Pur Rev)
Series 06
5.00%, 12/01/30 1,500 1,284,555 -0- -0- -0- -0- -0- 1,500 1,284,555
ASSURED GTY
5.00%, 12/01/29 400 365,404 -0- 400 365,404
Newberry
Investing in
Childrens Ed
(Newberry Cnty
Sch Dist Proj)
ASSURED GTY
Series 05
5.00%, 12/01/27 3,890 3,533,443 2,335 2,120,974 -0- -0- -0- 6,225 5,654,417
Series 05
5.00%, 12/01/30 335 277,306 115 95,195 -0- -0- -0- 450 372,501
Scago Ed Fac Corp.
(Calhoun Sch
Dist)
RADIAN
5.00%, 12/01/21 4,300 3,943,788 -0- -0- 945 866,716 -0- 5,245 4,810,504
South Carolina
Pub Svc Auth
AMBAC Series
2007A
5.00%, 1/01/25 -0- -0- 5,000 4,923,450 -0- -0- -0- 5,000 4,923,450
------------ ------------ ------------ ------------
9,039,092 7,505,023 866,716 17,410,831
------------ ------------ ------------ ------------
Tennessee - 0.2%
Sullivan Cnty
Hlth Ed
(Wellmont Hlth
Sys)
Series 06C
5.00%, 9/01/22 1,265 916,189 -0- -0- 725 525,088 -0- 1,990 1,441,277
5.25%, 9/01/26 275 193,083 -0- -0- -0- -0- -0- 275 193,083
------------ ------------ ------------ ------------
1,109,272 -0- 525,088 1,634,360
------------ ------------ ------------ ------------
Texas - 9.6%
Bexar Cnty Hlth
Fac Dev Corp.
5.00%, 7/01/27 325 222,176 -0- -0- 150 102,543 -0- 475 324,719
Camino Real Regl
Mobility Auth
5.00%, 2/15/21 3,000 2,829,240 -0- -0- -0- -0- -0- 3,000 2,829,240
Series 2008
5.00%, 8/15/21 1,790 1,674,617 -0- -0- -0- -0- -0- 1,790 1,674,617
5.00%, 2/15/22 -0- -0- -0- -0- 1,270 1,177,061 -0- 1,270 1,177,061
Corpus Christi
Arpt Rev
(Corpus Christi
Int'l)
FSA Series 00B
5.375%, 2/15/30 7,100 6,910,785 -0- -0- -0- -0- -0- 7,100 6,910,785
Dallas-Fort Worth
Arpt Rev
(Int'l Arpt)
FGIC Series 01
5.50%, 11/01/35 13,400 10,609,718 -0- -0- -0- -0- -0- 13,400 10,609,718
Ector Cnty ISD
5.25%, 8/15/27 160 161,061 -0- -0- -0- -0- -0- 160 161,061
Ector Cnty ISD
(Prerefunded)
5.25%, 8/15/27 2,840 3,077,566 -0- -0- -0- -0- -0- 2,840 3,077,566
El Paso Cnty Hosp
Dist
ASSURED GTY
Series 2008A
5.00%, 8/15/23 5,000 4,922,650 -0- -0- -0- -0- -0- 5,000 4,922,650
Garza Cnty Pub
Fac Corp.
5.50%, 10/01/19 535 478,589 -0- -0- -0- -0- -0- 535 478,589
Grapevine Arpt
Rev
6.50%, 1/01/24 995 829,999 -0- -0- -0- -0- -0- 995 829,999
Guadalupe-Blanco
River Auth
(Contract &
Sub Wtr Res)
MBIA Series
04A
5.00%, 8/15/24 1,440 1,344,931 455 424,961 -0- -0- -0- 1,895 1,769,892
Hidalgo Cnty Hlth
Svc
(Mission Hosp
Inc Proj)
Series 05
5.00%, 8/15/14
- 8/15/19 730 645,560 -0- -0- -0- -0- -0- 730 645,560
Houston Arpt Rev
(Cargo ACQ
Grp) AMT
Series 02
6.375%, 1/01/23 3,000 2,497,650 -0- -0- -0- -0- -0- 3,000 2,497,650
Laredo ISD
AMBAC Series
04A
5.00%, 8/01/24 1,000 968,160 -0- -0- -0- -0- -0- 1,000 968,160
Magnolia Tax ISD
5.00%, 8/15/20 -0- -0- -0- -0- 6,165 6,256,427 -0- 6,165 6,256,427
North Texas Hlth
Fac Dev Corp
(United Regl
Hlth Care Sys)
FSA Series 07
5.00%, 9/01/24 570 515,508 180 162,792 250 226,100 -0- 1,000 904,400
Richardson Hosp
Auth
(Richardson
Regl Med Ctr)
FSA Series 04
5.875%,
12/01/24 2,310 1,911,941 -0- -0- -0- -0- -0- 2,310 1,911,941
San Antonio
(Elec & Gas
Rev)
Series 08
5.00%, 2/01/26 6,830 6,629,813 -0- -0- -0- -0- -0- 6,830 6,629,813
San Antonio
(Unrefunded)
Series 02
5.00%, 2/01/22 3,060 3,066,120 -0- -0- -0- -0- -0- 3,060 3,066,120
Series 02
5.00%, 2/01/23 -0- -0- 1,485 1,483,381 -0- -0- -0- 1,485 1,483,381
Seguin Hgr Ed
Auth
(Texas
Lutheran Univ
Proj)
Series 04
5.25%, 9/01/28 1,000 794,820 -0- -0- -0- -0- -0- 1,000 794,820
Texas Trpk Auth
AMBAC Series
02A
5.50%, 8/15/39 7,500 6,965,700 2,000 1,857,520 -0- -0- -0- 9,500 8,823,220
Tyler Hosp Rev
(Mother Francis
Regl Hlth)
(Prerefunded)
Series 01
6.00%, 7/01/31 3,900 4,270,890 -0- -0- -0- -0- -0- 3,900 4,270,890
Tyler Tex Hlth
Fac Dev Corp.
5.25%, 7/01/26 -0- -0- -0- -0- 2,000 1,558,420 -0- 2,000 1,558,420
------------ ------------ ------------ ------------
61,327,494 3,928,654 9,320,551 74,576,699
------------ ------------ ------------ ------------
Utah - 0.5%
Intermountain Pwr
Agy
Series 2008A
5.25%, 7/01/23 2,750 2,708,392 -0- -0- -0- -0- -0- 2,750 2,708,392
Spanish Fork City
Charter Sch Rev
5.55%, 11/15/21 860 710,197 -0- -0- 370 305,550 -0- 1,230 1,015,747
------------ ------------ ------------ ------------
3,418,589 -0- 305,550 3,724,139
------------ ------------ ------------ ------------
Virgin Islands -
1.0%
Virgin Islands
Pub Fin Auth
(Virgin
Islands Gross
Receipts Taxes
Loan Note)
FSA Series 03
5.00%,
10/01/13 -
10/01/14 2,025 2,069,888 -0- -0- -0- -0- -0- 2,025 2,069,888
5.25%,
10/01/15 -
10/01/17 5,460 5,526,999 -0- -0- -0- -0- -0- 5,460 5,526,999
------------ ------------ ------------ ------------
7,596,887 -0- -0- 7,596,887
------------ ------------ ------------ ------------
Virginia - 0.6%
Arlington IDA
(Arlington
Hlth Sys)
(Prerefunded)
Series 01
5.25%,
7/01/31 (f) 1,000 1,070,200 -0- -0- -0- -0- -0- 1,000 1,070,200
Bell Creek CDD
Series 03A
6.75%, 3/01/22 602 592,789 -0- -0- -0- -0- -0- 602 592,789
Broad Street CDD
(Parking Fac)
Series 03
7.50%, 6/01/33 3,000 2,770,290 -0- -0- -0- -0- -0- 3,000 2,770,290
------------ ------------ ------------ ------------
4,433,279 -0- -0- 4,433,279
------------ ------------ ------------ ------------
Washington - 4.1%
Energy Northwest
Wind
AMBAC
5.00%, 7/01/21 7,845 7,507,273 -0- -0- 3,625 3,468,944 -0- 11,470 10,976,217
King Cnty Sch
Dist No 414
(Lake
Washington)
MBIA SCH BD
GTY
5.00%, 12/01/24 -0- -0- -0- -0- 4,500 4,359,735 -0- 4,500 4,359,735
Spokane
AMBAC
5.00%, 12/01/22 5,550 5,290,870 -0- -0- 2,390 2,278,411 -0- 7,940 7,569,281
Tacoma SWFR
XLCA Series 06
5.00%, 12/01/18 2,750 2,717,798 865 854,871 -0- -0- -0- 3,615 3,572,669
Washington
AMBAC
5.00%, 1/01/24 -0- -0- -0- -0- 5,000 4,911,100 -0- 5,000 4,911,100
------------ ------------ ------------ ------------
15,515,941 854,871 15,018,190 31,389,002
------------ ------------ ------------ ------------
West Virginia -
0.3%
Fairmont Hgr Ed
(Fairmont St
Coll)
FGIC Series 02A
5.375%, 6/01/27 -0- -0- 2,500 2,393,725 -0- -0- -0- 2,500 2,393,725
------------ ------------ ------------ ------------
Wisconsin - 0.9%
Milwaukee Arpt
Rev
(Cargo ACQ
Corp) AMT
Series 02
6.50%, 1/01/25 2,315 1,875,428 -0- -0- -0- -0- -0- 2,315 1,875,428
Wisconsin HEFA
(Bell Tower
Residence
Proj)
FHLB Series 05
5.00%, 7/01/25 1,270 1,098,436 -0- -0- -0- -0- -0- 1,270 1,098,436
Wisconsin HEFA
(Wheaton
Franciscan)
MBIA
5.25%, 8/15/20 3,400 2,655,332 -0- -0- 1,600 1,249,568 -0- 5,000 3,904,900
------------ ------------ ------------ ------------
5,629,196 -0- 1,249,568 6,878,764
------------ ------------ ------------ ------------
Total Long-Term
Municipal Bonds
(cost
$824,961,395) 474,104,153 134,996,778 148,945,147 758,046,078
------------ ------------ ------------ ------------
Short-Term
Municipal Notes -
0.7%
Alaska - 0.1%
Valdez Marine
Term Rev
0.80%,
12/01/33 (h) -0- -0- 700 700,000 -0- -0- -0- 700 700,000
------------ ------------ ------------ ------------
Florida - 0.3%
Orange Cnty IDA
(Lake Highland
Prep Sch)
1.50%,
8/01/32 (h) -0- -0- 2,700 2,700,000 -0- -0- -0- 2,700 2,700,000
------------ ------------ ------------ ------------
Kentucky - 0.1%
Shelby Cnty
1.20%,
9/01/34 (h) -0- -0- 1,100 1,100,000 -0- -0- -0- 1,100 1,100,000
------------ ------------ ------------ ------------
Ohio - 0.1%
Allen Cnty
(Catholic
Hlthcare
Partners)
Series A
0.70%,
10/01/31 (h) -0- -0- 700 700,000 -0- -0- -0- 700 700,000
------------ ------------ ------------ ------------
South Carolina -
0.1%
Charleston Cnty
0.85%,
8/15/30 (h) -0- -0- 500 500,000 -0- -0- -0- 500 500,000
------------ ------------ ------------ ------------
Total Short-Term
Municipal Notes
(cost
$5,700,000) -0- 5,700,000 -0- 5,700,000
------------ ------------ ------------ ------------
Total Investments
- - 98.6%
(cost
$830,661,395) 474,104,153 140,696,778 148,945,147 763,746,078
------------ ------------ ------------
Other assets less
liabilities -
1.4% 7,955,685 1,595,244 1,159,353 (276,000)++ 10,434,282
------------ ------------ ------------ ----------- ------------
Net Assets - 100.0% $482,059,838 $142,292,022 $150,104,500 $ (276,000) $774,180,360
------------ ------------ ------------ ----------- ------------
INTEREST RATE
SWAP
TRANSACTIONS
Alliance- Pro-Forma Pro-Forma
Alliance- Alliance- Bernstein Alliance- Alliance-
Bernstein Pro-Forma Bernstein Municipal Bernstein Bernstein
Alliance- Municipal Alliance- Alliance- Municipal Income Municipal Municipal
Bernstein Income Bernstein Bernstein Income Fund Income Income
Municipal Fund Municipal Municipal Fund National Fund II Fund
Income National Income Income Rate Type National II Florida National
Fund II Fund II Fund ----------------- Portfolio Portfolio*** Portfolio Portfolio
National Port- Florida National Payments Payments Unrealized Unrealized Unrealized Unrealized
Portfolio folio*** Portfolio Portfolio made by received Apprec- Apprec- Apprec- Apprec-
Notional Notional Notional Notional the by the iation/ iation/ iation/ iation/
Swap Amount Amount Amount Amount Termination Port- Port- (Deprec- (Deprec- (Deprec- (Deprec-
Counterparty (000) (000) (000) (000) Date folio folio iation) iation) iation) iation)
- -----------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch $ 3,205 $ -0- $ 1,540 $ 4,745 2/12/2012 SIFMA** 3.548% $ 105,575 $ -0- $ 50,728 $ 156,303
Merrill Lynch -0- 1,000 5,300 6,300 10/21/2016 SIFMA* 4.128% -0- 53,254 281,652 334,906
Merrill Lynch -0- 2,500 -0- 2,500 7/30/2026 4.090% SIFMA** -0- (110,192) -0- (110,192)
Merrill Lynch -0- 2,500 -0- 2,500 11/15/2026 4.377% SIFMA** -0- (203,000) -0- (203,000)
(a) Variable rate coupon, rate shown as of October 31, 2008.
(b) Floating Rate Security. Stated interest rate was in effect at October 31,
2008.
(c) Indicates a security that has a zero coupon that remains in effect until a
predetermined date at which time the stated coupon rate becomes effective
until final maturity.
(d) Security is in default and is non-income producing.
(e) Illiquid security, valued at fair value.
(f) Position, or a portion thereof, has been segregated to collateralize
interest rate swaps.
(g) Inverse Floater Security - Security with variable or floating interest rate
that moves in the opposite direction of short-term interest rates.
(h) 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.
* The obligor of this holding, which represents 0.03% of the Portfolio's net
assets, has disclosed that it is in default of certain payments under the
loan agreement, and is in early discussions with bond holders with respect
to a restructuring of the terms of the bonds, and with equity holders with
respect to additional equity contributions.
** Variable interest rate based on the Securities Industry & Financial Markets
Association (SIFMA).
*** Prior to December 1, 2008, known as Insured National Portfolio.
+ 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
October 31, 2008 and the aggregate market value of this security amounted
to $25,000 or 0.00% of net assets.
++ Includes adjustment for estimated merger costs of $276,000, consisting of
$137,000 for the National II Acquisition and $139,000 for the Florida
Acquisition.
+++ All holdings of National II and Florida Portfolio comply with the
investment strategies and restrictions of National Portfolio.
As of October 31, 2008, the Portfolio held 51% of net assets in insured
bonds (of this amount 9% represents the Portfolio's holding in pre-refunded
insured bonds).
ACA - ACA Capital
AMBAC - American Bond Assurance Corporation
AMT - Alternative Minimum Tax (subject to)
ASSET GTY - Asset Guaranty Insurance Company AKA Radian
ASSURED GTY - Assured Guaranty
CDA - Community Development Administration
CDD - Community Development District
CFD - Community Facilities District
CIFG - CIFG Assurance North America, Inc.
COP - Certificate of Participation
EDA - Economic Development Agency
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Company
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance Inc.
GNMA - Government National Mortgage Association
HDA - Housing Development Authority
HEFA - Health & Education Facility Authority
HFA - Housing Finance Authority
HFC - Housing Finance Corporation
IDA - Industrial Development Authority/Agency
IDR - Industrial Development Revenue
ISD - Independent School District
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-Family Housing Revenue
PCR - Pollution Control Revenue Bond
RADIAN - Radian Group, Inc.
SFMR - Single Family Mortgage Revenue
SWFR - Solid Waste Facility Revenue
XLCA - XL Capital Assurance Inc.
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - NATIONAL PORTFOLIO
AllianceBernstein Municipal Income Fund II - Florida Portfolio
October 31, 2008 (unaudited) AllianceBernstein Municipal Income Fund - National Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance- Alliance- Pro Forma Pro Forma
Alliance- Alliance- Bernstein Bernstein Alliance- Alliance-
Bernstein Bernstein Municipal Municipal Bernstein Bernstein
Municipal Municipal Income Income Municipal Municipal
Income Fund Income Fund Fund II Fund II Income Fund Income Fund
National National Flordia Florida National National
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
Principal (U.S. Principal (U.S. Principal (U.S.
Amount (000) $ Value) Amount (000) $ Value) Adjustments+++ Amount (000) $ Value)
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL OBLIGATIONS - 98.6%
Long-Term Municipal Bonds -
98.6%
Alabama - 1.5%
Jefferson Cnty Ltd Oblig Sch
Warrants
FSA Series 2004
5.50%, 1/01/21 $ 1,000 $ 895,480 $ -0- $ -0- $ -0- $ 1,000 $ 895,480
Series 04A
5.25%, 1/01/18 - 1/01/23 3,900 3,232,695 -0- -0- -0- 3,900 3,232,695
Montgomery Spl Care Fac Fin
Auth
(Baptist Hlth)
(Prerefunded)
Series 04C
5.25%, 11/15/29 2,190 2,368,200 -0- -0- -0- 2,190 2,368,200
Univ of Alabama Brd of
Trustees
(Univ of Alabama Hosp)
Series 08A
5.75%, 9/01/22 (a) 3,000 2,876,010 -0- -0- -0- 3,000 2,876,010
------------- ------------- -------------
9,372,385 -0- 9,372,385
------------- ------------- -------------
Arizona - 2.4%
Arizona Hlth Fac Auth
(Phoenix Children's Hosp)
2.82%, 2/01/42 (b) 2,600 2,283,814 1,250 1,097,987 -0- 3,850 3,381,801
Estrella Mtn Ranch CFD
(Desert Village)
7.375%, 7/01/27 2,594 2,325,132 -0- -0- -0- 2,594 2,325,132
Phoenix Civic Impr Corp.
Wastewtr Sys
MBIA Series 04
5.00%, 7/01/23 1,750 1,731,975 -0- -0- -0- 1,750 1,731,975
Pima Cnty IDA
(Horizon Comnty Learning
Ctr)
Series 05
5.125%, 6/01/20 3,310 2,753,754 -0- -0- -0- 3,310 2,753,754
Queen Creek Impr Dist No 1
5.00%, 1/01/26 1,300 1,020,695 600 471,090 -0- 1,900 1,491,785
Salt Verde Fin Corp.
(Prepaid Gas)
5.25%, 12/01/23 2,560 1,874,509 1,125 823,759 -0- 3,685 2,698,268
Sundance CFD No 1
Series 02
7.75%, 7/01/22 600 564,402 -0- -0- -0- 600 564,402
------------- ------------- -------------
12,554,281 2,392,836 14,947,117
------------- ------------- -------------
California - 2.7%
California
(Prerefunded)
5.25%, 4/01/30 810 873,463 -0- -0- -0- 810 873,463
AMBAC
5.00%, 4/01/27 910 973,964 -0- -0- -0- 910 973,964
California
(Unrefunded)
5.25%, 4/01/30 15 14,224 -0- -0- -0- 15 14,224
AMBAC
5.00%, 4/01/27 1,740 1,626,621 -0- -0- -0- 1,740 1,626,621
California Dept of Wtr Res
(Pwr Sup Rev)
(Prerefunded)
Series 02A
5.375%, 5/01/22 2,000 2,186,800 -0- -0- -0- 2,000 2,186,800
California Statewide Comnty
Dev Auth
(Enloe Med Ctr)
5.50%, 8/15/23 -0- -0- 80 76,942 -0- 80 76,942
6.25%, 8/15/28 -0- -0- 1,715 1,737,312 -0- 1,715 1,737,312
Series A
5.375%, 8/15/20 -0- -0- 510 501,014 -0- 510 501,014
Chula Vista IDR
(San Diego Gas)
Series 96A
5.30%, 7/01/21 4,000 3,540,560 -0- -0- -0- 4,000 3,540,560
Manteca Uni Sch Dist
MBIA Series 01
Zero Coupon, 9/01/31 11,910 2,803,257 -0- -0- -0- 11,910 2,803,257
San Diego Cnty Wtr Auth
FSA Series 08A
5.00%, 5/01/25 3,000 2,914,680 -0- -0- -0- 3,000 2,914,680
------------- ------------- -------------
14,933,569 2,315,268 17,248,837
------------- ------------- -------------
Colorado - 1.3%
Colorado Ed & Cultural Fac
Auth
(Knowledge Quest Charter
Sch)
Series 05
6.50%, 5/01/36 495 381,868 -0- -0- -0- 495 381,868
Colorado HFA SFMR
(Mtg Rev) AMT
Series 99A-2
6.45%, 4/01/30 485 439,230 -0- -0- -0- 485 439,230
Colorado Hlth Fac Auth
(Evangelical Lutheran
Proj)
5.25%, 6/01/19 1,500 1,344,195 700 608,171 -0- 2,200 1,952,366
Colorado Hlth Fac Auth
(Parkview Med Ctr)
Series 04
5.00%, 9/01/25 690 545,983 -0- -0- -0- 690 545,983
Park Creek Metro Dist Rev Ltd
(Ref-Sr-Ltd Tax Ppty Tax)
Series 05
5.50%, 12/01/30 1,900 1,510,158 -0- -0- -0- 1,900 1,510,158
PV Wtr & Sanitation Metro
Dist Capital
Appreciation
Series 06
Zero Coupon, 12/15/17 3,672 1,953,798 -0- -0- -0- 3,672 1,953,798
Todd Creek Farms Metro Dist
No 1
6.125%, 12/01/22 1,210 992,055 -0- -0- -0- 1,210 992,055
Series 04
6.125%, 12/01/19 820 707,849 -0- -0- -0- 820 707,849
------------- ------------- -------------
7,875,136 608,171 8,483,307
------------- ------------- -------------
Connecticut - 0.1%
Connecticut HEFA
(Griffin Hosp)
RADIAN Series 05B
5.00%, 7/01/23 750 616,785 -0- -0- -0- 750 616,785
------------- ------------- -------------
District Of Columbia - 3.0%
Dist of Columbia
ACA
5.00%, 6/01/26 1,000 721,670 -0- -0- -0- 1,000 721,670
FSA Series 2007C
5.00%, 6/01/23 7,775 7,578,448 3,205 3,123,978 -0- 10,980 10,702,426
Dist of Columbia Wtr & Swr
Auth
ASSURED GTY Series 2008A
5.00%, 10/01/23 3,220 3,117,926 -0- -0- -0- 3,220 3,117,926
Washington Conv Ctr Auth
AMBAC
5.00%, 10/01/23 -0- -0- 5,000 4,595,500 -0- 5,000 4,595,500
------------- ------------- -------------
11,418,044 7,719,478 19,137,522
------------- ------------- -------------
Florida - 18.4%
Beacon Tradeport CDD
Series 02B
7.25%, 5/01/33 150 131,364 855 748,775 -0- 1,005 880,139
Bonnet Creek Resort CDD
Series 02
7.25%, 5/01/18 2,000 1,868,880 2,000 1,868,880 -0- 4,000 3,737,760
Capital Trust Agy Arpt Fac
(Cargo Acq Grp) AMT
Series 02
6.25%, 1/01/19 -0- -0- 490 432,317 -0- 490 432,317
Series 03
5.75%, 1/01/32 -0- -0- 2,000 1,405,400 -0- 2,000 1,405,400
Collier Cnty CFD
(Fiddler's Creek)
Series 02A
6.875%, 5/01/33 1,120 941,741 350 264,562 -0- 1,470 1,206,303
Series 02B
6.625%, 5/01/33 480 391,243 150 109,829 -0- 630 501,072
Collier Cnty IDA
(Southern St Util) AMT
Series 96
6.50%, 10/01/25 705 705,056 -0- -0- -0- 705 705,056
Concorde Estates CDD
Series 04B
5.00%, 5/01/11 -0- -0- 700 651,952 -0- 700 651,952
Crossings At Fleming Island
CDD
Series 00C
7.05%, 5/01/15 1,550 1,471,322 -0- -0- -0- 1,550 1,471,322
Crossings at Fleming Island
CDD
(Eagle Harbor)
Series 00C
7.10%, 5/01/30 -0- -0- 2,240 1,999,088 -0- 2,240 1,999,088
Dade Cnty HFA MFHR
(Golden Lakes Apts) AMT
Series 97A
6.00%, 11/01/32 -0- -0- 250 214,213 -0- 250 214,213
6.05%, 11/01/39 -0- -0- 750 636,825 -0- 750 636,825
Florida HFA MFHR
(Turtle Creek Apts) AMT
AMBAC Series 96C
6.20%, 5/01/36 -0- -0- 3,245 2,785,346 -0- 3,245 2,785,346
Florida HFC MFHR
(Mystic Pointe II) AMT
GNMA Series 00
6.30%, 12/01/41 -0- -0- 1,165 1,035,673 -0- 1,165 1,035,673
Florida HFC MFHR
(Sabal Chase Apts) AMT
FSA Series 00
6.00%, 5/01/40 -0- -0- 3,650 3,058,554 -0- 3,650 3,058,554
Florida HFC MFHR
(Spring Harbor Apts) AMT
Series 99C-1
5.90%, 8/01/39 -0- -0- 2,540 2,127,809 -0- 2,540 2,127,809
Florida HFC MFHR
(Walker Ave Club) AMT
FSA Series 00L-1
6.00%, 12/01/38 -0- -0- 3,435 2,910,063 -0- 3,435 2,910,063
Florida HFC MFHR
(Waverly Apts) AMT
FSA Series 00C-1
6.50%, 7/01/40 -0- -0- 2,790 2,516,887 -0- 2,790 2,516,887
Gateway CDD
(Sun City Ctr)
Series 03B
5.50%, 5/01/10 255 255,000 -0- -0- -0- 255 255,000
Hamal CDD
(Prerefunded)
Series 01
6.65%, 5/01/21 -0- -0- 1,100 1,209,989 -0- 1,100 1,209,989
Herons Glen Recreation Dist
(Prerefunded)
Series 99
5.90%, 5/01/19 -0- -0- 2,385 2,452,448 -0- 2,385 2,452,448
Highlands Cnty Hlth Fac Auth
(Adventist/Sunbelt Hosp)
(Prerefunded)
Series 01A
6.00%, 11/15/31 -0- -0- 2,000 2,178,520 -0- 2,000 2,178,520
Indian Trace Dev Dist
(Wtr Mgmt Spl Benefit)
MBIA Series 05
5.00%, 5/01/22 320 310,230 680 659,240 -0- 1,000 969,470
Indian Trace Dev Dist Spl
Assmt
(Wtr Mgmt Spl Benefit)
MBIA Series 05
5.00%, 5/01/23 1,480 1,413,311 -0- -0- -0- 1,480 1,413,311
Jacksonville
(Excise Taxes Rev)
AMBAC Series 02B
5.00%, 10/01/26 -0- -0- 3,925 3,780,913 -0- 3,925 3,780,913
Jacksonville Hosp Rev
(Mayo Clinic)
Series 01C
5.50%, 11/15/36 6,750 5,806,823 -0- -0- -0- 6,750 5,806,823
Lee Cnty Arpt
(Southwest Int'l Arpt) AMT
FSA Series 00A
6.00%, 10/01/32 -0- -0- 13,500 12,390,840 -0- 13,500 12,390,840
Lee Cnty CFD
(Herons Glen)
(Prerefunded)
Series 99
6.00%, 5/01/29 6,090 6,280,373 -0- -0- -0- 6,090 6,280,373
Lee Cnty HFA SFMR
(Mtg Rev) AMT
GNMA/ FNMA Series 00A-1
7.20%, 3/01/33 70 69,957 -0- -0- -0- 70 69,957
Manatee Cnty HFA SFMR
(Mtg Rev) AMT
GNMA Series 99
6.25%, 11/01/28 -0- -0- 270 269,808 -0- 270 269,808
Marshall Creek CDD
Series 02A
6.625%, 5/01/32 1,645 1,405,504 900 768,969 -0- 2,545 2,174,473
Miami Beach Hlth Fac Auth
(Mt Sinai Med Ctr)
Series 01A
6.80%, 11/15/31 3,500 2,729,195 1,600 1,247,632 -0- 5,100 3,976,827
Miami-Dade Cnty Ed Fac Auth
(Univ of Miami)
Series 08A
5.20%, 4/01/24 2,500 2,339,925 -0- -0- -0- 2,500 2,339,925
Miami-Dade Cnty HFA SFMR
(Home Ownship Mtg) AMT
GNMA/ FNMA Series 00A-1
6.00%, 10/01/32 -0- -0- 710 699,300 -0- 710 699,300
Miromar Lakes CDD
Series 00A
7.25%, 5/01/12 3,195 3,050,746 2,450 2,339,382 -0- 5,645 5,390,128
North Broward Hosp Dist
(Prerefunded)
Series 01
6.00%, 1/15/31 -0- -0- 1,700 1,830,917 -0- 1,700 1,830,917
Northern Palm Beach Cnty Impr
Dist
(Mirasol Unit #43)
(Prerefunded)
6.125%, 8/01/31 -0- -0- 1,000 1,093,510 -0- 1,000 1,093,510
Northern Palm Beach Cnty Impr
Dist
(Unit Dev #43)
6.10%, 8/01/21 -0- -0- 75 63,681 -0- 75 63,681
Northern Palm Beach Cnty Impr
Dist
(Unit Dev #43)
(Prerefunded)
6.10%, 8/01/21 -0- -0- 510 557,359 -0- 510 557,359
Northern Palm Beach Cnty Impr
Dist
(Unit Dev 27B)
Series 02
6.40%, 8/01/32 -0- -0- 1,075 886,380 -0- 1,075 886,380
Orange Cnty HFA MFHR
(Loma Vista Proj) AMT
Series 99G
5.50%, 3/01/32 -0- -0- 2,000 1,577,280 -0- 2,000 1,577,280
(Seminole Proj) AMT
Series 99L
5.80%, 6/01/32 4,990 3,847,041 -0- -0- -0- 4,990 3,847,041
Orange Cnty Hosp
(Orlando Regl)
(Prerefunded)
Series 02
5.75%, 12/01/32 -0- -0- 1,320 1,441,202 -0- 1,320 1,441,202
Orlando Assess Dist
(Conroy Rd Proj)
Series 98A
5.80%, 5/01/26 3,250 2,562,365 -0- -0- -0- 3,250 2,562,365
Pasco Cnty HFA MFHR
(Pasco Woods Apts) AMT
Series 99A
5.90%, 8/01/39 3,690 3,062,885 -0- -0- -0- 3,690 3,062,885
Pier Park CDD
Series 02-1
7.15%, 5/01/34 3,245 2,842,685 -0- -0- -0- 3,245 2,842,685
Preserve at Wildnerness Lake
CDD
Series 02A
7.10%, 5/01/33 -0- -0- 1,425 1,284,224 -0- 1,425 1,284,224
Series 02B
6.20%, 11/01/08 25 25,000 -0- -0- -0- 25 25,000
South Miami Hlth Fac Hosp
(Baptist Hlth)
(Prerefunded)
5.25%, 11/15/33 -0- -0- 2,000 2,149,720 -0- 2,000 2,149,720
Tallahassee Hosp
(Tallahassee Memorial)
Series 00
6.375%, 12/01/30 -0- -0- 2,750 2,307,442 -0- 2,750 2,307,442
Tampa Hgr Ed
(Tampa Univ Proj)
RADIAN Series 02
5.625%, 4/01/32 -0- -0- 3,175 2,798,445 -0- 3,175 2,798,445
Tara CDD No 1
Series 00A
7.15%, 5/01/31 1,755 1,575,358 -0- -0- -0- 1,755 1,575,358
Village Ctr CDD
MBIA
5.125%, 10/01/28 -0- -0- 1,000 884,630 -0- 1,000 884,630
Volusia Cnty Ed Fac Auth
(Embry Riddle Aero Univ)
Series 99A
5.75%, 10/15/29 -0- -0- 2,000 1,627,660 -0- 2,000 1,627,660
Waterlefe CDD
Series 01
6.95%, 5/01/31 -0- -0- 665 590,148 -0- 665 590,148
West Palm Beach Comnty Redev
Agy
(Northwood-Pleasant Comnty
Redev)
5.00%, 3/01/25 - 3/01/29 -0- -0- 3,640 2,941,778 -0- 3,640 2,941,778
------------- ------------- -------------
43,086,004 72,797,590 115,883,594
------------- ------------- -------------
Illinois - 7.6%
Chicago
Series 08A
5.25%, 1/01/23 10,000 10,093,400 -0- -0- -0- 10,000 10,093,400
Chicago Arpt Rev
(O'Hare Int'l Arpt)
XLCA Series 03B-1
5.25%, 1/01/34 3,400 2,975,136 -0- -0- -0- 3,400 2,975,136
Chicago Brd of Ed
Series 07
5.00%, 12/01/24 15,000 14,852,400 -0- -0- -0- 15,000 14,852,400
Chicago HFA SFMR
(Mtg Rev)
GNMA/ FNMA/ FHLMC Series
99C
7.05%, 10/01/30 45 45,144 -0- -0- -0- 45 45,144
Chicago HFA SFMR
(Mtg Rev) AMT
GNMA/ FNMA/ FHLMC Series
98A 6.45%, 9/01/29 225 221,546 -0- -0- -0- 225 221,546
GNMA/ FNMA/ FHLMC Series
98C-1 6.30%, 9/01/29 165 164,543 -0- -0- -0- 165 164,543
GNMA/ FNMA/ FHLMC Series
99 A 6.35%, 10/01/30 230 196,266 -0- -0- -0- 230 196,266
Chicago Incr Alloc
(Diversey/Narragansett
Redev Proj)
7.46%, 2/15/26 1,770 1,696,952 830 795,746 -0- 2,600 2,492,698
Chicago Sales Tax Rev
FSA Series 05
5.00%, 1/01/25 6,905 6,534,201 -0- -0- -0- 6,905 6,534,201
Chicago Spec Assess
(Lake Shore East)
Series 03
6.75%, 12/01/32 3,500 2,970,240 -0- -0- -0- 3,500 2,970,240
Gilberts Spl Svc Area No 15
Spl Tax
(Gilberts Town Ctr Proj)
Series 03
6.00%, 3/01/28 2,430 1,876,956 -0- -0- -0- 2,430 1,876,956
Hampshire Spl Svc Area No 14
5.80%, 3/01/26 1,595 1,234,227 775 599,703 -0- 2,370 1,833,930
Illinois Fin Auth
(Illinois Inst of
Technology)
Series 06A
5.00%, 4/01/31 750 567,757 -0- -0- -0- 750 567,757
Manhattan
(No 04-1 Brookstone
Springs Proj)
Series 05
5.875%, 3/01/28 1,667 1,307,595 700 549,080 $ -0- 2,367 1,856,675
Metro Pier & Expo Auth
(McCormick Place)
MBIA Series 02A
5.25%, 6/15/42 1,750 1,670,323 -0- -0- -0- 1,750 1,670,323
------------- ------------- -------------
46,406,686 1,944,529 48,351,215
------------- ------------- -------------
Indiana - 1.5%
Franklin Township Sch Bldg
Corp.
5.00%, 7/15/21 - 7/15/22 -0- -0- 6,625 6,404,921 -0- 6,625 6,404,921
Hendricks Cnty Bldg Fac Corp.
5.50%, 7/15/23 1,165 1,191,154 -0- -0- -0- 1,165 1,191,154
Indiana Dev Fin Auth
(Inland Steel)
Series 97
5.75%, 10/01/11 1,825 1,762,567 -0- -0- -0- 1,825 1,762,567
------------- ------------- -------------
2,953,721 6,404,921 9,358,642
------------- ------------- -------------
Iowa - 0.0%
Coralville Urban Rev Tax Incr
Series 07C
5.00%, 6/01/18 140 133,886 100 95,633 -0- 240 229,519
------------- ------------- -------------
Kansas - 0.1%
Lenexa Hlth Care Fac
(Lakeview Village Inc.)
5.25%, 5/15/22 870 637,327 390 285,698 -0- 1,260 923,025
------------- ------------- -------------
Louisiana - 3.4%
De Soto Parish PCR
(Int'l Paper Co)
Series A-2
5.00%, 10/01/12 2,200 1,995,092 -0- -0- -0- 2,200 1,995,092
Lafayette
(Communications Sys Rev)
XLCA
5.25%, 11/01/20 1,550 1,545,892 2,215 2,209,130 -0- 3,765 3,755,022
Lafayette LA Communications
(Communications Sys Rev)
XLCA
5.25%, 11/01/21 - 11/01/23 3,450 3,397,731 -0- -0- -0- 3,450 3,397,731
Louisiana Agriculture Fin
Auth
5.25%, 9/15/17 -0- -0- 1,130 1,026,661 -0- 1,130 1,026,661
Louisiana Arpt Fac
(Cargo ACQ Grp) AMT
Series 02
6.65%, 1/01/25 800 667,464 -0- -0- -0- 800 667,464
New Orleans
MBIA Series 05
5.00%, 12/01/29 3,420 2,937,130 -0- -0- -0- 3,420 2,937,130
5.25%, 12/01/21 3,360 3,111,058 -0- -0- -0- 3,360 3,111,058
RADIAN
5.00%, 12/01/18 - 12/01/19 2,590 2,309,011 1,550 1,406,548 -0- 4,140 3,715,559
RADIAN Series A
5.00%, 12/01/22 1,060 885,895 -0- -0- -0- 1,060 885,895
------------- ------------- -------------
16,849,273 4,642,339 21,491,612
------------- ------------- -------------
Maryland - 1.0%
Maryland CDA SFMR
(Mtg Rev) AMT
Series 00A
6.10%, 7/01/38 6,285 5,415,408 -0- -0- -0- 6,285 5,415,408
Maryland IDR
(Med Waste Assoc) AMT
Series 89
8.75%, 11/15/10 (c)(d) 1,225 1,059,196 -0- -0- -0- 1,225 1,059,196
------------- ------------- -------------
6,474,604 -0- 6,474,604
------------- ------------- -------------
Massachusetts - 2.8%
Massachusetts
(Prerefunded)
Series 02C
5.25%, 11/01/30 5,000 5,319,300 -0- -0- -0- 5,000 5,319,300
Massachusetts Dev Fin Agy
(Seven Hills Fndtn)
RADIAN Series 99
5.15%, 9/01/28 6,035 5,128,603 -0- -0- -0- 6,035 5,128,603
Massachusetts Port Auth AMT
Series 99D
6.00%, 7/01/29 7,500 7,394,550 -0- -0- -0- 7,500 7,394,550
------------- ------------- -------------
17,842,453 -0- 17,842,453
------------- ------------- -------------
Michigan - 3.9%
Detroit Wtr Sup Sys
FSA Series 2006A
5.00%, 7/01/24 7,005 6,496,017 2,975 2,758,837 -0- 9,980 9,254,854
Kent Hosp Fin Auth
(Metro Hosp Proj)
Series 05A
5.75%, 7/01/25 710 576,619 -0- -0- -0- 710 576,619
Michigan HDA MFHR
(Rental Rev) AMT
AMBAC Series 97A
6.10%, 10/01/33 330 286,968 -0- -0- -0- 330 286,968
Michigan Hosp Fin Auth
(Sparrow Med Ctr)
(Prerefunded)
Series 01
5.625%, 11/15/36 2,650 2,858,078 -0- -0- -0- 2,650 2,858,078
Michigan Hosp Fin Auth
(Trinity Hlth)
Series 00A
6.00%, 12/01/27 4,515 4,336,071 -0- -0- -0- 4,515 4,336,071
Plymouth Ed Ctr Charter Sch
Pub
Academy Rev
Series 05
5.375%, 11/01/30 2,000 1,480,400 -0- -0- -0- 2,000 1,480,400
Saginaw Hosp Fin Auth
(Covenant Med Ctr)
Series 00F
6.50%, 7/01/30 6,125 6,082,125 -0- -0- -0- 6,125 6,082,125
------------- ------------- -------------
22,116,278 2,758,837 24,875,115
------------- ------------- -------------
Minnesota - 1.6%
Maple Grove Hlth Care
5.00%, 5/01/22 -0- -0- 1,350 1,157,679 -0- 1,350 1,157,679
Minneapolis & St. Paul Arpt
AMT
FGIC Series 00B
6.00%, 1/01/21 3,520 3,454,282 -0- -0- -0- 3,520 3,454,282
Shakopee Hlth Care Fac
(St Francis Regl Med Ctr)
Series 04
5.10%, 9/01/25 2,700 2,069,037 -0- -0- -0- 2,700 2,069,037
St. Paul Hsg & Redev Auth
(Hltheast Proj)
Series 05
6.00%, 11/15/25 500 431,540 500 431,540 -0- 1,000 863,080
Western Minnesota Muni Pwr
Agy
FSA
5.00%, 1/01/17 1,400 1,469,678 900 944,793 -0- 2,300 2,414,471
------------- ------------- -------------
7,424,537 2,534,012 9,958,549
------------- ------------- -------------
Missouri - 2.4%
Kansas City
(Downtown Arena Proj)
Series 08C
5.00%, 4/01/28 10,500 9,421,125 3,500 3,140,375 -0- 14,000 12,561,500
Kansas City Arpt Fac Rev
(Cargo ACQ Grp)
Series 02
6.25%, 1/01/30 1,965 1,519,770 -0- -0- -0- 1,965 1,519,770
Missouri Dev Fin Brd
(Crackerneck Creek Proj)
Series 05C
5.00%, 3/01/26 1,000 891,500 -0- -0- -0- 1,000 891,500
Riverside IDA
(Riverside Horizons Proj)
ACA Series 07A
5.00%, 5/01/27 370 299,933 160 129,701 -0- 530 429,634
------------- ------------- -------------
12,132,328 3,270,076 15,402,404
------------- ------------- -------------
Nevada - 5.7%
Carson City Hosp Rev
(Carson-Tahoe Hosp Proj)
RADIAN Series 03A
5.125%, 9/01/29 2,700 2,205,306 -0- -0- -0- 2,700 2,205,306
Clark Cnty
AMBAC Series 2006
5.00%, 11/01/23 6,000 5,845,620 2,250 2,192,107 -0- 8,250 8,037,727
Clark Cnty Passenger Fac
5.25%, 7/01/18 9,090 8,981,011 -0- -0- -0- 9,090 8,981,011
Clark Cnty Sch Dist
FGIC
5.00%, 6/15/22 5,720 5,653,019 -0- -0- -0- 5,720 5,653,019
Las Vegas Valley Wtr Dist
FGIC Series 05
5.00%, 6/01/27 5,000 4,795,400 -0- -0- -0- 5,000 4,795,400
Nevada Sys of Hgr Ed
AMBAC
5.00%, 7/01/25 6,985 6,587,414 -0- -0- -0- 6,985 6,587,414
------------- ------------- -------------
34,067,770 2,192,107 36,259,877
------------- ------------- -------------
New Hampshire - 0.8%
New Hampshire Bus Fin Auth
PCR
(Public Svc Co) AMT
Series 93E
6.00%, 5/01/21 4,000 3,768,880 -0- -0- -0- 4,000 3,768,880
New Hampshire HEFA
(Covenant Hlth)
Series 04
5.375%, 7/01/24 1,680 1,468,790 -0- -0- -0- 1,680 1,468,790
------------- ------------- -------------
5,237,670 -0- 5,237,670
------------- ------------- -------------
New Jersey - 3.0%
Morris-Union Jointure COP
RADIAN Series 04
5.00%, 5/01/27 5,175 4,247,692 -0- -0- -0- 5,175 4,247,692
New Jersey Ed Fac Auth
(Prerefunded)
AMBAC Series 02A
5.25%, 9/01/21 8,005 8,599,531 -0- -0- -0- 8,005 8,599,531
New Jersey EDA
(New Jersey St Contract)
Series 05
5.25%, 3/01/25 6,200 6,086,292 -0- -0- -0- 6,200 6,086,292
------------- ------------- -------------
18,933,515 -0- 18,933,515
------------- ------------- -------------
New Mexico - 1.7%
Clayton Jail Proj Rev
CIFG
5.00%, 11/01/25 - 11/01/27 8,475 6,843,254 4,620 3,731,528 -0- 13,095 10,574,782
------------- ------------- -------------
New York - 3.2%
Erie Cnty IDA
(Buffalo Sch Dist Proj)
FSA Series 04
5.75%, 5/01/25 - 5/01/26 3,800 3,822,793 -0- -0- -0- 3,800 3,822,793
New York City
5.25%, 9/01/23 5,000 4,923,750 -0- -0- -0- 5,000 4,923,750
Series 03A
5.50%, 8/01/21 5,000 5,053,500 -0- -0- -0- 5,000 5,053,500
Series 04G
5.00%, 12/01/23 895 851,709 -0- -0- -0- 895 851,709
New York City
(Unrefunded)
Series 1
5.75%, 3/01/17 420 436,703 -0- -0- -0- 420 436,703
New York City IDA
(Lycee Francais)
ACA Series 02C
6.80%, 6/01/28 2,500 2,255,600 -0- -0- -0- 2,500 2,255,600
New York Liberty Dev Corp.
(National Sports Museum
Proj)
6.125%, 2/15/19 (d)* 850 127,500 500 75,000 -0- 1,350 202,500
New York St Dorm Auth
(Orange Regl Med Ctr)
Series 2008
6.50%, 12/01/21 1,300 1,164,878 460 412,188 -0- 1,760 1,577,066
New York St HFA
(Econ Dev & Hsg)
FGIC Series 05A
5.00%, 9/15/25 1,200 1,160,112 -0- -0- -0- 1,200 1,160,112
------------- ------------- -------------
19,796,545 487,188 20,283,733
------------- ------------- -------------
North Carolina - 0.1%
Iredell Cnty COP
FSA Series 08
5.25%, 6/01/22 720 728,071 -0- -0- -0- 720 728,071
------------- ------------- -------------
North Dakota - 0.3%
Ward Cnty Hlth Care Fac
(Trinity Hlth)
5.125%, 7/01/18 - 7/01/20 1,380 1,141,114 685 553,994 -0- 2,065 1,695,108
------------- ------------- -------------
Ohio - 2.7%
Cleveland Cuyahoga Port Auth
(Univ Heights Ohio-Pub
Parking Proj)
Series 01
7.35%, 12/01/31 5,400 4,810,644 3,000 2,672,580 -0- 8,400 7,483,224
Cleveland Pub Pwr Sys
FGIC Series 06A
5.00%, 11/15/18 2,335 2,316,810 -0- -0- -0- 2,335 2,316,810
Franklin Cnty
(OCLC Online Computer
Library Ctr)
Series 98A
5.20%, 10/01/20 1,200 1,199,940 -0- -0- -0- 1,200 1,199,940
Toledo Lucas Cnty Port Auth
(CSX Transp)
Series 92
6.45%, 12/15/21 6,730 5,827,709 -0- -0- -0- 6,730 5,827,709
------------- ------------- -------------
14,155,103 2,672,580 16,827,683
------------- ------------- -------------
Oregon - 0.7%
Forest Grove Rev
(Ref & Campus Impr Pacific
Proj A)
RADIAN Series 05A
5.00%, 5/01/28 2,995 2,468,030 -0- -0- -0- 2,995 2,468,030
Oregon Hsg Dev Agy SFMR
(Mtg Rev) AMT
Series 02B
5.45%, 7/01/32 2,200 1,724,580 -0- -0- -0- 2,200 1,724,580
------------- ------------- -------------
4,192,610 -0- 4,192,610
------------- ------------- -------------
Pennsylvania - 3.4%
Allegheny Cnty Hosp Dev Auth
(West Pennsylvania Hlth
Sys)
Series 07A
5.00%, 11/15/17 2,900 2,312,866 1,300 1,036,802 -0- 4,200 3,349,668
Ephrata Area Sch Dist
(Prerefunded)
FGIC Series 05
5.00%, 3/01/22 2,565 2,740,882 -0- -0- -0- 2,565 2,740,882
Harrisburg Arpt Auth
(Susquehanna Arpt Proj)
AMT
Series 99
5.50%, 1/01/24 500 369,670 -0- -0- -0- 500 369,670
Montgomery Cnty Hosp
(Abington Mem Hosp)
Series 02A
5.125%, 6/01/32 2,000 1,523,920 -0- -0- -0- 2,000 1,523,920
Montgomery Cnty IDA
(Whitemarsh Continuing
Care Ret Comnty)
6.00%, 2/01/21 1,210 985,593 -0- -0- -0- 1,210 985,593
Pennsylvania Hgr Ed Fac Auth
(UPMC Hlth Sys)
Series 01A
6.00%, 1/15/31 3,845 3,659,248 -0- -0- -0- 3,845 3,659,248
Pennsylvania IDA
(St Revolving Fd)
Series 08A
5.50%, 7/01/23 3,940 3,824,046 -0- -0- $ -0- 3,940 3,824,046
Philadelphia IDA
(Leadership Learning
Partners)
Series 05A
5.25%, 7/01/24 1,030 784,819 -0- -0- -0- 1,030 784,819
South Ctr Gen Auth
(Wellspan Hlth)
MBIA Series 01
5.25%, 5/15/31 685 689,583 -0- -0- -0- 685 689,583
South Ctr Gen Auth
(Wellspan Hlth)
(Prerefunded)
MBIA Series 01
5.25%, 5/15/31 3,115 3,344,856 -0- -0- -0- 3,115 3,344,856
------------- ------------- -------------
20,235,483 1,036,802 21,272,285
------------- ------------- -------------
Puerto Rico - 1.8%
Puerto Rico
(Pub Impr)
5.25%, 7/01/23 1,100 968,198 600 528,108 -0- 1,700 1,496,306
Series 01A
5.50%, 7/01/19 500 475,175 500 475,175 -0- 1,000 950,350
Series 03A
5.25%, 7/01/23 500 440,090 -0- -0- -0- 500 440,090
Series 04A
5.25%, 7/01/19 1,920 1,778,765 960 889,383 -0- 2,880 2,668,148
Puerto Rico Govt Dev Bank
(Sr Notes)
Series 06B
5.00%, 12/01/15 500 484,015 695 654,252 -0- 1,195 1,138,267
Puerto Rico HFA
5.125%, 12/01/27 370 348,307 -0- -0- -0- 370 348,307
Univ of Puerto Rico
Series 06Q
5.00%, 6/01/19 - 6/01/20 3,730 3,381,421 730 668,979 -0- 4,460 4,050,400
------------- ------------- -------------
7,875,971 3,215,897 11,091,868
------------- ------------- -------------
South Carolina - 1.6%
Dorchester Cnty Sch Dist No 2
(Installment Pur Rev)
Series 06
5.00%, 12/01/30 1,500 1,284,555 -0- -0- -0- 1,500 1,284,555
Newberry Investing in
Childrens Ed
(Newberry Cnty Sch Dist
Proj)
ASSURED GTY Series 05
5.00%, 12/01/27 3,890 3,533,443 -0- -0- -0- 3,890 3,533,443
Series 05
5.00%, 12/01/30 335 277,306 -0- -0- -0- 335 277,306
Scago Ed Fac Corp.
(Calhoun Sch Dist)
RADIAN
5.00%, 12/01/21 4,300 3,943,788 945 866,716 -0- 5,245 4,810,504
------------- ------------- -------------
9,039,092 866,716 9,905,808
------------- ------------- -------------
Tennessee - 0.3%
Sullivan Cnty Hlth Ed
(Wellmont Hlth Sys)
Series 06C
5.00%, 9/01/22 1,265 916,189 725 525,088 -0- 1,990 1,441,277
5.25%, 9/01/26 275 193,083 -0- -0- -0- 275 193,083
------------- ------------- -------------
1,109,272 525,088 1,634,360
------------- ------------- -------------
Texas - 11.2%
Bexar Cnty Hlth Fac Dev Corp.
5.00%, 7/01/27 325 222,176 150 102,543 -0- 475 324,719
Camino Real Regl Mobility
Auth
5.00%, 2/15/21 3,000 2,829,240 -0- -0- -0- 3,000 2,829,240
Series 2008
5.00%, 8/15/21 1,790 1,674,617 -0- -0- -0- 1,790 1,674,617
5.00%, 2/15/22 -0- -0- 1,270 1,177,061 -0- 1,270 1,177,061
Corpus Christi Arpt Rev
(Corpus Christi Int'l)
FSA Series 00B
5.375%, 2/15/30 7,100 6,910,785 -0- -0- -0- 7,100 6,910,785
Dallas-Fort Worth Arpt Rev
(Int'l Arpt)
FGIC Series 01
5.50%, 11/01/35 13,400 10,609,718 -0- -0- -0- 13,400 10,609,718
Ector Cnty ISD
5.25%, 8/15/27 160 161,061 -0- -0- -0- 160 161,061
Ector Cnty ISD
(Prerefunded)
5.25%, 8/15/27 2,840 3,077,566 -0- -0- -0- 2,840 3,077,566
El Paso Cnty Hosp Dist
ASSURED GTY Series 2008A
5.00%, 8/15/23 5,000 4,922,650 -0- -0- -0- 5,000 4,922,650
Garza Cnty Pub Fac Corp.
5.50%, 10/01/19 535 478,589 -0- -0- -0- 535 478,589
Grapevine Arpt Rev
6.50%, 1/01/24 995 829,999 -0- -0- -0- 995 829,999
Guadalupe-Blanco River Auth
(Contract & Sub Wtr Res)
MBIA Series 04A
5.00%, 8/15/24 1,440 1,344,931 -0- -0- -0- 1,440 1,344,931
Hidalgo Cnty Hlth Svc
(Mission Hosp Inc Proj)
Series 05
5.00%, 8/15/14 - 8/15/19 730 645,560 -0- -0- -0- 730 645,560
Houston Arpt Rev
(Cargo ACQ Grp) AMT
Series 02
6.375%, 1/01/23 3,000 2,497,650 -0- -0- -0- 3,000 2,497,650
Laredo ISD
AMBAC Series 04A
5.00%, 8/01/24 1,000 968,160 -0- -0- -0- 1,000 968,160
Magnolia Tax ISD
5.00%, 8/15/20 -0- -0- 6,165 6,256,427 -0- 6,165 6,256,427
North Texas Hlth Fac Dev Corp
(United Regl Hlth Care
Sys)
FSA Series 07
5.00%, 9/01/24 570 515,508 250 226,100 -0- 820 741,608
Richardson Hosp Auth
(Richardson Regl Med Ctr)
FSA Series 04
5.875%, 12/01/24 2,310 1,911,941 -0- -0- -0- 2,310 1,911,941
San Antonio
(Elec & Gas Rev)
Series 08
5.00%, 2/01/26 6,830 6,629,813 -0- -0- -0- 6,830 6,629,813
San Antonio
(Unrefunded)
Series 02
5.00%, 2/01/22 3,060 3,066,120 -0- -0- -0- 3,060 3,066,120
Seguin Hgr Ed Auth
(Texas Lutheran Univ Proj)
Series 04
5.25%, 9/01/28 1,000 794,820 -0- -0- -0- 1,000 794,820
Texas Trpk Auth
AMBAC Series 02A
5.50%, 8/15/39 7,500 6,965,700 -0- -0- -0- 7,500 6,965,700
Tyler Hosp Rev
(Mother Francis Regl Hlth)
(Prerefunded)
Series 01
6.00%, 7/01/31 3,900 4,270,890 -0- -0- -0- 3,900 4,270,890
Tyler Tex Hlth Fac Dev Corp.
5.25%, 7/01/26 -0- -0- 2,000 1,558,420 -0- 2,000 1,558,420
------------- ------------- -------------
61,327,494 9,320,551 70,648,045
------------- ------------- -------------
Utah - 0.6%
Intermountain Pwr Agy
Series 2008A
5.25%, 7/01/23 2,750 2,708,392 -0- -0- -0- 2,750 2,708,392
Spanish Fork City Charter
Sch Rev
5.55%, 11/15/21 860 710,197 370 305,550 -0- 1,230 1,015,747
------------- ------------- -------------
3,418,589 305,550 3,724,139
------------- ------------- -------------
Virgin Islands - 1.2%
Virgin Islands Pub Fin Auth
(Virgin Islands Gross
Receipts Taxes
Loan Note)
FSA Series 03
5.00%, 10/01/13 - 10/01/14 2,025 2,069,888 -0- -0- -0- 2,025 2,069,888
5.25%, 10/01/15 - 10/01/17 5,460 5,526,999 -0- -0- -0- 5,460 5,526,999
------------- ------------- -------------
7,596,887 -0- 7,596,887
------------- ------------- -------------
Virginia - 0.7%
Arlington IDA
(Arlington Hlth Sys)
(Prerefunded)
Series 01
5.25%, 7/01/31 (e) 1,000 1,070,200 -0- -0- -0- 1,000 1,070,200
Bell Creek CDD
Series 03A
6.75%, 3/01/22 602 592,789 -0- -0- -0- 602 592,789
Broad Street CDD
(Parking Fac)
Series 03
7.50%, 6/01/33 3,000 2,770,290 -0- -0- -0- 3,000 2,770,290
------------- ------------- -------------
4,433,279 -0- 4,433,279
------------- ------------- -------------
Washington - 4.8%
Energy Northwest Wind
AMBAC
5.00%, 7/01/21 7,845 7,507,273 3,625 3,468,944 -0- 11,470 10,976,217
King Cnty Sch Dist No 414
(Lake Washington)
MBIA SCH BD GTY
5.00%, 12/01/24 -0- -0- 4,500 4,359,735 -0- 4,500 4,359,735
Spokane
AMBAC
5.00%, 12/01/22 5,550 5,290,870 2,390 2,278,411 -0- 7,940 7,569,281
Tacoma SWFR
XLCA Series 06
5.00%, 12/01/18 2,750 2,717,798 -0- -0- -0- 2,750 2,717,798
Washington
AMBAC
5.00%, 1/01/24 -0- -0- 5,000 4,911,100 -0- 5,000 4,911,100
------------- ------------- -------------
15,515,941 15,018,190 30,534,131
------------- ------------- -------------
Wisconsin - 1.1%
Milwaukee Arpt Rev
(Cargo ACQ Corp) AMT
Series 02
6.50%, 1/01/25 2,315 1,875,428 -0- -0- -0- 2,315 1,875,428
Wisconsin HEFA
(Bell Tower Residence
Proj)
FHLB Series 05
5.00%, 7/01/25 1,270 1,098,436 -0- -0- -0- 1,270 1,098,436
Wisconsin HEFA
(Wheaton Franciscan)
MBIA
5.25%, 8/15/20 3,400 2,655,332 1,600 1,249,568 -0- 5,000 3,904,900
------------- ------------- -------------
5,629,196 1,249,568 6,878,764
------------- ------------- -------------
Total Investments - 98.6%
(cost $688,761,068) 474,104,153 148,945,147 623,049,300
------------- ------------- -------------
Other assets less
liabilities - 1.4% 7,955,685 1,159,353 (139,000)++ 8,976,038
------------- ------------- ---------- -------------
Net Assets - 100.0% $ 482,059,838 $ 150,104,500 $ (139,000) $ 632,025,338
------------- ------------- ---------- -------------
INTEREST RATE SWAP
TRANSACTIONS
Alliance-
Alliance- Bernstein Alliance- Alliance- Alliance- Alliance-
Bernstein Municipal Bernstein Bernstein Bernstein Bernstein
Municipal Income Municipal Municipal Municipal Municipal
Income Fund Fund II Income Fund Rate Type Income Fund Income Fund II Income Fund
National Florida National ------------------- National Florida National
Portfolio Portfolio Portfolio Payments Payments Portfolio Portfolio Portfolio
Notional Notional Notional made by received Unrealized Unrealized Unrealized
Swap Amount Amount Amount Termination the by the Appreciation/ Appreciation/ Appreciation/
Counterparty (000) (000) (000) Date Portfolio Portfolio (Depreciation) (Depreciation) (Depreciation)
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch $ 3,205 $ 1,540 $ 4,745 2/12/2012 SIFMA** 3.548% $ 105,575 $ 50,728 $ 156,303
Merrill Lynch -0- 5,300 5,300 10/21/2016 SIFMA* 4.128% -0- 281,652 281,652
(a) Variable rate coupon, rate shown as of October 31, 2008.
(b) Floating Rate Security. Stated interest rate was in effect at October 31,
2008.
(c) Security is in default and is non-income producing.
(d) Illiquid security, valued at fair value.
(e) Position, or a portion thereof, has been segregated to collateralize
interest rate swaps.
* The obligor of this holding, which represents 0.03% of the Portfolio's net
assets, has disclosed that it is in default of certain payments under the
loan agreement, and is in early discussions with bond holders with respect
to a restructuring of the terms of the bonds, and with equity holders with
respect to additional equity contributions.
** Variable interest rate based on the Securities Industry & Financial Markets
Association (SIFMA).
As of October 31, 2008, the Portfolio held 44% of net assets in insured
bonds (of this amount 2% represents the Portfolio's holding in pre-refunded
insured bonds).
++ Includes adjustment for estimated merger costs of $140,000.
+++ All holdings of Florida Portfolio comply with the investment strategies
and restrictions of National Portfolio.
ACA - ACA Capital
AMBAC - American Bond Assurance Corporation
AMT - Alternative Minimum Tax (subject to)
ASSET GTY - Asset Guaranty Insurance Company AKA Radian
ASSURED GTY - Assured Guaranty
CDA - Community Development Administration
CDD - Community Development District
CFD - Community Facilities District
CIFG - CIFG Assurance North America, Inc.
COP - Certificate of Participation
EDA - Economic Development Agency
FGIC - Financial Guaranty Insurance Company
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance Inc.
GNMA - Government National Mortgage Association
HDA - Housing Development Authority
HEFA - Health & Education Facility Authority
HFA - Housing Finance Authority
HFC - Housing Finance Corporation
IDA - Industrial Development Authority/Agency
IDR - Industrial Development Revenue
ISD - Independent School District
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-Family Housing Revenue
PCR - Pollution Control Revenue Bond
RADIAN - Radian Group, Inc.
SFMR - Single Family Mortgage Revenue
SWFR - Solid Waste Facility Revenue
XLCA - XL Capital Assurance Inc.
STATEMENT OF ASSETS AND LIABILITIES
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - NATIONAL PORTFOLIO
AllianceBernstein Municipal Income Fund - National II Portfolio
October 31, 2008 (unaudited) AllianceBernstein Municipal Income Fund - National Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma
Alliance- Alliance- Alliance-
Bernstein Bernstein Bernstein
Municipal Municipal Municipal
Income Fund Income Fund Income Fund
National National II National
Portfolio Portfolio + Adjustments Portfolio
------------- ------------- ------------- -------------
ASSETS
Investments in securities, at value
(cost $522,563,607 and 141,900,327, respectively) $ 474,104,153 $ 140,696,778 $ -0- $ 614,800,931
Cash 71,188 197,389 -0- 268,577
Interest receivable 9,659,718 1,935,615 -0- 11,595,333
Receivable for capital stock sold 1,499,573 382,153 -0- 1,881,726
Unrealized appreciation of interest rate swap contracts 105,575 53,254 -0- 158,829
Receivable for investment securities sold 130,000 -0- -0- 130,000
------------- ------------- ------------- -------------
Total assets 485,570,207 143,265,189 -0- 628,835,396
------------- ------------- ------------- -------------
LIABILITIES
Payable for capital stock redeemed 1,263,860 317,154 -0- 1,581,014
Payable for investment securities purchased 1,198,652 -0- -0- 1,198,652
Dividends payable 691,487 162,135 -0- 853,622
Unrealized depreciation of interest rate swap contracts -0- 313,192 -0- 313,192
Distribution fee payable 169,030 45,238 -0- 214,268
Advisory fee payable 57,762 52,801 -0- 110,563
Administrative fee payable 29,707 29,930 -0- 59,637
Transfer Agent fee payable 13,824 731 -0- 14,555
Accrued expenses 86,047 51,986 137,000 275,033 (a)
------------- ------------- ------------- -------------
Total liabilities 3,510,369 973,167 137,000 4,620,536
------------- ------------- ------------- -------------
NET ASSETS $ 482,059,838 $ 142,292,022 $ (137,000) $ 624,214,860
============= ============= ============= =============
Composition of Net Assets
Capital stock, at par $ 54,166 $ 14,931 -0- $ 69,097
Additional paid-in capital 554,399,570 144,161,759 -0- 698,561,329
Undistributed/(distributions) in excess of net
investment income (218,063) 218,343 (137,000) (136,720)(a)
Accumulated net realized loss on investment transactions (23,821,560) (639,524) -0- (24,461,084)
Net unrealized depreciation of investments (48,354,275) (1,463,487) -0- (49,817,762)
------------- ------------- ------------- -------------
$ 482,059,838 $ 142,292,022 $ (137,000) $ 624,214,860
============= ============= ============= =============
CLASS A SHARES
Net Assets $ 401,886,184 $ 125,910,374 $ 527,796,558
Shares of capital stock outstanding 45,150,768 13,208,426 934,978 59,294,172
------------- ------------- ------------- -------------
Net asset value per share $ 8.90 $ 9.53 $ 8.90
------------- ------------- -------------
CLASS B SHARES
Net Assets $ 14,988,548 $ 3,450,143 $ 18,438,691
Shares of capital stock outstanding 1,685,781 362,890 25,308 2,073,979
------------- ------------- ------------- -------------
Net asset value per share $ 8.89 $ 9.51 $ 8.89
------------- ------------- -------------
CLASS C SHARES
Net Assets $ 63,703,512 $ 12,931,505 $ 76,635,017
Shares of capital stock outstanding 7,162,706 1,359,550 94,817 8,617,073
------------- ------------- ------------- -------------
Net asset value per share $ 8.89 $ 9.51 $ 8.89
------------- ------------- -------------
ADVISOR CLASS SHARES
Net Assets $ 1,481,594 $ 1,481,594
Shares of capital stock outstanding 166,525 0 166,525
------------- ------------- -------------
Net asset value per share $ 8.90 $ 8.90
------------- -------------
- ----------
See Notes to Pro Forma AllianceBernstein Municipal Income Fund - National
Portfolio Financial Statements.
+ Prior to December 1, 2008 known as Insured National Portfolio.
(a) Includes adjustment for estimated Acquisition costs of $137,000.
STATEMENT OF OPERATIONS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - NATIONAL PORTFOLIO
AllianceBernstein Municipal Income Fund - National II Portfolio
Twelve Months Ended October, 31 2008 (unaudited) AllianceBernstein Municipal Income Fund - National Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma
Alliance- Alliance- Alliance-
Bernstein Bernstein Bernstein
Municipal Income Municipal Income Municipal Income
Fund National Fund National II Fund National
Portfolio Portfolio + Adjustments* Portfolio
---------------- ---------------- ---------------- ----------------
INVESTMENT INCOME
Interest $ 24,855,797 $ 6,939,141 $ -0- $ 31,794,938
---------------- ---------------- ---------------- ----------------
EXPENSES
Advisory fee 2,243,000 636,370 2,501 2,881,871 (a)
Distribution fee- Class A 1,241,691 373,832 -0- 1,615,523 (b)
Distribution fee- Class B 200,377 46,857 -0- 247,234 (c)
Distribution fee- Class C 643,392 121,190 -0- 764,582 (c)
Transfer agency 284,009 74,939 (20,809) 338,139 (d)
Custodian 172,984 120,780 (87,550) 206,214 (d)
Registration 110,824 51,041 (56,865) 105,000 (d)
Administrative 94,932 93,764 (99,696) 89,000 (d)
Audit & legal 79,217 86,979 (84,196) 82,000 (d)
Printing 32,515 8,247 5,970 46,732 (d)
Directors' fees 10,537 9,596 (9,596) 10,537 (d)
Miscellaneous 15,009 8,859 (4,402) 19,466 (d)
---------------- ---------------- ---------------- ----------------
Total expenses 5,128,487 1,632,454 (354,643) 6,406,298
Less: advisory fee waived (1,143,603) (42,674) 289,209 (897,068)
Less: expense offset agreement (5,334) (1,427) -0- (6,761)
---------------- ---------------- ---------------- ----------------
Net expenses 3,979,550 1,588,353 (65,434) 5,502,469
---------------- ---------------- ---------------- ----------------
Net investment income 20,876,247 5,350,788 65,434 26,292,469
---------------- ---------------- ---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized gain (loss) on:
Investment transactions 196,731 (283,547) -0- (86,816)
Futures contracts (119,256) (34,768) -0- (154,024)
Swap contracts 344,924 37,738 -0- 382,662
Net change in unrealized
Appreciation/depreciation of:
Investments (60,729,249) (8,232,177) -0- (68,961,426)
Swap contracts (96,468) (196,248) -0- (292,716)
---------------- ---------------- ---------------- ----------------
Net loss on investment transactions (60,403,318) (8,709,002) -0- (69,112,320)
---------------- ---------------- ---------------- ----------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $ (39,527,071) $ (3,358,214) $ 65,434 $ (42,819,851)
================ ================ ================ ================
- ----------
(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 1% 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 - National
Portfolio Financial Statements.
* Does not reflect the estimated Acquisition costs of $137,000 which will be
which will be assumed by National II prior to the National II Acquisition.
STATEMENT OF ASSETS AND LIABILITIES
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - NATIONAL PORTFOLIO
AllianceBernstein Municipal Income Fund - National II Portfolio
AllianceBernstein Municipal Income Fund II - Florida Portfolio
October 31, 2008 (unaudited) AllianceBernstein Municipal Income Fund - National Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma
Alliance- Alliance- Alliance- Alliance-
Bernstein Bernstein Bernstein Bernstein
Municipal Municipal Municipal Municipal
Income Income Income Income
Fund Fund II Fund II Fund
National National Florida National
Portfolio Portfolio + Portfolio Adjustments Portfolio
------------- ------------- ------------- ------------- -------------
ASSETS
Investments in securities, at value (cost
$522,563,607, 141,900,327 and $166,197,461,
respectively) $ 474,104,153 $ 140,696,778 $ 148,945,147 $ -0- $ 763,746,078
Cash 71,188 197,389 -0- -0- 268,577
Interest receivable 9,659,718 1,935,615 2,949,092 -0- 14,544,425
Receivable for capital stock sold 1,499,573 382,153 -0- -0- 1,881,726
Unrealized appreciation of interest rate
swap contracts 105,575 53,254 332,380 -0- 491,209
Receivable for investment securities sold 130,000 -0- 325,000 -0- 455,000
------------- ------------- ------------- ------------- -------------
Total assets 485,570,207 143,265,189 152,551,619 -0- 781,387,015
------------- ------------- ------------- ------------- -------------
LIABILITIES
Due to custodian -0- -0- 1,439,414 -0- 1,439,414
Payable for capital stock redeemed 1,263,860 317,154 204,966 -0- 1,785,980
Payable for investment securities purchased 1,198,652 -0- 374,579 -0- 1,573,231
Dividends payable 691,487 162,135 224,871 -0- 1,078,493
Unrealized depreciation of interest rate
swap contracts -0- 313,192 -0- -0- 313,192
Distribution fee payable 169,030 45,238 62,502 -0- 276,770
Advisory fee payable 57,762 52,801 30,315 -0- 140,878
Administrative fee payable 29,707 29,930 29,896 -0- 89,533
Transfer Agent fee payable 13,824 731 2,404 -0- 16,959
Accrued expenses 86,047 51,986 78,172 276,000 492,205 (a)
------------- ------------- ------------- ------------- -------------
Total liabilities 3,510,369 973,167 2,447,119 276,000 7,206,655
------------- ------------- ------------- ------------- -------------
NET ASSETS $ 482,059,838 $ 142,292,022 $ 150,104,500 $ (276,000) $ 774,180,360
------------- ------------- ------------- ------------- -------------
Composition of Net Assets
Capital stock, at par $ 54,166 $ 14,931 $ 167,732 -0- $ 236,829
Additional paid-in capital 554,399,570 144,161,759 172,581,047 -0- 871,142,376
Undistributed/(distributions in excess of)
net investment income (218,063) 218,343 (315,785) (276,000) (591,505)(a)
Accumulated net realized loss on investment
transactions (23,821,560) (639,524) (5,408,560) -0- (29,869,644)
Net unrealized depreciation of investments (48,354,275) (1,463,487) (16,919,934) -0- (66,737,696)
------------- ------------- ------------- ------------- -------------
$ 482,059,838 $ 142,292,022 $ 150,104,500 $ (276,000) $ 774,180,360
============= ============= ============= ============= =============
CLASS A SHARES
Net Assets $ 401,886,184 $ 125,910,374 $ 111,126,888 $ 638,923,446
Shares of capital stock outstanding 45,150,768 13,208,426 12,419,420 1,004,750 71,783,364
------------- ------------- ------------- ------------- -------------
Net asset value per share $ 8.90 $ 9.53 $ 8.95 $ 8.90
------------- ------------- ------------- -------------
CLASS B SHARES
Net Assets $ 14,988,548 $ 3,450,143 $ 11,597,191 $ 30,035,882
Shares of capital stock outstanding 1,685,781 362,890 1,295,571 34,052 3,378,294
------------- ------------- ------------- ------------- -------------
Net asset value per share $ 8.89 $ 9.51 $ 8.95 $ 8.89
------------- ------------- ------------- -------------
CLASS C SHARES
Net Assets $ 63,703,512 $ 12,931,505 $ 27,380,421 $ 104,015,438
Shares of capital stock outstanding 7,162,706 1,359,550 3,058,232 115,457 11,695,945
------------- ------------- ------------- ------------- -------------
Net asset value per share $ 8.89 $ 9.51 $ 8.95 $ 8.89
------------- ------------- ------------- -------------
ADVISOR CLASS SHARES
Net Assets $ 1,481,594 $ 1,481,594
Shares of capital stock outstanding 166,525 -0- 166,525
------------- ------------- -------------
Net asset value per share $ 8.90 $ 8.90
------------- -------------
- ----------
See Notes to Pro Forma AllianceBernstein Municipal Income Fund - National
Portfolio Financial Statements.
+ Prior to December 1, 2008 known as Insured National Portfolio.
(a) Includes adjustment for estimated Acquisition costs of $276,000, consisting
of $137,000 for the National II Acquisition and $139,000 for the Florida
Acquisition.
STATEMENT OF OPERATIONS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - NATIONAL PORTFOLIO
AllianceBernstein Municipal Income Fund - National II Portfolio
AllianceBernstein Municipal Income Fund II - Florida Portfolio
Twelve Months Ended October, 31 2008 (unaudited) AllianceBernstein Municipal Income Fund - National Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance- Pro Forma
Alliance- Alliance- Bernstein Alliance-
Bernstein Bernstein Municipal Bernstein
Municipal Municipal Income Municipal
Income Fund Income Fund Fund II Income Fund
National National II Florida National
Portfolio Portfolio + Portfolio Adjustments* Portfolio
------------- ------------- ------------- ------------- -------------
INVESTMENT INCOME
Interest $ 24,855,797 $ 6,939,141 $ 9,358,588 $ -0- $ 41,153,526
------------- ------------- ------------- ------------- -------------
EXPENSES
Advisory fee 2,243,000 636,370 799,048 (109,808) 3,568,610 (a)
Distribution fee- Class A 1,241,691 373,832 385,558 (46,910) 1,954,171 (b)
Distribution fee- Class B 200,377 46,857 175,965 -0- 423,199 (c)
Distribution fee- Class C 643,392 121,190 314,502 -0- 1,079,084 (c)
Transfer agency 284,009 74,939 61,324 (34,069) 386,203 (d)
Custodian 172,984 120,780 105,437 (170,810) 228,391 (d)
Registration 110,824 51,041 13,538 (65,403) 110,000 (d)
Administrative 94,932 93,764 95,774 (195,470) 89,000 (d)
Audit & legal 79,217 86,979 74,086 (156,282) 84,000 (d)
Printing 32,515 8,247 18,859 (9,499) 50,122 (d)
Directors' fees 10,537 9,596 5,608 (15,204) 10,537 (d)
Miscellaneous 15,009 8,859 9,170 (8,916) 24,122 (d)
------------- ------------- ------------- ------------- -------------
Total expenses 5,128,487 1,632,454 2,058,869 (812,371) 8,007,439
Less: advisory fee waived (1,143,603) (42,674) (330,526) 534,428 (982,375)
Less: expense offset agreement (5,334) (1,427) (987) -0- (7,748)
------------- ------------- ------------- ------------- -------------
Net expenses 3,979,550 1,588,353 1,727,356 (277,943) 7,017,316
------------- ------------- ------------- ------------- -------------
Net investment income 20,876,247 5,350,788 7,631,232 277,943 34,136,210
------------- ------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT TRANSACTIONS
Net realized gain (loss) on:
Investment transactions 196,731 (283,547) 415,788 -0- 328,972
Futures contracts (119,256) (34,768) (50,306) -0- (204,330)
Swap contracts 344,924 37,738 238,262 -0- 620,924
Net change in unrealized
Appreciation/depreciation of:
Investments (60,729,249) (8,232,177) (21,592,230) -0- (90,553,656)
Swap contracts (96,468) (196,248) 43,779 -0- (248,937)
------------- ------------- ------------- ------------- -------------
Net loss on investment transactions (60,403,318) (8,709,002) (20,944,707) -0- (90,057,027)
------------- ------------- ------------- ------------- -------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $ (39,527,071) $ (3,358,214) $ (13,313,475) $ 277,943 $ (55,920,817)
============= ============= ============= ============= =============
- ----------
(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 1% 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 - National
Portfolio Financial Statements.
+ Prior to December 1, 2008 known as Insured National Portfolio.
* Does not reflect the estimated Acquisition costs of $276,000, consisting
of $137,000 for the National II Acquisition and $139,000 for the Florida
Acquisition, which will be assumed by National II and Florida Portfolio,
respectively, prior to the Acquisitions.
STATEMENT OF ASSETS AND LIABILITIES
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - NATIONAL PORTFOLIO
AllianceBernstein Municipal Income Fund II - Florida Portfolio
October 31, 2008 (unaudited) AllianceBernstein Municipal Income Fund - National Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma
Alliance- Alliance- Alliance-
Bernstein Bernstein Bernstein
Municipal Municipal Municipal
Income Income Income
Fund Fund II Fund
National Florida National
Portfolio Portfolio Adjustments Portfolio
------------- ------------- ------------- -------------
ASSETS
Investments in securities, at value (cost $522,563,607
and $166,197,461, respectively) $ 474,104,153 $ 148,945,147 $ -0- $ 623,049,300
Cash 71,188 -0- -0- 71,188
Interest receivable 9,659,718 2,949,092 -0- 12,608,810
Receivable for capital stock sold 1,499,573 -0- -0- 1,499,573
Unrealized appreciation of interest rate swap contracts 105,575 332,380 -0- 437,955
Receivable for investment securities sold 130,000 325,000 -0- 455,000
------------- ------------- ------------- -------------
Total assets 485,570,207 152,551,619 -0- 638,121,826
------------- ------------- ------------- -------------
LIABILITIES
Due to custodian -0- 1,439,414 -0- 1,439,414
Payable for investment securities purchased 1,198,652 374,579 -0- 1,573,231
Payable for capital stock redeemed 1,263,860 204,966 -0- 1,468,826
Dividends payable 691,487 224,871 -0- 916,358
Distribution fee payable 169,030 62,502 -0- 231,532
Advisory fee payable 57,762 30,315 -0- 88,077
Administrative fee payable 29,707 29,896 -0- 59,603
Transfer Agent fee payable 13,824 2,404 -0- 16,228
Accrued expenses 86,047 78,172 139,000 303,219 (a)
------------- ------------- ------------- -------------
Total liabilities 3,510,369 2,447,119 139,000 6,096,488
------------- ------------- ------------- -------------
NET ASSETS $ 482,059,838 $ 150,104,500 $ (139,000) $ 632,025,338
------------- ------------- ------------- -------------
Composition of Net Assets
Capital stock, at par $ 54,166 $ 167,732 -0- $ 221,898
Additional paid-in capital 554,399,570 172,581,047 -0- 726,980,617
Distributions in excess of net investment income (218,063) (315,785) (139,000) (672,848)(a)
Accumulated net realized loss on investment transactions (23,821,560) (5,408,560) -0- (29,230,120)
Net unrealized depreciation of investments (48,354,275) (16,919,934) -0- (65,274,209)
------------- ------------- ------------- -------------
$ 482,059,838 $ 150,104,500 $ (139,000) $ 632,025,338
------------- ------------- ------------- -------------
CLASS A SHARES
Net Assets $ 401,886,184 $ 111,126,888 $ 513,013,072
Shares of capital stock outstanding 45,150,768 12,419,420 69,772 57,639,960
------------- ------------- ------------- -------------
Net asset value per share $ 8.90 $ 8.95 $ 8.90
------------- ------------- -------------
CLASS B SHARES
Net Assets $ 14,988,548 $ 11,597,191 $ 26,585,739
Shares of capital stock outstanding 1,685,781 1,295,571 8,744 2,990,096
------------- ------------- ------------- -------------
Net asset value per share $ 8.89 $ 8.95 $ 8.89
------------- ------------- -------------
CLASS C SHARES
Net Assets $ 63,703,512 $ 27,380,421 $ 91,083,933
Shares of capital stock outstanding 7,162,706 3,058,232 20,640 10,241,578
------------- ------------- ------------- -------------
Net asset value per share $ 8.89 $ 8.95 $ 8.89
------------- ------------- -------------
ADVISOR CLASS SHARES
Net Assets $ 1,481,594 $ 1,481,594
Shares of capital stock outstanding 166,525 -0- 166,525
------------- ------------- -------------
Net asset value per share $ 8.90 $ 8.90
------------- -------------
- ----------
See Notes to Pro Forma AllianceBernstein Municipal Income Fund - National
Portfolio Financial Statements.
(a) Includes adjustment for estimated Acquisition costs of $139,000.
STATEMENT OF OPERATIONS
PRO FORMA ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - NATIONAL PORTFOLIO
AllianceBernstein Municipal Income Fund II - Florida Portfolio
Twelve Months Ended October, 31 2008 (unaudited) AllianceBernstein Municipal Income Fund - National Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma
Alliance- Alliance- Alliance-
Bernstein Bernstein Bernstein
Municipal Income Municipal Income Municipal Income
Fund National Fund II Florida Fund National
Portfolio Portfolio Adjustments* Portfolio
---------------- ---------------- ---------------- ----------------
INVESTMENT INCOME
Interest $ 24,855,797 $ 9,358,588 $ -0- $ 34,214,385
---------------- ---------------- ---------------- ----------------
EXPENSES
Advisory fee 2,243,000 799,048 (109,807) 2,932,241 (a)
Distribution fee- Class A 1,241,691 385,558 (49,664) 1,577,585 (b)
Distribution fee- Class B 200,377 175,965 -0- 376,342 (c)
Distribution fee- Class C 643,392 314,502 -0- 957,894 (c)
Transfer agency 284,009 61,324 (27,999) 317,334 (d)
Custodian 172,984 105,437 (69,255) 209,166 (d)
Registration 110,824 13,538 (19,362) 105,000 (d)
Administrative 94,932 95,774 (101,706) 89,000 (d)
Audit & legal 79,217 74,086 (70,303) 83,000 (d)
Printing 32,515 18,859 (4,469) 46,905 (d)
Directors' fees 10,537 5,608 (5,608) 10,537 (d)
Miscellaneous 15,009 9,170 (4,495) 19,684 (d)
---------------- ---------------- ---------------- ----------------
Total expenses 5,128,487 2,058,869 (462,668) 6,724,688
Less: advisory fee waived (1,143,603) (330,526) 593,503 (880,626)
Less: expense offset agreement (5,334) (987) -0- (6,321)
---------------- ---------------- ---------------- ----------------
Net expenses 3,979,550 1,727,356 130,835 5,837,741
---------------- ---------------- ---------------- ----------------
Net investment income 20,876,247 7,631,232 (130,835) 28,376,644
---------------- ---------------- ---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized gain (loss) on:
Investment transactions 196,731 415,788 -0- 612,519
Futures contracts (119,256) (50,306) -0- (169,562)
Swap contracts 344,924 238,262 -0- 583,186
Net change in unrealized
Appreciation/depreciation of:
Investments (60,729,249) (21,592,230) -0- (82,321,479)
Swap contracts (96,468) 43,779 -0- (52,689)
---------------- ---------------- ---------------- ----------------
Net loss on investment transactions (60,403,318) (20,944,707) -0- (81,348,025)
---------------- ---------------- ---------------- ----------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $ (39,527,071) $ (13,313,475) $ (130,835) $ (52,971,381)
================ ================ ================ ================
- -------------
(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 1% 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 - National
Portfolio Financial Statements.
* Does not reflect the estimated Acquisition costs of $139,000, which will be
assumed by Florida Portfolio prior to the Florida Acquisition.
NOTES TO FINANCIAL STATEMENTS
PRO FORMA
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - NATIONAL PORTOFLIO
October 31, 2008 (unaudited)
NOTE A: General
The Pro Forma AllianceBernstein Municipal Income Fund, Inc. - National Portfolio
Financial Statements give effect to the proposed acquisition (the "Acquisition")
of the assets and liabilities of AllianceBernstein Municipal Income Fund -
National Portfolio II (prior to December 1, 2008 know as Insured National
Portfolio) (the "Acquired Fund") by AllianceBernstein Municipal Income Fund -
National 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 the Acquired Fund for shares of the
Fund. After the proposed acquisition, the tax survivor for federal income tax
purposes will be Acquiring Fund.
AllianceBernstein Municipal Income Fund, Inc. (the "Registrant") is incorporated
under the laws of the State of Maryland. The Fund is a series of the Registrant,
comprised of five portfolios as of October 31, 2008; the diversified National
Portfolio, National Portfolio II, New York Portfolio and California Portfolio
and the non-diversified California Portfolio II (prior to December 1, 2008 known
as 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 November 1, 2007
- - October 31, 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. The Acquired Fund will bear the expenses of the Acquisition
including the cost of proxy solicitation. Due to the operation of the expense
limitation undertaking provided by the AllianceBernstein L.P. (the "Adviser") to
the Acquired Fund, these expenses will ultimately be borne by the Adviser.
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, 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. Investments in money market funds are valued at their
net asset value each day.
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, California II 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 the Fund'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 Class A, Class B,
Class C and Advisor class shares, respectively. Assuming the merger had been
consummated prior to November 1, 2007, for the twelve months ended October 31,
2008 such waiver would have amounted to approximately $897,068.
Pursuant to the Advisory agreement, the Fund paid $89,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the twelve months ended October 31, 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
Fund. ABIS may make payments to intermediaries that provide omnibus account
services, sub accounting services and/or networking services.
For the twelve months ended October 31, 2008, the Fund's expenses were reduced
by $6,761 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 Fund'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 Fund 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 October 31, 2008. The pro-forma number of
shares outstanding for the combined entity consists of the following at October
31, 2008.
Shares of Additional Shares Total Shares
Acquiring Fund Assumed Issued Outstanding
Class of Shares Pre-Combination with Merger Post-Combination
- -------------------- ------------------- -------------------- ------------------
- -------------------- ------------------- -------------------- ------------------
Class A 45,150,768 14,143,404 59,294,172
Class B 1,685,781 388,198 2,073,979
Class C 7,162,706 1,454,367 8,617,073
Advisor Class 166,525 -0- 166,525
NOTES TO FINANCIAL STATEMENTS
PRO FORMA
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - NATIONAL PORTOFLIO
October 31, 2008 (unaudited)
NOTE A: General
The Pro Forma AllianceBernstein Municipal Income Fund, Inc. - National Portfolio
Financial Statements give effect to the proposed acquisition (the "Acquisition")
of the assets and liabilities of AllianceBernstein Municipal Income Fund II -
Florida Portfolio ("Florida Portfolio") and AllianceBernstein Municipal Income
Fund, Inc. - National Portfolio II ("National Portfolio II") (prior to December
1, 2008 know as Insured National Portfolio) (the "Acquired Funds") by
AllianceBernstein Municipal Income Fund - National 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 Florida Portfolio and National Portfolio II for shares of the
Fund. After the proposed acquisition, the tax survivor for federal income tax
purposes will be the Acquiring Fund.
AllianceBernstein Municipal Income Fund, Inc. (the "Registrant") is incorporated
under the laws of the State of Maryland. The Fund is a series of the Registrant,
comprised of five portfolios as of October 31, 2008; the diversified National
Portfolio, National Portfolio II, New York Portfolio and California Portfolio
and the non-diversified California Portfolio II (prior to December 1, 2008 know
as 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 November 1, 2007
- - October 31, 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. The Acquired Funds will bear the expenses of the Acquisition
including the cost of proxy solicitation. Due to the operation of the expense
limitation undertakings provided by AllianceBernstein L.P. (the "Adviser") to
the Acquired Funds, these expenses will ultimately be borne by the Adviser.
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, 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. Investments in money market funds are valued at their
net asset value each day.
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, California II 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 the Fund'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 Class A, Class B,
Class C and Advisor class shares, respectively. Assuming the merger had been
consummated prior to November 1, 2007, for the twelve months ended October 31,
2008 such waiver would have amounted to approximately $982,375.
Pursuant to the Advisory agreement, the Fund paid $89,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the twelve months ended October 31, 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
Fund. ABIS may make payments to intermediaries that provide omnibus account
services, sub accounting services and/or networking services.
For the twelve months ended October 31, 2008, the Fund's expenses were reduced
by $7,748 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 Fund'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 Fund 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 October 31, 2008. The pro-forma number of
shares outstanding for the combined entity consists of the following at October
31, 2008.
Shares of Additional Shares Total Shares
Acquiring Fund Assumed Issued Outstanding
Class of Shares Pre-Combination with Merger Post-Combination
- -------------------- ------------------- -------------------- ------------------
- -------------------- ------------------- -------------------- ------------------
Class A 45,150,768 26,632,596 71,783,364
Class B 1,685,781 1,692,513 3,378,294
Class C 7,162,706 4,533,239 11,695,945
Advisor Class 166,525 -0- 166,525
NOTES TO FINANCIAL STATEMENTS
PRO FORMA
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND - NATIONAL PORTOFLIO
October 31, 2008 (unaudited)
NOTE A: General
The Pro Forma AllianceBernstein Municipal Income Fund, Inc. - National Portfolio
Financial Statements give effect to the proposed acquisition (the "Acquisition")
of the assets and liabilities of AllianceBernstein Municipal Income Fund II -
Florida Portfolio (the "Acquired Fund") by AllianceBernstein Municipal Income
Fund, Inc. - National 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 the Acquired Fund for shares
of the Fund. After the proposed acquisition, the tax survivor for federal income
tax purposes will be the Acquiring Fund.
AllianceBernstein Municipal Income Fund, Inc. (the "Registrant") is incorporated
under the laws of the State of Maryland. The Fund is a series of the Registrant
comprised of five portfolios as of October 31, 2008; the diversified National
Portfolio, National Portfolio II (prior to December 1, 2008 known as Insured
National Portfolio), New York Portfolio and California Portfolio and the
non-diversified California Portfolio II (prior to December 1, 2008 known as
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 November 1, 2007
- - October 31, 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. The Acquired Fund will bear the expenses of the Acquisition
including the cost of proxy solicitation. Due to the operation of the expense
limitation undertaking provided by AllianceBernstein L.P. (the "Adviser") to the
Acquired Fund, these expenses will ultimately be borne by the Adviser.
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, 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. Investments in money market funds are valued at their
net asset value each day.
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, California II 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 the Fund'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 Class A, Class B,
Class C and Advisor class shares, respectively. Assuming the merger had been
consummated prior to November 1, 2007, for the twelve months ended October 31,
2008 such waiver would have amounted to approximately $880,626.
Pursuant to the Advisory agreement, the Fund paid $89,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the twelve months ended October 31, 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
Fund. ABIS may make payments to intermediaries that provide omnibus account
services, sub accounting services and/or networking services.
For the twelve months ended October 31, 2008, the Fund's expenses were reduced
by $6,321 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 Fund'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 Fund 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 October 31, 2008. The pro-forma number of
shares outstanding for the combined entity consists of the following at October
31, 2008.
Shares of Additional Shares Total Shares
Acquiring Fund Assumed Issued Outstanding
Class of Shares Pre-Combination with Merger Post-Combination
- ------------------- ------------------- -------------------- -------------------
- ------------------- ------------------- -------------------- -------------------
Class A 45,150,768 12,489,192 57,639,960
Class B 1,685,781 1,304,315 2,990,096
Class C 7,162,706 3,078,872 10,241,578
Advisor Class 166,525 -0- 166,525
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) (a) 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.
(b) Articles of Amendment to the Articles of Incorporation of the
Registrant, dated November 28, 2008 and filed on December 8,
2008 - Incorporated by reference to Exhibit (a)(2) to
Post-Effective Amendment No. 40 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, 2009.
(2) Amended and Restated By-Laws of the Registrant - Incorporated by
reference to Exhibit 99.77Q1 - Other Exhibits of 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) (a) Form of Plan of Acquisition and Liquidation between the
National Portfolio and the National II Portfolio, each a
series of AllianceBernstein Municipal Income Fund, Inc. -
constitutes Appendix H to Part A hereof.
(b) Form of Plan of Acquisition and Liquidation between National
Portfolio, a series of AllianceBernstein Municipal Income
Fund, Inc. and Florida Portfolio, a series of
AllianceBernstein Municipal Income Fund II - constitutes
Appendix I 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. Filed
h (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 -
Incorporated by reference to Exhibit 14 of Registrant's Registration
Statement on Form N-14 (File Nos. 333-157449 and 811-04791), filed
with the Securities and Exchange Commission on February 20, 2009.
(15) Not applicable.
(16) (a) Powers of Attorney for: John H. Dobkin, Michael J. Downey,
William H. Foulk, Jr., Nancy P. Jacklin, Garry L. Moody,
Marshall C. Turner, Jr. and Earl D. Weiner - Incorporated by
reference to Exhibit 16 of Registrant's Registration Statement
on Form N-14 (File Nos. 333-153889 and 811-04791), filed with
the Securities and Exchange Commission on October 7, 2008.
(b) Power of Attorney for Robert M. Keith - Incorporated by
reference to Exhibit 16(a) of Registrant's Registration
Statement on Form N-14 (File Nos. 333-157449 and 811-04791),
filed with the Securities and Exchange Commission on February
20, 2009.
(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 23rd day of March, 2009.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND, INC.
By: /s/ 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:
/s/ Robert M. Keith* President and Chief March 23, 2009
----------------------- Executive Officer
Robert M. Keith
(2) Principal Financial and
Accounting Officer:
/s/Joseph J. Mantineo Treasurer and
--------------------- Chief Financial March 23, 2009
Joseph J. Mantineo Officer
(3) Majority of the Directors:
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 March 23, 2009
------------------------------
Emilie D. Wrapp
(Attorney-in-fact)
INDEX TO EXHIBITS
-----------------
Exhibit No. Description of Exhibits
- ----------- -----------------------
(11) Opinion and Consent of Seward & Kissel LLP
SK 00250 0457 978808