UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-04791
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 offices) (Zip code)
Mark R. Manley
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: October 31, 2005
Date of reporting period: October 31, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
[LOGO] ALLIANCEBERNSTEIN(R)
Investment Research and Management
ANNUAL REPORT
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AllianceBernstein Municipal
Income Fund
----------------------------
Annual Report
October 31, 2005
----------------------------
Investment Products Offered
-------------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
-------------------------------
The investment return and principal value of an investment in the Fund will
fluctuate as the prices of the individual securities in which it invests
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 Fund carefully before investing. For a free copy of
the Fund's prospectus, which contains this and other information, visit our web
site at www.alliancebernstein.com or call your financial advisor or
AllianceBernstein at (800) 227-4618. Please read the prospectus carefully before
you invest.
You may obtain performance information current to the most recent month-end by
visiting www.alliancebernstein.com.
This shareholder report must be preceded or accompanied by the Fund's prospectus
for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund's proxy voting policies and procedures,
and information regarding how the Fund voted proxies relating to portfolio
securities during the most recent 12-month period ended June 30, without charge.
Simply visit AllianceBernstein's web site at www.alliancebernstein.com, or go to
the Securities and Exchange Commission's (the "Commission") web site at
www.sec.gov, or call AllianceBernstein at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
AllianceBernstein Investment Research and Management, Inc. is an affiliate of
Alliance Capital Management L.P., the manager of the funds, and is a member of
the NASD.
December 20, 2005
Annual Report
This report provides management's discussion of fund performance for the
portfolios of AllianceBernstein Municipal Income Fund (the "Portfolios") for the
annual reporting period ended October 31, 2005.
Investment Objective and Policies
Each of the five portfolios of this open-end fund invests principally in
high-yielding, predominantly medium- quality municipal securities with interest
that is exempt from federal income tax, although these securities may pay
interest that is subject to the federal alternative minimum tax ("AMT") for
certain taxpayers. The Insured National Portfolio and the Insured California
Portfolio invest principally in municipal securities paying interest that is
wholly exempt from federal income taxes, including the AMT, whereas the other
AllianceBernstein Municipal Portfolios may invest without limit in municipal
securities paying interest subject to AMT. The average weighted maturity of the
securities in each AllianceBernstein Municipal Portfolio will normally range
between 10 and 30 years.
Investment Results
The tables on pages 4-8 show performance for each Portfolio compared to its
benchmark, the Lehman Brothers (LB) Municipal Index, for the six- and 12-month
periods ended October 31, 2005.
For the 12-month period ended October 31, 2005, all of the AllianceBernstein
Municipal Income Fund Portfolios' Class A shares outperformed the benchmark, the
LB Municipal Index. The Index, which represents the municipal market, posted a
positive return of 2.54% for the annual reporting period. A description of each
Portfolio's relative performance versus the benchmark for the 12-month period
ended October 31, 2005 follows.
National Portfolio -- The National Portfolio's stronger relative performance was
largely the result of its relative weight in the hospital sector. The Portfolio
benefited from security selection in the insured and special tax sectors. The
Portfolio's lack of exposure to bonds backed by the Master Settlement Agreement
with the tobacco industry hurt performance relative to the benchmark.
California Portfolio -- The California Portfolio's stronger relative performance
was largely the result of security selection in the special tax, pre-refunded,
general obligation and insured sectors. The Portfolio's lack of exposure to
bonds backed by the Master Settlement Agreement with the tobacco industry hurt
performance relative to the benchmark.
New York Portfolio -- The New York Portfolio's stronger relative performance was
due to security selection in the pre-refunded and special tax sectors. The
Portfolio's lack of exposure to bonds backed by the Master Settlement Agreement
with the tobacco industry hurt performance relative to the benchmark.
Insured National Portfolio -- The Insured National Portfolio's stronger relative
performance was largely the re-
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ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 1
sult of security selection in the insured sector. The Portfolio's lack of
exposure to bonds backed by the Master Settlement Agreement with the tobacco
industry hurt performance relative to the benchmark.
Insured California Portfolio -- The Insured California Portfolio's stronger
relative performance was largely the result of security selection in the insured
sector. The Portfolio's lack of exposure to bonds backed by the Master
Settlement Agreement with the tobacco industry hurt performance relative to the
benchmark.
Market Review and Investment Strategy
For the 12-month period ended October 31, 2005, yields on municipal bonds with
maturities out to 20 years rose, while those with longer than 20-year maturities
declined slightly. For example, five- to 10-year yields rose, on average, 0.66%
while 20- to 25-year bond yields declined by an average of 0.03%. Rising
short-term rates were in line with the actions of the U.S. Federal Reserve.
Since October 2004, the Federal Reserve Open Market Committee voted to increase
the Fed Funds rate by 0.25% on nine separate occasions to the current level of
4.0%. In contrast, strong demand for U.S. taxable bonds by foreign investors and
a relatively favorable inflationary environment have led to lower yields for
long-term bonds.
During this period, total returns were positive for municipal bonds of all
maturities. On a pre-tax basis, the municipal bond market outperformed the
taxable bond market. The LB Municipal Index gained 2.54% during the period while
the LB U.S. Aggregate Index, representing taxable bonds, gained 1.13%. As of
October 31, 2005, 20- to 30-year municipal bonds were yielding, on average,
94.2% of comparable maturity Treasury bonds compared to an average ratio of
92.2% last year.
Interest rates are still low by historical standards versus inflation.
Therefore, Portfolio durations are still slightly below the benchmark duration
as a defensive measure. The continued low municipal yield environment has also
led to ongoing heavier-than-normal demand for lower-rated, higher-yielding bonds
as investors seek income. In the view of the Fund's Municipal Bond Investment
Team, that demand has made lower-rated bonds more expensive than they have been
on an historic basis. To take advantage of that opportunity, the Team sold
lower-rated bonds and replaced them with higher-quality bonds. State and local
government tax revenues have continued to improve in line with general economic
growth. The Portfolios have been positioned to benefit from the positive impact
on tax-supported debt from this improved fiscal health of state and local
governments.
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2 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Historical Performance
- --------------------------------------------------------------------------------
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 Portfolios
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 Portfolios carefully before investing. For a free
copy of the Portfolios' prospectus, which contains this and other information,
visit our web site at www.alliancebernstein.com or call your financial advisor
or AllianceBernstein at (800) 227-4618. You should read the prospectus carefully
before you invest.
Returns are annualized for periods longer than one year. All fees and expenses
related to the operation of the Portfolios have been deducted. NAV returns do
not reflect sales charges; if sales charges were reflected, the Portfolios'
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. Performance assumes reinvestment of distributions and
does not account for taxes.
Benchmark Disclosure
The unmanaged Lehman Brothers (LB) 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 Portfolios.
A Word About Risk
Price fluctuation in the Portfolios' 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
Portfolios to decline. Individual state municipal portfolios are non-diversified
and are subject to geographic risk based on their narrow investment objectives.
While the Portfolios invest principally in bonds and other fixed-income
securities, in order to achieve their investment objectives, the Portfolios 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. These risks are fully discussed in the Portfolios' prospectus.
(Historical Performance continued on next page)
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ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 3
Historical Performance
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NATIONAL PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
--------------------------
Returns
THE PORTFOLIO VS. ITS BENCHMARK --------------------------
PERIODS ENDED OCTOBER 31, 2005 6 Months 12 Months
- --------------------------------------------------------------------------------
National Portfolio
Class A 0.87% 3.95%
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Class B 0.52% 3.25%
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Class C 0.62% 3.24%
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LB Municipal Index 0.59% 2.54%
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GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
10/31/95 TO 10/31/05
[THE FOLLOWING TABLE WAS DEPICTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL.]
National
Portfolio
Class A at LB Municipal
Offering Index
- -----------------------------------------------------------
10/31/95 $ 9,575 $10,000
10/31/96 $10,180 $10,570
10/31/97 $11,186 $11,467
10/31/98 $11,949 $12,387
10/31/99 $11,479 $12,168
10/31/00 $12,277 $13,203
10/31/01 $13,204 $14,591
10/31/02 $13,213 $15,447
10/31/03 $14,180 $16,237
10/31/04 $15,162 $17,216
10/31/05 $15,761 $17,653
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund National Portfolio Class A shares (from
10/31/95 to 10/31/05) as compared to the performance of the Portfolio's
benchmark. The chart assumes the reinvestment of dividends and capital gains.
See Historical Performance and Benchmark disclosures on page 3.
(Historical Performance continued on next page)
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4 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Historical Performance
- --------------------------------------------------------------------------------
CALIFORNIA PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
--------------------------
Returns
THE PORTFOLIO VS. ITS BENCHMARK --------------------------
PERIODS ENDED OCTOBER 31, 2005 6 Months 12 Months
- --------------------------------------------------------------------------------
California Portfolio
Class A 0.89% 3.78%
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Class B 0.54% 3.06%
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Class C 0.54% 3.06%
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LB Municipal Index 0.59% 2.54%
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GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
10/31/95 TO 10/31/05
[THE FOLLOWING TABLE WAS DEPICTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL.]
California
Portfolio
Class A at LB Municipal
Offering Index
- -----------------------------------------------------------
10/31/95 $ 9,575 $10,000
10/31/96 $10,260 $10,570
10/31/97 $11,293 $11,467
10/31/98 $12,219 $12,387
10/31/99 $12,999 $12,168
10/31/00 $13,003 $13,203
10/31/01 $13,846 $14,591
10/31/02 $14,375 $15,447
10/31/03 $14,829 $16,237
10/31/04 $15,986 $17,216
10/31/05 $16,590 $17,653
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund California Portfolio Class A shares
(from 10/31/95 to 10/31/05) as compared to the performance of the Portfolio's
benchmark. The chart assumes the reinvestment of dividends and capital gains.
See Historical Performance and Benchmark disclosures on page 3.
(Historical Performance continued on next page)
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ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 5
Historical Performance
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
--------------------------
Returns
THE PORTFOLIO VS. ITS BENCHMARK --------------------------
PERIODS ENDED OCTOBER 31, 2005 6 Months 12 Months
- --------------------------------------------------------------------------------
New York Portfolio
Class A 0.88% 3.46%
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Class B 0.63% 2.75%
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Class C 0.52% 2.74%
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LB Municipal Index 0.59% 2.54%
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GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
10/31/95 TO 10/31/05
[THE FOLLOWING TABLE WAS DEPICTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL.]
New York
Portfolio
Class A at LB Municipal
Offering Index
- ------------------------------------------
10/31/95 $ 9,575 $10,000
10/31/96 $10,178 $10,570
10/31/97 $11,249 $11,467
10/31/98 $12,071 $12,387
10/31/99 $11,677 $12,168
10/31/00 $12,660 $13,203
10/31/01 $13,655 $14,591
10/31/02 $14,049 $15,447
10/31/03 $14,947 $16,237
10/31/04 $15,931 $17,216
10/31/05 $16,482 $17,653
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund New York Portfolio Class A shares (from
10/31/95 to 10/31/05) as compared to the performance of the Portfolio's
benchmark. The chart assumes the reinvestment of dividends and capital gains.
See Historical Performance and Benchmark disclosures on page 3.
(Historical Performance continued on next page)
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6 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Historical Performance
- --------------------------------------------------------------------------------
INSURED NATIONAL PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
--------------------------
Returns
THE PORTFOLIO VS. ITS BENCHMARK --------------------------
PERIODS ENDED OCTOBER 31, 2005 6 Months 12 Months
- --------------------------------------------------------------------------------
Insured National Portfolio
Class A 0.75% 3.05%
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Class B 0.41% 2.34%
- --------------------------------------------------------------------------------
Class C 0.50% 2.34%
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LB Municipal Index 0.59% 2.54%
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GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
10/31/95 TO 10/31/05
[THE FOLLOWING TABLE WAS DEPICTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL.]
Insured
National
Portfolio
Class A at LB Municipal
Offering Index
- ------------------------------------------------------------
10/31/95 $ 9,575 $10,000
10/31/96 $10,286 $10,570
10/31/97 $11,189 $11,467
10/31/98 $11,990 $12,387
10/31/99 $11,357 $12,168
10/31/00 $12,247 $13,203
10/31/01 $13,485 $14,591
10/31/02 $13,907 $15,447
10/31/03 $14,786 $16,237
10/31/04 $15,735 $17,216
10/31/05 $16,215 $17,653
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund Insured National Portfolio Class A
shares (from 10/31/95 to 10/31/05) as compared to the performance of the
Portfolio's benchmark. The chart assumes the reinvestment of dividends and
capital gains.
See Historical Performance and Benchmark disclosures on page 3.
(Historical Performance continued on next page)
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ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 7
Historical Performance
- --------------------------------------------------------------------------------
INSURED CALIFORNIA PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
--------------------------
Returns
THE PORTFOLIO VS. ITS BENCHMARK --------------------------
PERIODS ENDED OCTOBER 31, 2005 6 Months 12 Months
- --------------------------------------------------------------------------------
Insured California Portfolio
Class A 0.42% 2.60%
- --------------------------------------------------------------------------------
Class B 0.06% 1.96%
- --------------------------------------------------------------------------------
Class C 0.06% 1.88%
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LB Municipal Index 0.59% 2.54%
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
10/31/95 TO 10/31/05
[THE FOLLOWING TABLE WAS DEPICTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL.]
Insured
California
Portfolio
Class A at LB Municipal
Offering Index
- ------------------------------------------------------------
10/31/95 $ 9,575 $10,000
10/31/96 $10,129 $10,570
10/31/97 $11,059 $11,467
10/31/98 $11,901 $12,387
10/31/99 $11,456 $12,168
10/31/00 $12,604 $13,203
10/31/01 $13,885 $14,591
10/31/02 $14,394 $15,447
10/31/03 $14,882 $16,237
10/31/04 $15,737 $17,216
10/31/05 $16,146 $17,653
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund Insured California Portfolio Class A
shares (from 10/31/95 to 10/31/05) as compared to the performance of the
Portfolio's benchmark. The chart assumes the reinvestment of dividends and
capital gains.
See Historical Performance and Benchmark disclosures on page 3.
(Historical Performance continued on next page)
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8 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Historical Performance
- --------------------------------------------------------------------------------
NATIONAL PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2005
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NAV Returns SEC Returns
Class A Shares
1 Year 3.95% -0.47%
5 Years 5.12% 4.21%
10 Years 5.11% 4.65%
SEC Yield* 4.75%
Taxable Equivalent Yield** 8.51%
Class B Shares
1 Year 3.25% 0.27%
5 Years 4.40% 4.40%
10 Years(a) 4.68% 4.68%
SEC Yield* 4.26%
Taxable Equivalent Yield** 6.40%
Class C Shares
1 Year 3.24% 2.25%
5 Years 4.42% 4.42%
10 Years 4.41% 4.41%
SEC Yield* 4.26%
Taxable Equivalent Yield** 6.37%
SEC AVERAGE ANNUAL RETURNS (WITH SALES CHARGES)
AS OF THE MOST RECENT CALENDAR QUARTER-END (SEPTEMBER 30, 2005)
- --------------------------------------------------------------------------------
Class A Shares
1 Year 1.00%
5 Years 4.51%
10 Years 4.93%
Class B Shares
1 Year 1.78%
5 Years 4.70%
10 Years(a) 4.96%
Class C Shares
1 Year 3.67%
5 Years 4.70%
10 Years 4.68%
(a) Assumes conversion of Class B shares into Class A shares after six years.
* SEC Yields are calculated based on SEC guidelines for the 30-day period
ended October 31, 2005.
** Taxable equivalent yields are based on net asset value (NAV) and a 35%
marginal Federal income tax rate and maximum state, city and local taxes
where applicable.
See Historical Performance disclosures on page 3.
(Historical Performance continued on next page)
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ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 9
Historical Performance
- --------------------------------------------------------------------------------
CALIFORNIA PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2005
- --------------------------------------------------------------------------------
NAV Returns SEC Returns
Class A Shares
1 Year 3.78% -0.67%
5 Years 4.99% 4.09%
10 Years 5.65% 5.19%
SEC Yield* 3.98%
Taxable Equivalent Yield** 7.96%
Class B Shares
1 Year 3.06% 0.08%
5 Years 4.26% 4.26%
10 Years(a) 5.20% 5.20%
SEC Yield* 3.55%
Taxable Equivalent Yield** 6.31%
Class C Shares
1 Year 3.06% 2.07%
5 Years 4.26% 4.26%
10 Years 4.91% 4.91%
SEC Yield* 3.55%
Taxable Equivalent Yield** 6.31%
SEC AVERAGE ANNUAL RETURNS (WITH SALES CHARGES)
AS OF THE MOST RECENT CALENDAR QUARTER-END (SEPTEMBER 30, 2005)
- --------------------------------------------------------------------------------
Class A Shares
1 Year 1.06%
5 Years 4.39%
10 Years 5.51%
Class B Shares
1 Year 1.79%
5 Years 4.58%
10 Years(a) 5.52%
Class C Shares
1 Year 3.79%
5 Years 4.56%
10 Years 5.23%
(a) Assumes conversion of Class B shares into Class A shares after six years.
* SEC Yields are calculated based on SEC guidelines for the 30-day period
ended October 31, 2005.
** Taxable equivalent yields are based on net asset value (NAV) and a 35%
marginal Federal income tax rate and maximum state, city and local taxes
where applicable.
See Historical Performance disclosures on page 3.
(Historical Performance continued on next page)
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10 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Historical Performance
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2005
- --------------------------------------------------------------------------------
NAV Returns SEC Returns
Class A Shares
1 Year 3.46% -0.93%
5 Years 5.42% 4.51%
10 Years 5.58% 5.12%
SEC Yield* 4.21%
Taxable Equivalent Yield** 8.92%
Class B Shares
1 Year 2.75% -0.22%
5 Years 4.66% 4.66%
10 Years(a) 5.12% 5.12%
SEC Yield* 3.70%
Taxable Equivalent Yield** 6.45%
Class C Shares
1 Year 2.74% 1.75%
5 Years 4.63% 4.63%
10 Years 4.82% 4.82%
SEC Yield* 3.70%
Taxable Equivalent Yield** 6.43%
SEC AVERAGE ANNUAL RETURNS (WITH SALES CHARGES)
AS OF THE MOST RECENT CALENDAR QUARTER-END (SEPTEMBER 30, 2005)
- --------------------------------------------------------------------------------
Class A Shares
1 Year 0.59%
5 Years 4.80%
10 Years 5.40%
Class B Shares
1 Year 1.24%
5 Years 4.93%
10 Years(a) 5.40%
Class C Shares
1 Year 3.24%
5 Years 4.94%
10 Years 5.09%
(a) Assumes conversion of Class B shares into Class A shares after six years.
* SEC Yields are calculated based on SEC guidelines for the 30-day period
ended October 31, 2005.
** Taxable equivalent yields are based on net asset value (NAV) and a 35%
marginal Federal income tax rate and maximum state, city and local taxes
where applicable.
See Historical Performance disclosures on page 3.
(Historical Performance continued on next page)
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ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 11
Historical Performance
- --------------------------------------------------------------------------------
INSURED NATIONAL PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2005
- --------------------------------------------------------------------------------
NAV Returns SEC Returns
Class A Shares
1 Year 3.05% -1.36%
5 Years 5.77% 4.85%
10 Years 5.41% 4.95%
SEC Yield* 3.54%
Taxable Equivalent Yield** 7.06%
Class B Shares
1 Year 2.34% -0.63%
5 Years 5.04% 5.04%
10 Years(a) 4.97% 4.97%
SEC Yield* 3.01%
Taxable Equivalent Yield** 5.20%
Class C Shares
1 Year 2.34% 1.35%
5 Years 5.06% 5.06%
10 Years 4.69% 4.69%
SEC Yield* 3.01%
Taxable Equivalent Yield** 5.18%
SEC AVERAGE ANNUAL RETURNS (WITH SALES CHARGES)
AS OF THE MOST RECENT CALENDAR QUARTER-END (SEPTEMBER 30, 2005)
- --------------------------------------------------------------------------------
Class A Shares
1 Year 0.57%
5 Years 5.22%
10 Years 5.20%
Class B Shares
1 Year 1.19%
5 Years 5.40%
10 Years(a) 5.23%
Class C Shares
1 Year 3.19%
5 Years 5.40%
10 Years 4.94%
(a) Assumes conversion of Class B shares into Class A shares after six years.
* SEC Yields are calculated based on SEC guidelines for the 30-day period
ended October 31, 2005.
** Taxable equivalent yields are based on net asset value (NAV) and a 35%
marginal Federal income tax rate and maximum state, city and local taxes
where applicable.
See Historical Performance disclosures on page 3.
(Historical Performance continued on next page)
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12 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Historical Performance
- --------------------------------------------------------------------------------
INSURED CALIFORNIA PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2005
- --------------------------------------------------------------------------------
NAV Returns SEC Returns
Class A Shares
1 Year 2.60% -1.76%
5 Years 5.08% 4.17%
10 Years 5.36% 4.91%
SEC Yield* 3.74%
Taxable Equivalent Yield** 5.49%
Class B Shares
1 Year 1.96% -1.00%
5 Years 4.32% 4.32%
10 Years(a) 4.90% 4.90%
SEC Yield* 3.20%
Taxable Equivalent Yield** 5.51%
Class C Shares
1 Year 1.88% 0.90%
5 Years 4.31% 4.31%
10 Years 4.60% 4.60%
SEC Yield* 3.20%
Taxable Equivalent Yield** 5.49%
SEC AVERAGE ANNUAL RETURNS (WITH SALES CHARGES)
AS OF THE MOST RECENT CALENDAR QUARTER-END (SEPTEMBER 30, 2005)
- --------------------------------------------------------------------------------
Class A Shares
1 Year 0.07%
5 Years 4.67%
10 Years 5.26%
Class B Shares
1 Year 0.81%
5 Years 4.82%
10 Years(a) 5.26%
Class C Shares
1 Year 2.81%
5 Years 4.80%
10 Years 4.95%
(a) Assumes conversion of Class B shares into Class A shares after six years.
* SEC Yields are calculated based on SEC guidelines for the 30-day period
ended October 31, 2005.
** Taxable equivalent yields are based on net asset value (NAV) and a 35%
marginal Federal income tax rate and maximum state, city and local taxes
where applicable.
See Historical Performance disclosures on page 3.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 13
Fund Expenses
- --------------------------------------------------------------------------------
FUND EXPENSES
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent deferred
sales charges on redemptions and (2) ongoing costs, including management fees;
distribution (12b-1) fees; and other Fund expenses. This example is intended to
help you understand your ongoing costs (in dollars) of investing in the Fund and
to compare these costs with the ongoing costs of investing in other mutual
funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period as indicated below.
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed annual rate of return of 5% before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds by comparing this 5% hypothetical example
with the 5% hypothetical examples that appear in the shareholder reports of
other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions. Therefore,
the second line of the table is useful in comparing ongoing costs only, and will
not help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have been
higher.
Beginning Ending
Account Value Account Value Expenses Paid
National Portfolio May 1, 2005 October 31, 2005 During Period*
- -------------------------------------------------------------------------------------------
Class A
Actual $ 1,000 $ 1,021.78 $ 3.47
Hypothetical (5% return before expenses) $ 1,000 $ 1,008.65 $ 3.44
- -------------------------------------------------------------------------------------------
Class B
Actual $ 1,000 $ 1,018.25 $ 7.02
Hypothetical (5% return before expenses) $ 1,000 $ 1,005.17 $ 6.97
- -------------------------------------------------------------------------------------------
Class C
Actual $ 1,000 $ 1,018.25 $ 7.02
Hypothetical (5% return before expenses) $ 1,000 $ 1,006.15 $ 6.98
- -------------------------------------------------------------------------------------------
California Portfolio
- -------------------------------------------------------------------------------------------
Class A
Actual $ 1,000 $ 1,021.32 $ 3.92
Hypothetical (5% return before expenses) $ 1,000 $ 1,008.94 $ 3.90
- -------------------------------------------------------------------------------------------
Class B
Actual $ 1,000 $ 1,017.80 $ 7.48
Hypothetical (5% return before expenses) $ 1,000 $ 1,005.44 $ 7.43
- -------------------------------------------------------------------------------------------
Class C
Actual $ 1,000 $ 1,017.80 $ 7.48
Hypothetical (5% return before expenses) $ 1,000 $ 1,005.43 $ 7.43
- -------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
14 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Fund Expenses
- --------------------------------------------------------------------------------
Beginning Ending
Account Value Account Value Expenses Paid
New York Portfolio May 1, 2005 October 31, 2005 During Period*
- -------------------------------------------------------------------------------------------
Class A
Actual $ 1,000 $ 1,022.28 $ 2.96
Hypothetical (5% return before expenses) $ 1,000 $ 1,008.78 $ 2.94
- -------------------------------------------------------------------------------------------
Class B
Actual $ 1,000 $ 1,018.75 $ 6.51
Hypothetical (5% return before expenses) $ 1,000 $ 1,006.28 $ 6.47
- -------------------------------------------------------------------------------------------
Class C
Actual $ 1,000 $ 1,018.75 $ 6.51
Hypothetical (5% return before expenses) $ 1,000 $ 1,006.25 $ 6.47
- -------------------------------------------------------------------------------------------
Insured National Portfolio
- -------------------------------------------------------------------------------------------
Class A
Actual $ 1,000 $ 1,019.96 $ 5.30
Hypothetical (5% return before expenses) $ 1,000 $ 1,007.54 $ 5.26
- -------------------------------------------------------------------------------------------
Class B
Actual $ 1,000 $ 1,016.43 $ 8.84
Hypothetical (5% return before expenses) $ 1,000 $ 1,004.05 $ 8.79
- -------------------------------------------------------------------------------------------
Class C
Actual $ 1,000 $ 1,016.43 $ 8.84
Hypothetical (5% return before expenses) $ 1,000 $ 1,005.01 $ 8.79
- -------------------------------------------------------------------------------------------
Insured California Portfolio
- -------------------------------------------------------------------------------------------
Class A
Actual $ 1,000 $ 1,020.06 $ 5.19
Hypothetical (5% return before expenses) $ 1,000 $ 1,004.15 $ 5.15
- -------------------------------------------------------------------------------------------
Class B
Actual $ 1,000 $ 1,016.48 $ 8.79
Hypothetical (5% return before expenses) $ 1,000 $ 1,000.60 $ 8.72
- -------------------------------------------------------------------------------------------
Class C
Actual $ 1,000 $ 1,016.48 $ 8.79
Hypothetical (5% return before expenses) $ 1,000 $ 1,000.59 $ 8.72
- -------------------------------------------------------------------------------------------
Annualized Expense Ratio
-----------------------------------------------------------------------------
Insured Insured
National California New York National California
- -------------------------------------------------------------------------------------------
Class A 0.68% 0.77% 0.58% 1.04% 1.02%
Class B 1.38% 1.47% 1.28% 1.74% 1.73%
Class C 1.38% 1.47% 1.28% 1.74% 1.73%
* Expenses are equal to the classes' annualized expense ratios, shown in the
table above, multiplied by the average account value over the period,
multiplied by the number of days in the most recent fiscal half-year/365
(to reflect the one-half year period).
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 15
Bond Rating Summary
- --------------------------------------------------------------------------------
BOND RATING SUMMARY*
October 31, 2005
[THE FOLLOWING TABLE WAS DEPICTED AS A PIE CHART IN THE PRINTED MATERIAL.]
NATIONAL PORTFOLIO
Quality Rating
33.0% AAA
16.0% AA
12.5% A
19.5% BBB
3.1% BB
0.6% B
15.3% Unrated
[THE FOLLOWING TABLE WAS DEPICTED AS A PIE CHART IN THE PRINTED MATERIAL.]
CALIFORNIA PORTFOLIO
Quality Rating
50.4% AAA
4.3% AA
15.4% A
3.4% BBB
26.5% Unrated
[THE FOLLOWING TABLE WAS DEPICTED AS A PIE CHART IN THE PRINTED MATERIAL.]
NEW YORK PORTFOLIO
Quality Rating
42.8% AAA
13.8% AA
21.2% A
9.0% BBB
1.9% BB
0.8% B
10.5% Unrated
* All data are as of October 31, 2005. Each Portfolio's quality rating
distribution is expressed as a percentage of the Portfolio's total
investments rated in particular ratings categories by Standard & Poor's
Rating Services and Moody's Investors Service. The distributions may vary
over time. If ratings are not available, the Fund's Adviser will assign
ratings that are considered to be of equivalent quality to such ratings.
- --------------------------------------------------------------------------------
16 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Bond Rating Summary
- --------------------------------------------------------------------------------
BOND RATING SUMMARY*
October 31, 2005
[THE FOLLOWING TABLE WAS DEPICTED AS A PIE CHART IN THE PRINTED MATERIAL.]
INSURED NATIONAL PORTFOLIO
Quality Rating
71.4% AAA
26.1% AA
2.4% A
0.1% BBB
[THE FOLLOWING TABLE WAS DEPICTED AS A PIE CHART IN THE PRINTED MATERIAL.]
INSURED CALIFORNIA PORTFOLIO
Quality Rating
96.0% AAA
2.4% AA
1.6% A
* All data are as of October 31, 2005. Each Portfolio's quality rating
distribution is expressed as a percentage of the Portfolio's total
investments rated in particular ratings categories by Standard & Poor's
Rating Services and Moody's Investors Service. The distributions may vary
over time. If ratings are not available, the Fund's Adviser will assign
ratings that are considered to be of equivalent quality to such ratings.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 17
National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
NATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 2005
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS-99.1%
Long-Term Municipal Bonds-98.0%
Alabama-0.8%
Jefferson Cnty Ltd Oblig Sch Warrants
Ser 04A
5.25%, 1/01/23............................... $ 1,200 $ 1,256,652
Montgomery Bmc Spl Care Facs Fin Auth Rev
(Baptist Health) Ser 04C
5.25%, 11/15/29.............................. 2,190 2,205,615
------------
3,462,267
------------
Arizona-2.8%
Estrella Mtn Ranch CFD
(Desert Village) Ser 02
7.38%, 7/01/27............................... 2,892 3,114,308
Phoenix Civic Impt Corp Wastewtr Sys Rev
MBIA Ser 04
5.00%, 7/01/23 - 7/01/24..................... 2,800 2,914,618
Pima Cnty IDA
(Horizon Cmnty Learning Center) Ser 05
5.125%, 6/01/20.............................. 3,310 3,348,595
Sundance CFD
Ser 02
7.75%, 7/01/22............................... 950 1,042,615
Vistancia CFD
Ser 02
6.75%, 7/15/22............................... 2,000 2,119,520
------------
12,539,656
------------
California-3.5%
California Dept Wtr Rev
Ser 02A
5.375%, 5/01/22.............................. 2,000 2,137,040
California GO
AMBAC Ser 02B
5.00%, 4/01/27............................... 2,650 2,718,529
Ser 02
5.25%, 4/01/30............................... 825 858,165
Ser 04
5.125%, 2/01/28.............................. 1,000 1,035,610
Chula Vista IDR
(San Diego Gas) Ser 96A
5.30%, 7/01/21............................... 4,000 4,221,400
Manteca Uni Sch Dist
MBIA Ser 01
Zero coupon, 9/01/31......................... 11,910 3,147,098
- --------------------------------------------------------------------------------
18 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
San Jose MFHR
(Almaden Apts) Ser 01G AMT
5.35%, 7/15/34............................... $ 1,595 $ 1,640,059
------------
15,757,901
------------
Colorado-1.0%
Colorado Ed & Cult Facs Auth Rev
(Charter Sch-Knowledge Quest)
6.50%, 5/01/36............................... 500 501,800
Colorado HFA SFMR
(Mtg Rev) Ser 99A-2 AMT
6.45%, 4/01/30............................... 840 878,632
Colorado Hlth Facs Auth Rev
(Parkview Med Ctr) Ser 04
5.00%, 9/01/25............................... 1,690 1,701,864
Todd Creek Farms Met Dist # 1
Wtr and Wastewtr Rev Ser 04
6.13%, 12/01/19.............................. 820 809,151
Wheatlands Met Dist No. 2
Ltd Tax
6.00%, 12/01/25.............................. 500 498,140
------------
4,389,587
------------
Connecticut-0.2%
Connecticut Hlth & Ed Facs Auth Rev
(Griffin Hosp) RADIAN Ser 05B
5.00%, 7/01/23............................... 750 773,145
------------
Florida-19.7%
Beacon Tradeport CDD
Ser 02B
7.25%, 5/01/33............................... 170 180,705
Bonnet Creek CDD
Ser 02
7.25%, 5/01/18............................... 2,000 2,171,780
Clay Cnty CDD
(Crossings at Fleming Island) Ser 00C
7.05%, 5/01/15............................... 1,965 2,076,828
Collier Cnty CFD
(Fiddlers Creek) Ser 96
7.50%, 5/01/18............................... 895 929,153
Collier Cnty IDR
(Southern St Util) Ser 96 AMT
6.50%, 10/01/25.............................. 3,605 3,715,710
Dade Cnty Arpt Rev
(Miami Int'l) MBIA Ser 95B AMT
6.00%, 10/01/24.............................. 2,450 2,509,707
Gateway CDD
(Sun City Center)
5.50%, 5/01/10............................... 565 570,774
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 19
National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Indian Trace Dev Dist Spl Assmt
(Wtr Mgmt Spl Benefit) Ser 05 MBIA
5.00%, 5/01/22 - 5/01/23..................... $ 1,800 $ 1,895,244
Jacksonville Elec Auth
Ser 02A
5.50%, 10/01/41.............................. 3,750 3,911,400
Jacksonville Hosp Rev
(Mayo Clinic) Ser 01C
5.50%, 11/15/36.............................. 6,750 7,265,835
Lee Cnty CDD
(Miromar Lakes) Ser 00A
7.25%, 5/01/12............................... 4,200 4,413,150
(Stoneybrook) Ser 98
5.70%, 5/01/08............................... 85 85,489
(Herons Glen) Ser 99
6.00%, 5/01/29............................... 6,300 6,431,040
Lee Cnty HFA SFMR
(Mtg Rev) GNMA/FNMA Ser 00A-1 AMT
7.20%, 3/01/33............................... 155 157,156
Lee Cnty Transp Fac
(Sanibel Brdgs & Causway) CIFG Ser 05B
5.00%, 10/01/30.............................. 1,600 1,655,568
Manatee Cnty CDD
(Tara) Ser 00A
7.15%, 5/01/31............................... 1,880 1,985,900
Marshall Creek CDD
Ser 02
6.63%, 5/01/32............................... 1,705 1,783,549
Miami Beach Hosp Rev
(Mt Sinai Med Center) Ser 01A
6.80%, 11/15/31.............................. 3,500 3,782,905
Miami Dade Cnty HFA MFHR
(Marbrisa Apts) FSA Ser 00-2A AMT
6.15%, 8/01/38............................... 4,200 4,446,162
Northern Palm Beach Cnty
(ABACOA) Ser 96A
7.20%, 8/01/16............................... 8,000 8,401,520
7.30%, 8/01/27............................... 8,000 8,407,360
Orange Cnty HFA MFHR
(Seminole Pt Proj) Ser 99L AMT
5.80%, 6/01/32............................... 6,255 6,307,917
Orlando Assess Dist
(Conroy Rd Proj) Ser 98A
5.80%, 5/01/26............................... 3,250 3,295,728
Pasco Cnty HFA MFHR
(Pasco Woods Apts) Ser 99A AMT
5.90%, 8/01/39............................... 3,690 3,829,150
Pier Park CDD
Ser 02-1
7.15%, 5/01/34............................... 3,245 3,393,718
- --------------------------------------------------------------------------------
20 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Preserve at Wilderness Lake CDD
Ser 02B
6.20%, 11/01/08.............................. $ 285 $ 287,548
Volusia Cnty Ed Fac
(Embry-Riddle Aero Univ) Ser 96A
6.13%, 10/15/26.............................. 4,135 4,331,454
------------
88,222,450
------------
Illinois-2.7%
Chicago Arpt Rev
(O'Hare Int'l Arpt) XLCA Ser 03B-1
5.25%, 1/01/34............................... 3,400 3,539,366
Chicago HFA SFMR
(Mtg Rev) GNMA/FNMA/FHLMC Ser 98A AMT
6.45%, 9/01/29............................... 440 457,873
(Mtg Rev) GNMA/FNMA/FHLMC Ser 98C-1 AMT
6.30%, 9/01/29............................... 335 344,641
(Mtg Rev) GNMA/FNMA/FHLMC Ser 99A AMT
6.35%, 10/01/30.............................. 400 414,508
(Mtg Rev) GNMA/FNMA/FHLMC Ser 99C AMT
7.05%, 10/01/30.............................. 125 124,778
Chicago Spec Assess
(Lake Shore East) Ser 03
6.75%, 12/01/32.............................. 3,500 3,764,530
Manhattan
No. 04-1 (Brookstone Springs Proj) Ser 05
5.875%, 3/01/28.............................. 1,685 1,633,708
Met Pier & Expo Auth Spec Tax Rev
(McCormick Place) MBIA Ser 02A
5.25%, 6/15/42............................... 1,750 1,829,170
------------
12,108,574
------------
Indiana-0.7%
Hendricks Cnty Bldg Facs Corp
(First Mtg) Ser 04
5.50%, 7/15/23............................... 1,165 1,268,510
Indiana St Dev Fin Auth
Refund-Exempt Facs-Inland Steel
5.75%, 10/01/11.............................. 1,825 1,880,225
------------
3,148,735
------------
Louisiana-2.5%
De Soto Parish PCR
(Int'l Paper Co) Ser 02A
5.00%, 10/01/12.............................. 4,000 4,119,920
Louisiana Arpt Fac
(Cargo ACQ Grp) Ser 02 AMT
6.65%, 1/01/25............................... 1,125 1,178,134
New Orleans GO
MBIA Ser 05
5.00%, 12/01/29.............................. 3,420 3,495,958
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 21
National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
New Orleans Sew Svc
Bond Anticipation Notes
3.00%, 7/26/06............................... $ 2,500 $ 2,475,925
------------
11,269,937
------------
Maine-0.4%
Jay PCR
(Int'l Paper) Ser 99A AMT
6.25%, 9/01/23............................... 1,800 1,911,042
------------
Maryland-2.5%
Maryland CDA SFMR
(Mtg Rev) Ser 00A AMT
6.10%, 7/01/38............................... 6,285 6,503,153
Maryland IDR
(Med Waste Assoc) Ser 89 AMT
8.75%, 11/15/10(a)........................... 1,225 885,932
Tax Exempt Municipal Infrastructure
Ser 04A
3.80%, 5/01/08(b)............................ 4,035 4,019,788
------------
11,408,873
------------
Massachusetts-7.5%
Massachusetts Dev Fin Agy Hlth Fac
(Seven Hills) Asset Gty Ser 99
5.15%, 9/01/28............................... 6,035 6,179,598
Massachusetts GO
Ser 02C Prerefunded
5.25%, 11/01/30.............................. 3,220 3,485,908
Ser 02C Unrefunded
5.25%, 11/01/30.............................. 1,780 1,926,992
Massachusetts Port Auth
Ser 99D AMT
6.00%, 7/01/29............................... 7,500 8,079,075
Massachusetts Port Auth Spec Fac
(BosFuel Corp) MBIA Ser 97 AMT
6.00%, 7/01/36............................... 11,920 12,408,005
New England Student Loan Rev
Ser 93H AMT
6.90%, 11/01/09.............................. 1,500 1,582,620
------------
33,662,198
------------
Michigan-5.8%
Detroit Local Dev Fin Auth
(DaimlerChrysler Assembly Plant) Ser 98A
5.50%, 5/01/21............................... 535 498,727
Kent Hosp Fin Auth
(Met Hosp Project) Ser 05A
5.75%, 7/01/25............................... 710 748,127
Michigan HDA MFHR
(Rental Rev) AMBAC Ser 97A AMT
6.10%, 10/01/33.............................. 1,000 1,050,660
- --------------------------------------------------------------------------------
22 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Michigan Hosp Fin Auth
(Marquette Gen Hosp Oblig Grp) Ser 05A
5.00%, 5/15/26............................... $ 1,150 $ 1,148,517
(Sparrow Med Ctr) Ser 01
5.625%, 11/15/36............................. 2,650 2,766,282
(Trinity Health) Ser 00A
6.00%, 12/01/27.............................. 4,515 4,923,878
Midland Cnty PCR
(CMS Energy) Ser 00A AMT
6.88%, 7/23/09............................... 8,000 8,331,280
Saginaw Hosp Rev
(Covenant Med Ctr) Ser 00F
6.50%, 7/01/30............................... 6,125 6,692,359
------------
26,159,830
------------
Minnesota-1.6%
Minn-St Paul Met Arpt Rev
FGIC Ser 00B AMT
6.00%, 1/01/21............................... 3,520 3,802,973
Shakopee Hlth Care Facs Rev
(St. Francis Regl Med Ctr) Ser 04
5.10%, 9/01/25............................... 2,700 2,753,649
St Paul Hsg & Redev Hosp Rev
Healtheast Proj
6.00%, 11/15/25.............................. 500 536,995
------------
7,093,617
------------
Mississippi-0.3%
Warren Cnty PCR
(Int'l Paper) Ser 99A AMT
6.25%, 9/01/23............................... 1,300 1,382,537
------------
Missouri-0.8%
Jackson Cnty Pub Bldg Corp Leasehld Rev
(Cap Impts Proj) Ser 05
5.00%, 12/01/29.............................. 700 714,826
Kansas City Arpt Fac Rev
(Cargo ACQ Grp) Ser 02
6.25%, 1/01/30............................... 1,985 2,007,232
Missouri Dev Fin Brd Infrastructure Fac Rev
(Crackerneck Creek Project) Ser 05C
5.00%, 3/01/26............................... 1,000 1,008,750
------------
3,730,808
------------
Nevada-0.8%
Carson City Hosp Rev
(Carson-Tahoe Hosp Proj) RADIAN Ser 03A
5.13%, 9/01/29............................... 2,700 2,742,417
North Las Vegas CDD
Ser 03
6.40%, 12/01/22.............................. 990 1,022,244
------------
3,764,661
------------
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 23
National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
New Hampshire-0.9%
New Hampshire Bus Fin Auth PCR
(Public Service Co) Ser 93E AMT
6.00%, 5/01/21............................... $ 4,000 $ 4,172,080
------------
New Jersey-5.2%
Morris-Union Jointure Commn COP
RADIAN Ser 04
5.00%, 5/01/27............................... 5,175 5,292,783
New Jersey Eco Dev Auth Rev
(Rols II-R 311) FGIC Ser 04
7.16%, 6/15/12(b)(c)......................... 6,000 6,719,640
(Sch Facs Constr) Ser O
5.25%, 3/01/25............................... 6,200 6,545,774
New Jersey Ed Facs Auth
AMBAC Ser 03
7.69%, 9/01/21(b)(c)......................... 4,000 4,547,520
------------
23,105,717
------------
New York-7.0%
Erie Cnty IDA Sch Fac Rev
(Buffalo Sch Dist Proj) FSA Ser 04
5.75%, 5/01/25 - 5/01/26..................... 3,800 4,238,938
New York City TFA
(Refunding Subordinated) Ser A-2
5.00%, 11/01/17.............................. 5,000 5,336,350
New York GO
Ser 03
5.50%, 8/01/21............................... 5,000 5,384,500
5.75%, 3/01/15 - 3/01/17..................... 4,250 4,670,263
Ser 04G
5.00%, 12/01/23.............................. 895 921,957
Ser 04I
5.00%, 8/01/21............................... 1,000 1,034,290
Ser 97A Prerefunded
6.25%, 8/01/17............................... 5,750 5,968,385
New York Hsg Fin Agy Personal Income Tax Rev
(Eco Dev & Hsg) Ser 05A FGIC
5.00%, 9/15/25............................... 1,200 1,251,912
New York IDA
(Lycee Francais) ACA Ser 02C
6.80%, 6/01/28............................... 2,500 2,629,925
------------
31,436,520
------------
Ohio-5.5%
Cuyahoga Cnty Port Auth Rev
Ser 01
7.35%, 12/01/31.............................. 5,400 5,653,746
Franklin Cnty
(OCLC Online Computer Libry Ctr) Ser 98
5.20%, 10/01/20.............................. 1,200 1,249,512
- --------------------------------------------------------------------------------
24 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Port Auth of Columbiana Cnty SWR
(Apex Environmental, Llc.) Ser 04A AMT
7.13%, 8/01/25............................... $ 1,240 $ 1,238,549
Toledo Lucas Cnty Port Auth Rev
(Crocker Park Proj) Ser 03
5.38%, 12/01/35.............................. 5,000 5,255,950
Toledo Lucas Cnty Port Fac Rev
(CSX Transp) Ser 92
6.45%, 12/15/21.............................. 9,730 11,114,677
------------
24,512,434
------------
Oregon-1.4%
Forest Grove Rev
(Refunding & Campus Improvement
Pacific Proj A) RADIAN
5.00%, 5/01/28............................... 2,995 3,049,389
Oregon Hsg Dev Agy SFMR
(Mtg Rev) Ser 02B AMT
5.45%, 7/01/32............................... 3,300 3,336,366
------------
6,385,755
------------
Pennsylvania-4.5%
Ephrata Area Sch Dist
Ser 05 FGIC
5.00%, 3/01/22............................... 2,565 2,675,577
Montgomery Cnty Hosp Rev
(Abington Mem Hosp) Ser 02A
5.13%, 6/01/32............................... 2,000 2,039,540
Montgomery Cnty IDA Rev
(Whitemarsh Cont Care Proj) Ser 05
6.00%, 2/01/21............................... 1,210 1,261,836
Pennsylvania HFA
FSA Ser 03-1235
7.02%, 6/01/08(c)............................ 575 575,000
Ser 04 - 1263 AMT
5.12%, 6/01/07(c)............................ 625 625,000
Pennsylvania HFA SFMR
(Mtg Rev) Ser 03 AMT
3.22%, 6/01/08(c)............................ 3,451 3,450,954
Pennsylvania Hgr Ed Hosp Rev
(UPMC) Ser 01A
6.00%, 1/15/31............................... 3,845 4,188,474
Philadelphia Auth IDR
(Leadership Learning Partners) Ser 05A
5.25%, 7/01/24............................... 1,030 991,715
South Central Hosp Rev
(Wellspan Health) MBIA Ser 01
5.25%, 5/15/31............................... 685 728,950
Prerefunded MBIA Ser 01
5.25%, 5/15/31(d)............................ 3,115 3,407,810
------------
19,944,856
------------
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 25
National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Puerto Rico-0.6%
Puerto Rico Commonwealth
MBIA Ser 04-441
13.83%, 1/01/09(b)(c)........................ $ 2,125 $ 2,869,005
------------
South Carolina-0.1%
Newberry Investing in Children Ed
(Newberry Cnty Sch Dist Proj)
5.00%, 12/01/30.............................. 335 329,811
------------
Texas-15.9%
Alliance Arpt Fac
(Federal Express) Ser 96 AMT
6.38%, 4/01/21............................... 12,550 12,947,458
Brownwood ISD
(Schl Bldg) Ser 05 FGIC
5.25%, 2/15/22 - 2/15/24..................... 3,505 3,738,830
Corpus Christi Arpt Rev
(Corpus Christi Int'l) FSA Ser 00B
5.38%, 2/15/30............................... 7,100 7,503,848
Dallas Fort Worth Arpt Rev
FGIC Ser 01 AMT
5.50%, 11/01/35.............................. 13,400 13,925,950
Ector Cnty Sch Dist
Ser 03
5.25%, 8/15/27............................... 3,000 3,164,280
Garza Cnty Pub Fac Corp.
5.50%, 10/01/19.............................. 535 553,163
Grapevine Arpt Rev
(Cargo ACQ Grp) Ser 02 AMT
6.50%, 1/01/24............................... 1,000 1,040,320
Guadalupe-Blanco Riv Auth
Contract & Sub Wtr Res Div & Water Surp Rev
MBIA Ser 04A
5.00%, 8/15/24............................... 1,440 1,480,738
Hidalgo Cnty Hlth Svcs
(Mission Hosp, Inc. Proj) Ser 05
5.00%, 8/15/14 - 8/15/19..................... 730 735,594
Houston Arpt Fac
(Continental Airlines) Ser 01E AMT
7.00%, 7/01/29............................... 2,750 2,428,937
Houston Arpt Rev
(Cargo ACQ Grp) Ser 02 AMT
6.38%, 1/01/23............................... 3,000 3,081,510
Laredo ISD Pub Fac Corp
Lease Rev AMBAC Ser 04A
5.00%, 8/01/24............................... 1,000 1,027,030
Lubbock
(Ctfs Oblig-Tax & Wtrwks Surp) FSA
5.13%, 2/15/24............................... 3,335 3,496,681
- --------------------------------------------------------------------------------
26 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Richardson Hosp Auth Rev
(Richardson Regional) FSA Ser 04
5.88%, 12/01/24.............................. $ 2,310 $ 2,430,328
(Richardson Regional) Ser 04
6.00%, 12/01/19.............................. 1,830 1,981,908
San Antonio GO
Ser 02 Unrefunded
5.00%, 2/01/22............................... 3,060 3,165,845
Seguin Hgr Ed Rev
(Texas Lutheran Univ Proj) Ser 04
5.25%, 9/01/28............................... 1,000 1,002,020
Texas Turnpike Auth
AMBAC Ser 04-284
9.49%, 8/15/39(b)(c)......................... 3,000 3,496,890
Tyler Hosp Rev
(Mother Francis Regl Hlth) Ser 01
6.00%, 7/01/31............................... 3,900 4,062,318
------------
71,263,648
------------
Virginia-1.8%
Arlington IDA Hosp Rev
(Arlington Hlth Sys) Ser 01
5.25%, 7/01/31............................... 1,000 1,033,670
Bell Creek CDD
Ser 03A
6.75%, 3/01/22............................... 2,320 2,380,784
Broad St CDD
Ser 03
7.50%, 6/01/33............................... 3,000 3,272,580
Pocahontas Pkwy Assoc Toll Rd Rev
(Cap Appreciation) Sr Ser 98B
Zero coupon, 8/15/15......................... 2,000 1,179,040
------------
7,866,074
------------
Washington-0.2%
Snohomish Cnty Sch Dist No 004 (Lake Stevens)
FGIC Ser 05
5.00%, 12/01/22.............................. 960 1,003,267
------------
Wisconsin-0.8%
Milwaukee Arpt Rev
(Cargo ACQ Grp) Ser 02 AMT
6.50%, 1/01/25............................... 2,340 2,441,345
Wisconsin Hlth & Ed Facs Auth Rev
(Bell Tower Residence Proj) Ser 05
5.00%, 7/01/25............................... 1,270 1,272,807
------------
3,714,152
------------
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 27
National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
U.S. Virgin Islands-0.5%
Virgin Islands Pub Fin Auth
FSA Ser 03A-1233
11.42%, 10/01/11(b)(c)....................... $ 255 $ 356,847
FSA Ser 03B-1233
11.42%, 10/01/14(b)(c)....................... 150 213,930
FSA Ser 03C-1233
12.68%, 10/01/15(b)(c)....................... 210 318,160
FSA Ser 03D-1233
12.68%, 10/01/16(b)(c)....................... 540 797,170
FSA Ser 03E-1233
12.68%, 10/01/17(b)(c)....................... 330 477,167
------------
2,163,274
------------
Total Long-Term Municipal Bonds
(cost $421,893,975).......................... 439,552,411
------------
Short-Term Municipal Notes(e)-1.1%
Connecticut-0.7%
Connecticut Hlth & Ed Facs Auth Rev
(Yale University) Ser X-3
2.70%, 7/01/37............................... 3,000 3,000,000
------------
Nevada-0.4%
Clark Cnty Sch Dist
FSA Ser A
2.70%, 6/15/21............................... 2,000 2,000,000
------------
Total Short Term Municipal Notes
(cost $5,000,000)............................ 5,000,000
------------
Total Investments-99.1%
(cost $426,893,975).......................... 444,552,411
Other assets less liabilities-0.9%.............. 4,071,477
------------
Net Assets-100%................................. $448,623,888
============
- --------------------------------------------------------------------------------
28 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
INTEREST RATE SWAP TRANSACTIONS (see Note D)
Rate Type
---------------------------------
Payments Payments
Notional Made Received Unrealized
Swap Amount Termination by the by the Appreciation/
Counterparty (000) Date Portfolio Portfolio (Depreciation)
- ------------------------------------------------------------------------------------------------
Citigroup $ 4,700 6/22/07 BMA* 2.962% $ (29,402)
Citigroup+ 1,800 1/25/26 BMA* 4.170% (6,061)
Goldman Sachs 28,700 2/03/06 76.48% of BMA* (32,203)
1 Month LIBOR**
Goldman Sachs 7,500 3/01/06 2.255% BMA* 22,486
J.P. Morgan 4,400 4/05/07 BMA* 2.988% (21,179)
Merrill Lynch 28,700 2/03/06 BMA* 85.10% of 62,111
1 Month LIBOR**
Morgan Stanley 2,300 4/06/06 BMA* 3.081% 1,080
Morgan Stanley 2,300 10/06/06 BMA* 3.217% 209
* BMA (Bond Market Association)
** LIBOR (London Interbank Offered Rate)
+ Represents a forward interest rate swap whose effective date of the
exchange of cash flows is January 25, 2006.
(a) Security is in default and is non-income producing.
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At October 31, 2005, the aggregate market value of these
securities amounted to $23,816,117 or 5.3% of net assets.
(c) Inverse floater security -- security with variable or floating interest
rate that moves in opposite direction of short-term interest rates.
(d) Represents entire or partial position segregated as collateral for
interest rate swap.
(e) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specific date (such as coupon date or interest payment date)
or whose interest rates vary with changes in a designated base rate (such
as the prime interest rate). This instrument is payable on demand and is
secured by letters of credit or other credit support agreements from major
banks.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 29
National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Glossary of Terms:
ACA - American Capital Access Financial Guaranty Corporation
AMBAC - American Municipal Bond Assurance Corporation
AMT - Alternative Minimum Tax - (subject to)
CDA - Community Development Administration
CDD - Community Development District
CFD - Community Facilities District
CIFG - CIFG Assurance North America, Inc.
COP - Certificates of Participation
FGIC - Financial Guaranty Insurance Company
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance Inc.
GNMA - Government National Mortgage Association
GO - General Obligation
HDA - Housing Development Authority
HFA - Housing Finance Authority
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
RADIAN - Radian Group, Inc.
SFMR - Single Family Mortgage Revenue
SWR - Solid Waste Revenue
TFA - Transitional Finance Authority
XLCA - XL Capital Assurance Inc.
See notes to financial statements.
- --------------------------------------------------------------------------------
30 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Insured National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
INSURED NATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 2005
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS-98.3%
Long-Term Municipal Bonds-97.0%
Alabama-0.7%
Jefferson Cnty Wtr & Swr Rev
FGIC Ser 02B
5.00%, 2/01/41............................... $ 625 $ 673,456
FGIC Ser 02B Prerefunded
5.00%, 2/01/41............................... 375 400,609
------------
1,074,065
------------
Alaska-3.1%
Alaska HFC SFMR
(Mtg Rev) MBIA Ser 97A
6.00%, 6/01/27............................... 4,510 4,672,676
------------
Arizona-0.6%
Phoenix Civic Impt Corp Wastewtr Sys Rev
MBIA Ser 04
5.00%, 7/01/24............................... 950 987,154
------------
California-7.0%
California GO
5.13%, 2/01/28............................... 1,500 1,553,415
AMBAC Ser 02B
5.00%, 4/01/27............................... 3,000 3,077,580
FSA Ser 03
5.00%, 2/01/29............................... 1,445 1,485,995
California Statewide Cmm Dev Auth COP
(Eskaton) ACA Ser 99
4.04%, 5/15/29(a)............................ 300 300,000
Golden St
Tob Settlement Bonds XLCA Ser 03
5.50%, 6/01/33............................... 2,000 2,216,440
San Bernardino Cnty Redev
(Ontario Proj #1) MBIA Ser 93 ETM
5.80%, 8/01/23............................... 2,000 2,048,280
------------
10,681,710
------------
Colorado-5.6%
Northwest Parkway Toll Rev
FSA Ser 01C
Zero coupon, 6/15/25(b)...................... 9,000 7,523,640
SBC Met Dist
ACA Ser 05
5.00%, 12/01/29.............................. 1,000 1,003,890
------------
8,527,530
------------
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 31
Insured National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Florida-2.0%
Volusia Cnty Hlth Fac
(John Knox Village) Asset Gty Ser 96A
6.00%, 6/01/17............................... $ 3,000 $ 3,084,960
------------
Illinois-7.2%
Chicago Arpt Rev
(O'Hare Int'l Arpt) XLCA Ser 03
5.25%, 1/01/34............................... 1,700 1,769,683
Chicago Stadium Rev
(Soldier Field) AMBAC Ser 01
Zero coupon, 6/15/30(b)...................... 9,000 7,455,330
Met Pier & Expo Auth
(McCormick Place) MBIA Ser 02A
5.25%, 6/15/42............................... 1,750 1,829,170
------------
11,054,183
------------
Louisiana-0.4%
New Orleans GO
MBIA Ser 05
5.00%, 12/01/29.............................. 570 582,660
------------
Massachusetts-5.9%
Massachusetts Hlth & Ed Facs Hosp Rev
(Berkshire Hlth Sys) Asset Gty Ser 01E
5.70%, 10/01/25.............................. 6,800 7,367,052
(Cape Cod Healthcare) Asset Gty Ser 01C
5.25%, 11/15/31.............................. 1,600 1,668,096
------------
9,035,148
------------
Michigan-7.5%
Detroit Wtr Sply Sys
FGIC Ser 01
5.50%, 7/01/33............................... 1,450 1,556,227
Kalamazoo Hosp Rev
(Borgess Med Ctr) FGIC Ser 94A ETM
7.56%, 6/01/11(c)............................ 5,140 5,262,846
Michigan Mun Bd Auth Rev
(Sch Dist City of Detroit) Ser 05 FSA
5.00%, 6/01/20............................... 1,500 1,566,090
Michigan Trunk Line Fund
FSA Ser 01A
5.25%, 11/01/30.............................. 1,000 1,081,530
PontiacTax Increment
ACA Ser 02
5.625%, 6/01/22.............................. 700 730,422
Royal Oak Hosp Rev
(William Beaumont) MBIA Ser 01M
5.25%, 11/15/35.............................. 1,300 1,335,789
------------
11,532,904
------------
- --------------------------------------------------------------------------------
32 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Insured National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Minnesota-4.3%
Waconia Hlth Fac
(Ridgeview Med Ctr) Asset Gty Ser 99A
6.125%, 1/01/29.............................. $ 6,095 $ 6,603,567
------------
Nevada-1.4%
Carson City Hosp Rev
(Carson-Tahoe Hosp) RADIAN Ser 03A
5.125%, 9/01/29.............................. 2,100 2,132,991
------------
New Hampshire-1.6%
New Hampshire Hosp Rev
(Mary Hitchcock Hosp) FSA Ser 02
5.50%, 8/01/27............................... 2,250 2,436,525
------------
New Jersey-5.4%
Morris-Union Jointure COP
RADIAN Ser 04
5.00%, 5/01/27............................... 1,700 1,738,692
New Jersey Eco Dev Auth Rev
(Cigarette Tax) FGIC Ser 04
5.00%, 6/15/12............................... 1,500 1,589,955
New Jersey Ed Facs Auth Rev
AMBAC Ser 02A
5.125%, 9/01/22.............................. 2,500 2,632,850
AMBAC Ser 03
7.69%, 9/01/21(c)(d)......................... 1,210 1,375,625
New Jersey Health Care Fac Fin Auth Rev
(RWJ Health Care Corp) RADIAN Ser 05B
5.00%, 7/01/25............................... 840 861,957
------------
8,199,079
------------
New York-6.4%
Erie Cnty IDA Sch Fac Rev
(Buffalo Sch Dist Proj) FSA Ser 04
5.75%, 5/01/26............................... 1,300 1,449,591
Nassau Cnty Hlth Fac Rev
(Nassau Hlth Sys) FSA Ser 99
5.75%, 8/01/29............................... 7,600 8,376,340
------------
9,825,931
------------
Ohio-8.5%
Hamilton Cnty Sales Tax Rev
AMBAC Ser 00B
5.25%, 12/01/32.............................. 7,100 7,439,309
Summit Cnty GO
FGIC Ser 00 Prerefunded
6.00%, 12/01/21.............................. 5,000 5,621,150
------------
13,060,459
------------
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 33
Insured National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Pennsylvania-9.3%
Allegheny Cnty Hgr Ed Rev
(Carnegie Mellon Univ) Ser 02
5.50%, 3/01/28............................... $ 6,665 $ 7,157,010
Pennsylvania Turnpike Transp Rev
AMBAC Ser 01
5.25%, 7/15/41............................... 6,500 7,111,455
------------
14,268,465
------------
Puerto Rico-4.8%
Puerto Rico Elec Pwr Auth
XLCA Ser 02-1
5.25%, 7/01/22(e)............................ 6,935 7,410,602
------------
Rhode Island-4.7%
Rhode Island Eco Dev Auth
(Providence Place Mall Proj) Asset Gty Ser 00
6.125%, 7/01/20.............................. 6,500 7,136,935
------------
South Carolina-0.1%
Newberry Investing In Childrens Ed
(Newberry Cnty Sch Dist Proj) Ser 05
5.00%, 12/01/30.............................. 115 113,219
------------
Texas-4.9%
Guadalupe-Blanco Riv Auth & Surp
(Contract & Sub Wtr Res) MBIA Ser 04A
5.00%, 8/15/24............................... 455 467,872
Lubbock
(Ctfs Oblig-Tax & Wtrwks Surp) Ser 05 FSA
5.13%, 2/15/23............................... 3,160 3,322,992
San Antonio GO
Ser 02
5.00%, 2/01/23............................... 1,485 1,531,451
Texas Turnpike Auth
AMBAC Series 02A
5.50%, 8/15/39............................... 2,000 2,132,500
------------
7,454,815
------------
Washington-0.2%
Snohomish Cnty Sch Dist No 004 (Lake Stevens)
FGIC Ser 05
5.00%, 12/01/22.............................. 340 355,324
------------
West Virginia-1.7%
Fairmont Higher Ed
(Fairmont St Col) FGIC Ser 02A
5.375%, 6/01/27.............................. 2,500 2,666,925
------------
- --------------------------------------------------------------------------------
34 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Insured National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Wisconsin-3.7%
Wisconsin Pub Pwr Inc Sys Rev
AMBAC Ser A
5.00%, 7/01/24............................... $ 5,415 $ 5,620,608
------------
Total Long-Term Municipal Bonds
(cost $139,889,001).......................... 148,518,435
------------
Short-Term Municipal Notes(f)-1.3%
Nevada-0.6%
Clark Cnty Schl Dist
FSA Ser A
2.70%, 6/15/21............................... 1,000 1,000,000
------------
New York-0.7%
New York City Muni Wtr Fin Auth
FGIC Ser G
2.71%, 6/15/24............................... 1,000 1,000,000
------------
Total Short Term Municipal Notes
(cost $2,000,000)............................ 2,000,000
------------
Total Investments-98.3%
(cost $141,889,001).......................... 150,518,435
Other assets less liabilities-1.7%.............. 2,545,922
------------
Net Assets-100%................................. $153,064,357
============
INTEREST RATE SWAP TRANSACTIONS (see Note D)
Rate Type
-------------------------------
Payments Payments
Notional made received Unrealized
Swap Amount Termination by the by the Appreciation/
Counterparty (000) Date Portfolio Portfolio (Depreciation)
- ---------------------------------------------------------------------------------------------
Citigroup $ 1,600 6/22/07 BMA* 2.962% $ (10,009)
Citigroup+ 2,000 4/10/26 BMA* 5.041% 54,960
Goldman Sachs 9,500 2/03/06 76.48% of BMA* (10,660)
1 Month LIBOR**
J.P. Morgan 1,500 4/05/07 BMA* 2.988% (7,220)
J.P. Morgan 4,000 7/01/22 BMA* 80.98% of 28,496
1 Month LIBOR**
Merrill Lynch 9,500 2/03/06 BMA* 85.10% of 20,558
1 Month LIBOR**
Merrill Lynch 3,100 11/01/19 BMA* 3.896% 32,533
Morgan Stanley 800 4/06/06 BMA* 3.081% 376
Morgan Stanley 800 10/06/06 BMA* 3.217% 73
* BMA (Bond Market Association)
** LIBOR (London Interbank Offered Rate)
+ Represents a forward interest rate swap whose effective date of the
exchange of cash flows is April 10, 2006.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 35
Insured National Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
(a) Floating Rate Security -- Security with variable or floating interest
rate.
(b) 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.
(c) Inverse floater security-security with variable or floating interest rate
that moves in opposite direction of short-term interest rates.
(d) Security exempt from registration under Rule 144A of the Securities Act of
1933. This security is considered to be liquid and may be resold in
transactions exempt from registration, normally to qualified buyers. At
October 31, 2005, the market value of this security amounted to $1,375,625
representing 0.9% of net assets.
(e) Represents entire or partial position segregated as collateral for
interest rate swap.
(f) 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.
Glossary of Terms:
ACA - American Capital Access Financial Guaranty Corporation
AMBAC - American Municipal Bond Assurance Corporation
COP - Cerificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Company
FSA - Financial Security Assurance Inc.
GO - General Obligation
HFC - Housing Finance Corporation
IDA - Industrial Development Authority / Agency
MBIA - Municipal Bond Investors Assurance
RADIAN - Radian Group, Inc.
SFMR - Single Family Mortgage Revenue
XLCA - XL Capital Assurance Inc.
See notes to financial statements.
- --------------------------------------------------------------------------------
36 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
NEW YORK PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 2005
New York Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS-101.7%
Long-Term Municipal Bonds-98.0%
Arizona-0.5%
Goodyear IDA Wtr & Swr Rev
(Litchfield Park Proj) Ser 01 AMT
6.75%, 10/01/31.............................. $ 1,000 $ 1,065,480
Quailwood Meadows CFD
Ser 04
6.00%, 7/15/22............................... 1,120 1,120,840
------------
2,186,320
------------
California-0.2%
California GO
Ser 03
5.25%, 11/01/25.............................. 650 682,877
Ser 04
5.20%, 4/01/26............................... 350 365,488
------------
1,048,365
------------
Florida-3.3%
Crossings at Fleming Island CDD
(Eagle Harbor) Ser 00
7.10%, 5/01/30............................... 5,500 5,794,745
Fiddlers Creek CDD
Ser 96
7.50%, 5/01/18............................... 3,000 3,114,480
Ser 99B
5.80%, 5/01/21............................... 1,230 1,269,594
Hammock Bay CDD
Ser 04A
6.15%, 5/01/24............................... 1,200 1,197,912
Manatee Cnty CDD
(Heritage Harbor South) Ser 02B
5.40%, 11/01/08.............................. 560 558,773
Marshall Creek CDD
Ser 02A
6.625%, 5/01/32.............................. 970 1,014,688
Midtown Miami CDD
Ser 04A
6.00%, 5/01/24............................... 2,500 2,586,250
------------
15,536,442
------------
Georgia-0.1%
Atlanta Tax Alloc
(Eastside Proj) Ser 05B
5.60%, 1/01/30............................... 500 495,045
------------
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 37
New York Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Illinois-0.9%
Antioch Village Spl Svc Area
(Clublands Proj) Ser 03
6.625%, 3/01/33.............................. $ 1,000 $ 1,002,900
Plano Spl Svcs Area No.3
(Lakewood Springs Proj) Ser 05A
5.95%, 3/01/28............................... 1,350 1,333,327
Yorkville Spl Svc Area
(Raintree Vlg Proj) Ser 03
6.875%, 3/01/33.............................. 1,980 2,046,429
------------
4,382,656
------------
Nevada-0.7%
Clark Cnty Impt Dist
Ser 03
6.10%, 8/01/18............................... 1,500 1,526,895
Henderson Local Impt Dist
Ser 03
5.80%, 3/01/23............................... 975 1,006,083
North Las Vegas CDD
Ser 03
6.40%, 12/01/22.............................. 990 1,022,244
------------
3,555,222
------------
New Jersey-1.9%
Garden St Pres Tr
Open Space & Farmland FSA Ser 05A
5.80%, 11/01/17 - 11/01/21(a)................ 8,000 9,027,960
------------
New York-85.0%
Cattaraugus Cnty Hgr Ed
(Jamestown) Ser 00A
6.50%, 7/01/30............................... 1,000 1,145,410
Cortland Cnty Hosp Rev
(Cortland Mem Hosp) RADIAN Ser 02
5.25%, 7/01/32............................... 2,700 2,796,201
Erie Cnty IDA Sch Fac Rev
(Buffalo Sch Dist Proj) FSA Ser 04
5.75%, 5/01/24 - 5/01/25(b).................. 3,800 4,250,338
Essex Cnty IDR
(Int'l Paper) Ser 95A AMT
5.80%, 12/01/19.............................. 4,750 4,848,277
Glen Cove IDR
(The Regency at Glen Cove) Ser 92B ETM
Zero coupon, 10/15/19........................ 13,010 6,845,472
Hempstead Hgr Ed
(Adelphi Univ) Ser 02
5.50%, 6/01/32............................... 1,000 1,055,190
- --------------------------------------------------------------------------------
38 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
New York Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Herkimer Cnty IDR Hgr Ed
(Herkimer CC Stud Hsg) Ser 00
6.50%, 11/01/30.............................. $ 2,000 $ 2,193,140
Horseheads CCRC
(Appleridge Retrmt Cmnty) GNMA Ser 99
5.75%, 9/01/41............................... 4,000 4,254,320
Long Island Power Auth Elec Rev
FSA Ser 01A
5.25%, 9/01/28............................... 10,000 10,458,300
Metro Trans Auth of New York Rev
AMBAC Ser 05B
5.00%, 11/15/26.............................. 7,500 7,855,500
Monroe Cnty MFHR
(Southview Towers Proj) Sonyma Ser 00 AMT
6.25%, 2/01/31............................... 1,130 1,230,886
Montgomery Cnty IDA Lease Rev
(HFM Boces) XLCA Ser 05A
5.00%, 7/01/24............................... 1,500 1,556,490
Nassau Cnty Interim Fin Auth
(Sales Tax Secd) MBIA Ser 05A
5.00%, 11/15/24.............................. 3,000 3,127,380
New York City Cultural Resources
(Museum of Modern Art) AMBAC Ser 01D
5.125%, 7/01/31.............................. 14,000 14,555,100
New York City Ed Fac
(Lycee Francais) ACA Ser 02C
6.80%, 6/01/28............................... 2,500 2,629,925
(Magen David Yeshivah Proj) ACA Ser 02
5.70%, 6/15/27............................... 2,500 2,628,300
(Spence School)
5.20%, 7/01/34............................... 3,155 3,293,631
New York City GO
FSA Ser 04E
5.00%, 11/01/21.............................. 4,000 4,176,680
Ser 01B Prerefunded
5.50%, 12/01/31.............................. 8,430 9,306,804
Ser 01B Unrefunded
5.50%, 12/01/31.............................. 3,570 3,790,983
Ser 03
5.75%, 3/01/15 - 3/01/17..................... 4,250 4,670,263
Ser 04G
5.00%, 12/01/23.............................. 3,225 3,322,137
Ser 04I
5.00%, 8/01/21............................... 11,400 11,790,906
Ser 05J
5.00%, 3/01/24............................... 12,000 12,341,640
Ser 96A Prerefunded
6.25%, 8/01/17(c)............................ 15,500 16,088,690
Ser 96J Prerefunded
6.00%, 2/15/24............................... 11,165 11,425,591
XLCA Ser 04-1249
6.57%, 8/01/18(d)(e)......................... 5,000 5,527,400
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 39
New York Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
New York City HDC MFHR
(Rental Hsg) Ser 01C-2 AMT
5.40%, 11/01/33.............................. $ 3,030 $ 3,092,418
(Rental Hsg) Ser 02A AMT
5.50%, 11/01/34.............................. 1,250 1,275,963
New York City Hlth & Hosp Rev
AMBAC Ser 03A
5.25%, 2/15/22............................... 5,700 6,053,457
New York City Hosp Rev
(Health Sys) FSA Ser 02A
5.125%, 2/15/23.............................. 1,500 1,567,410
New York City IDA
(Brooklyn Navy Yard) Ser 97 AMT
5.75%, 10/01/36.............................. 3,000 2,970,870
New York City IDA Spl Fac
(Airis JFK Proj) Ser 01A
5.50%, 7/01/28............................... 9,000 8,850,690
(British Airways) Ser 98 AMT
5.25%, 12/01/32.............................. 1,175 1,004,566
New York City IDR Spl Fac
(Terminal One) Ser 94 AMT
6.125%, 1/01/24.............................. 18,690 18,797,094
New York City Mun Wtr Fin Auth
Ser 03A
5.00%, 6/15/27............................... 1,000 1,033,200
New York City TFA
(Refunding Subordinated) Ser A-2
5.00%, 11/01/17.............................. 5,000 5,336,350
MBIA Ser 04-478
12.00%, 2/01/11(d)(e)........................ 2,500 3,194,400
Ser 00B Prerefunded
6.00%, 11/15/29.............................. 6,000 6,715,140
Ser 02A
5.50%, 11/01/26.............................. 5,000 5,426,750
New York State
Tobacco Settlement Bonds Ser 03-1156
7.42%, 6/01/14(d)(e)......................... 2,500 2,800,550
New York State Dorm Auth
(FHA Insd Maimonides) MBIA Ser 04
5.75%, 8/01/29............................... 3,515 3,929,137
Ser 02
5.00%, 7/01/32............................... 4,000 4,319,040
New York State Dorm Auth Hlth Fac
(Eger Rehab Ctr) FHA Ser 00
6.10%, 8/01/37............................... 3,815 4,261,279
(Nursing Home) FHA Ser 02-34
5.20%, 2/01/32............................... 3,965 4,172,726
New York State Dorm Auth Hosp Rev
(Mem Sloan-Kettering Ctr) MBIA Ser 03A
5.00%, 7/01/22............................... 5,000 5,206,250
(Mount Sinai) NYU Health System Ser 00
6.50%, 7/01/25............................... 7,500 7,932,225
- --------------------------------------------------------------------------------
40 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
New York Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
New York State Dorm Auth Lease Rev
(Master Boces Program Wayne Finger)
FSA Ser 04
5.00%, 8/15/23............................... $ 3,175 $ 3,317,050
New York State Dorm Auth MFHR
(Joachim & Anne Residence) Ser 02
5.25%, 7/01/27............................... 1,000 1,026,480
New York State Dorm Auth Rev
(Leake & Watts Svcs Inc) MBIA Ser 04
5.00%, 7/01/22 - 7/01/23..................... 3,275 3,422,149
(Montefiore Hosp) FGIC/FHA Ser 04
5.00%, 8/01/23............................... 5,000 5,213,950
(New York University) FGIC Ser 04A
5.00%, 7/01/24............................... 2,240 2,340,710
(Rochester University) Ser 04A
5.25%, 7/01/21 - 7/01/24..................... 1,825 1,940,605
New York State Energy Res & Dev Auth
(Brooklyn Union Gas) MBIA AMT
8.64%, 7/08/26(d)............................ 6,000 6,045,000
New York State Energy Res & Dev Auth Elec Rev
(Long Island Ltg Co) Ser 95A AMT
5.30%, 8/01/25............................... 7,500 7,705,875
New York State Env Solid Waste Disp Rev
(Waste Mgmnt Proj) Ser 02A
2.90%, 5/01/12............................... 3,500 3,487,575
New York State Metro Trans Auth
Ser 02
5.25%, 11/15/31.............................. 5,000 5,233,050
Ser 02A
5.125%, 11/15/31............................. 5,500 5,698,495
5.25%, 11/15/30.............................. 10,000 10,484,600
New York State Mtg Agy SFMR
(Mtg Rev) Ser 01-31A AMT
5.30%, 10/01/31.............................. 9,000 9,058,410
(Mtg Rev) Ser 82 AMT
5.65%, 4/01/30............................... 3,415 3,450,277
Ser 01-29 AMT
5.45%, 4/01/31............................... 9,000 9,198,720
Ser 84 AMT
5.95%, 4/01/30............................... 16,820 17,374,892
New York State Twy Auth Hwy & Brdg Tr Fd
AMBAC General 2nd Ser B
5.00%, 4/01/24............................... 4,800 5,021,280
New York State Twy Auth Personal Income Tax Rev
(Transport) AMBAC Ser 04A
5.00%, 3/15/24............................... 5,000 5,221,750
New York State UDC
(State Pers Income Tax) AMBAC Ser 05A-1
5.00%, 12/15/25.............................. 2,450 2,562,749
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 41
New York Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
New York State UDC Spl Tax
(Empire State) Ser 02A
5.25%, 3/15/32............................... $ 3,945 $ 4,300,523
Niagara Frontier Trans Arpt Rev
(Buffalo Niagara) MBIA AMT
5.625%, 4/01/29.............................. 2,500 2,653,375
Onondaga Cnty IDR Swr Rev
(Anheuser Busch) Ser 99 AMT
6.25%, 12/01/34.............................. 2,000 2,152,880
Onondaga Cnty PCR
(Bristol-Myers Squibb) AMT
5.75%, 3/01/24............................... 4,000 4,480,360
Onondaga County IDA Arpt Fac
(Cargo ACQ Grp) Ser 02 AMT
6.125%, 1/01/32.............................. 1,000 1,023,290
Port Auth of NY & NJ
(JFK Int'l Proj) MBIA Ser 97-6 AMT
5.75%, 12/01/22.............................. 6,820 7,230,359
Ser 03 AMT
6.39%, 12/15/12(d)........................... 4,500 4,886,640
Spencerport Uni Sch Dist
MBIA Ser 02
5.00%, 6/15/21............................... 2,500 2,618,125
Staten Island Hosp Rev
(Staten Island Hosp) Ser 01B
6.375%, 7/01/31.............................. 1,980 2,004,295
Suffolk County IDR
(Nissequogue Cogen Fac) Ser 98 AMT
5.50%, 1/01/23............................... 5,750 5,709,865
Western Nassau Cnty Wtr Auth Wtr Sys Rev
AMBAC Ser 05
5.00%, 5/01/24............................... 1,945 2,031,708
Yonkers IDA Hlth Fac
(Malotz Pavilion Proj) MBIA Ser 99
5.65%, 2/01/39............................... 700 735,903
------------
402,735,409
------------
Ohio-0.3%
Port Auth of Columbiana Cnty SWR
(Apex Environmental Llc) Ser 04A AMT
7.125%, 8/01/25.............................. 1,200 1,198,596
------------
Puerto Rico-3.9%
Puerto Rico Commonwealth
MBIA Ser 04-441
13.83%, 1/01/09(d)(e)........................ 375 506,295
Puerto Rico Elec Pwr Auth
XLCA Ser 02-1
5.25%, 7/01/22(f)............................ 10,000 10,685,800
- --------------------------------------------------------------------------------
42 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
New York Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Puerto Rico HFC SFMR
(Mtg Rev) Ser 01A
5.20%, 12/01/33.............................. $ 1,780 $ 1,799,313
Puerto Rico Hsg Fin Auth
Capital Funding Program
5.00%, 12/01/20.............................. 5,215 5,414,839
------------
18,406,247
------------
Texas-0.4%
Houston Arpt Rev
(Continental Airlines) Ser 01E AMT
7.00%, 7/01/29............................... 2,050 1,810,663
------------
Virginia-0.8%
Bell Creek CDD
Ser 03A
6.75%, 3/01/22............................... 772 792,226
Broad Str Parking Fac
Ser 03
7.50%, 6/01/33............................... 2,680 2,923,505
------------
3,715,731
------------
Total Long-Term Municipal Bonds
(cost $443,933,255).......................... 464,098,656
------------
Short-Term Municipal Notes(g)-3.7%
Nevada-0.1%
Clark Cnty Sch Dist
FSA Ser A
2.70%, 6/15/21............................... 500 500,000
------------
New York-3.6%
New York City GO
Subser E4
2.43%, 8/01/21 - 8/01/22..................... 7,425 7,425,000
New York City Mun Wtr Fin Auth
FGIC Ser G
2.66%, 6/15/24............................... 7,500 7,500,000
New York City TFA
(NYC Recovery) Ser 3 Subser 3 B
2.65%, 11/01/22.............................. 2,000 2,000,000
------------
16,925,000
------------
Total Short-Term Municipal Notes
(cost $17,425,000)........................... 17,425,000
------------
Total Investments-101.6%
(cost $461,358,255).......................... 481,523,656
Other assets less liabilities-(1.6%)............ (7,816,410)
------------
Net Assets-100%................................. $473,707,246
============
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 43
New York Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
INTEREST RATE SWAP TRANSACTIONS (see Note D)
Rate Type
--------------------------------
Payments Payments
Notional made received Unrealized
Swap Amount Termination by the by the Appreciation/
Counterparty (000) Date Portfolio Portfolio (Depreciation)
- ----------------------------------------------------------------------------------------------
Citigroup $ 4,800 6/22/07 BMA* 2.962% $ (30,027)
Citigroup+ 2,200 1/25/26 BMA* 4.108% (24,233)
Goldman Sachs 27,300 2/03/06 76.48% of BMA* (30,632)
1 Month LIBOR**
J.P. Morgan 4,300 4/05/07 BMA* 2.988% (20,698)
J.P. Morgan 4,500 6/15/15 3.777% BMA* 4,462
Merrill Lynch 6,500 12/01/05 BMA* 2.220% (8,009)
Merrill Lynch 27,300 2/03/06 BMA* 85.10% of 59,080
1 Month LIBOR**
Morgan Stanley 2,400 4/06/06 BMA* 3.081% 1,164
Morgan Stanley 2,400 10/06/06 BMA* 3.217% 218
* BMA (Bond Market Association)
** LIBOR (London Interbank Offered Rate)
+ Represents a forward interest rate swap whose effective date of the
exchange of cash flows is January 25, 2006.
FINANCIAL FUTURES CONTRACTS SOLD (see Note D)
Value at
Number of Expiration Original October 31, Unrealized
Type Contracts Month Value 2005 Appreciation
- --------------------------------------------------------------------------------
U.S. T-Note
10 Yr Future 10 December 2005 $1,121,056 $1,084,531 $ 36,525
(a) When-issued security.
(b) Position, or portion thereof, with a market value of $228,901 has been
segregated to collateralize margin requirements for open future contracts.
(c) Represents entire or partial position segregated as collateral for when
issued security.
(d) Inverse floater security -- security with variable or floating interest
rate that moves in opposite direction of short-term interest rates.
(e) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At October 31, 2005, the aggregate market value of these
securities amounted to $12,028,645 or 2.5% of net assets.
(f) Represents entire or partial position segregated as collateral for
interest rate swap.
(g) 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.
- --------------------------------------------------------------------------------
44 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
New York Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Glossary of Terms:
ACA - American Capital Access Financial Guaranty Corporation
AMBAC - American Municipal Bond Assurance Corporation
AMT - Alternative Minimum Tax -- (subject to)
CCRC - Congregate Care Retirement Center
CDD - Community Development District
CFD - Community Facilities District
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Company
FHA - Federal Housing Administration
FSA - Financial Security Assurance Inc.
GNMA - Government National Mortgage Association
GO - General Obligation
HDC - Housing Development Corporation
HFC - Housing Finance Corporation
IDA - Industrial Development Authority / Agency
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-Family Housing Revenue
PCR - Pollution Control Revenue
RADIAN - Radian Group, Inc.
SFMR - Single Family Mortgage Revenue
SWR - Solid Waste Revenue
TFA - Transitional Finance Authority
UDC - Urban Development Corporation
XLCA - XL Capital Assurance Inc.
See notes to financial statements.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 45
California Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
CALIFORNIA PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 2005
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS-97.8%
Long-Term Municipal Bonds-97.7%
California-97.1%
Bassett Uni Sch Dist
(Election of 2004) Ser 05A FSA
5.00%, 8/01/23 - 8/01/25..................... $ 3,255 $ 3,405,129
California Dept of Wtr Res
FGIC Ser 02A
5.125%, 5/01/18.............................. 10,000 10,582,900
Ser 02A
5.375%, 5/01/21.............................. 3,000 3,209,100
California Dept Transp Rev
FGIC Ser 04A
5.00%, 2/01/13............................... 10,000 10,792,600
California Ed Facs Auth Rev
(University of Pacific) Ser 04
5.00%, 11/01/20.............................. 1,000 1,028,450
5.25%, 5/01/34............................... 1,000 1,048,190
California GO
5.00%, 2/01/32............................... 13,200 13,462,284
5.125%, 6/01/31.............................. 1,730 1,780,170
5.25%, 2/01/30............................... 14,000 14,549,640
MBIA - IBC Ser 03
5.25%, 2/01/16............................... 2,050 2,210,986
MBIA Ser 02
5.00%, 2/01/32............................... 3,500 3,576,895
Ser 02
5.25%, 4/01/30............................... 1,175 1,222,235
Ser 03
5.25%, 2/01/24............................... 3,500 3,679,130
Ser 04
5.00%, 2/01/33............................... 6,925 7,069,871
5.125%, 2/01/28.............................. 3,500 3,624,635
5.30%, 4/01/29............................... 6,400 6,750,400
California Health Fac Auth
(Cottage Hlth Sys) MBIA Ser 03B
5.00%, 11/01/23.............................. 2,500 2,584,850
(Lucile Salter Packard Hosp) AMBAC Ser 03C
5.00%, 8/15/21............................... 3,365 3,496,639
California HFA SFMR
(Mtg Rev) FHA Ser 95A-2 AMT
6.45%, 8/01/25............................... 525 529,757
(Mtg Rev) Ser 99A-2 AMT
5.25%, 8/01/26............................... 1,765 1,770,930
California Hgr Ed
(Col of Arts & Crafts) Ser 01
5.875%, 6/01/30.............................. 2,200 2,301,310
- --------------------------------------------------------------------------------
46 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
California Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
California Poll Ctl Fin Auth
(Pacific Gas & Elec) MBIA Ser 96A AMT
5.35%, 12/01/16.............................. $ 15,500 $ 16,570,585
(So Calif Edison) MBIA Ser 99C AMT
5.55%, 9/01/31............................... 7,950 8,327,068
(So Calif) Ser 86A
2.00%, 2/28/08............................... 3,000 2,984,520
(Tracy Material Recovery) ACA Ser 99A AMT
5.70%, 8/01/14............................... 3,670 3,785,495
California Poll Ctl Fin Auth SWR
(Waste Management) Ser 02A AMT
3.125%, 1/01/22.............................. 6,000 5,985,240
California Pub Wks Bd Lease Rev
(Coalinga) Ser 04A
5.50%, 6/01/22 - 6/01/23..................... 6,790 7,207,067
(Dept of Hlth Svcs-Richmond Lab)
Ser 05B XLCA
5.00%, 11/01/30.............................. 1,270 1,293,000
(Univ of Calif Proj) Ser 05C
5.00%, 4/01/23............................... 3,130 3,241,585
(Univ of Calif Proj) Ser 05D
5.00%, 5/01/25............................... 3,250 3,351,627
(Various Univ Calif Projs) Ser 04F
5.00%, 11/01/26.............................. 8,065 8,294,449
XLCA Ser 04-413
6.99%, 12/01/11(a)(b)........................ 10,070 11,234,696
California Rural MFA SFMR
(Mtg Rev) GNMA/FNMA Ser 00B AMT
6.25%, 12/01/31.............................. 210 210,250
(Mtg Rev) GNMA/FNMA Ser 00D AMT
6.00%, 12/01/31.............................. 695 722,466
(Mtg Rev) GNMA/FNMA Ser 99A AMT
5.40%, 12/01/30.............................. 550 556,078
(Mtg Rev) MBIA Ser 99A AMT
5.40%, 12/01/30.............................. 1,365 1,383,059
California State University Rev
FGIC Ser 03A
5.00%, 11/01/22.............................. 6,000 6,231,600
California Statewide Comm Dev Auth
(Kaiser Hosp) Ser 01A
5.55%, 8/01/31............................... 18,000 18,910,620
(San Diego Space & Science) Ser 96
7.50%, 12/01/16.............................. 2,715 2,897,557
California Statewide Comm Dev Auth COP
(Eskaton Properties) Ser 99 ACA
4.20%, 5/15/29(a)............................ 250 250,000
(Savrs Eskaton Convertible 12/28/00) ACA Ser
99 4.04%, 5/15/29(a)......................... 1,900 1,900,000
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 47
California Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
California Statewide Comm Dev Auth Ed Fac
(Drew College Prep) Ser 00
7.25%, 10/01/30.............................. $ 8,000 $ 8,648,240
(Saint Mark's Sch) Ser 01
6.75%, 6/01/28............................... 2,555 2,650,710
(Sonoma Cntry Day Sch) Ser 99
6.00%, 1/01/29............................... 11,540 12,169,507
(Wildwood Elem Sch) Ser 01
7.00%, 11/01/29.............................. 4,000 4,323,960
(Windward Sch) Ser 99
6.90%, 9/01/23............................... 1,960 2,020,153
California Statewide Comm Dev Auth Rev
(Daughters of Charity Health) Ser 05A
5.25%, 7/01/24............................... 3,225 3,308,334
California Statewide MFHR
(Highland Creek Apts) FNMA Ser 01K AMT
5.40%, 4/01/34............................... 5,745 5,878,284
(Santa Paula Vlg Apt) FNMA Ser 98D AMT
5.43%, 5/01/28............................... 2,090 2,115,853
California Veterans Hsg
AMBAC Ser 02A
5.35%, 12/01/27(c)........................... 22,320 23,292,929
Carson Assmt Dist
(Dominguez Tech Ctr) Ser 01-1
6.35%, 9/02/23............................... 3,825 3,980,295
6.375%, 9/02/31.............................. 5,000 5,203,550
Castaic Lake Wtr Agy
AMBAC Ser 04A
5.00%, 8/01/16 - 8/01/18..................... 4,325 4,581,758
MBIA Ser 01A
5.20%, 8/01/30............................... 1,625 1,688,895
Chino CFD
(Spectrum South) Ser 99
6.35%, 9/01/29............................... 3,450 3,504,752
Chino Hills CFD
(Fairfield Ranch) Ser 00
6.95%, 9/01/30............................... 5,200 5,514,548
Coachella Valley Uni Sch Dist
FGIC Ser 05A
5.00%, 8/01/25............................... 2,900 3,027,136
Commerce Joint Pwrs Fin Auth Lease Rev
(Cmnty Ctr Proj) Ser 04 XLCA
5.00%, 10/01/34.............................. 2,015 2,059,995
Corona CFD
(Eagle Glen) Ser 98
5.875%, 9/01/23.............................. 3,260 3,352,617
(Eagle Glen) Ser 98 ETM
5.875%, 9/01/23.............................. 3,005 3,090,372
Desert Cmnty College Dist
MBIA Ser 05
5.00%, 8/01/24............................... 2,600 2,720,276
- --------------------------------------------------------------------------------
48 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
California Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
East Bay Mun Util Dist Wtr Sys Rev
MBIA Ser 05A
5.00%, 6/01/27............................... $ 3,600 $ 3,744,360
East Palo Alto Pub Fin Auth Rev
(University Circle Gateway 101) RADIAN
Ser 05A
5.00%, 10/01/25.............................. 4,390 4,512,920
Eastern Wtr CFD
(Morningstar Ranch) Ser 02
6.40%, 9/01/32............................... 3,765 3,844,630
El Centro Fin Auth Hosp Rev
(El Centro Med Ctr) Ser 01
5.375%, 3/01/26.............................. 18,000 18,737,640
Elk Grove Assmt Dist
(E. Franklin Cmnty) Ser 02
5.80%, 8/01/25............................... 1,000 1,082,640
6.00%, 8/01/33............................... 5,000 5,430,050
Encinitas Rec Rev
(Encinitas Ranch Golf Course) Ser 04
5.50%, 9/01/23 - 9/01/24..................... 1,110 1,088,027
5.60%, 9/01/26............................... 1,000 983,020
(Encinitas Ranch Golf Course) Ser 96A
7.75%, 9/01/26............................... 9,735 10,301,285
Fontana
(Heritage West End) Ser 99A
6.50%, 9/01/28............................... 8,720 9,084,496
Fontana Pub Fin Auth
(No Fontana Redev Proj) AMBAC Ser 03A
5.50%, 9/01/32............................... 1,000 1,069,550
Fremont Uni Sch Dist
(Election 2002) FSA Ser 05B
5.00%, 8/01/26 - 8/01/27..................... 7,410 7,712,743
Fresno Joint Pwrs Lease Rev
XLCA Ser 04A
5.25%, 10/01/21 - 10/01/24................... 3,425 3,625,860
5.375%, 10/01/17............................. 1,315 1,422,725
Gilroy Uni Sch Dist
FGIC
5.00%, 8/01/27............................... 1,500 1,550,460
Huntington Park Pub Fin Auth Rev
FSA Ser 04A
5.25%, 9/01/17............................... 1,000 1,101,520
Kaweah Delta Health Care Dist
MBIA Ser 04
5.25%, 8/01/25 - 8/01/26..................... 3,780 3,995,977
Kern Cnty
(Tejon Industrial Complex) Ser 00A
7.20%, 9/01/30............................... 9,925 10,326,863
La Verne Spl Tax
Ser 98
5.875%, 3/01/14.............................. 5,225 5,382,116
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 49
California Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Lammersville Sch Dist CFD
(Mountain House) Ser 02
6.375%, 9/01/32.............................. $ 4,250 $ 4,414,305
Lancaster Redev Agy Tax Alloc
(Fire Protn Fac Proj) XLCA Ser 04
5.00%, 12/01/23.............................. 1,120 1,157,946
(Sheriffs Fac Proj) XLCA Ser 04
5.00%, 12/01/23.............................. 1,875 1,938,525
Loma Linda Hosp Rev
(Univ Med Ctr) Ser 05A
5.00%, 12/01/23.............................. 2,000 2,026,800
Los Angeles Cmnty College Dist
(Election of 2001) Ser 05A FSA
5.00%, 8/01/24............................... 4,500 4,708,170
Los Angeles Cmnty Redev Agy
Ser 04L
5.00%, 3/01/17............................... 2,565 2,578,877
5.10%, 3/01/19............................... 1,350 1,352,362
Los Angeles Cmnty Redev MFHR
(Grand Ctrl Proj) Ser 93A AMT
5.85%, 12/01/26.............................. 4,030 4,031,813
Los Angeles Cnty Arpt
(Ontario Int'l Arpt) FGIC Ser 96A AMT
6.00%, 5/15/22............................... 12,780 13,061,671
Los Angeles Cnty Pub Works
AMBAC Ser 97V-B
5.125%, 12/01/29............................. 3,400 3,572,142
Los Angeles Cnty Transp Auth
FGIC Ser 00A
5.25%, 7/01/30............................... 2,750 2,903,615
Los Angeles Dept of Wtr & Pwr Elec Rev
MBIA Ser 01A
5.00%, 7/01/24............................... 1,500 1,555,410
Los Angeles Harbor Rev
MBIA Ser 96B AMT
6.20%, 8/01/25............................... 10,000 10,328,800
Ser 96B AMT
5.375%, 11/01/23............................. 8,250 8,518,207
Los Angeles MFHR
(Park Plaza West) GNMA AMT
5.50%, 1/20/43............................... 5,000 5,192,000
Los Angeles Uni Sch Dist
MBIA Ser 03A-1116
7.31%, 7/01/16(a)(b)......................... 4,850 5,795,847
Manteca Uni Sch Dist
FSA Ser 04
5.25%, 8/01/22............................... 1,390 1,486,355
Marin Wtr Dist Rev
AMBAC Ser 04
5.25%, 7/01/20............................... 3,040 3,260,461
- --------------------------------------------------------------------------------
50 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
California Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Murrieta Valley Uni Sch Dist
(Election 2002) FSA Ser 05B
5.125%, 9/01/29.............................. $ 1,275 $ 1,336,621
Napa Valley Uni Sch Dist
(Election 2002) FGIC Ser 05
5.00%, 8/01/29............................... 2,000 2,076,460
Natomas Uni Sch Dist
(Election of 2002) Ser 04B FGIC
5.00%, 9/01/27 - 9/01/28..................... 6,030 6,240,705
Norco Redev Agy Tax Alloc
(Norco Redev Proj #1) RADIAN Ser 04
5.00%, 3/01/24............................... 3,060 3,078,421
Ohlone Cmnty College Dist
Ser 05B FSA
5.00%, 8/01/24............................... 1,850 1,935,581
Ontario Assmt Dist
(Calif Commerce Ctr So)
7.70%, 9/02/10............................... 3,805 3,863,293
Ontario COP
(Wtr Sys Impt Proj) MBIA Ser 04
5.25%, 7/01/21............................... 1,700 1,819,459
Orange Cnty CFD
(Ladera Ranch) Ser 99A
6.70%, 8/15/29............................... 3,000 3,386,850
Orange Cnty Sr Lien
(Foothill/Eastern Corr) Ser 95 ETM
Zero coupon, 1/01/24 - 1/01/25............... 25,255 10,442,372
(San Joaquin Hills Transp Corr) MBIA
Zero coupon, 1/15/36......................... 47,415 9,942,451
(San Joaquin Hills Transp Corr) Ser 93 ETM
Zero coupon, 1/01/19 - 1/01/23............... 75,000 37,568,650
Palm Springs Arpt Rev
(Palm Springs Regional Arpt) MBIA Ser 92 AMT
6.00%, 1/01/22............................... 6,860 6,897,936
Palm Springs COP
Ser 91B ETM
Zero coupon, 4/15/21......................... 37,500 18,055,125
Palmdale Wtr Dist Rev COP
FGIC Ser 04
5.00%, 10/01/24.............................. 1,775 1,844,775
Pittsburg Redev Agy
(Los Medanos Proj) Ser 03A
5.00%, 8/01/21............................... 6,410 6,681,015
Placentia Yorba Linda Uni Sch Dist
(Election 2002) MBIA Ser 05C
5.00%, 8/01/27............................... 3,300 3,434,079
Port of Oakland
FGIC Ser 02L AMT
5.375%, 11/01/27............................. 2,500 2,610,200
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 51
California Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Rancho Cordova CFD
(Sunridge Anatolia) Ser 03
6.00%, 9/01/28............................... $ 2,000 $ 2,080,620
Riverside CFD
(MTN Cove) Ser 00
6.50%, 9/01/25............................... 3,390 3,519,125
Riverside Cmnty College Dist
MBIA Ser 04A
5.25%, 8/01/25 - 8/01/26..................... 1,980 2,194,889
Riverside Cnty Pub Fin Auth Tax Alloc
(Redev Proj) Ser 04 XLCA
5.00%, 10/01/35.............................. 2,475 2,539,325
Rocklin Uni Sch Dist
MBIA Ser 04
5.00%, 9/01/25............................... 1,000 1,036,630
Roseville CFD
(No Central Roseville Highland Park) Ser 99-A
5.80%, 9/01/17............................... 6,685 6,949,927
Roseville COP
AMBAC Ser 03A
5.00%, 8/01/25............................... 7,490 7,737,020
Roseville High Sch Dist
Ser 01E
5.25%, 8/01/26............................... 2,435 2,560,281
Sacramento CFD
(N Natomas Drain) Ser 00B
7.25%, 9/01/30............................... 5,375 6,224,949
Sacramento City Uni Sch Dist
FSA Ser 04D
5.25%, 7/01/21 - 7/01/23..................... 8,525 9,088,225
Sacramento Cnty Arpt Rev
MBIA Ser 96A AMT
5.90%, 7/01/24............................... 5,050 5,233,416
Sacramento Cnty Hsg Auth MFHR
(Cottage Estates) FNMA Ser 00B AMT
6.00%, 2/01/33............................... 5,300 5,575,017
(Verandas Apts) FNMA Ser 00H AMT
5.70%, 3/01/34............................... 2,875 2,963,320
Sacramento Muni Util Dist Elec Rev
MBIA Ser 03S
5.00%, 11/15/17.............................. 5,000 5,301,750
MBIA Ser 04R-289-2
11.46%, 8/15/17(a)(b)........................ 2,500 3,087,100
San Bernardino Cnty CFD
(Kaiser Commerce Cntr) Ser 02-1
5.90%, 9/01/33............................... 4,750 4,698,320
(Rancho Etiwanda) Ser 01
6.40%, 9/01/31............................... 8,000 8,233,360
(Rancho Etiwanda) Ser 01 ETM
6.40%, 9/01/31............................... 3,135 3,226,448
- --------------------------------------------------------------------------------
52 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
California Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
San Bernardino SFMR
(Mtg Rev) GNMA/FNMA Ser 01-A1 AMT
6.35%, 7/01/34............................... $ 795 $ 802,855
San Diego Cnty COP
Ser 04A
5.50%, 9/01/44............................... 5,000 5,223,450
San Diego HFA MFHR
(Rental Rev) GNMA/FNMA Ser 98C AMT
5.25%, 1/20/40............................... 6,105 6,170,995
San Diego Hsg Auth MFHR
(Vista La Rosa Apt) GNMA Ser 00A AMT
6.00%, 7/20/41............................... 10,230 10,745,899
San Diego Uni Sch Dist
(Election of 1998) MBIA Ser 04E-1
5.00%, 7/01/23-7/01/24....................... 2,240 2,353,916
San Francisco City & Cnty Int'l Arpt
(Issue 10A) MBIA Second Ser 96 AMT
5.70%, 5/01/26(d)............................ 9,385 9,685,789
FSA Ser 00A AMT
6.125%, 1/01/27.............................. 1,480 1,563,339
San Francisco Univ Ed Fac
ACA Ser 99
5.25%, 7/01/32............................... 16,650 16,819,996
San Jose MFHR
(Fallen Leaves Apts) AMBAC AMT
5.15%, 6/01/36............................... 1,400 1,417,318
San Jose Redev Agy Tax Alloc
MBIA Ser 04A
5.25%, 8/01/19............................... 5,000 5,361,650
San Marcos Pub Facs Auth Tax Alloc Rev
(Proj Areas No 1 & 3) AMBAC Ser 05A
5.00%, 8/01/25............................... 5,715 5,951,887
San Mateo Cnty Cmnty College Dist COP
MBIA Ser 04
5.25%, 10/01/20.............................. 2,870 3,094,204
San Mateo Uni Sch Dist
FSA Ser 04
5.00%, 9/01/24............................... 2,000 2,085,400
Santa Margarita Wtr Fac Dist
(Talega) Ser 99
6.25%, 9/01/29............................... 11,550 12,200,265
Semitropic Impt Dist Wtr Storage
XLCA Ser 04A
5.50%, 12/01/23.............................. 1,640 1,787,846
So Tahoe Joint Pwr Fin Auth
Ser 95A
5.75%, 10/01/25(c)........................... 3,000 3,071,910
South Gate Pub Fin Auth
(South Gate Redev Proj #1) XLCA Ser 02
5.125%, 9/01/24.............................. 1,800 1,879,776
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 53
California Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Tejon Ranch CFD
Ser 03
6.125%, 9/01/27.............................. $ 1,000 $ 1,007,000
6.20%, 9/01/33............................... 2,375 2,387,896
Torrance COP
(Ref & Pub Imprt Proj) AMBAC Ser 05B
5.00%, 6/01/24............................... 2,900 3,010,519
Univ of Calif Regents Hgr Ed
FGIC Ser 01M
5.125%, 9/01/30.............................. 12,270 12,762,518
Vacaville Uni Sch Dist
(Election 2001) MBIA Ser 05
5.00%, 8/01/26............................... 1,075 1,116,097
West Contra Costa Healthcare Dist COP
AMBAC Ser 04
5.375%, 7/01/21 - 7/01/24.................... 4,720 5,042,792
West Kern Cnty Wtr Rev
Ser 01
5.625%, 6/01/31.............................. 3,000 3,121,230
Westminster Redev Agy MFHR
(Rose Garden Apt) Ser 93A AMT
6.75%, 8/01/24............................... 4,300 4,339,775
Yorba Linda Rec Rev
(Black Gold Golf Proj) Ser 00
7.50%, 10/01/30.............................. 5,680 6,365,803
------------
812,859,255
------------
Florida-0.2%
Ft Lauderdale Arpt Fac
(Cargo Acq Grp) Ser 03 AMT
5.75%, 1/01/32............................... 1,500 1,468,275
------------
Ohio-0.2%
Port Auth of Columbiana Cnty SWR
(Apex Environmental Llc) Ser 04A AMT
7.125%, 8/01/25.............................. 2,000 1,997,660
------------
Texas-0.2%
Richardson Texas Hosp Auth
(Richardson Regional) Ser 04
6.00%, 12/01/19.............................. 1,715 1,857,362
------------
Total Long-Term Municipal Bonds
(cost $768,469,793).......................... 818,182,552
------------
Short-Term Municipal Notes(e)-0.1%
California-0.1%
California GO
Ser 03A-2
2.68%, 5/01/33............................... 500 500,000
------------
- --------------------------------------------------------------------------------
54 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
California Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Illinois-0.0%
Illinois Dev Fin Auth PCR
(Illinois Pwr Proj) AMBAC Ser 01
2.50%, 11/01/28.............................. $ 100 $ 100,000
------------
Total Short-Term Municipal Notes
(cost $600,000).............................. 600,000
------------
Total Investments-97.8%
(cost $769,069,793).......................... 818,782,552
Other assets less liabilities-2.2%.............. 18,454,717
------------
Net Assets-100%................................. $837,237,269
============
INTEREST RATE SWAP TRANSACTIONS (see Note D)
Rate Type
-------------------------------
Payments Payments
Notional made received Unrealized
Swap Amount Termination by the by the Appreciation/
Counterparty (000) Date Portfolio Portfolio (Depreciation)
- ---------------------------------------------------------------------------------------------
Citigroup $ 8,700 6/22/07 BMA* 2.962% $ (54,425)
Citigroup+ 5,600 1/25/26 BMA* 4.108% (61,684)
Citigroup++ 11,000 4/10/26 5.041% 3 Month LIBOR** 302,280
Goldman Sachs 52,700 2/03/06 76.48% of BMA* (59,132)
1 Month LIBOR**
Goldman Sachs 5,000 3/01/06 2.255% BMA* 14,991
J.P. Morgan 8,400 4/05/07 BMA* 2.988% (40,432)
J.P. Morgan 16,000 7/01/22 BMA* 80.98% of 113,984
1 Month LIBOR**
Merrill Lynch 52,700 2/03/06 BMA* 85.10% of 114,048
1 Month LIBOR**
Merrill Lynch 17,000 11/01/19 3.896% BMA* 178,409
Morgan Stanley 4,200 4/06/06 BMA* 3.081% 1,972
Morgan Stanley 4,200 10/06/06 BMA* 3.217% 382
* BMA (Bond Market Association)
** LIBOR (London Interbank Offered Rate)
+ Represents a forward interest rate swap whose effective date of the
exchange of cash flows is January 25, 2006.
++ Represents a forward interest rate swap whose effective date of the
exchange of cash flows is April 10, 2006.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 55
California Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
FINANCIAL FUTURES CONTRACTS (see Note D)
Value at Unrealized
Number of Expiration Original October 31, Appreciation/
Type Contracts Month Value 2005 (Depreciation)
- ------------------------------------------------------------------------------------------------
Purchased Contracts
U.S. T-Bond
Future 82 December 2005 $ 9,560,995 $9,181,437 $ (379,558)
Sold Contracts
U.S. T-Note
10 Yr Future 51 December 2005 5,656,426 5,531,109 125,317
Swap
10 Yr Future 92 December 2005 10,191,530 9,849,750 341,780
----------
$ 87,539
----------
(a) Inverse floater security -- security with variable or floating interest
rate that moves in opposite direction of short-term interest rates.
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At October 31, 2005, the aggregate market value of these
securities amounted to $20,117,643 or 2.4% of net assets.
(c) Represents entire or partial position segregated as collateral for
interest rate swap.
(d) Position, or portion thereof, with a market value of $1,460,351 has been
segregated to collaterize margin requirements for open futures contracts.
(e) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specific date (such as coupon date or interest payment date)
or whose interest rates vary with changes in a designated base rate (such
as the prime interest rate). This instrument is payable on demand and is
secured by letters of credit or other credit support agreements from major
banks.
Glossary of Terms:
ACA - American Capital Access Financial Guaranty Corporation
AMBAC - American Municipal Bond Assurance Corporation
AMT - Alternative Minimum Tax -- (subject to)
CFD - Community Facilities District
COP - Cerificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Company
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance Inc.
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Authority
MBIA - Municipal Bond Investors Assurance
MFA - Mortgage Finance Authority
MFHR - Multi-Family Housing Revenue
PCR - Pollution Control Revenue
RADIAN - Radian Group, Inc.
SFMR - Single Family Mortgage Revenue
SWR - Solid Waste Revenue
XLCA - XL Capital Assurance Inc.
See notes to financial statements.
- --------------------------------------------------------------------------------
56 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Insured California Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
INSURED CALIFORNIA PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 2005
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS-97.8%
Long-Term Municipal Bonds-93.2%
California-93.2%
Butte-Glenn Cmnty College Dist
(Election 2002) MBIA Ser 05B
5.00%, 8/01/25............................... $ 3,620 $ 3,778,701
California GO
(Veterans Housing) FSA Ser 01
5.60%, 12/01/32.............................. 4,415 4,523,653
Ser 02
5.25%, 2/01/30............................... 2,000 2,078,520
California HFA MFHR
(Mtg Rev) AMBAC Ser 95A
6.25%, 2/01/37............................... 5,000 5,112,300
California Pub Wks Bd Lease Rev
(Dept of Hlth Svcs-Richmond Lab)
Ser 05B XLCA
5.00%, 11/01/30.............................. 3,000 3,054,330
(Univ of Calif Proj) Ser 05B
5.00%, 5/01/25............................... 750 773,453
Capistrano Uni Sch Dist
FGIC Ser 00A
6.00%, 8/01/24............................... 1,550 1,723,399
FSA Ser 01B
Zero coupon, 8/01/20 - 8/01/25............... 24,465 10,305,738
Chino Redev Agy Spl Tax
AMBAC Ser 01A
5.125%, 9/01/30.............................. 1,000 1,035,810
AMBAC Ser 01B ETM
5.25%, 9/01/30............................... 5,435 5,692,619
Coachella Valley Uni Sch Dist
FGIC Ser 05A
5.00%, 8/01/25............................... 400 417,536
Coronado CDD
FSA Ser 96
6.00%, 9/01/26............................... 6,250 6,523,312
Desert Cmnty College Dist
MBIA Ser 05
5.00%, 8/01/24............................... 400 418,504
East Bay Mun Util Dist Wtr Sys Rev
MBIA Sub Ser 05A
5.00%, 6/01/27............................... 1,400 1,456,140
East Palo Alto Pub Fin Auth Rev
(University Circle Gateway 101) RADIAN
Ser 05A
5.00%, 10/01/25.............................. 680 699,040
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 57
Insured California Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Fontana Pub Fin Auth
(No Fontana Proj) AMBAC Ser 03A
5.50%, 9/01/32............................... $ 4,200 $ 4,492,110
Franklin-McKinley Sch Dist
FSA Ser 02B
5.00%, 8/01/27............................... 700 723,548
Fremont Uni Sch Dist
(Election 2002) FSA Ser 05B
5.00%, 8/01/27............................... 920 957,380
Golden St
Tobacco Settlement Bonds RADIAN Ser 03
5.50%, 6/01/43............................... 1,400 1,551,508
Jurupa Uni Sch Dist
(Election 2001) FGIC Ser 04
5.00%, 8/01/22............................... 1,340 1,397,553
Long Beach
(Aquarium of the Pacific Proj) AMBAC Ser 01
5.25%, 11/01/30(a)........................... 6,500 6,821,555
Los Angeles Cnty Pub Wks Fin Auth Lease Rev
(Master Refunding Proj) Ser 05A MBIA
5.00%, 12/01/27.............................. 2,000 2,067,120
Los Angeles Dept of Wtr & Pwr
MBIA Ser 01A
5.00%, 7/01/24............................... 5,900 6,117,946
Mojave Wtr Agy Imp Dist
(Morongo Basin Pipeline) FGIC Ser 96
5.80%, 9/01/22............................... 10,000 10,421,000
Murrieta Valley Uni Sch Dist
(Election 2002) FSA Ser 05B
5.125%, 9/01/29.............................. 225 235,874
Orange Cnty COP
(Loma Ridge Data Ctr Proj) AMBAC
6.00%, 6/01/21............................... 1,000 1,146,170
Orange Cnty Recovery Certificates
MBIA Ser 96A
6.00%, 7/01/26............................... 3,000 3,119,610
Perris Union High Sch Dist
Ser 05A FGIC
5.00%, 9/01/24............................... 800 837,264
Placentia-Yorba Linda Uni Sch Dist
(Election 2002) MBIA Ser 05C
5.00%, 8/01/27............................... 1,600 1,665,008
Poway Redev Agy
(Paguay Proj) AMBAC Ser 01 ETM
5.375%, 12/15/31............................. 6,225 6,618,856
Rancho Cordova COP
(City Hall Fac Acq Proj) XLCA Ser 05
5.00%, 2/01/24............................... 2,645 2,731,809
- --------------------------------------------------------------------------------
58 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Insured California Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Redding Elec Sys Rev
MBIA Ser 92A
10.07%, 7/01/22(b)........................... $ 2,000 $ 2,691,840
Riverside Cnty Pub Fin Auth Tax Alloc Rev
(Redev Proj) XLCA Ser 04
5.00%, 10/01/23.............................. 1,955 2,021,685
Riverside Cnty Spl Tax
(Jurupa Valley) AMBAC Ser 01
5.13%, 10/01/35.............................. 5,000 5,175,600
(Jurupa Valley) AMBAC Ser 01 ETM
5.25%, 10/01/35(c)........................... 8,000 8,400,800
San Diego Uni Port Dist Rev
MBIA Ser 04B
5.00%, 9/01/23............................... 1,035 1,077,652
San Diego Uni Sch Dist
(Election 1998) MBIA Ser 04E-1
5.00%, 7/01/23............................... 1,000 1,052,300
So Tahoe Joint Powers Auth
Fin Auth Ser 95A
5.75%, 10/01/25.............................. 1,500 1,535,955
Southwestern Cmnty College Dist
MBIA Ser 05
5.00%, 8/01/24............................... 1,000 1,059,330
Torrance COP
(Ref & Pub Impt Proj) AMBAC Ser 05B
5.00%, 6/01/24............................... 465 482,721
------------
Total Long-Term Municipal Bonds
(cost $115,353,841).......................... 121,995,249
------------
Short-Term Municipal Notes(d)-4.6%
California-4.6%
California Dept Wtr Res Pwr Supply Rev
Ser 02B-2
2.81%, 5/01/22............................... 5,000 5,000,000
California GO
Ser 03A-2
2.68%, 5/01/33............................... 1,000 1,000,000
------------
Total Short-Term Municipal Notes
(cost $6,000,000)............................ 6,000,000
------------
Total Investments-97.8%
(cost $121,353,841).......................... 127,995,249
Other assets less liabilities-2.2%.............. 2,914,207
------------
Net Assets-100%................................. $130,909,456
============
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 59
Insured California Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
INTEREST RATE SWAP TRANSACTIONS (see Note D)
Rate Type
----------------------------------
Payments Payments
Notional made received Unrealized
Swap Amount Termination by the by the Appreciation/
Counterparty (000) Date Portfolio Portfolio (Depreciation)
- -------------------------------------------------------------------------------------------------
Citigroup $ 1,400 6/22/07 BMA* 2.962% $ (8,758)
Citigroup+ 900 1/25/26 BMA* 4.108% (9,914)
Citigroup++ 600 4/10/26 5.041% 3 Month LIBOR** 16,488
Goldman Sachs 9,000 2/03/06 76.48% of BMA* (10,099)
1 Month LIBOR**
J.P. Morgan 1,300 4/05/07 BMA* 2.988% (6,257)
J.P. Morgan 1,400 7/01/22 BMA* 80.98% of 9,974
1 Month LIBOR**
Merrill Lynch 9,000 2/03/06 BMA* 85.10% of 19,477
1 Month LIBOR**
Merrill Lynch 2,000 11/01/19 3.896% BMA* 20,989
Morgan Stanley 700 4/06/06 BMA* 3.081% 329
Morgan Stanley 700 10/06/06 BMA* 3.217% 64
* BMA (Bond Market Association)
** LIBOR (London Interbank Offered Rate)
+ Represents a forward interest rate swap whose effective date of the
exchange of cash flows is January 25, 2006.
++ Represents a forward interest rate swap whose effective date of the
exchange of cash flows is April 10, 2006.
FINANCIAL FUTURES CONTRACTS (see Note D)
Value at Unrealized
Number of Expiration Original October 31, Appreciation/
Type Contracts Month Value 2005 (Depreciation)
- -------------------------------------------------------------------------------------------
Purchase Contracts
U.S. T-Bond
Future 28 December 2005 $3,264,730 $3,135,125 $ (129,605)
U.S. T-Note
10 Yr Future 9 December 2005 979,768 976,078 (3,690)
Sold Contracts
Swap
10 Yr Future 7 December 2005 775,443 749,438 26,005
----------
$ (107,290)
----------
- --------------------------------------------------------------------------------
60 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Insured California Portfolio--Portfolio of Investments
- --------------------------------------------------------------------------------
(a) Position with a market value of $6,821,555 has been segregated to
collateralize margin requirements for open futures contracts.
(b) Inverse floater security - security with variable or floating interest
rate that moves in opposite direction of short-term interest rates.
(c) Represents entire or partial position segregated as collateral for
interest rate swap.
(d) 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.
Glossary of Terms:
AMBAC - American Municipal Bond Assurance Corporation
CDD - Community Development District
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Company
FSA - Financial Security Assurance Inc.
GO - General Obligation
HFA - Housing Finance Authority
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-Family Housing Revenue
RADIAN - Radian Group, Inc.
XLCA - XL Capital Assurance Inc.
See notes to financial statements.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 61
Statement of Assets & Liabilities
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
October 31, 2005
Insured
National National
============= =============
Assets
Investments in securities, at value
(cost $426,893,975 and $141,889,001,
respectively) ................................. $ 444,552,411 $ 150,518,435
Cash ............................................. 160,600 164,530
Interest receivable .............................. 7,715,941 2,112,391
Receivable for investment securities sold ........ 3,427,307 6,502,500
Receivable for capital stock sold ................ 1,340,766 483,852
Unrealized appreciation of swap contracts ........ 85,886 136,996
------------- -------------
Total assets ..................................... 457,282,911 159,918,704
============= =============
Liabilities
Payable for investment securities
purchased ..................................... 5,913,288 5,650,823
Payable for capital stock redeemed ............... 1,528,947 756,979
Dividends payable ................................ 627,798 181,095
Distribution fee payable ......................... 182,205 56,541
Unrealized depreciation of swap contracts ........ 88,845 27,889
Advisory fee payable ............................. 82,764 70,717
Transfer Agent fee payable ....................... 47,851 10,894
Administrative fee payable ....................... 6,197 6,213
Accrued expenses and other liabilities ........... 181,128 93,196
------------- -------------
Total liabilities ................................ 8,659,023 6,854,347
------------- -------------
Net Assets ....................................... $ 448,623,888 $ 153,064,357
============= =============
Composition of Net Assets
Capital stock, at par ............................ $ 44,633 $ 15,046
Additional paid-in capital ....................... 483,660,179 146,785,405
Undistributed/distributions in excess of
net investment income ......................... (232,554) 218,607
Accumulated net realized loss on
investment transactions ....................... (52,502,777) (2,693,242)
Net unrealized appreciation
of investments ................................ 17,654,407 8,738,541
------------- -------------
$ 448,623,888 $ 153,064,357
============= =============
- --------------------------------------------------------------------------------
62 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Statement of Assets & Liabilities
- --------------------------------------------------------------------------------
Insured
National National
============= =============
Class A Shares
Net assets ....................................... $ 337,201,433 $ 124,957,517
============= =============
Shares of capital stock outstanding .............. 33,539,817 12,277,680
============= =============
Class B Shares
Net assets ....................................... $ 49,800,630 $ 16,374,722
============= =============
Shares of capital stock outstanding .............. 4,959,004 1,613,069
============= =============
Class C Shares
Net assets ....................................... $ 61,621,825 $ 11,732,118
============= =============
Shares of capital stock outstanding .............. 6,134,180 1,155,159
============= =============
Calculation of Maximum Offering Price
Class A Shares
Net asset value and redemption price
per share ..................................... $ 10.05 $ 10.18
Sales charge--4.25% of public offering
price ......................................... .45 .45
------------- -------------
Maximum offering price ........................... $ 10.50 $ 10.63
============= =============
Class B Shares
Net asset value and offering price
per share ..................................... $ 10.04 $ 10.15
============= =============
Class C Shares
Net asset value and offering price
per share ..................................... $ 10.05 $ 10.16
============= =============
See notes to financial statements.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 63
Statement of Assets & Liabilities
- --------------------------------------------------------------------------------
New York California
============= =============
Assets
Investments in securities, at value
(cost $461,358,255 and $769,069,793,
respectively) ................................. $ 481,523,656 $ 818,782,552
Cash ............................................. 31,236 -0-
Interest receivable .............................. 7,173,004 10,734,615
Receivable for capital stock sold ................ 1,067,241 3,429,109
Receivable for investment securities sold ........ 695,000 9,095,465
Unrealized appreciation of
swap contracts ................................ 64,924 726,066
Receivable for variation margin on
futures contracts ............................. -0- 14,094
------------- -------------
Total assets ..................................... 490,555,061 842,781,901
============= =============
Liabilities
Due to custodian ................................. -0- 49,071
Payable for investment securities
purchased ..................................... 14,183,640 -0-
Payable for capital stock redeemed ............... 1,527,225 3,360,247
Dividends payable ................................ 609,494 1,051,019
Distribution fee payable ......................... 229,058 364,723
Unrealized depreciation of
swap contracts ................................ 113,599 215,673
Advisory fee payable ............................. 29,472 272,303
Transfer Agent fee payable ....................... 28,240 32,371
Administrative fee payable ....................... 6,284 6,210
Payable for variation margin on futures
contracts ..................................... 313 -0-
Accrued expenses ................................. 120,490 193,015
------------- -------------
Total liabilities ................................ 16,847,815 5,544,632
------------- -------------
Net Assets ....................................... $ 473,707,246 $ 837,237,269
============= =============
Composition of Net Assets
Capital stock, at par ............................ $ 48,300 $ 77,079
Additional paid-in capital ....................... 471,021,706 812,193,463
Distributions in excess of
net investment income ......................... (380,582) (1,013,494)
Accumulated net realized loss on
investment transactions ....................... (17,135,429) (24,330,470)
Net unrealized appreciation
of investments ................................ 20,153,251 50,310,691
------------- -------------
$ 473,707,246 $ 837,237,269
============= =============
- --------------------------------------------------------------------------------
64 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Statement of Assets & Liabilities
- --------------------------------------------------------------------------------
New York California
============= =============
Class A Shares
Net assets ....................................... $ 294,004,974 $ 590,042,146
============= =============
Shares of capital stock outstanding .............. 29,964,525 54,317,686
============= =============
Class B Shares
Net assets ....................................... $ 133,746,213 $ 122,127,852
============= =============
Shares of capital stock outstanding .............. 13,648,358 11,245,974
============= =============
Class C Shares
Net assets ....................................... $ 45,956,059 $ 125,067,271
============= =============
Shares of capital stock outstanding .............. 4,687,088 11,515,785
============= =============
Calculation of Maximum Offering Price
Class A Shares
Net asset value and redemption price
per share ..................................... $ 9.81 $ 10.86
Sales charge-4.25% of public offering
price ......................................... .44 .48
------------- -------------
Maximum offering price ........................... $ 10.25 $ 11.34
============= =============
Class B Shares
Net asset value and offering price
per share ..................................... $ 9.80 $ 10.86
============= =============
Class C Shares
Net asset value and offering price
per share ..................................... $ 9.80 $ 10.86
============= =============
See notes to financial statements.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 65
Statement of Assets & Liabilities
- --------------------------------------------------------------------------------
Insured
California
=============
Assets
Investments in securities, at value (cost $121,353,841) .......... $ 127,995,249
Cash ............................................................. 148,025
Receivable for investment securities sold ........................ 1,691,172
Interest receivable .............................................. 1,477,150
Receivable for capital stock sold ................................ 29,082
Unrealized appreciation of swap contracts ........................ 67,321
Receivable for variation margin on futures contracts ............. 4,875
-------------
Total assets ..................................................... 131,412,874
-------------
Liabilities
Payable for capital stock redeemed ............................... 129,277
Dividends payable ................................................ 145,490
Distribution fee payable ......................................... 54,027
Advisory fee payable ............................................. 50,565
Unrealized depreciation of swap contracts ........................ 35,028
Administrative fee payable ....................................... 6,277
Transfer Agent fee payable ....................................... 5,484
Accrued expenses ................................................. 77,270
-------------
Total liabilities ................................................ 503,418
-------------
Net Assets ....................................................... $ 130,909,456
=============
Composition of Net Assets
Capital stock, at par ............................................ $ 9,343
Additional paid-in capital ....................................... 122,257,109
Distributions in excess of net investment income ................. (142,859)
Accumulated net realized gain on investment transactions ......... 2,219,452
Net unrealized appreciation of investments ....................... 6,566,411
-------------
$ 130,909,456
=============
Class A Shares
Net assets ....................................................... $ 97,079,080
=============
Shares of capital stock outstanding .............................. 6,927,619
=============
Class B Shares
Net assets ....................................................... $ 15,626,486
=============
Shares of capital stock outstanding .............................. 1,115,655
=============
Class C Shares
Net assets ....................................................... $ 18,203,890
=============
Shares of capital stock outstanding .............................. 1,299,855
=============
Calculation of Maximum Offering Price
Class A Shares
Net asset value and redemption price per share ................... $ 14.01
Sales charge--4.25% of public offering price ..................... .62
-------------
Maximum offering price ........................................... $ 14.63
=============
Class B Shares
Net asset value and offering price per share ..................... $ 14.01
=============
Class C Shares
Net asset value and offering price per share ..................... $ 14.00
=============
See notes to financial statements.
- --------------------------------------------------------------------------------
66 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Statement of Operations
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended October 31, 2005
Insured
National National
============= =============
Investment Income
Interest ......................................... $ 24,978,376 $ 8,104,122
------------- -------------
Expenses
Advisory fee ..................................... 2,107,426 713,409
Distribution fee--Class A ........................ 1,023,662 380,563
Distribution fee--Class B ........................ 614,888 197,073
Distribution fee--Class C ........................ 656,075 119,738
Transfer agency .................................. 357,527 117,854
Custodian ........................................ 182,541 133,819
Printing ......................................... 111,106 34,486
Administrative ................................... 72,500 72,500
Legal ............................................ 41,830 20,545
Registration fees ................................ 38,869 37,655
Audit ............................................ 38,028 34,870
Directors' fees and expenses ..................... 5,841 5,363
Miscellaneous .................................... 16,640 6,853
------------- -------------
Total expenses ................................... 5,266,933 1,874,728
Less: advisory fee waived (see Note B) ........... (1,191,067) (3,721)
Less: expense offset arrangement
(see Note B) .................................. (1,638) (471)
------------- -------------
Net expenses ..................................... 4,074,228 1,870,536
------------- -------------
Net investment income ............................ 20,904,148 6,233,586
------------- -------------
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized gain (loss) on:
Investment transactions ....................... 2,633,319 1,433,290
Futures contracts ............................. 101,149 (91,233)
Swap contracts ................................ 103,591 (26,169)
Net change in unrealized
appreciation/depreciation of:
Investments ................................... (6,120,306) (3,278,631)
Futures contracts ............................. -0- 196,993
Swap contracts ................................ (103,352) 77,247
------------- -------------
Net loss on investment transactions .............. (3,385,599) (1,688,503)
------------- -------------
Net Increase in Net Assets from
Operations .................................... $ 17,518,549 $ 4,545,083
============= =============
See notes to financial statements.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 67
Statement of Operations
- --------------------------------------------------------------------------------
New York California
============= =============
Investment Income
Interest ......................................... $ 24,573,243 $ 44,885,257
------------- -------------
Expenses
Advisory fee ..................................... 2,124,794 3,938,176
Distribution fee--Class A ........................ 847,736 1,769,077
Distribution fee--Class B ........................ 1,446,393 1,514,436
Distribution fee--Class C ........................ 449,584 1,340,142
Transfer agency .................................. 304,312 368,206
Custodian ........................................ 175,864 247,188
Printing ......................................... 89,987 124,100
Administrative ................................... 72,500 72,500
Legal ............................................ 41,229 48,252
Audit ............................................ 34,968 34,712
Registration fees ................................ 18,774 19,941
Directors' fees and expenses ..................... 4,666 5,445
Miscellaneous .................................... 23,531 37,998
------------- -------------
Total expenses ................................... 5,634,338 9,520,173
Less: advisory fee waived (see Note B) ........... (1,567,210) (781,672)
Less: expense offset arrangement
(see Note B) .................................. (1,322) (1,639)
------------- -------------
Net expenses ..................................... 4,065,806 8,736,862
------------- -------------
Net investment income ............................ 20,507,437 36,148,395
------------- -------------
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized gain (loss) on:
Investment transactions ....................... 2,486,058 9,066,020
Futures contracts ............................. 181,540 (927,316)
Swap contracts ................................ (681) (152,688)
Net change in unrealized
appreciation/depreciation of:
Investments ................................... (8,228,719) (15,101,315)
Futures contracts ............................. (237,821) 1,520,293
Swap contracts ................................ 2,110 332,341
------------- -------------
Net loss on investment transactions .............. (5,797,513) (5,262,665)
------------- -------------
Net Increase in Net Assets from
Operations .................................... $ 14,709,924 $ 30,885,730
============= =============
See notes to financial statements.
- --------------------------------------------------------------------------------
68 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Statement of Operations
- --------------------------------------------------------------------------------
Insured
California
=============
Investment Income
Interest ......................................................... $ 6,858,737
-------------
Expenses
Advisory fee ..................................................... 615,537
Distribution fee--Class A ........................................ 297,300
Distribution fee--Class B ........................................ 188,503
Distribution fee--Class C ........................................ 188,356
Custodian ........................................................ 130,015
Administrative ................................................... 72,500
Transfer agency .................................................. 59,034
Audit ............................................................ 35,553
Legal ............................................................ 29,861
Printing ......................................................... 14,354
Registration fees ................................................ 13,500
Directors' fees and expenses ..................................... 4,590
Miscellaneous .................................................... 17,682
-------------
Total expenses ................................................... 1,666,785
Less: expense offset arrangement
(see Note B) .................................................. (189)
-------------
Net expenses ..................................................... 1,666,596
-------------
Net investment income ............................................ 5,192,141
-------------
Realized and Unrealized Gain (Loss) on
Investment Transactions
Net realized gain on:
Investment transactions ....................................... 2,117,951
Futures contracts ............................................. 81,538
Swap contracts ................................................ 5,966
Net change in unrealized
appreciation/depreciation of:
Investments ................................................... (4,060,230)
Futures contracts ............................................. (10,787)
Swap contracts ................................................ 10,123
-------------
Net loss on investment transactions .............................. (1,855,439)
-------------
Net Increase in Net Assets from Operations ....................... $ 3,336,702
=============
See notes to financial statements.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 69
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
National
==============================
Year Ended Year Ended
October 31, October 31,
2005 2004
============= =============
Increase (Decrease) in Net Assets
from Operations
Net investment income ............................ $ 20,904,148 $ 24,366,623
Net realized gain on investment
transactions .................................. 2,838,059 3,113,816
Net change in unrealized
appreciation/depreciation of
investments ................................... (6,223,658) 6,224,758
------------- -------------
Net increase in net assets
from operations ............................... 17,518,549 33,705,197
Dividends to Shareholders from
Net investment income
Class A ....................................... (15,963,828) (17,799,171)
Class B ....................................... (2,450,437) (3,770,465)
Class C ....................................... (2,615,269) (3,217,276)
Capital Stock Transactions
Net decrease ..................................... (33,454,693) (80,198,932)
------------- -------------
Total decrease ................................... (36,965,678) (71,280,647)
Net Assets
Beginning of period .............................. 485,589,566 556,870,213
------------- -------------
End of period (including distributions
in excess of net investment income
of ($232,554) and ($640,472),
respectively) ................................. $ 448,623,888 $ 485,589,566
============= =============
See notes to financial statements.
- --------------------------------------------------------------------------------
70 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Insured National
==============================
Year Ended Year Ended
October 31, October 31,
2005 2004
============= =============
Increase (Decrease) in Net Assets
from Operations
Net investment income ............................ $ 6,233,586 $ 7,186,751
Net realized gain on investment
transactions .................................. 1,315,888 274,358
Net change in unrealized
appreciation/depreciation of
investments ................................... (3,004,391) 3,023,422
------------- -------------
Net increase in net assets from
operations .................................... 4,545,083 10,484,531
Dividends to Shareholders from
Net investment income
Class A ....................................... (5,178,839) (5,905,957)
Class B ....................................... (670,798) (1,108,189)
Class C ....................................... (406,577) (511,793)
Capital Stock Transactions
Net decrease ..................................... (10,278,839) (25,474,760)
------------- -------------
Total decrease ................................... (11,989,970) (22,516,168)
Net Assets
Beginning of period .............................. 165,054,327 187,570,495
------------- -------------
End of period (including undistributed
net investment income of $218,607,
and $218,127, respectively) ................... $ 153,064,357 $ 165,054,327
============= =============
See notes to financial statements.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 71
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
New York
==============================
Year Ended Year Ended
October 31, October 31,
2005 2004
============= =============
Increase (Decrease) in Net Assets
from Operations
Net investment income ............................ $ 20,507,437 $ 22,889,310
Net realized gain on investment
transactions .................................. 2,666,917 4,704,523
Net change in unrealized
appreciation/depreciation of
investments ................................... (8,464,430) 2,594,027
------------- -------------
Net increase in net assets from
operations .................................... 14,709,924 30,187,860
Dividends to Shareholders from
Net investment income
Class A ....................................... (13,054,686) (14,205,327)
Class B ....................................... (5,686,805) (6,854,476)
Class C ....................................... (1,765,080) (2,052,427)
Capital Stock Transactions
Net increase (decrease) .......................... 2,697,090 (65,951,705)
------------- -------------
Total decrease ................................... (3,099,557) (58,876,075)
Net Assets
Beginning of period .............................. 476,806,803 535,682,878
------------- -------------
End of period (including distributions
in excess of net investment income
of ($380,582) and ($416,128),
respectively) ................................. $ 473,707,246 $ 476,806,803
============= =============
See notes to financial statements.
- --------------------------------------------------------------------------------
72 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
California
==============================
Year Ended Year Ended
October 31, October 31,
2005 2004
============= =============
Increase (Decrease) in Net Assets
from Operations
Net investment income ............................ $ 36,148,395 $ 43,461,349
Net realized gain on investment
transactions .................................. 7,986,016 10,411,627
Net change in unrealized
appreciation/depreciation of
investments ................................... (13,248,681) 16,043,975
------------- -------------
Net increase in net assets from
operations .................................... 30,885,730 69,916,951
Dividends to Shareholders from
Net investment income
Class A ....................................... (25,712,923) (28,909,395)
Class B ....................................... (5,556,168) (8,383,891)
Class C ....................................... (4,914,162) (6,227,673)
Capital Stock transactions
Net decrease ..................................... (61,585,736) (174,293,229)
------------- -------------
Total decrease ................................... (66,883,259) (147,897,237)
Net Assets
Beginning of period .............................. 904,120,528 1,052,017,765
------------- -------------
End of period (including distributions
in excess of net investment income
of ($1,013,494) and ($1,119,724),
respectively) ................................. $ 837,237,269 $ 904,120,528
============= =============
See notes to financial statements.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 73
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Insured California
==============================
Year Ended Year Ended
October 31, October 31,
2005 2004
============= =============
Increase (Decrease) in Net Assets
from Operations
Net investment income ............................ $ 5,192,141 $ 6,554,307
Net realized gain on investment
transactions .................................. 2,205,455 166,181
Net change in unrealized
appreciation/depreciation of
investments ................................... (4,060,894) 1,683,673
------------- -------------
Net increase in net assets from
operations .................................... 3,336,702 8,404,161
Dividends to Shareholders from
Net investment income
Class A ....................................... (3,949,909) (4,940,332)
Class B ....................................... (620,847) (914,071)
Class C ....................................... (619,928) (767,377)
Capital Stock Transactions
Net decrease ..................................... (11,812,030) (33,260,007)
------------- -------------
Total decrease ................................... (13,666,012) (31,477,626)
Net Assets
Beginning of period .............................. 144,575,468 176,053,094
------------- -------------
End of period (including distributions
in excess of net investment income
of ($142,859) and ($165,837),
respectively) ................................. $ 130,909,456 $ 144,575,468
============= =============
See notes to financial statements.
- --------------------------------------------------------------------------------
74 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
October 31, 2005
NOTE A
Significant Accounting Policies
AllianceBernstein Municipal Income Fund, Inc. (the "Fund"), is registered under
the Investment Company Act of 1940 as an open-end management investment company.
The Fund, which is a Maryland corporation, operates as a series company
currently comprised of five portfolios: National Portfolio, Insured National
Portfolio, New York Portfolio, California Portfolio and Insured California
Portfolio (the "Portfolios"). Each of the State Portfolios are non-diversified.
Each series is considered to be a separate entity for financial reporting and
tax purposes. Each Portfolio offers three classes of shares: Class A, Class B
and Class C Shares. Class A shares are sold with a front-end sales charge of up
to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of
$1,000,000 or more, Class A shares redeemed within one year of purchase may be
subject to a contingent deferred sales charge of 1%. Class B shares are
currently sold with a contingent deferred sales charge which declines from 3% to
zero depending on the period of time the shares are held. Class B shares will
automatically convert to Class A shares six years after the end of the calendar
month of purchase. Class C shares are subject to a contingent deferred sales
charge of 1% on redemptions made within the first year after purchase. All three
classes of shares have identical voting, dividend, liquidation and other rights,
except that each class bears different distribution expenses and has exclusive
voting rights with respect to its distribution plan. The 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. Additional information about
some of the items discussed in these notes to financial statements is contained
in the Fund's Statement of Additional Information, which is available upon
request. The following is a summary of significant accounting policies followed
by the Fund.
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 values of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 not listed
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 75
Notes to Financial Statements
- --------------------------------------------------------------------------------
on an exchange but traded on The NASDAQ Stock Market, Inc. ("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) (but excluding securities traded on NASDAQ) 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, Alliance Capital Management, L.P. (the
"Adviser") may establish procedures whereby changes in market yields or spreads
are used to adjust, on a daily basis, a recently obtained quoted price on a
security; and OTC and other derivatives are valued on the basis of a quoted bid
price or spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not limited
to, information obtained by contacting the issuer, analysts, analysis of the
issuer's financial statements or other available documents. In addition, the
Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund values its
securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim and may materially affect the
value of those securities.
2. Taxes
It is each Portfolio's 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 trade date 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
- --------------------------------------------------------------------------------
76 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Notes to Financial Statements
- --------------------------------------------------------------------------------
Investment Company Act of 1940. Each Portfolio has adopted procedures to ensure
that all such transactions are done in accordance with the requirements of Rule
17a-7. Investment gains and losses are determined on the identified cost basis.
The Portfolios amortize premiums and accrete original issue discount and market
discount as adjustments to interest income.
The New York, Insured California and California Portfolios follow an investment
policy of investing primarily in municipal obligations of one state. Economic
changes affecting the state and certain of its public bodies and municipalities
may affect the ability of issuers within the state to pay interest on, or repay
principal of, municipal obligations held by the Portfolios.
4. Income and Expenses
All income earned and expenses incurred by the Portfolios are borne on a
pro-rata basis by each settled class of shares, based on proportionate interest
in each Portfolio represented by the net assets of such class, except that each
Portfolio's Class B and Class C shares bear higher distribution and transfer
agent fees than Class A shares. Expenses of the Fund are charged to each
Portfolio in proportion to 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 B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser
an advisory fee at an annual rate of .45% of the first $2.5 billion, .40% of the
next $2.5 billion and .35% in excess of $5 billion, of each Portfolio's average
daily net assets. Prior to September 7, 2004, the National, New York and
California Portfolios paid the Adviser an advisory fee at an annual rate of
..625% of each Portfolio's average daily net assets. For the Insured National
Portfolio, the Agreement provided for a fee at an annual rate of up to .625% of
the first $200 million, .50% of the next $200 million and .45% in excess of $400
million of its average daily net assets. For the Insured California Portfolio,
the Agreement provided for a fee at an annual rate of up to .55% of the first
$200 million, .50% of the next $200 million and .45% in excess of $400 million
of its average daily net assets. Such fee is accrued daily and paid monthly.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 77
Notes to Financial Statements
- --------------------------------------------------------------------------------
Effective January 1, 2004 through September 6, 2004, in contemplation of the
final agreement with the Office of New York Attorney General ("NYAG"), the
Advisor began waiving a portion of its advisory fee so as to charge the Fund at
the reduced annual rate discussed above. For a more complete discussion of the
Adviser's settlement with the NYAG, please see "Legal Proceedings" below.
Effective June 16, 2004, the Adviser has agreed to waive its fees and bear
certain expenses to the extent necessary to limit the total portfolio operating
expenses on an annual basis as follows:
Portfolios Class A Class B Class C
- ----------------------------------------------------------------------------
National ................ .68% 1.38% 1.38%
Insured National ........ 1.04% 1.74% 1.74%
New York ................ .58% 1.28% 1.28%
California .............. .77% 1.47% 1.47%
For the year ended October 31, 2005, such reimbursement waivers amounted to
$1,191,067, $3,721, $1,567,210 and $781,672 for National, Insured National, New
York and California Portfolios, respectively.
Pursuant to the advisory agreement, the National, Insured National, New York,
California and Insured California Portfolios each paid $72,500 to the Adviser
representing the cost of certain legal and accounting services provided to each
portfolio by the Adviser for the year ended October 31, 2005.
Each Portfolio compensates Alliance Global Investor Services, Inc. (AGIS), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for each
Portfolio. AGIS may make payments to intermediaries that provide omnibus account
services, sub-accounting services and/or networking services. Such compensation
retained by AGIS amounted to: National Portfolio, $227,951; Insured National
Portfolio, $70,628; New York Portfolio, $169,841; California Portfolio, $193,014
and Insured California Portfolio, $29,743 for the year ended October 31, 2005.
For the year ended October 31, 2005, the Fund's expenses were reduced by:
National Portfolio $1,638; Insured National Portfolio $471; New York Portfolio
$1,322; California Portfolio $1,639 and Insured California Portfolio, $189 under
an expense offset arrangement with AGIS.
AllianceBernstein Investment Research and Management, Inc. (the "Distributor"),
a wholly-owned subsidiary of the Adviser, serves as the distributor of the
Fund's shares. The Distributor has advised the Fund that it has received
front-end sales charges from sales of Class A shares and contingent deferred
sales
- --------------------------------------------------------------------------------
78 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Notes to Financial Statements
- --------------------------------------------------------------------------------
charges imposed upon redemptions by shareholders of Class A, Class B and Class C
shares for the year ended October 31, 2005 as follows:
Front-End Contingent Deferred Sales Charges
Sales Charges ---------------------------------
Portfolio Class A Class A Class B Class C
- -------------------------------------------------------------------------------
National ................... $ 24,475 $ 2,728 $ 25,006 $ 4,204
Insured National ........... 7,563 2,555 16,510 3,243
New York ................... 41,670 -0- 62,993 4,524
California ................. 37,213 2,557 54,633 11,255
Insured California ......... 5,566 -0- 14,557 1,061
Accrued expenses for the National Portfolio includes $561 owed to a director
under the trust's deferred compensation plan.
NOTE C
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, each Portfolio pays distribution and servicing fees to the
Distributor at an annual rate of up to .30 of 1% of each Portfolio's average
daily net assets attributable to the Class A shares and 1% of each Portfolio's
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. The Distributor has incurred expenses in excess of
the distribution costs reimbursed by each Portfolio as follows:
Portfolio Class B Class C
========= ============= =============
National ........................... $ 4,034,625 $ 4,622,241
Insured National ................... 3,643,952 1,877,098
New York ........................... 7,746,758 2,702,986
California ......................... 7,753,160 5,680,423
Insured California ................. 3,092,838 1,717,165
Such costs may be recovered from each Portfolio in future periods so long as the
Agreement is in effect. In accordance with the Agreement, there is no provision
for recovery of unreimbursed distribution costs incurred by the Distributor
beyond the current fiscal year for Class A shares. The Agreement also provides
that the Adviser may use its own resources to finance the distribution of each
Portfolio's shares.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 79
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the year ended October 31, 2005 were as follows:
Portfolio Purchases Sales
========= ============= =============
National ............................ $ 114,191,655 $ 155,988,174
Insured National .................... 26,227,493 39,254,051
New York ............................ 96,259,926 91,027,543
California .......................... 147,637,297 217,570,788
Insured California .................. 49,447,001 72,258,774
There were no purchases or sales of U.S. government and government agency
obligations for the year ended October 31, 2005.
At October 31, 2005, the cost of investments for federal income tax purposes,
gross unrealized appreciation and unrealized depreciation (excluding futures and
swap transactions) are as follows:
Gross Unrealized Net
============================ Unrealized
Portfolio Cost Appreciation (Depreciation) Appreciation
==================================================================================
National ............ $ 427,263,350 $ 18,911,013 $ (1,621,952) $ 17,289,061
Insured National .... 142,096,096 8,659,077 (236,738) 8,422,339
New York ............ 461,833,135 21,081,777 (1,391,256) 19,690,521
California .......... 770,099,851 50,597,990 (1,915,289) 48,682,701
Insured California .. 121,353,841 7,041,216 (399,808) 6,641,408
1. Financial Futures Contracts
The Fund may buy or sell financial futures contracts for the purpose of hedging
its portfolio against adverse affects of anticipated movements in the market.
The Fund bears the market risk that arises from changes in the value of these
financial instruments and the imperfect correlation between movements in the
price of the futures contracts and movements in the price of the securities
hedged or used for cover.
At the time the Fund enters into a futures contract, the Fund deposits and
maintains as collateral an initial margin as required by the exchange on which
the transaction is effected. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are known as
variation margin and
- --------------------------------------------------------------------------------
80 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Notes to Financial Statements
- --------------------------------------------------------------------------------
are recorded by the Fund as unrealized gains or losses. Risks may arise from the
potential inability of a counterparty to meet the terms of the contract. When
the contract is closed, the Fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
time it was closed.
2. Swap Agreements
The Fund may enter into swaps to hedge its exposure to interest rates and credit
risk or for investment purposes. A swap is an agreement that obligates two
parties to exchange a series of cash flows at specified intervals based upon or
calculated by reference to changes in specified prices or rates for a specified
amount of an underlying asset. The payment flows are usually netted against each
other, with the difference being paid by one party to the other.
Risks may arise as a result of the failure of the counterparty to the swap
contract to comply with the terms of the swap contract. The loss incurred by the
failure of a counterparty is generally limited to the net interim payment to be
received by the Fund, and/or the termination value at the end of the contract.
Therefore, the Fund considers the creditworthiness of each counterparty to a
swap contract in evaluating potential credit risk. Additionally, risks may arise
from unanticipated movements in interest rates or in the value of the underlying
securities.
As of November 1, 2003, the Fund has adopted the method of accounting for
interim payments on swap contracts in accordance with Financial Accounting
Standards Board Statement No. 133. The Fund accrues for the interim payments on
swap contracts on a daily basis, with the net amount recorded within unrealized
appreciation/depreciation of swap contracts on the statement of assets and
liabilities. Once the interim payments are settled in cash, the net amount is
recorded as realized gain/loss on swaps, in addition to realized gain/loss
recorded upon the termination of swap contracts on the statement of operations.
Prior to November 1, 2003, these interim payments were reflected within interest
income/expense in the statement of operations. Fluctuations in the value of swap
contracts are recorded as a component of net change in unrealized
appreciation/depreciation of investments.
NOTE E
Capital Stock
The Fund has 3,000,000,000 shares of $.001 par value capital stock authorized,
divided into three classes, designated as Class A, Class B and Class C shares.
Each
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 81
Notes to Financial Statements
- --------------------------------------------------------------------------------
Portfolio class consists of 200,000,000 authorized shares. Transactions in
capital stock were as follows:
--------------------------------- -----------------------------------
Shares Amount
--------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
National Portfolio 2005 2004 2005 2004
- -----------------------------------------------------------------------------------------------------
Class A
Shares sold 2,169,106 2,106,313 $ 22,038,954 $ 21,206,306
- -----------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 1,016,683 1,062,068 10,332,816 10,700,580
- -----------------------------------------------------------------------------------------------------
Shares converted
from Class B 1,237,740 908,105 12,575,580 9,149,675
- -----------------------------------------------------------------------------------------------------
Shares redeemed (4,882,449) (7,574,363) (49,621,231) (76,128,944)
- -----------------------------------------------------------------------------------------------------
Net decrease (458,920) (3,497,877) $ (4,673,881) $ (35,072,383)
=====================================================================================================
Class B
Shares sold 539,179 578,587 $ 5,476,906 $ 5,842,291
- -----------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 162,344 219,683 1,647,470 2,211,420
- -----------------------------------------------------------------------------------------------------
Shares converted
to Class A (1,238,960) (909,487) (12,575,580) (9,149,675)
- -----------------------------------------------------------------------------------------------------
Shares redeemed (1,642,058) (2,931,579) (16,670,311) (29,317,272)
- -----------------------------------------------------------------------------------------------------
Net decrease (2,179,495) (3,042,796) $ (22,121,515) $ (30,413,236)
=====================================================================================================
Class C
Shares sold 496,836 439,534 $ 5,044,011 $ 4,427,586
- -----------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 147,406 168,949 1,496,899 1,700,732
- -----------------------------------------------------------------------------------------------------
Shares redeemed (1,301,218) (2,074,718) (13,200,207) (20,841,631)
- -----------------------------------------------------------------------------------------------------
Net decrease (656,976) (1,466,235) $ (6,659,297) $ (14,713,313)
=====================================================================================================
- --------------------------------------------------------------------------------
82 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Notes to Financial Statements
- --------------------------------------------------------------------------------
------------------------------ ---------------------------------
Shares Amount
------------------------------ ---------------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
Insured National Portfolio 2005 2004 2005 2004
- ---------------------------------------------------------------------------------------------------------
Class A
Shares sold 880,450 663,909 $ 9,056,371 $ 6,797,650
- ---------------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 313,426 314,725 3,226,217 3,210,143
- ---------------------------------------------------------------------------------------------------------
Shares converted
from Class B 294,647 314,704 3,029,121 3,204,389
- ---------------------------------------------------------------------------------------------------------
Shares redeemed (1,833,727) (2,436,297) (18,852,138) (24,802,001)
- ---------------------------------------------------------------------------------------------------------
Net decrease (345,204) (1,142,959) $ (3,540,429) $(11,589,819)
=========================================================================================================
Class B
Shares sold 203,316 187,387 $ 2,088,215 $ 1,914,256
- ---------------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 42,968 67,644 441,072 688,458
- ---------------------------------------------------------------------------------------------------------
Shares converted
to Class A (295,467) (315,535) (3,029,121) (3,204,389)
- ---------------------------------------------------------------------------------------------------------
Shares redeemed (575,604) (1,096,825) (5,908,162) (11,106,033)
- ---------------------------------------------------------------------------------------------------------
Net decrease (624,787) (1,157,329) $ (6,407,996) $(11,707,708)
=========================================================================================================
Class C
Shares sold 165,914 135,329 $ 1,705,216 $ 1,384,233
- ---------------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 15,550 20,113 159,710 204,719
- ---------------------------------------------------------------------------------------------------------
Shares redeemed (214,218) (369,493) (2,195,340) (3,766,185)
- ---------------------------------------------------------------------------------------------------------
Net decrease (32,754) (214,051) $ (330,414) $ (2,177,233)
=========================================================================================================
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 83
Notes to Financial Statements
- --------------------------------------------------------------------------------
--------------------------------- -----------------------------------
Shares Amount
--------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
New York Portfolio 2005 2004 2005 2004
- -----------------------------------------------------------------------------------------------------
Class A
Shares sold 3,926,953 2,422,050 $ 39,021,649 $ 23,861,758
- -----------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 963,742 1,009,825 9,574,279 9,941,832
- -----------------------------------------------------------------------------------------------------
Shares converted
from Class B 1,328,078 1,018,102 13,202,828 10,022,329
- -----------------------------------------------------------------------------------------------------
Shares redeemed (4,470,905) (8,061,705) (44,406,239) (79,561,547)
- -----------------------------------------------------------------------------------------------------
Net increase
(decrease) 1,747,868 (3,611,728) $ 17,392,517 $ (35,735,628)
=====================================================================================================
Class B
Shares sold 1,926,045 2,250,287 $ 19,122,910 $ 22,104,831
- -----------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 432,906 473,978 4,294,873 4,660,130
- -----------------------------------------------------------------------------------------------------
Shares converted
to Class A (1,329,811) (1,019,366) (13,202,828) (10,022,329)
- -----------------------------------------------------------------------------------------------------
Shares redeemed (2,652,730) (4,010,210) (26,320,114) (39,249,636)
- -----------------------------------------------------------------------------------------------------
Net decrease (1,623,590) (2,305,311) $ (16,105,159) $ (22,507,004)
=====================================================================================================
Class C
Shares sold 676,261 353,153 $ 6,723,393 $ 3,469,107
- -----------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 115,667 122,716 1,148,115 1,207,406
- -----------------------------------------------------------------------------------------------------
Shares redeemed (651,483) (1,265,156) (6,461,776) (12,385,586)
- -----------------------------------------------------------------------------------------------------
Net increase
(decrease) 140,445 (789,287) $ 1,409,732 $ (7,709,073)
=====================================================================================================
- --------------------------------------------------------------------------------
84 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Notes to Financial Statements
- --------------------------------------------------------------------------------
--------------------------------- -----------------------------------
Shares Amount
--------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
California Portfolio 2005 2004 2005 2004
- -----------------------------------------------------------------------------------------------------
Class A
Shares sold 4,523,661 4,313,305 $ 49,667,277 $ 46,524,777
- -----------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 1,481,158 1,565,519 16,261,227 16,901,277
- -----------------------------------------------------------------------------------------------------
Shares converted
from Class B 2,379,633 1,341,372 26,135,781 14,482,317
- -----------------------------------------------------------------------------------------------------
Shares redeemed (7,830,684) (14,100,595) (85,984,334) (151,643,233)
- -----------------------------------------------------------------------------------------------------
Net increase
(decrease) 553,768 (6,880,399) $ 6,079,951 $ (73,734,862)
=====================================================================================================
Class B
Shares sold 369,481 623,013 $ 4,060,353 $ 6,737,003
- -----------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 339,891 482,633 3,728,943 5,211,465
- -----------------------------------------------------------------------------------------------------
Shares converted
to Class A (2,379,792) (1,341,787) (26,135,781) (14,482,317)
- -----------------------------------------------------------------------------------------------------
Shares redeemed (3,112,103) (6,042,269) (34,127,186) (64,850,399)
- -----------------------------------------------------------------------------------------------------
Net decrease (4,782,523) (6,278,410) $ (52,473,671) $ (67,384,248)
=====================================================================================================
Class C
Shares sold 639,970 736,060 $ 7,015,694 $ 7,949,969
- -----------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 229,716 267,954 2,520,877 2,892,849
- -----------------------------------------------------------------------------------------------------
Shares redeemed (2,254,450) (4,094,746) (24,728,587) (44,016,937)
- -----------------------------------------------------------------------------------------------------
Net decrease (1,384,764) (3,090,732) $ (15,192,016) $ (33,174,119)
=====================================================================================================
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 85
Notes to Financial Statements
- --------------------------------------------------------------------------------
------------------------------ ---------------------------------
Shares Amount
------------------------------ ---------------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
Insured California Portfolio 2005 2004 2005 2004
- ---------------------------------------------------------------------------------------------------------
Class A
Shares sold 393,065 311,027 $ 5,586,379 $ 4,392,860
- ---------------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 166,504 192,258 2,364,804 2,720,559
- ---------------------------------------------------------------------------------------------------------
Shares converted
from Class B 84,972 127,615 1,209,910 1,798,159
- ---------------------------------------------------------------------------------------------------------
Shares redeemed (996,530) (2,248,715) (14,120,616) (31,557,790)
- ---------------------------------------------------------------------------------------------------------
Net decrease (351,989) (1,617,815) $ (4,959,523) $(22,646,212)
=========================================================================================================
Class B
Shares sold 39,730 126,832 $ 566,584 $ 1,809,363
- ---------------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 28,746 40,644 408,009 575,164
- ---------------------------------------------------------------------------------------------------------
Shares converted
to Class A (84,985) (127,663) (1,209,910) (1,798,159)
- ---------------------------------------------------------------------------------------------------------
Shares redeemed (386,094) (609,915) (5,473,138) (8,598,143)
- ---------------------------------------------------------------------------------------------------------
Net decrease (402,603) (570,102) $ (5,708,455) $ (8,011,775)
=========================================================================================================
Class C
Shares sold 113,212 169,523 $ 1,603,951 $ 2,409,230
- ---------------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 27,382 33,934 388,653 479,739
- ---------------------------------------------------------------------------------------------------------
Shares redeemed (221,483) (388,546) (3,136,656) (5,490,989)
- ---------------------------------------------------------------------------------------------------------
Net decrease (80,889) (185,089) $ (1,144,052) $ (2,602,020)
=========================================================================================================
NOTE F
Risks Involved in Investing in the Fund
Concentration of Credit Risk--The Portfolios of the AllianceBernstein Municipal
Income Fund are State Portfolios that may invest a large portion of their assets
in a particular state's municipal securities and their various political
subdivisions, and the performance of each of these Portfolios may be closely
tied to economic conditions within the applicable state and the financial
condition of that state and its agencies and municipalities.
Indemnification Risk--In the ordinary course of business, the Fund enters into
contracts that contain a variety of indemnifications. The Fund's maximum
exposure under these arrangements is unknown. However, the Fund has not had
prior claims or losses pursuant to these indemnification provisions and expects
the risk of loss thereunder to be remote.
- --------------------------------------------------------------------------------
86 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE G
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $250 million revolving credit facility (the "Facility")
intended to provide short-term financing if necessary, subject to certain
restrictions, in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the year ended October 31, 2005.
NOTE H
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended October
31, 2005 and 2004 were as follows:
National Portfolio 2005 2004
============= =============
Distributions paid from:
Ordinary income ........................ $ 687,169 $ 736,836
Tax-exempt income ...................... 20,342,365 24,050,076
------------- -------------
Total distributions paid ................. $ 21,029,534 $ 24,786,912
============= =============
As of October 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed tax-exempt net investment income ............ $ 410,701
Accumulated capital and other losses ...................... (52,133,402)(a)
Unrealized appreciation ................................... 17,269,575(b)
-------------
Total accumulated earnings/(deficit) ...................... $ (34,453,126)(c)
=============
(a) On October 31, 2005, the Portfolio had a net capital loss carryforward of
$52,133,402, of which $9,864,810 expires in the year 2007, $18,808,737
expires in the year 2008, $12,984,821 expires in the year 2010 and
$10,475,034 expires in the year 2011. To the extent future capital gains
are offset by capital loss carryforward, such gains will not be
distributed. During the fiscal year ended October 31, 2005, the Portfolio
utilized capital loss carryforwards of $2,296,682.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral
of losses on wash sales, and the difference between the book and tax
treatment of swap income.
(c) The difference between book-basis and tax-basis components of accumulated
earnings/(deficit) is attributable primarily to dividends payable.
During the current fiscal year, permanent differences primarily due to the tax
treatment of sales of defaulted securities and tax treatment of swap income,
resulted in a net decrease of distribution in excess of net investment income
and an increase in accumulated net realized loss on investment transactions.
This reclassification had no effect on net assets.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 87
Notes to Financial Statements
- --------------------------------------------------------------------------------
Insured National Portfolio 2005 2004
============= =============
Distributions paid from:
Ordinary income ........................ $ 37,917 $ 12,360
Tax-exempt income ...................... 6,218,297 7,513,579
------------- -------------
Total distributions paid ................. $ 6,256,214 $ 7,525,939
============= =============
As of October 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income ............................. $ 394,739
Accumulated capital and other losses ...................... (2,486,146)(a)
Unrealized appreciation ................................... 8,536,408(b)
-------------
Total accumulated earnings/(deficit) ...................... $ 6,445,001(c)
=============
(a) On October 31, 2005, the Portfolio had a net capital loss carryforward of
$2,486,146, of which $472,211 expires in the year 2007, $1,593,951 in 2008
and $419,984 expires in the year 2010. To the extent future capital gains
are offset by capital loss carryforward, such gains will not be
distributed. During the fiscal year ended October 31, 2005, the Portfolio
utilized capital loss carryforwards of $1,402,812.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral
of losses on wash sales and the realization for tax purpose of gain/losses
on certain derivative instruments, and the difference between the book and
tax treatment of swap income.
(c) The difference between book-basis and tax-basis components of accumulated
earnings/ (deficit) is attributable primarily to dividends payable.
During the current fiscal year, permanent differences, primarily due to the tax
treatment of swap income, resulted in a net increase of undistributed net
investment income, and an increase in accumulated net realized loss on
investment transactions. This reclassification had no effect on net assets.
New York Portfolio 2005 2004
============= =============
Distributions paid from:
Ordinary income ........................ $ 203,413 $ -0-
Tax-exempt income ...................... 20,303,158 23,112,230
------------- -------------
Total distributions paid ................. $ 20,506,571 $ 23,112,230
============= =============
- --------------------------------------------------------------------------------
88 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Notes to Financial Statements
- --------------------------------------------------------------------------------
As of October 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed tax-exempt net investment income ............ $ 213,485
Accumulated capital and other losses ...................... (16,624,024)(a)
Unrealized appreciation/(depreciation) .................... 19,657,273(b)
-------------
Total accumulated earnings/(deficit) ...................... $ 3,246,734(c)
=============
(a) On October 31, 2005, the Portfolio had a net capital loss carryforward of
$16,624,024, of which $5,878,712 expires in the year 2008, $6,973,404
expires in the year 2009 and $3,771,908 expires in the year 2011. To the
extent future capital gains are offset by capital loss carryforward, such
gains will not be distributed. During the fiscal year ended October 31,
2005, the Portfolio utilized capital loss carryforwards of $2,394,416.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral
of losses on wash sales and the realization for tax purposes of unrealized
gains/(losses) on certain derivative instruments, and the difference
between the book and tax treatment of swap income.
(c) The difference between book-basis and tax-basis components of accumulated
earnings/ (deficit) is attributable primarily to dividends payable.
During the current fiscal year, permanent differences, primarily due to the tax
treatment of swap income, resulted in a net decrease in distributions in excess
of net investment income, and an increase in accumulated net realized loss on
investment transactions. This reclassification had no effect on net assets.
California Portfolio 2005 2004
============= =============
Distributions paid from:
Ordinary income ........................ $ 278,826 $ 662,168
Tax-exempt income ...................... 35,904,427 42,858,791
------------- -------------
Total distributions paid ................. $ 36,183,253 $ 43,520,959
============= =============
As of October 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed tax-exempt net investment income ............ $ 10,698
Accumulated capital and other losses ...................... (23,212,871)(a)
Unrealized appreciation/(depreciation) .................... 49,219,919(b)
-------------
Total accumulated earnings/(deficit) ...................... $ 26,017,746(c)
=============
(a) On October 31, 2005, the Portfolio had a net capital loss carryforward of
$23,212,871 of which $8,298,844 expires in the year 2008, $10,406,492
expires in the year 2009 and $4,507,535 expires in the year 2010. To the
extent future capital gains are offset by capital loss carryforward, such
gains will not be distributed. During the fiscal year ended October 31,
2005, the Portfolio utilized capital loss carryforwards of $9,177,413.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral
of losses on wash sales and the realization for tax purposes of
gains/(losses) on certain derivative instruments and the difference
between the book and tax treament of swap income.
(c) The difference between book-basis and tax-basis components of accumulated
earnings/ (deficit) is attributable primarily to dividends payable.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 89
Notes to Financial Statements
- --------------------------------------------------------------------------------
During the current fiscal year, permanent differences primarily due to the tax
treatment of swap income, resulted in a net decrease of distributions in excess
of net investment income, and an increase in accumulated net realized loss on
investment transactions. This reclassification has no effect on net assets.
Insured California Portfolio 2005 2004
============ ============
Distributions paid from:
Ordinary income ...................... $ 58,179 $ 193,787
Tax-exempt income ....................... 5,132,505 6,427,993
------------ ------------
Total distributions paid ................ $ 5,190,684 $ 6,621,780
============ ============
As of October 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Long term capital gains .................................. $ 2,112,162(a)
Unrealized appreciation/(depreciation) ................... 6,676,332(b)
------------
Total accumulated earnings/(deficit) ..................... $ 8,788,494(c)
============
(a) During the fiscal year ended October 31, 2005, the Portfolio utilized
capital loss carryforwards of $63,273.
(b) The differences between book-basis and tax-basis unrealized
appreciation/(depreciation) are attributable primarily to the realization
for tax purposes of gains/losses on certain derivative instruments, and
the difference between the book and tax treatment of swap income.
(c) The difference between book-basis and tax-basis components of accumulated
earnings/ (deficit) is attributable primarily to dividends payable.
During the current fiscal year, permanent differences, primarily due to
distributions in excess of net investment income, and the tax treatment of swap
income, resulted in a net decrease in distributions in excess of net investment
income, and a decrease in accumulated net realized gain on investment
transactions. This reclassification had no effect on net assets.
NOTE I
Legal Proceedings
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the NYAG have been investigating practices in the mutual
fund industry identified as "market timing" and "late trading" of mutual fund
shares. Certain other regulatory authorities have also been conducting
investigations into these practices within the industry and have requested that
the Adviser provide information to them. The Adviser has been cooperating and
will continue to cooperate with all of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized
- --------------------------------------------------------------------------------
90 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Notes to Financial Statements
- --------------------------------------------------------------------------------
in an Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among
the key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the
adverse effects of market timing attributable to market timing
relationships described in the SEC Order. According to the SEC
Order, the Reimbursement Fund is to be paid, in order of priority,
to fund investors based on (i) their aliquot share of losses
suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such
market timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from some
of the AllianceBernstein long-term, open-end retail funds until
December 31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG
Order contemplate that the Adviser's registered investment company
clients, including the Fund, will introduce governance and
compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement , please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of the
Adviser's Board, is continuing to direct and oversee an internal investigation
and a comprehensive review of the facts and circumstances relevant to the SEC's
and the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent Directors")
have initiated an investigation of the above-mentioned matters with the advice
of an independent economic consultant and independent counsel. The Independent
Directors have formed a special committee to supervise the investigation.
On October 2, 2003, a purported class action complaint entitled Hindo, et al. v.
AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"),
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 91
Notes to Financial Statements
- --------------------------------------------------------------------------------
and certain other defendants not affiliated with the Adviser, as well as unnamed
Doe defendants. The Hindo Complaint was filed in the United States District
Court for the Southern District of New York by alleged shareholders of two of
the AllianceBernstein Funds. The Hindo Complaint alleges that certain of the
Alliance defendants failed to disclose that they improperly allowed certain
hedge funds and other unidentified parties to engage in "late trading" and
"market timing" of AllianceBernstein Fund securities, violating Sections 11 and
15 of the Securities Act, Sections 10(b) and 20(a) of the Exchange Act and
Sections 206 and 215 of the Advisers Act. Plaintiffs seek an unspecified amount
of compensatory damages and rescission of their contracts with the Adviser,
including recovery of all fees paid to the Adviser pursuant to such contracts.
Since October 2, 2003, numerous additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants, and others
may be filed. The plaintiffs in such lawsuits have asserted a variety of
theories for recovery including, but not limited to, violations of the
Securities Act, the Exchange Act, the Advisers Act, the Investment Company Act,
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
certain state securities laws and common law. On February 20, 2004, the Judicial
Panel on Multidistrict Litigation transferred all federal actions, and removed
all state court actions, to the United States District Court for the District of
Maryland (the "Mutual Fund MDL"). The plaintiffs in the removed actions have
since moved for remand, and that motion is pending.
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order and
the NYAG Order. The claims in the mutual fund derivative consolidated amended
complaint are generally based on the theory that all fund advisory agreements,
distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to those
that the respective plaintiffs asserted in their previous federal lawsuits. All
of these lawsuits seek an unspecified amount of damages. The Alliance defendants
have moved to dismiss the complaints, and those motions are pending.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from
- --------------------------------------------------------------------------------
92 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Notes to Financial Statements
- --------------------------------------------------------------------------------
the Office of the Attorney General of the State of West Virginia and (ii) a
request for information from West Virginia's Office of the State Auditor,
Securities Commission (the "West Virginia Securities Commission") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed against
the Adviser, Alliance Holding, and various other defendants not affiliated with
the Adviser. The WVAG Complaint was filed in the Circuit Court of Marshall
County, West Virginia by the Attorney General of the State of West Virginia. The
WVAG Complaint makes factual allegations generally similar to those in the Hindo
Complaint. On May 31, 2005, defendants removed the WVAG Complaint to the United
States District Court for the Northern District of West Virginia. On July 12,
2005, plaintiff moved to remand. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commission signed a "Summary Order to Cease and Desist, and Notice of
Right to Hearing" addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to those
in the Commission Order and the NYAG Order. The Adviser intends to vigorously
defend against the allegations in the WVAG Complaint.
As a result of the matters discussed above, investors in the AllianceBernstein
Mutual Funds may choose to redeem their investments. This may require the
AllianceBernstein Mutual Funds to sell investments held by those funds to
provide for sufficient liquidity and could also have an adverse effect on the
investment performance of the AllianceBernstein Mutual Funds.
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Capital Management Holding L.P., Alliance Capital
Management Corporation, AXA Financial, Inc., AllianceBernstein Investment
Research & Management, Inc., certain current and former directors of the
AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint
names certain of the AllianceBernstein mutual funds as nominal defendants. The
Aucoin Complaint was filed in the United States District Court for the Southern
District of New York by an alleged shareholder of an AllianceBernstein mutual
fund. The Aucoin Complaint alleges, among other things, (i) that certain of the
defendants improperly authorized the payment of excessive commissions and other
fees from fund assets to broker-dealers in
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 93
Notes to Financial Statements
- --------------------------------------------------------------------------------
exchange for preferential marketing services, (ii) that certain of the
defendants misrepresented and omitted from registration statements and other
reports material facts concerning such payments, and (iii) that certain
defendants caused such conduct as control persons of other defendants. The
Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a)
of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach
of common law fiduciary duties, and aiding and abetting breaches of common law
fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages
and punitive damages, rescission of their contracts with the Adviser, including
recovery of all fees paid to the Adviser pursuant to such contracts, an
accounting of all fund-related fees, commissions and soft dollar payments, and
restitution of all unlawfully or discriminatorily obtained fees and expenses.
Since June 22, 2004, numerous additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants, and others may be filed. On October 19,
2005, the District Court granted in part, and denied in part, defendants' motion
to dismiss the Aucoin Complaint and as a result the only claim remaining is
plaintiffs' Section 36(b) claim.
It is possible that these matters and/or other developments resulting from these
matters could result in increased redemptions of the AllianceBernstein Mutual
Funds' shares or other adverse consequences to the AllianceBernstein Mutual
Funds. However, the Adviser believes that these matters are not likely to have a
material adverse effect on its ability to perform advisory services relating to
the AllianceBernstein Mutual Funds.
- --------------------------------------------------------------------------------
94 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Financial Highlights
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
National Portfolio
-----------------------------------------------------------
Class A
-----------------------------------------------------------
Year Ended October 31,
-----------------------------------------------------------
2005 2004(a) 2003 2002 2001
-----------------------------------------------------------
Net asset value,
beginning of period........... $ 10.13 $ 9.96 $ 9.80 $ 10.34 $ 10.14
-----------------------------------------------------------
Income From Investment
Operations
Net investment income(b)(c)...... .47 .50 .52 .54 .54
Net realized and unrealized
gain (loss) on investment
transactions.................. (.07) .17 .18 (.53) .21
-----------------------------------------------------------
Net increase in net asset value
from operations............... .40 .67 .70 .01 .75
-----------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income............. (.48) (.50) (.54) (.54) (.54)
Distributions in excess of net
investment income............. -0- -0- -0- (.01) (.01)
-----------------------------------------------------------
Total dividends and
distributions................. (.48) (.50) (.54) (.55) (.55)
-----------------------------------------------------------
Net asset value,
end of period................. $ 10.05 $ 10.13 $ 9.96 $ 9.80 $ 10.34
===========================================================
Total Return
Total investment return based
on net asset value(d)......... 3.95% 6.92% 7.32% .06% 7.55%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted)............... $ 337,201 $344,557 $ 373,416 $ 411,408 $425,506
Ratio to average net assets of:
Expenses,
net of fee waivers.......... .68% .68% .68% .65% .64%
Expenses,
before fee waivers.......... .93% 1.08% 1.11% 1.07% 1.06%
Net investment income(b)...... 4.65% 4.94% 5.25% 5.28% 5.22%
Portfolio turnover rate.......... 25% 47% 35% 63% 194%
See footnote summary on page 110.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 95
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
National Portfolio
-----------------------------------------------------------
Class B
-----------------------------------------------------------
Year Ended October 31,
-----------------------------------------------------------
2005 2004(a) 2003 2002 2001
-----------------------------------------------------------
Net asset value,
beginning of period........... $ 10.12 $ 9.95 $ 9.79 $ 10.33 $ 10.13
-----------------------------------------------------------
Income From Investment
Operations
Net investment income(b)(c)...... .40 .43 .45 .46 .47
Net realized and unrealized
gain (loss) on investment
transactions.................. (.07) .17 .18 (.52) .21
-----------------------------------------------------------
Net increase (decrease) in
net asset value from
operations.................... .33 .60 .63 (.06) .68
-----------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income............. (.41) (.43) (.47) (.47) (.47)
Distributions in excess of net
investment income............. -0- -0- -0- (.01) (.01)
-----------------------------------------------------------
Total dividends and
distributions................. (.41) (.43) (.47) (.48) (.48)
-----------------------------------------------------------
Net asset value,
end of period................. $ 10.04 $ 10.12 $ 9.95 $ 9.79 $ 10.33
===========================================================
Total Return
Total investment return based
on net asset value(d)......... 3.25% 6.18% 6.57% (.62)% 6.84%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted)............... $ 49,801 $ 72,264 $ 101,287 $ 122,656 $132,074
Ratio to average net assets of:
Expenses,
net of fee waivers.......... 1.38% 1.39% 1.39% 1.35% 1.36%
Expenses,
before fee waivers.......... 1.64% 1.79% 1.81% 1.77% 1.79%
Net investment income(b)...... 3.96% 4.24% 4.54% 4.57% 4.59%
Portfolio turnover rate.......... 25% 47% 35% 63% 194%
See footnote summary on page 110.
- --------------------------------------------------------------------------------
96 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
National Portfolio
-----------------------------------------------------------
Class C
-----------------------------------------------------------
Year Ended October 31,
-----------------------------------------------------------
2005 2004(a) 2003 2002 2001
-----------------------------------------------------------
Net asset value,
beginning of period........... $ 10.13 $ 9.95 $ 9.79 $ 10.34 $ 10.13
-----------------------------------------------------------
Income From Investment
Operations
Net investment income(b)(c)...... .40 .43 .45 .47 .47
Net realized and unrealized
gain (loss) on investment
transactions.................. (.07) .18 .18 (.54) .22
-----------------------------------------------------------
Net increase (decrease) in
net asset value from
operations.................... .33 .61 .63 (.07) .69
-----------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income............. (.41) (.43) (.47) (.47) (.47)
Distributions in excess of net
investment income............. -0- -0- -0- (.01) (.01)
-----------------------------------------------------------
Total dividends and
distributions................. (.41) (.43) (.47) (.48) (.48)
-----------------------------------------------------------
Net asset value,
end of period................. $ 10.05 $ 10.13 $ 9.95 $ 9.79 $ 10.34
===========================================================
Total Return
Total investment return based
on net asset value(d)......... 3.24% 6.28% 6.57% (.72)% 6.94%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted)............... $ 61,622 $ 68,769 $ 82,167 $ 93,032 $ 98,825
Ratio to average net assets of:
Expenses,
net of fee waivers.......... 1.38% 1.38% 1.38% 1.35% 1.35%
Expenses,
before fee waivers.......... 1.64% 1.78% 1.81% 1.76% 1.78%
Net investment income(b)...... 3.96% 4.24% 4.55% 4.58% 4.61%
Portfolio turnover rate.......... 25% 47% 35% 63% 194%
See footnote summary on page 110.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 97
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Insured National Portfolio
-----------------------------------------------------------
Class A
-----------------------------------------------------------
Year Ended October 31,
-----------------------------------------------------------
2005 2004(a) 2003 2002 2001
-----------------------------------------------------------
Net asset value,
beginning of period........... $ 10.29 $ 10.11 $ 9.92 $ 10.07 $ 9.58
-----------------------------------------------------------
Income From Investment
Operations
Net investment income(b)(c)...... .42 .44 .47 .45 .45
Net realized and unrealized
gain (loss) on investment
transactions.................. (.11) .20 .14 (.14) .50
-----------------------------------------------------------
Net increase in net asset value
from operations............... .31 .64 .61 .31 .95
-----------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income............. (.42) (.46) (.42) (.45) (.45)
Distributions in excess of net
investment income............. -0- -0- -0- (.01) (.01)
-----------------------------------------------------------
Total dividends and
distributions................. (.42) (.46) (.42) (.46) (.46)
-----------------------------------------------------------
Net asset value,
end of period................. $ 10.18 $ 10.29 $ 10.11 $ 9.92 $ 10.07
===========================================================
Total Return
Total investment return based
on net asset value(d)......... 3.05% 6.42% 6.32% 3.13% 10.11%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted)............... $ 124,957 $129,888 $ 139,179 $ 164,154 $169,744
Ratio to average net assets of:
Expenses,
net of fee waivers.......... 1.04% 1.03% 1.04% 1.01% 1.04%
Expenses,
before fee waivers.......... 1.04% 1.18% 1.16% 1.13% 1.14%
Net investment income(b)...... 4.07% 4.28% 4.69% 4.49% 4.53%
Portfolio turnover rate.......... 17% 12% 28% 43% 105%
See footnote summary on page 110.
- --------------------------------------------------------------------------------
98 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Insured National Portfolio
-----------------------------------------------------------
Class B
-----------------------------------------------------------
Year Ended October 31,
-----------------------------------------------------------
2005 2004(a) 2003 2002 2001
-----------------------------------------------------------
Net asset value,
beginning of period........... $ 10.26 $ 10.09 $ 9.89 $ 10.05 $ 9.56
-----------------------------------------------------------
Income From Investment
Operations
Net investment income(b)(c)...... .35 .36 .40 .37 .38
Net realized and unrealized
gain (loss) on investment
transactions.................. (.11) .19 .16 (.14) .50
-----------------------------------------------------------
Net increase in net asset value
from operations............... .24 .55 .56 .23 .88
-----------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income............. (.35) (.38) (.36) (.38) (.38)
Distributions in excess of net
investment income............. -0- -0- -0- (.01) (.01)
-----------------------------------------------------------
Total dividends and
distributions................. (.35) (.38) (.36) (.39) (.39)
-----------------------------------------------------------
Net asset value,
end of period................. $ 10.15 $ 10.26 $ 10.09 $ 9.89 $ 10.05
===========================================================
Total Return
Total investment return based
on net asset value(d)......... 2.34% 5.60% 5.71% 2.34% 9.39%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted)............... $ 16,375 $ 22,968 $ 34,243 $ 35,048 $ 35,326
Ratio to average net assets of:
Expenses,
net of fee waivers.......... 1.74% 1.74% 1.75% 1.72% 1.75%
Expenses,
before fee waivers.......... 1.75% 1.89% 1.87% 1.84% 1.85%
Net investment income(b)...... 3.39% 3.58% 4.00% 3.79% 3.83%
Portfolio turnover rate.......... 17% 12% 28% 43% 105%
See footnote summary on page 110.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 99
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Insured National Portfolio
-----------------------------------------------------------
Class C
-----------------------------------------------------------
Year Ended October 31,
-----------------------------------------------------------
2005 2004(a) 2003 2002 2001
-----------------------------------------------------------
Net asset value,
beginning of period........... $ 10.27 $ 10.09 $ 9.90 $ 10.05 $ 9.56
-----------------------------------------------------------
Income From Investment
Operations
Net investment income(b)(c)...... .35 .37 .40 .37 .38
Net realized and unrealized
gain (loss) on investment
transactions.................. (.11) .19 .15 (.13) .50
-----------------------------------------------------------
Net increase in net asset value
from operations............... .24 .56 .55 .24 .88
-----------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income............. (.35) (.38) (.36) (.38) (.38)
Distributions in excess of net
investment income............. -0- -0- -0- (.01) (.01)
-----------------------------------------------------------
Total dividends and
distributions................. (.35) (.38) (.36) (.39) (.39)
-----------------------------------------------------------
Net asset value,
end of period................. $ 10.16 $ 10.27 $ 10.09 $ 9.90 $ 10.05
===========================================================
Total Return
Total investment return based
on net asset value(d)......... 2.34% 5.71% 5.60% 2.44% 9.39%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted)............... $ 11,732 $ 12,198 $ 14,149 $ 17,592 $ 16,650
Ratio to average net assets of:
Expenses,
net of fee waivers.......... 1.74% 1.73% 1.74% 1.71% 1.74%
Expenses,
before fee waivers.......... 1.75% 1.88% 1.86% 1.83% 1.85%
Net investment income(b)...... 3.38% 3.59% 3.98% 3.78% 3.84%
Portfolio turnover rate.......... 17% 12% 28% 43% 105%
See footnote summary on page 110.
- --------------------------------------------------------------------------------
100 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
New York Portfolio
-----------------------------------------------------------
Class A
-----------------------------------------------------------
Year Ended October 31,
-----------------------------------------------------------
2005 2004(a) 2003 2002 2001
-----------------------------------------------------------
Net asset value,
beginning of period........... $ 9.93 $ 9.79 $ 9.69 $ 9.93 $ 9.70
-----------------------------------------------------------
Income From Investment
Operations
Net investment income(b)(c)...... .46 .48 .50 .53 .53
Net realized and unrealized
gain (loss) on investment
transactions.................. (.12) .15 .11 (.25) .22
-----------------------------------------------------------
Net increase in net asset value
from operations............... .34 .63 .61 .28 .75
-----------------------------------------------------------
Less: Dividends
Dividends from net
investment income............. (.46) (.49) (.51) (.52) (.52)
-----------------------------------------------------------
Total dividends.................. (.46) (.49) (.51) (.52) (.52)
-----------------------------------------------------------
Net asset value,
end of period................. $ 9.81 $ 9.93 $ 9.79 $ 9.69 $ 9.93
===========================================================
Total Return
Total investment return based
on net asset value(d)......... 3.46% 6.58% 6.39% 2.89% 7.86%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted)............... $ 294,005 $280,213 $ 311,596 $ 322,621 $326,500
Ratio to average net assets of:
Expenses,
net of fee waivers.......... .58% .59% .58% .58% .59%
Expenses,
before fee waivers.......... .91% 1.05% 1.06% 1.05% 1.04%
Net investment income(b)...... 4.62% 4.93% 5.09% 5.42% 5.28%
Portfolio turnover rate.......... 19% 33% 35% 33% 92%
See footnote summary on page 110.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 101
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
New York Portfolio
-----------------------------------------------------------
Class B
-----------------------------------------------------------
Year Ended October 31,
-----------------------------------------------------------
2005 2004(a) 2003 2002 2001
-----------------------------------------------------------
Net asset value,
beginning of period........... $ 9.92 $ 9.78 $ 9.68 $ 9.93 $ 9.70
-----------------------------------------------------------
Income From Investment
Operations
Net investment income(b)(c)...... .39 .41 .43 .46 .45
Net realized and unrealized
gain (loss) on investment
transactions.................. (.12) .15 .11 (.26) .23
-----------------------------------------------------------
Net increase in net asset value
from operations............... .27 .56 .54 .20 .68
-----------------------------------------------------------
Less: Dividends
Dividends from net
investment income............. (.39) (.42) (.44) (.45) (.45)
-----------------------------------------------------------
Total dividends.................. (.39) (.42) (.44) (.45) (.45)
-----------------------------------------------------------
Net asset value,
end of period................. $ 9.80 $ 9.92 $ 9.78 $ 9.68 $ 9.93
===========================================================
Total Return
Total investment return based
on net asset value(d)......... 2.75% 5.85% 5.64% 2.04% 7.10%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted)............... $ 133,746 $151,474 $ 171,881 $ 184,700 $165,787
Ratio to average net assets of:
Expenses,
net of fee waivers.......... 1.28% 1.30% 1.29% 1.29% 1.30%
Expenses,
before fee waivers.......... 1.62% 1.76% 1.77% 1.78% 1.76%
Net investment income(b)...... 3.93% 4.22% 4.38% 4.70% 4.59%
Portfolio turnover rate.......... 19% 33% 35% 33% 92%
See footnote summary on page 110.
- --------------------------------------------------------------------------------
102 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
New York Portfolio
-----------------------------------------------------------
Class C
-----------------------------------------------------------
Year Ended October 31,
-----------------------------------------------------------
2005 2004(a) 2003 2002 2001
-----------------------------------------------------------
Net asset value,
beginning of period........... $ 9.92 $ 9.78 $ 9.68 $ 9.94 $ 9.71
-----------------------------------------------------------
Income From Investment
Operations
Net investment income(b)(c)...... .39 .41 .43 .46 .46
Net realized and unrealized
gain (loss) on investment
transactions.................. (.12) .15 .11 (.27) .22
-----------------------------------------------------------
Net increase in net asset value
from operations............... .27 .56 .54 .19 .68
-----------------------------------------------------------
Less: Dividends
Dividends from net
investment income............. (.39) (.42) (.44) (.45) (.45)
-----------------------------------------------------------
Total dividends.................. (.39) (.42) (.44) (.45) (.45)
-----------------------------------------------------------
Net asset value,
end of period................. $ 9.80 $ 9.92 $ 9.78 $ 9.68 $ 9.94
===========================================================
Total Return
Total investment return based
on net asset value(d)......... 2.74% 5.85% 5.64% 1.94% 7.09%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted)............... $ 45,956 $ 45,121 $ 52,206 $ 57,386 $ 54,631
Ratio to average net assets of:
Expenses,
net of fee waivers.......... 1.28% 1.29% 1.29% 1.29% 1.30%
Expenses,
before fee waivers.......... 1.61% 1.75% 1.77% 1.77% 1.76%
Net investment income(b)...... 3.92% 4.23% 4.38% 4.71% 4.60%
Portfolio turnover rate.......... 19% 33% 35% 33% 92%
See footnote summary on page 110.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 103
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
California Portfolio
-----------------------------------------------------------
Class A
-----------------------------------------------------------
Year Ended October 31,
-----------------------------------------------------------
2005 2004(a) 2003 2002 2001
-----------------------------------------------------------
Net asset value,
beginning of period........... $ 10.93 $ 10.63 $ 10.84 $ 11.00 $ 10.88
-----------------------------------------------------------
Income From Investment
Operations
Net investment income(b)(c)...... .48 .51 .53 .55 .54
Net realized and unrealized
gain (loss) on investment
transactions.................. (.07) .30 (.19) (.15) .14
-----------------------------------------------------------
Net increase in net asset value
from operations............... .41 .81 .34 .40 .68
-----------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income............. (.48) (.51) (.55) (.54) (.54)
Distributions in excess of net
investment income............. -0- -0- -0- (.02) (.02)
-----------------------------------------------------------
Total dividends and
distributions................. (.48) (.51) (.55) (.56) (.56)
-----------------------------------------------------------
Net asset value,
end of period................. $ 10.86 $ 10.93 $ 10.63 $ 10.84 $ 11.00
===========================================================
Total Return
Total investment return based
on net asset value(d)......... 3.78% 7.80% 3.15% 3.82% 6.47%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted)............... $ 590,042 $587,874 $ 644,868 $ 725,242 $755,947
Ratio to average net assets of:
Expenses,
net of fee waivers.......... .77% .78% .77% .76% .77%
Expenses,
before fee waivers.......... .86% 1.01% 1.02% 1.01% 1.02%
Net investment income(b)...... 4.36% 4.75% 4.93% 5.05% 4.98%
Portfolio turnover rate.......... 17% 34% 33% 23% 78%
See footnote summary on page 110.
- --------------------------------------------------------------------------------
104 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
California Portfolio
-----------------------------------------------------------
Class B
-----------------------------------------------------------
Year Ended October 31,
-----------------------------------------------------------
2005 2004(a) 2003 2002 2001
-----------------------------------------------------------
Net asset value,
beginning of period........... $ 10.93 $ 10.63 $ 10.84 $ 11.00 $ 10.88
-----------------------------------------------------------
Income From Investment
Operations
Net investment income(b)(c)...... .40 .44 .46 .47 .46
Net realized and unrealized
gain (loss) on investment
transactions.................. (.07) .30 (.20) (.14) .15
-----------------------------------------------------------
Net increase in net asset value
from operations............... .33 .74 .26 .33 .61
-----------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income............. (.40) (.44) (.47) (.47) (.46)
Distributions in excess of net
investment income............. -0- -0- -0- (.02) (.03)
-----------------------------------------------------------
Total dividends and
distributions................. (.40) (.44) (.47) (.49) (.49)
-----------------------------------------------------------
Net asset value,
end of period................. $ 10.86 $ 10.93 $ 10.63 $ 10.84 $ 11.00
===========================================================
Total Return
Total investment return based
on net asset value(d)......... 3.06% 7.05% 2.43% 3.10% 5.74%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted)............... $ 122,128 $175,215 $ 237,147 $ 279,697 $269,726
Ratio to average net assets of:
Expenses,
net of fee waivers.......... 1.47% 1.48% 1.48% 1.46% 1.48%
Expenses,
before fee waivers.......... 1.56% 1.71% 1.73% 1.72% 1.73%
Net investment income(b)...... 3.66% 4.05% 4.22% 4.35% 4.26%
Portfolio turnover rate.......... 17% 34% 33% 23% 78%
See footnote summary on page 110.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 105
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
California Portfolio
-----------------------------------------------------------
Class C
-----------------------------------------------------------
Year Ended October 31,
-----------------------------------------------------------
2005 2004(a) 2003 2002 2001
-----------------------------------------------------------
Net asset value,
beginning of period........... $ 10.93 $ 10.63 $ 10.84 $ 11.00 $ 10.88
-----------------------------------------------------------
Income From Investment
Operations
Net investment income(b)(c)...... .40 .44 .46 .47 .46
Net realized and unrealized
gain (loss) on investment
transactions.................. (.07) .30 (.20) (.14) .15
-----------------------------------------------------------
Net increase in net asset value
from operations............... .33 .74 .26 .33 .61
-----------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income............. (.40) (.44) (.47) (.47) (.46)
Distributions in excess of net
investment income............. -0- -0- -0- (.02) (.03)
-----------------------------------------------------------
Total dividends and
distributions................. (.40) (.44) (.47) (.49) (.49)
-----------------------------------------------------------
Net asset value,
end of period................. $ 10.86 $ 10.93 $ 10.63 $ 10.84 $ 11.00
===========================================================
Total Return
Total investment return based
on net asset value(d)......... 3.06% 7.05% 2.43% 3.10% 5.74%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted)............... $ 125,067 $141,031 $ 170,003 $ 209,008 $211,502
Ratio to average net assets of:
Expenses,
net of fee waivers.......... 1.47% 1.48% 1.47% 1.46% 1.47%
Expenses,
before fee waivers.......... 1.56% 1.71% 1.72% 1.71% 1.72%
Net investment income(b)...... 3.66% 4.05% 4.23% 4.35% 4.25%
Portfolio turnover rate.......... 17% 34% 33% 23% 78%
See footnote summary on page 110.
- --------------------------------------------------------------------------------
106 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Insured California Portfolio
-----------------------------------------------------------
Class A
-----------------------------------------------------------
Year Ended October 31,
-----------------------------------------------------------
2005 2004(a) 2003 2002 2001
-----------------------------------------------------------
Net asset value,
beginning of period........... $ 14.21 $ 14.03 $ 14.17 $ 14.45 $ 13.74
-----------------------------------------------------------
Income From Investment
Operations
Net investment income(b)(c)...... .57 .61 .60 .62 .63
Net realized and unrealized
gain (loss) on investment
transactions.................. (.20) .18 (.12) (.12) .74
-----------------------------------------------------------
Net increase in net asset value
from operations............... .37 .79 .48 .50 1.37
-----------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income............. (.57) (.61) (.62) (.62) (.63)
Distributions in excess of net
investment income............. -0- -0- -0- (.04) (.03)
Distributions from net realized
gain on investment
transactions.................. -0- -0- -0- (.12) -0-
-----------------------------------------------------------
Total dividends and
distributions................. (.57) (.61) (.62) (.78) (.66)
-----------------------------------------------------------
Net asset value,
end of period................. $ 14.01 $ 14.21 $ 14.03 $ 14.17 $ 14.45
===========================================================
Total Return
Total investment return based
on net asset value(d)......... 2.60% 5.75% 3.39% 3.65% 10.16%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted)............... $ 97,079 $103,414 $ 124,817 $ 144,973 $168,469
Ratio to average net assets of:
Expenses,
net of fee waivers.......... 1.02% 1.00% 1.07% 1.03% 1.04%
Expenses,
before fee waivers.......... 1.02% 1.07% 1.07% 1.03% 1.04%
Net investment income(b)...... 3.99% 4.29% 4.24% 4.43% 4.44%
Portfolio turnover rate.......... 37% 5% 34% 31% 140%
See footnote summary on page 110.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 107
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Insured California Portfolio
-----------------------------------------------------------
Class B
-----------------------------------------------------------
Year Ended October 31,
-----------------------------------------------------------
2005 2004(a) 2003 2002 2001
-----------------------------------------------------------
Net asset value,
beginning of period........... $ 14.20 $ 14.02 $ 14.16 $ 14.46 $ 13.75
-----------------------------------------------------------
Income From Investment
Operations
Net investment income(b)(c)...... .47 .50 .50 .52 .52
Net realized and unrealized
gain (loss) on investment
transactions.................. (.19) .19 (.12) (.14) .75
-----------------------------------------------------------
Net increase in net asset value
from operations............... .28 .69 .38 .38 1.27
-----------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income............. (.47) (.51) (.52) (.53) (.52)
Distributions in excess of net
investment income............. -0- -0- -0- (.03) (.04)
Distributions from net realized
gain on investment
transactions.................. -0- -0- -0- (.12) -0-
-----------------------------------------------------------
Total dividends and
distributions................. (.47) (.51) (.52) (.68) (.56)
-----------------------------------------------------------
Net asset value,
end of period................. $ 14.01 $ 14.20 $ 14.02 $ 14.16 $ 14.46
===========================================================
Total Return
Total investment return based
on net asset value(d)......... 1.96% 5.02% 2.67% 2.76% 9.38%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted)............... $ 15,626 $ 21,559 $ 29,285 $ 33,133 $ 27,015
Ratio to average net assets of:
Expenses,
net of fee waivers.......... 1.73% 1.71% 1.77% 1.73% 1.74%
Expenses,
before fee waivers.......... 1.73% 1.77% 1.77% 1.73% 1.74%
Net investment income(b)...... 3.29% 3.58% 3.52% 3.70% 3.72%
Portfolio turnover rate.......... 37% 5% 34% 31% 140%
See footnote summary on page 110.
- --------------------------------------------------------------------------------
108 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Insured California Portfolio
-----------------------------------------------------------
Class C
-----------------------------------------------------------
Year Ended October 31,
-----------------------------------------------------------
2005 2004(a) 2003 2002 2001
-----------------------------------------------------------
Net asset value,
beginning of period........... $ 14.20 $ 14.02 $ 14.16 $ 14.47 $ 13.75
-----------------------------------------------------------
Income From Investment
Operations
Net investment income(b)(c)...... .47 .51 .50 .52 .52
Net realized and unrealized
gain (loss) on investment
transactions.................. (.20) .18 (.12) (.15) .76
-----------------------------------------------------------
Net increase in net asset value
from operations............... .27 .69 .38 .37 1.28
-----------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income............. (.47) (.51) (.52) (.53) (.52)
Distributions in excess of net
investment income............. -0- -0- -0- (.03) (.04)
Distributions from net realized
gain on investment
transactions.................. -0- -0- -0- (.12) -0-
-----------------------------------------------------------
Total dividends and
distributions................. (.47) (.51) (.52) (.68) (.56)
-----------------------------------------------------------
Net asset value,
end of period................. $ 14.00 $ 14.20 $ 14.02 $ 14.16 $ 14.47
===========================================================
Total Return
Total investment return based
on net asset value(d)......... 1.88% 5.02% 2.67% 2.69% 9.46%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted)............... $ 18,204 $ 19,603 $ 21,951 $ 22,715 $ 20,541
Ratio to average net assets of:
Expenses,
net of fee waivers.......... 1.73% 1.70% 1.77% 1.73% 1.74%
Expenses,
before fee waivers.......... 1.73% 1.77% 1.77% 1.73% 1.74%
Net investment income(b)...... 3.29% 3.59% 3.53% 3.71% 3.73%
Portfolio turnover rate.......... 37% 5% 34% 31% 140%
See footnote summary on page 110.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 109
Financial Highlights
- --------------------------------------------------------------------------------
(a) As of November 1, 2003, the Fund has adopted the method of accounting for
interim payments on swap contracts in accordance with Financial Accounting
Standards Board Statement No. 133. These interim payments are reflected
within net realized and unrealized gain (loss) on swap contracts, however
prior to November 1, 2003, these interim payments were reflected within
interest income/expense on the statement of operations. The effects of
these changes for the year ended October 31, 2004 were as follows:
Realized
and Unrealized Ratio of Net
Gain (Loss) on Investment
Investment Investment Income
Income Transactions to Average
Per Share* Per Share* Net Assets
--------------------------------------------
National Portfolio
Class A.................. $ .00 $ .00 .01%
Class B.................. .00 .00 .01%
Class C.................. .00 .00 .01%
Insured National Portfolio
Class A.................. .00 .00 .01%
Class B.................. .00 .00 .01%
Class C.................. .00 .00 .01%
New York Portfolio
Class A.................. .00 .00 .05%
Class B.................. .00 .00 .05%
Class C.................. .00 .00 .05%
California Portfolio
Class A.................. .00 .00 .00%+
Class B.................. .00 .00 .00%+
Class C.................. .00 .00 .00%+
Insured California Portfolio
Class A.................. .00 .00 .00%+
Class B.................. .00 .00 .00%+
Class C.................. .00 .00 .00%+
* Per share amounts less than $0.01
+ Amount is less than .01%
(b) Net of fees waived by the Adviser.
(c) Based on average shares outstanding.
(d) 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 return. Total return does not reflect the deduction of
taxes that a shareholder would pay on fund distributions or the redemption
of fund shares. Total investment return calculated for a period of less
than one year is not annualized.
- --------------------------------------------------------------------------------
110 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
AllianceBernstein Municipal Income Fund, Inc.
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of AllianceBernstein Municipal Income Fund, Inc.
(the "Fund"), (comprising, respectively, the National, Insured National, New
York, California, and Insured California Portfolios) as of October 31, 2005, and
the related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of October 31, 2005 by correspondence with the custodian and
others, or by other appropriate auditing procedures where replies from others
were not received. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the portfolios constituting the AllianceBernstein Municipal Income Fund, Inc.
at October 31, 2005, the results of their operations for the year then ended,
the changes in their net assets for each of the two years in the period then
ended, and their financial highlights for each of the five years then ended, in
conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
December 16, 2005
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 111
Board of Directors
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Marc O. Mayer, President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
Michael J. Downey(1)
D. James Guzy(1)
Marshall C. Turner, Jr.(1)
OFFICERS(2)
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer
Robert B. Davidson, III, Senior Vice President
Douglas J. Peebles, Senior Vice President
Jeffrey S. Phlegar, Senior Vice President
David M. Dowden, Vice President
Terrance T. Hults, Vice President
Emilie D. Wrapp, Secretary
Mark D. Gersten, Treasurer and Chief Financial Officer
Thomas R. Manley, Controller
Custodian
State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02110
Principal Underwriter
AllianceBernstein Investment Research and Management, Inc.
1345 Avenue of the Americas
New York, NY 10105
Legal Counsel
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
Independent Registered Public Accounting Firm
Ernst & Young LLP
5 Times Square
New York, NY 10036
Transfer Agent
Alliance Global Investor Services, Inc.
P.O. Box 786003
San Antonio, TX 78278-6003
Toll-free (800) 221-5672
(1) Member of the Audit Committee, Governance and Nominating Committee and the
Independent Directors Committee.
(2) The management of and investment decisions for the Portfolios' portfolios
are made by the Municipal Bond Investment Team. The five investment
professionals with the most significant responsibility for the day-to-day
management of the Portfolios' portfolios are: Michael Brooks, Fred S.
Cohen, R.B. Davidson III, David M. Dowden and Terrance T. Hults.
- --------------------------------------------------------------------------------
112 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Management of the Fund
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the
Board of Directors. Certain information concerning the Fund's Directors is set
forth below.
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
DATE OF BIRTH, OCCUPATION(S) OVERSEEN BY HELD BY
(FIRST YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- -----------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
William H. Foulk, Jr. #,+ Investment adviser and an independent 108 None
2 Sound View Drive consultant. He was formerly Senior
Suite 100 Manager of Barrett Associates, Inc.,
Greenwich, CT 06830 a registered investment adviser, with
Chairman of the Board which he had been associated since
9-7-1932 prior to 2000. He was formerly Deputy
(1998) Comptroller and Chief Investment
Officer of the State of New York and,
prior thereto, Chief Investment
Officer of the New York Bank for
Savings.
Ruth Block #,** Formerly an Executive Vice President 106 None
500 SE Mizner Blvd. and Chief Insurance Officer of The
Boca Raton, FL 33432 Equitable Life Assurance Society of
11-7-1930 the United States; Chairman and Chief
(1987) Executive Officer of Evlico
(insurance); Director of Avon, BP
(oil and gas), Ecolab Incorporated
(specialty chemicals), Tandem
Financial Group and Donaldson, Lufkin
& Jenrette Securities Corporation;
Governor at Large, National
Association of Securities Dealers,
Inc.
David H. Dievler # Independent consultant. Until 107 None
P.O. Box 167 December 1994, he was Senior Vice
Spring Lake, NJ 07762 President of Alliance Capital
10-23-1929 Management Corporation ("ACMC")
(1987) responsible for mutual fund
administration. Prior to joining ACMC
in 1984, he was Chief Financial
Officer of Eberstadt Asset Management
since 1968. Prior to that, he was a
Senior Manager at Price Waterhouse &
Co. Member of American Institute of
Certified Public Accountants since
1953.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 113
Management of the Fund
- --------------------------------------------------------------------------------
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
DATE OF BIRTH, OCCUPATION(S) OVERSEEN BY HELD BY
(FIRST YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- -----------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
John H. Dobkin # Consultant. Formerly President of 106 None
P.O. Box 12 Save Venice, Inc. (preservation
Annandale, NY 12504 organization) from 2001-2002, Senior
2-19-1942 Advisor from June 1999- June 2000 and
(1998) President of Historic Hudson Valley
(historic preservation) from December
1989-May 1999. Previously, Director
of the National Academy of Design and
during 1988-1992, Director and
Chairman of the Audit Committee of
ACMC.
Michael J. Downey # Consultant since January 2004. 106 Asia Pacific
c/o Alliance Capital Formerly managing partner of Fund, Inc.;
Management L.P. Lexington Capital, LLC (investment and The
1345 Avenue of the advisory firm) from December 1997 Merger Fund
Americas until December 2003. Prior thereto,
New York, NY 10105 Chairman and CEO of Prudential Mutual
Attention: Phil Kirstein Fund Management from 1987 to 1993.
1-26-1944
(2005)
D. James Guzy # Chairman of the Board of PLX 106 Intel Corporation,
P.O. Box 128 Technology (semi-conductors) and of Cirrus Logic
Glenbrook, NV 89413 SRC Computers, Inc., with which he Corporation,
3-7-36 has been associated since prior to Novellus
(2005) 2000. He is also President of the Corporation,
Arbor Company (private family Micro Component
investments). Technology, the
Davis Selected
Advisers Group
of Mutual Funds
and LogicVision
Marshall C. Turner, Jr. # Principal of Turner Venture 106 Toppan
220 Montgomery Street Associates (venture capital and Photomasks, Inc.,
Penthouse 10 consulting) since prior to 2000. the George
San Francisco, Chairman and CEO, DuPont Photomasks, Lucas
CA 94104 Inc., Austin, Texas, 2003- 2005, and Educational
10-10-41 President and CEO since company Foundation,
2005) acquired, and name changed to Toppan Chairman of the
Photomasks, Inc. in 2005 (semi- Board of the
conductor manufacturing services). Smithsonian's
National
Museum of
Natural History
- --------------------------------------------------------------------------------
114 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Management of the Fund
- --------------------------------------------------------------------------------
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
DATE OF BIRTH, OCCUPATION(S) OVERSEEN BY HELD BY
(FIRST YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
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INTERESTED DIRECTOR
Marc O. Mayer ++ Executive Vice President of ACMC 106 SCB Partners,
1345 Avenue of the since 2001 and Chairman of the Board Inc.; and
Americas of AllianceBernstein Investment SCB, Inc.
New York, NY 10105 Research and Management, Inc.
10-2-1957 ("ABIRM"); prior thereto, Chief
(2003) Executive Officer -of Sanford C.
Bernstein & Co., LLC (institutional
research and brokerage arm of
Bernstein & Co., LLC ("SCB & Co."))
and its predecessor since prior to
2000.
* There is no stated term of office for the Fund's Directors.
** Ms. Block was an "interested person", as defined in the 1940 Act, from
July 22, 1992 until October 21, 2004 by reason of her ownership of
securities of a control person of the Adviser. Ms. Block received shares
of The Equitable Companies Incorporated ("Equitable") as part of the
demutualization of The Equitable Life Assurance Society of the United
States in 1992. Ms. Block's Equitable shares were subsequently converted
through a corporate action into American Depositary Shares of AXA, which
were sold for approximately $2,400 on October 21, 2004. Equitable and AXA
are control persons of the Adviser.
# Member of the Audit Committee, the Governance and Nominating Committee and
the Independent Directors Committee.
+ Member of the Fair Value Pricing Committee.
++ Mr. Mayer is an "interested director", as defined in the 1940 Act, due to
his position as an Executive Vice President of ACMC.
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ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 115
Management of the Fund
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Officer Information
Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) PRINCIPAL OCCUPATION(S)
AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS
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Marc O. Mayer President and Chief See biography above.
10-2-1957 Executive Officer
Philip L. Kirstein Senior Vice President Senior Vice President and Independent
5-29-1945 and Independent Compliance Officer of the Alliance-
Compliance Officer Bernstein Funds, with which he has
been associated since October 2004.
Prior thereto, he was Of Counsel to
Kirkpatrick & Lockhart, LLP from
October 2003 to October 2004, and
General Counsel of Merrill Lynch
Investment Managers, L.P. since prior
to 2000 until March 2003.
Robert B. Davidson, III Senior Vice President Senior Vice President of ACMC**, with
4-8-1961 which he has been associated since
prior to 2000.
Douglas J. Peebles Senior Vice President Executive Vice President of ACMC**,
8-10-1965 with which he has been associated
since prior to 2000.
Jeffrey S. Phlegar Senior Vice President Executive Vice President of ACMC**,
6-28-1966 with which he has been associated
since prior to 2000.
David M. Dowden Vice President Senior Vice President of ACMC**, with
11-21-1965 which he has been associated since
prior to 2000.
Terrance T. Hults Vice President Senior Vice President of ACMC**, with
5-17-1966 which he has been associated since
prior to 2000.
Emilie D. Wrapp Secretary Senior Vice President, Assistant
11-13-1955 General Counsel and Assistant
Secretary of ABIRM**, with which she
has been associated since prior to
2000.
* The address for each of the Fund's Officers is 1345 Avenue of the
Americas, New York, NY 10105.
** ACMC, ABIRM, AGIS and SCB & Co. are affiliates of the Fund.
The Fund's Statement of Additional Information ("SAI") has additional
information about the Fund's Directors and Officers and is available
without a charge upon request. Contact your financial representative or
Alliance Capital at (800) 227-4618 for a free prospectus or SAI.
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116 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Management of the Fund
- --------------------------------------------------------------------------------
Officer Information
Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) PRINCIPAL OCCUPATION(S)
AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS
- -------------------------------------------------------------------------------------------------------
Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global
10-4-1950 Financial Office Investor Services, Inc. ("AGIS")** and a
Vice President of ABIRM**, with which
he has been associated since prior to
2000.
Thomas R. Manley Controller Vice President of ACMC **, with which
8-3-1951 he has been associated since prior to 2000.
* The address for each of the Fund's Officers is 1345 Avenue of the
Americas, New York, NY 10105.
** ACMC, ABIRM, AGIS and SCB & Co. are affiliates of the Fund.
The Fund's Statement of Additional Information ("SAI") has additional
information about the Fund's Directors and Officers and is available
without a charge upon request. Contact your financial representative or
Alliance Capital at (800) 227-4618 for a free prospectus or SAI.
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ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 117
Information Regarding the Review and Approval of the Fund's Advisory Agreement
In this disclosure, the term "Fund" refers to AllianceBernstein Municipal Income
Fund, Inc. and the term "Portfolio" refers to the California Portfolio, Insured
California Portfolio, Insured National Portfolio, National Portfolio and New
York Portfolio, as appropriate (each, a "Portfolio" and together, the
"Portfolios"). There is a single advisory agreement between the Adviser and the
Fund that relates to all five Portfolios.
The Fund's disinterested directors (the "directors") unanimously approved the
continuance of the Advisory Agreement between the Fund and the Adviser in
respect of each Portfolio at a meeting held on September 14 and 16, 2005.
In preparation for the meeting, the directors had requested from the Adviser and
evaluated extensive materials, including performance and expense information for
other investment companies with similar investment objectives derived from data
compiled by Lipper Inc. ("Lipper"), which is not affiliated with the Adviser.
The directors also reviewed an independent evaluation from the Fund's Senior
Officer (who is also the Fund's Independent Compliance Officer) of the
reasonableness of the advisory fees in the Advisory Agreement in respect of each
Portfolio (as contemplated by the Assurance of Discontinuance between the
Adviser and the New York Attorney General) wherein the Senior Officer concluded
that such fees were reasonable. In addition, the directors received a
presentation from the Adviser and had an opportunity to ask representatives of
the Adviser various questions relevant to the proposed approvals. The directors
noted that the Senior Officer's evaluation considered the following factors in
respect of each Portfolio: management fees charged to institutional and other
clients of the Adviser for like services; management fees charged by other
mutual fund companies for like services; cost to the Adviser and its affiliates
of supplying services pursuant to the Advisory Agreement, excluding any
intra-corporate profit; profit margins of the Adviser and its affiliates from
supplying such services; possible economies of scale as the Portfolio grows
larger; and nature and quality of the Adviser's services including the
performance of the Portfolio.
Prior to voting, the directors reviewed the proposed continuance of the Advisory
Agreement with management and with experienced counsel who are independent of
the Adviser and received a memorandum from such counsel discussing the legal
standards for their consideration of the proposed continuances. The directors
also discussed the proposed continuances in four private sessions at which only
the directors, their independent counsel and the Fund's Independent Compliance
Officer were present. In reaching their determinations relating to continuance
of the Advisory Agreement in respect of each Portfolio, the directors considered
all factors they believed relevant, including the following:
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118 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
1. information comparing the performance of each of the Portfolios to
other investment companies with similar investment objectives and to
an index;
2. the nature, extent and quality of investment, compliance,
administrative and other services rendered by the Adviser;
3. payments received by the Adviser from all sources in respect of each
Portfolio and all investment companies in the AllianceBernstein
Funds complex;
4. the costs borne by, and profitability of, the Adviser and its
affiliates in providing services to each Portfolio and to all
investment companies in the AllianceBernstein Funds complex;
5. comparative fee and expense data for each Portfolio and other
investment companies with similar investment objectives;
6. the extent to which economies of scale would be realized to the
extent the Portfolio grows and whether fee levels reflect any
economies of scale for the benefit of investors;
7. the Adviser's policies and practices regarding allocation of
portfolio transactions of the Portfolios, including the extent to
which the Adviser benefits from soft dollar arrangements;
8. information about "revenue sharing" arrangements that the Adviser
has entered into in respect of the Portfolios;
9. portfolio turnover rates for each Portfolio compared to other
investment companies with similar investment objectives;
10. fall-out benefits which the Adviser and its affiliates receive from
their relationships with the Portfolios;
11. the Adviser's representation that it does not advise other clients
with substantially similar investment objectives and strategies as
the Portfolios;
12. the Senior Officer's evaluation of the reasonableness of the fees
payable to the Adviser in the Advisory Agreement;
13. the professional experience and qualifications of each Portfolio's
portfolio management team and other senior personnel of the Adviser;
and
14. the terms of the Advisory Agreement.
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ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 119
The directors also considered their knowledge of the nature and quality of the
services provided by the Adviser to the Portfolios gained from their experience
as directors or directors of most of the funds advised by the Adviser, their
overall confidence in the Adviser's integrity and competence they have gained
from that experience and the Adviser's responsiveness to concerns raised by them
in the past, including the Adviser's willingness to consider and implement
organizational and operational changes designed to improve investment results
and the services provided to the AllianceBernstein Funds.
In their deliberations, the directors did not identify any particular
information that was all-important or controlling, and each director attributed
different weights to the various factors. The directors evaluated all
information available to them on a fund-by-fund basis, and their determinations
were made separately in respect of each Portfolio.
The directors determined that the overall arrangements between each Portfolio
and the Adviser, as provided in the Advisory Agreement in respect of that
Portfolio, were fair and reasonable in light of the services performed, expenses
incurred and such other matters as the directors considered relevant in the
exercise of their business judgment.
The material factors and conclusions that formed the basis for the directors
reaching their determinations to approve the continuance of the Advisory
Agreement in respect of each Portfolio (including their determinations that the
Adviser should continue to be the investment adviser for each Portfolio, and
that the fees payable to the Adviser pursuant to the Advisory Agreement are
appropriate) were separately discussed by the directors.
Nature, extent and quality of services provided by the Adviser
The directors noted that, under the Advisory Agreement, the Adviser, subject to
the control of the directors, administers each Portfolio's business and other
affairs. The Adviser manages the investment of the assets of each Portfolio,
including making purchases and sales of portfolio securities consistent with the
Portfolio's investment objective and policies. Under the Advisory Agreement, the
Adviser also provides each Portfolio with such office space, administrative and
other services (exclusive of, and in addition to, any such services provided by
any others retained by the Portfolio) and executive and other personnel as are
necessary for the Portfolio's operations. The Adviser pays all of the
compensation of directors of the Fund who are affiliated persons of the Adviser
and of the officers of the Portfolio.
The directors also considered that the Advisory Agreement in respect of each
Portfolio provides that the Portfolio will reimburse the Adviser for the cost of
certain clerical, accounting, administrative and other services provided at the
Portfolio's request by employees of the Adviser or its affiliates. Requests for
these
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120 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
"at no more than cost" reimbursements are approved by the directors on a
quarterly basis and (to the extent requested and paid) result in a higher rate
of total compensation from the Portfolios to the Adviser than the fee rates
stated in the Portfolio's Advisory Agreement.
The directors considered the scope and quality of services provided by the
Adviser under the Advisory Agreement and noted that the scope of services
provided by advisers of funds had expanded over time as a result of regulatory
and other developments. The directors noted, for example, that the Adviser is
responsible for maintaining and monitoring its own and, to varying degrees, the
Portfolios' compliance programs, and that these compliance programs have
recently been refined and enhanced in light of new regulatory requirements. The
directors considered the quality of the in-house investment research
capabilities of the Adviser and the other resources it has dedicated to
performing services for the Portfolios. The quality of administrative and other
services, including the Adviser's role in coordinating the activities of the
Portfolios' other service providers, also were considered. The directors also
considered the Adviser's response to recent regulatory compliance issues
affecting a number of the investment companies in the AllianceBernstein Funds
complex. The directors concluded that, overall, they were satisfied with the
nature, extent and quality of services provided to each of the Portfolios under
the Advisory Agreement.
Costs of Services Provided and Profitability to the Adviser
The directors reviewed a schedule of the revenues, expenses and related notes
indicating the profitability of each Portfolio to the Adviser for calendar years
2003 and 2004. The directors reviewed the assumptions and methods of allocation
used by the Adviser in preparing fund-specific profitability data, and noted the
Adviser's representation to them that it believed that the methods of allocation
used in preparing the profitability information were reasonable and appropriate
and that the Adviser had previously discussed with the directors that there is
no generally accepted allocation methodology for information of this type. The
directors also noted that the methodology for preparing fund-by-fund
profitability information was being reviewed and that it was expected that an
updated methodology would be used in 2005, and that it would differ in various
respects from the methodology used in 2004 and in prior years.
The directors recognized that it is difficult to make comparisons of
profitability from fund advisory contracts because comparative information is
not generally publicly available and is affected by numerous factors, including
the structure of the particular adviser, the types of funds it manages, its
business mix, numerous assumptions regarding allocations and the adviser's
capital structure and cost of capital. In considering profitability information,
the directors considered the effect of fall-out benefits on the Adviser's
expenses, as well as the "revenue sharing" arrangements the Adviser has entered
into with certain entities that distribute shares of the Portfolios. The
directors focused on the profitability of the
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ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 121
Adviser's relationships with the Portfolios before taxes and distribution
expenses. The directors recognized that the Adviser should generally be entitled
to earn a reasonable level of profits for the services it provides to each
Portfolio and, based on their review, concluded that they were satisfied that
the Adviser's level of profitability from its relationship with each Portfolio
was not excessive.
Fall-Out Benefits
The directors considered that the Adviser benefits from soft dollar arrangements
whereby it receives brokerage and research services from many of the brokers and
dealers that execute purchases and sales of securities on behalf of its clients
on an agency basis. The directors noted that since the Portfolios do not engage
in brokerage transactions, the Adviser does not receive soft dollar benefits in
respect of portfolio transactions of the Portfolios.
The directors also considered that the Distributor, which is a wholly-owned
subsidiary of the Adviser: receives 12b-1 fees from each Portfolio in respect of
classes of shares of the Portfolio that are subject to the Fund's 12b-1 plans;
retains a portion of the 12b-1 fees from the Portfolio; and receives all or a
portion of the sales charges on sales or redemptions of certain classes of
shares. The directors also noted that certain affiliates of the Adviser
distribute shares of the Portfolios and receive compensation in that connection
and that a subsidiary of the Adviser provides transfer agency services to the
Portfolios and receives compensation from the Portfolios for such services.
The directors recognized that the Adviser's profitability would be somewhat
lower if it did not receive research for soft dollars or if the Adviser's
affiliates did not receive the benefits described above. The directors believe
that the Adviser derives reputational and other benefits from its association
with the Portfolios.
Investment Results
In addition to the information reviewed by the directors in connection with the
meeting, the directors receive detailed comparative performance information for
each Portfolio at each regular Board meeting during the year. At the meeting,
the directors reviewed information from a report prepared by Lipper showing
performance for Class A shares of each Portfolio as compared to a group of funds
in its Lipper category selected by Lipper (the "Performance Group") and as
compared to a universe of funds in its Lipper category selected by Lipper (the
"Performance Universe"). The directors also reviewed information prepared by the
Adviser showing performance of the Class A Shares of each Portfolio as compared
to an index.
California Portfolio
The directors reviewed information showing performance for Class A shares of the
California Portfolio as compared to a Performance Group of 10 to 9 funds
(depending on the year) in its Lipper category selected by Lipper and as
com-
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122 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
pared to a Performance Universe of 35 to 26 funds (depending on the year) in
its Lipper category selected by Lipper for periods ended May 31, 2005 over the
1-, 3-, 5- and 10-year periods, and as compared to the Lehman Brothers Municipal
Bond Index for periods ending May 31, 2005 over the year to date ("YTD"), 1-,
3-, 5- and 10-year and since inception periods (December 1986 inception). The
directors noted that in the Performance Group comparison the California
Portfolio was in the second quintile in all periods except in the 5-year period
when it was in the fifth quintile and in the Performance Universe comparison the
California Portfolio was in the second quintile in the 1- and 3-year periods, in
the fourth quintile in the 5-year period and in the first quintile in the
10-year period. The comparative information showed that the California Portfolio
outperformed the Index in the YTD, 1- and 3-year periods and underperformed the
Index in the 5- and 10-year and since inception periods. Based on their review,
the directors concluded that the California Portfolio's relative performance
over time was satisfactory.
Insured California Portfolio
The directors reviewed information showing performance for Class A shares of the
Insured California Portfolio as compared to a Performance Group of 5 funds in
its Lipper category selected by Lipper and as compared to a Performance Universe
of 6 funds in its Lipper category selected by Lipper for periods ended May 31,
2005 over the 1-, 3-, 5- and 10-year periods, and as compared to the Lehman
Brothers Municipal Bond Index for periods ending May 31, 2005 over the year to
date ("YTD"), 1-, 3-, 5- and 10-year and since inception periods (November 1985
inception). The directors noted that in the Performance Universe comparison the
Insured California Portfolio was in the second quintile in the 1-year period, in
the fourth quintile in the 3- and 5-year periods and in the third quintile in
the 10-year period. Quintile information in the Performance Group comparison was
not provided by Lipper in light of the small number of funds in the Insured
California Portfolio's Lipper category. The comparative information showed that
the Insured California Portfolio outperformed the Index in the YTD period and
underperformed the Index in all other periods reviewed. Based on their review,
the directors concluded that the Insured California Portfolio's relative
performance over time was satisfactory.
Insured National Portfolio
The directors reviewed information showing performance for Class A shares of the
Insured National Portfolio as compared to a Performance Group of 7 funds in its
Lipper category selected by Lipper and as compared to a Performance Universe of
16 to 14 funds (depending on the year) in its Lipper category selected by Lipper
for periods ended May 31, 2005 over the 1-, 3-, 5- and 10-year periods, and as
compared to the Lehman Brothers Municipal Bond Index for periods ending May 31,
2005 over the year to date, 1-, 3-, 5- and 10-year and since inception periods
(December 1986 inception). The directors noted that in the Performance Group and
Performance Universe comparisons the Insured
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ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 123
National Portfolio was in the first quintile in the 1- and 3-year periods and
in the second quintile in the 5- and 10-year periods. The comparative
information showed that the Insured National Portfolio outperformed the Index
in the YTD and 1-year periods and underperformed the Index in all other
periods reviewed. Based on their review, the directors concluded that the
Insured National Portfolio's relative performance over time was satisfactory.
National Portfolio
The directors reviewed information showing performance for Class A shares of the
National Portfolio as compared to a Performance Group of 13 to 11 funds
(depending on the year) in its Lipper category selected by Lipper and as
compared to a Performance Universe of 80 to 53 funds (depending on the year) in
its Lipper category selected by Lipper for periods ended May 31, 2005 over the
1-, 3-, 5- and 10-year periods, and as compared to the Lehman Brothers Municipal
Bond Index for periods ending May 31, 2005 over the year to date, 1-, 3-, 5- and
10-year and since inception periods (December 1986 inception). The directors
noted that in the Performance Group and Performance Universe comparisons, the
National Portfolio was in the first quintile in the 1-year period and in the
third quintile in all other periods reviewed. The comparative information showed
that the National Portfolio outperformed the Index in the YTD and 1-year periods
and underperformed the Index in all other periods reviewed. Based on their
review, the directors concluded that the National Portfolio's relative
performance over time was satisfactory.
New York Portfolio
The directors reviewed information showing performance for Class A shares of the
New York Portfolio as compared to a Performance Group of 12 funds in its Lipper
category selected by Lipper and as compared to a Performance Universe of 31 to
26 funds (depending on the year) in its Lipper category selected by Lipper for
periods ended May 31, 2005 over the 1-, 3-, 5- and 10-year periods, and as
compared to the Lehman Brothers Municipal Bond Index for periods ending May 31,
2005 over the year to date ("YTD"), 1-, 3-, 5- and 10-year and since inception
periods (December 1986 inception). The directors noted that in the Performance
Group and Performance Universe comparisons, the New York Portfolio was in the
first quintile in the 1-year period, second quintile in the 3- and 10-year
periods and fourth quintile in the 5-year period. The comparative information
showed that the New York Portfolio outperformed the Index in the YTD and 1-year
periods and underperformed the Index in all other periods reviewed. Based on
their review, the directors concluded that the New York Portfolio's relative
performance over time was satisfactory.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate paid by each Portfolio to the
Adviser and information prepared by Lipper concerning fee rates paid by other
funds in the same Lipper category as the Portfolio at a common asset level. The
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124 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
directors recognized that it is difficult to make comparisons of advisory fees
because there are variations in the services that are included in the fees paid
by other funds.
The directors reviewed information in the Adviser's Form ADV and noted that it
charged institutional clients lower fees for advising comparably sized accounts
using strategies that differ from those of the Portfolios but which involve
investments in fixed income municipal securities. They had previously received
an oral presentation from the Adviser that supplemented the information in the
Form ADV.
The Adviser reviewed with the directors the significant differences in the scope
of services it provides to institutional clients and to the Portfolios. For
example, the Advisory Agreement requires the Adviser to provide, in addition to
investment advice, office facilities and officers (including officers to provide
required certifications). The Adviser also coordinates the provision of services
to the Portfolios by non-affiliated service providers and is responsible for the
compensation of the Fund's Independent Compliance Officer and certain related
expenses. The provision of these non-advisory services involves costs and
exposure to liability. The Adviser explained that many of these services
normally are not provided to non-investment company clients, and that fees
charged to the Portfolios reflect the costs and risks of the additional
obligations. The Adviser also noted that since the Portfolios are constantly
issuing and redeeming their shares, they are more difficult to manage than an
institutional account, where the assets are relatively stable. In light of these
facts, the directors did not place significant weight on these fee comparisons.
The directors also considered the total expense ratio of the Class A shares of
each Portfolio in comparison to the fees and expenses of funds within two
comparison groups of funds in the same Lipper category created by Lipper: an
Expense Group and an Expense Universe. Lipper described an Expense Group as a
representative sample of comparable funds and an Expense Universe as a broader
group, consisting of all funds in the Portfolio's investment
classification/objective with a similar load type as the Portfolio. The Class A
expense ratio of each Portfolio was based on the Portfolio's latest fiscal year
expense ratio. The directors recognized that the expense ratio information for
each Portfolio potentially reflected on the Adviser's provision of services, as
the Adviser is responsible for coordinating services provided to each Portfolio
by others. The directors noted that it was likely that the expense ratios of
some funds in each Portfolio's Lipper category also were lowered by waivers or
reimbursements by those funds' investment advisers, which in some cases were
voluntary and perhaps temporary.
California Portfolio
The information reviewed by the directors showed that the California Portfolio's
at approximate current size contractual effective fee rate of 45 basis points
was
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ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 125
somewhat lower than the Expense Group median. The directors noted that the
latest fiscal year administrative expense reimbursement by the California
Portfolio pursuant to the Advisory Agreement was 1 basis point. The directors
also noted that the California Portfolio's total expense ratio, which had been
capped by the Adviser, was the same as the median for the Expense Group and
somewhat lower than the median for the Expense Universe. The directors concluded
that the California Portfolio's expense ratio was satisfactory.
Insured California Portfolio
The information reviewed by the directors showed that the Insured California
Portfolio's at approximate current size contractual effective fee rate of 45
basis points was materially lower than the Expense Group median. The directors
noted that the latest fiscal year administrative expense reimbursement by the
Insured California Portfolio pursuant to the Advisory Agreement was 5 basis
points and that as a result the Adviser's total compensation from the Insured
California Portfolio pursuant to the Advisory Agreement was only somewhat lower
than the Expense Group median. The directors also noted that the Insured
California Portfolio's total expense ratio was materially higher than the
medians for the Expense Group and Expense Universe. The directors noted that the
Fund's expense ratio was affected by its relatively modest size compared to most
of the funds in its Expense Group and Expense Universe (the Insured California
Portfolio's net asset value was approximately $137 million as of June 30, 2005).
The directors also noted that the Adviser had recently reviewed with them steps
being taken that are intended to reduce expenses of the AllianceBernstein Funds.
The directors concluded that the Insured California Portfolio's expense ratio
was acceptable.
Insured National Portfolio
The information reviewed by the directors showed that the Insured National
Portfolio's at approximate current size contractual effective fee rate of 45
basis points was materially lower than the Expense Group median. The directors
noted that the latest fiscal year administrative expense reimbursement by the
Insured National Portfolio pursuant to the Advisory Agreement was 4 basis points
and that as a result the total compensation received by the Adviser from the
Insured National Portfolio pursuant to the Advisory Agreement was only slightly
lower than the Expense Group median. The directors also noted that the Insured
National Portfolio's total expense ratio, which had been capped by the Adviser,
was slightly higher than the median for the Expense Group and somewhat higher
than the median for the Expense Universe. The directors concluded that the
Insured National Portfolio's expense ratio was satisfactory.
National Portfolio
The information reviewed by the directors showed that the National Portfolio's
at approximate current size contractual effective fee rate of 45 basis points
was significantly lower than the Expense Group median. The directors noted that
the latest fiscal year administrative expense reimbursement by the National
Portfolio
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126 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
pursuant to the Advisory Agreement was 2 basis points. The directors also noted
that the National Portfolio's total expense ratio, which had been capped by the
Adviser, was significantly lower than the medians for the Expense Group and
Expense Universe. The directors concluded that the National Portfolio's expense
ratio was highly satisfactory.
New York Portfolio
The information reviewed by the directors showed that the New York Portfolio's
at approximate current size contractual effective fee rate of 45 basis points
was materially lower than the Expense Group median. The directors noted that the
latest fiscal year administrative expense reimbursement by the New York
Portfolio pursuant to the Advisory Agreement was 2 basis points and as a result
the total compensation received by the Adviser from the Fund pursuant to the
Advisory Agreement was only somewhat lower than the Expense Group median. The
directors also noted that the New York Portfolio's total expense ratio, which
had been capped by the Adviser, was significantly lower than the medians for the
Expense Group and the Expense Universe. The directors concluded that the New
York Portfolio's expense ratio was highly satisfactory.
Economies of Scale
The directors noted that the advisory fee schedule for each Portfolio contains
breakpoints so that, if assets were to increase over the breakpoint levels, the
fee rates would be reduced on the incremental assets. The directors also
considered a presentation by an independent consultant discussing economies of
scale issues in the mutual fund industry. The directors believe that economies
of scale are realized (if at all) by the Adviser across a variety of products
and services, and not only in respect of a single fund. The directors noted that
there is no uniform methodology for establishing breakpoints that give effect to
fund-specific services provided by the Adviser and to the economies of scale
that the Adviser may realize in its overall mutual fund business or those
components of it which directly or indirectly affect a Portfolio's operations.
The directors observed that in the mutual fund industry as a whole, as well as
among funds similar to the Portfolios, there is no uniformity or pattern in the
fees and asset levels at which breakpoints (if any) apply. Depending on the age
and size of a particular fund and its adviser's cost structure, different
conclusions can be drawn as to whether there are economies of scale to be
realized at any particular level of assets, notwithstanding the intuitive
conclusion that such economies exist, or will be realized at some level of total
assets. Moreover, because different advisers have different cost structures and
service models, it is difficult to draw meaningful conclusions from the
comparison of a fund's advisory fee breakpoints with those of comparable funds.
The directors also noted that the advisory agreements for many funds do not have
breakpoints at all. Having taken these factors into account, the directors
concluded that each Portfolio's breakpoint arrangements would result in a
sharing of economies of scale in the event of a very significant increase in the
Portfolio's net assets.
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ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 127
Alliancebernstein Family of Funds
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN FAMILY OF FUNDS
- -------------------------------------------
Wealth Strategies Funds
- -------------------------------------------
Balanced Wealth Strategy
Wealth Appreciation Strategy
Wealth Preservation Strategy
Tax-Managed Balanced Wealth Strategy
Tax-Managed Wealth Appreciation Strategy
Tax-Managed Wealth Preservation Strategy
- -------------------------------------------
Blended Style Funds
- -------------------------------------------
U.S. Large Cap Portfolio
International Portfolio
Tax-Managed International Portfolio
- -------------------------------------------
Growth Funds
- -------------------------------------------
Domestic
Growth Fund
Mid-Cap Growth Fund
Large Cap Growth Fund*
Small Cap Growth Portfolio
Global & International
Global Health Care Fund*
Global Research Growth Fund
Global Technology Fund*
Greater China '97 Fund
International Growth Fund*
International Research Growth Fund*
- -------------------------------------------
Value Funds
- -------------------------------------------
Domestic
Balanced Shares
Focused Growth & Income Fund*
Growth & Income Fund
Real Estate Investment Fund
Small/Mid-Cap Value Fund*
Utility Income Fund
Value Fund
Global & International
Global Value Fund
International Value Fund
- -------------------------------------------
Taxable Bond Funds
- -------------------------------------------
Americas Government Income Trust
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Multi-Market Strategy Trust
Quality Bond Portfolio
Short Duration Portfolio
U.S. Government Portfolio
- -------------------------------------------
Municipal Bond Funds
- -------------------------------------------
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
- -------------------------------------------
Intermediate Municipal Bond Funds
- -------------------------------------------
Intermediate California
Intermediate Diversified
Intermediate New York
- -------------------------------------------
Closed-End Funds
- -------------------------------------------
All-Market Advantage Fund
ACM Income Fund
ACM Government Opportunity Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
California Municipal Income Fund
National Municipal Income Fund
New York Municipal Income Fund
The Spain Fund
World Dollar Government Fund
World Dollar Government Fund II
We also offer Exchange Reserves,** which serves as the money market fund
exchange vehicle for the AllianceBernstein mutual funds.
For more complete information on any AllianceBernstein mutual fund, including
investment objectives and policies, sales charges, expenses, risks and other
matters of importance to prospective investors, visit our web site at
www.alliancebernstein.com or call us at (800) 227-4618 for a current prospectus.
You should read the prospectus carefully before you invest.
* Prior to December 15, 2004, these Funds were named as follows: Global
Health Care Fund was Health Care Fund; Large Cap Growth Fund was Premier
Growth Fund; Global Technology Fund was Technology Fund; and Focused
Growth & Income Fund was Disciplined Value Fund. Prior to February 1,
2005, Small/Mid-Cap Value Fund was named Small Cap Value Fund. Prior to
May 16, 2005, International Growth Fund was named Worldwide Privatization
Fund and International Research Growth Fund was named International
Premier Growth Fund. On June 24, 2005, All-Asia Investment Fund merged
into International Research Growth Fund. On July 8, 2005, New Europe Fund
merged into International Research Growth Fund.
** An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing
in the Fund.preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
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128 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF
INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Municipal Income Fund, Inc. on behalf of California Portfolio,
Insured California Portfolio, National Portfolio, Insured National Portfolio and
New York Portfolio (each a "Fund" and collectively the "Funds"), prepared by
Philip L. Kirstein, the Senior Officer, for the independent directors of the
Funds, as required by the Assurance of Discontinuance between the New York State
Attorney General and the Adviser. The Senior Officer's evaluation of the
investment advisory agreement is not meant to diminish the responsibility or
authority of the Board of Directors of the Funds to perform its duties pursuant
to Section 15 of the Investment Company Act of 1940 (the "40 Act") and
applicable state law. The purpose of the summary is to provide shareholders with
a synopsis of the independent evaluation of the reasonableness of the advisory
fees which was provided to the independent directors in connection with their
review of the proposed continuance of the investment advisory agreement. The
Senior Officer's evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the
Adviser for like services.
2. Management fees charged by other mutual fund companies for like
services.
3. Costs to the Adviser and its affiliates of supplying services pursuant
to the advisory agreements, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Funds grow larger.
6. Nature and quality of the Adviser's services including the performance
of the Funds.
(1) It should be noted that the information in the fee summary was completed
on September 2, 2005 and presented to the Board of Directors on September
14, 2005 in accordance with the Assurance of Discontinuance between the
New York State Attorney General and the Adviser. It also should be noted
that references in the fee summary pertaining to performance and expense
ratios refer to Class A shares of the Funds.
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ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 129
FUNDS ADVISORY FEES, EXPENSE REIMBURSEMENTS, CAPS & RATIOS
The table below describes the Funds' advisory fees pursuant to the Investment
Advisory Agreement. This is the fee schedule the Adviser implemented in January
2004 as a result of the settlement with the New York State Attorney General.(2)
Advisory Fee Based on % of
Fund Average Daily Net Assets
- --------------------------------------------------------------------------------
California Portfolio First $2.5 billion 0.45%
Next $2.5 billion 0.40%
Excess of $5 billion 0.35%
Insured California Portfolio First $2.5 billion 0.45%
Next $2.5 billion 0.40%
Excess of $5 billion 0.35%
National Portfolio First $2.5 billion 0.45%
Next $2.5 billion 0.40%
Excess of $5 billion 0.35%
Insured National Portfolio First $2.5 billion 0.45%
Next $2.5 billion 0.40%
Excess of $5 billion 0.35%
New York Portfolio First $2.5 billion 0.45%
Next $2.5 billion 0.40%
Excess of $5 billion 0.35%
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Funds as indicated below:
As a %
of average
Fund Amount daily net assets
- --------------------------------------------------------------------------------
California Portfolio $ 78,666 0.01
Insured California Portfolio $ 78,666 0.05
National Portfolio $ 78,666 0.02
Insured National Portfolio $ 78,666 0.04
New York Portfolio $ 78,666 0.02
The Adviser has agreed to waive that portion of its management fees and/or
reimburse each Fund for that portion of its total operating expenses to the
degree necessary to limit each Fund's expense ratio to the amounts set forth
(2) The advisory fee schedule implemented in January 2004 contemplates eight
categories of the AllianceBernstein Mutual Funds with all
AllianceBernstein Funds in each category having the same advisory fee
schedule.
- --------------------------------------------------------------------------------
130 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
below for each Fund's current fiscal year. The waiver agreement is terminable by
the Adviser at the end of the Funds' fiscal year upon at least 60 days written
notice.
Expense Cap
Pursuant to Expense Gross
Limitation Expense Fiscal
Fund Expense Ratio(3) Year End
- --------------------------------------------------------------------------------
California Portfolio Class A - 0.77% 0.86% October 31
Class B - 1.47% 1.56%
Class C - 1.47% 1.55%
National Portfolio Class A - 0.68% 0.93% October 31
Class B - 1.38% 1.64%
Class C - 1.38% 1.63%
Insured National Portfolio Class A - 1.04% 1.04% October 31
Class B - 1.74% 1.74%
Class C - 1.74% 1.74%
New York Portfolio Class A - 0.58% 0.90% October 31
Class B - 1.28% 1.60%
Class C - 1.28% 1.60%
The table below shows Insured California Portfolio's expense ratio calculated
from the beginning of the Fund's current fiscal year through May 31, 2005. The
Fund does not have an expense cap pursuant to an expense limitation undertaking.
Fund Expense Ratio Fiscal Year End
- --------------------------------------------------------------------------------
Insured California Portfolio Class A - 1.02% October 31
Class B - 1.73%
Class C - 1.72%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors is normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different services
provided to such clients, and different liabilities assumed. Services provided
by the Adviser to the Funds that are not provided to non-investment company
clients include providing office space and personnel to serve as Fund Officers,
who among other responsibilities make the certifications required under the
SarbanesnOxley Act of 2002, and coordinating with and monitoring the Funds'
third party service providers such as Fund counsel, auditors, custodians,
transfer agents and pricing services. The accounting, administrative, legal and
compliance requirements for
(3) These gross expense ratios are calculated from the beginning of each
Fund's current fiscal year through May 31, 2005.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 131
the Funds are more costly than those for institutional assets due to the greater
complexities and time required for investment companies, although as previously
noted, a portion of these expenses are reimbursed by the Funds to the Adviser.
In addition, managing the cash flow of an investment company may be more
difficult than that of a stable pool of assets, such as an institutional account
with little cash movement in either direction, particularly, if a Fund is in net
redemption and the Adviser is frequently forced to sell securities to raise cash
for redemptions. However, managing a fund with positive cash flow may be easier
at times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is
not comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with substantially similar
investment styles as the Funds. However, the Adviser represented that it does
not manage any separate managed account that has similar investment guidelines
as the Funds. The Adviser does manage separately managed accounts that invest
principally in municipal securities but those mandates have a substantially
lower risk profile (credit and interest rate risk) than the Funds.
The Adviser manages the Sanford C. Bernstein Fund, Inc., an open-end
investment company. The Adviser charges the following fees to the Portfolios
that invest in municipal securities like the Funds, although they invest in
securities of different maturities and qualities:
Portfolio Advisory Fee
- ----------------------------------------------------------------------------------------------
California Municipal Portfolio 0.50% of the first $1 billion;
Diversified Municipal Portfolio 0.45% in excess of $1 billion up to but
New York Municipal Portfolio not exceeding $3 billion; 0.40% in
excess of $3 billion
Short Duration California Municipal Portfolio 0.50% of the first $250 million;
Short Duration Diversified Municipal Portfolio 0.45% in excess of $250 million up to but
Short Duration New York Municipal Portfolio but not exceeding $750 million; 0.40%
excess of $750 million
The Adviser also manages and sponsors retail mutual funds which are organized in
jurisdictions outside the United States, generally Luxembourg, and sold to
non-United States resident investors. The Adviser charges the following fees for
an offshore mutual fund that invests in fixed income securities:
- --------------------------------------------------------------------------------
132 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Asset Class Fee(4)
- --------------------------------------------------------------------------------
Fixed Income 0.65%
The Adviser represented that it does not sub-advise any registered investment
companies of other fund families with a similar investment style as the Fund.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUNDS COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fees charged to the Funds with fees charged to other investment
companies for similar services by other investment advisers. Lipper's analysis
included the Funds' ranking with respect to the proposed management fees
relative to the Lipper group median at the approximate current asset levels of
the Funds.(5)
Effective Lipper
Management Group
Fund Fee(6) Median Rank
- --------------------------------------------------------------------------------
California Portfolio 0.450 0.485 4/10
Insured California Portfolio 0.450 0.548 1/5
National Portfolio 0.450 0.613 2/13
Insured National Portfolio 0.450 0.500 1/7
New York Portfolio(7) 0.450 0.500 3/11
Lipper also analyzed the expense ratio of the Funds in comparison to its Lipper
Expense Group(8) and Lipper Expense Universe(9). Lipper describes a Lipper
Expense Group as a representative sample of comparable funds, consisting of all
(4) The fees charged to the fund include a 0.10% fee for administrative
services provided by the Adviser or its affiliates.
(5) It should be noted that "effective management fee" is calculated by Lipper
using each Fund's contractual management fee rate at a hypothetical asset
level. The hypothetical asset level is based on the combined net assets of
all classes of each Fund, rounded up to the next $25 million. Lipper's
total expense ratio information is based on the most recent annual report
except as otherwise noted. A ranking of "1" means that the
AllianceBernstein Fund has the lowest effective fee rate in the Lipper
peer group.
(6) It should be noted that the "effective management fee" rate for the Funds
does not reflect the payments by the Funds to the Adviser for certain
clerical, legal, accounting, administrative and other services. The dollar
amount and basis point impact of such payments on the Funds is discussed
in Section I.
(7) The number of funds used in Lipper's group ranking for management fees is
one less than the number of funds used in Lipper's group ranking for total
expenses. According to Lipper, the excluded fund's contractual management
fee cannot be computed because of its breakpoint gross income component.
(8) Lipper uses the following criteria in screening funds to be included in
each Fund's Expense Group: fund type, investment classification/objective,
load type and similar 12b-1/non-12b-1 service fees, asset (size)
comparability, and expense components and attributes. An Expense Group
will typically consist of seven to twenty funds.
(9) Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting an Expense Group when selecting an Expense
Universe. Unlike an Expense Group, an Expense Universe allows for the same
adviser to be represented by more than just one fund.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 133
funds in the investment classification/objective with a similar load type as the
subject Fund. The Lipper Expense Universe is a broader collection of. The
results of that analysis are set forth below:
Lipper Lipper Lipper Lipper
Expense Universe Universe Group Group
Fund Ratio(10) Median Rank Median Rank
- --------------------------------------------------------------------------------
California Portfolio 0.778 0.835 12/31 0.768 6/10
Insured California Portfolio 0.996 0.856 6/6 0.862 5/5
National Portfolio 0.680 0.875 5/74 0.884 1/13
Insured National Portfolio 1.028 0.930 12/15 0.982 6/7
New York Portfolio(11) 0.590 0.859 2/29 0.863 1/12
Based on this analysis, except for National Portfolio and New York Portfolio,
which have a more favorable ranking for total expense ratio compared to
management fees, the Funds have a more favorable ranking on a management fee
basis than they do on a total expense ratio basis. This has resulted in a
variety of efforts by the Adviser to lower non-management expenses.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
The profitability information for the Funds prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. An independent consultant
is working with the Adviser's personnel on a new system to produce profitability
information at the Fund level which will reflect the Adviser's management
reporting approach. It is possible that future Fund profitability information
may differ from previously reviewed information due to changes in methodologies
and allocations. See Section IV for additional discussion.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The Adviser's profitability from providing investment advisory services to the
Funds decreased during calendar 2004 relative to 2003 primarily as a result of
the reduction in the advisory fee schedule implemented early in 2004.
In addition to the Adviser's direct profits from managing the Funds, certain of
the Adviser's affiliates have business relationships with the Funds and may earn
a profit from providing other services to the Funds. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Funds and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type
(10) Most recent fiscal year end Class A share expense ratio.
(11) See footnote 7 on page 7.
- --------------------------------------------------------------------------------
134 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
of relationship. These affiliates provide transfer agent and distribution
services to the Funds and receive transfer agent fees, Rule 12b-1 payments,
front-end sales loads and contingent deferred sales charges ("CDSC"). Additional
information regarding distribution related fees can be found in the prospectus
of the Funds.
The Adviser's affiliate, AllianceBernstein Investment Research and Management,
Inc. ("ABIRM"), is the Funds' principal underwriter. ABIRM and the Adviser have
disclosed in the Funds prospectus that they may make payments(12) from their own
resources, in addition to resources derived from sales loads and Rule 12b-1
fees, to firms that sell shares of the Funds. In 2004, ABIRM paid approximately
0.04% of the average monthly assets of the AllianceBernstein Mutual Funds for
distribution services and educational support. For 2005, it is anticipated,
ABIRM will pay approximately 0.04% of the average monthly assets of each of the
Funds for such purposes.
After payments to third party intermediaries, ABIRM retained the following
amount in Class A front-end load sales charge from sales of the Funds' shares in
the Funds' most recent fiscal year.
Fund Amount Received
- --------------------------------------------------------------------------------
California Portfolio $39,251
Insured California Portfolio $ 4,636
National Portfolio $28,633
Insured National Portfolio $ 5,256
New York Portfolio $25,534
ABIRM received the amounts set forth below in Rule 12b-1 fees for the Funds
during the Funds most recent fiscal year. A significant percentage of such
amounts were paid out to third party intermediaries by ABIRM.
12b-1Fee
Received CDSC Received
- --------------------------------------------------------------------------------
California Portfolio $ 5,426,523 $ 51,798
Insured California Portfolio $ 805,741 $ 191,927
National Portfolio $ 1,064,679 $ 241,418
Insured National Portfolio $ 824,338 $ 183,133
New York Portfolio $ 2,941,261 $ 75,292
Fees and reimbursements for out of pocket expenses charged by Alliance Global
Investor Services, Inc. ("AGIS"), the affiliated transfer agent, are based on
the level of the network account and the class of share held by the account.
AGIS also receives a fee per shareholder sub-account for each account maintained
by an
(12) The total amount paid to the financial intermediary in connection with the
sale of shares 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 the average daily
net assets attributable to that firm over the year.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 135
intermediary on an omnibus basis. AGIS' after-tax profitability decreased in
2004 in comparison to 2003.
AGIS received the following fees from the Funds in the most recent fiscal year:
Fund AGIS Fee
- --------------------------------------------------------------------------------
California Portfolio $225,239
Insured California Portfolio $ 35,048
National Portfolio $256,626
Insured National Portfolio $ 74,396
New York Portfolio $184,156
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional literature
that has considered economies of scale in the mutual fund industry it is thought
that to the extent economies of scale exist, they may more often exist across a
fund family as opposed to a specific fund. This is because the costs incurred by
the Adviser, such as investment research or technology for trading or compliance
systems can be spread across a greater asset base as the fund family increases
in size. It is also possible that as the level of services required to operate a
successful investment company has increased over time, and advisory firms have
made such investments in their business to provide improved services, there may
be a sharing of economies of scale without a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual fund
industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of economies
of scale or scope are being passed to shareholders by the Adviser. In the
meantime, it is clear that to the extent the Funds' assets exceed the initial
breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUNDS.
With assets under management of $516 billion as of June 30, 2005, the Adviser
has the investment experience to manage and provide non-investment services
(described in Section II) to the Funds.
- --------------------------------------------------------------------------------
136 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
The information prepared by Lipper showed the 1, 3, 5 and 10 year performance
ranking of the Funds(13) relative to its Lipper group and universe for the
periods ended May 31, 2005:
California Portfolio Group Universe
- --------------------------------------------------------------------------------
1 year 4/10 11/35
3 year 3/9 8/31
5 year 8/9 24/30
10 year 3/9 6/26
Insured California Portfolio Group Universe
- --------------------------------------------------------------------------------
1 year 2/5 3/6
3 year 4/5 5/6
5 year 4/5 5/6
10 year 3/5 4/6
National Portfolio Group Universe
- --------------------------------------------------------------------------------
1 year 2/13 8/80
3 year 7/13 35/74
5 year 8/13 38/68
10 year 6/11 22/53
Insured National Portfolio Group Universe
- --------------------------------------------------------------------------------
1 year 1/7 1/16
3 year 2/7 2/15
5 year 3/7 4/15
10 year 3/7 4/14
New York Portfolio Group Universe
- --------------------------------------------------------------------------------
1 year 3/12 6/31
3 year 4/12 8/28
5 year 9/12 20/28
10 year 4/12 7/26
Set forth below are the 1, 3, 5, 10 year and since inception performance returns
of the Funds (in bold)(14) versus its benchmarks(15). It should be noted that
each Fund has the Lehman Brothers Municipal Bond Index as its benchmark. The
Lehman Brothers Municipal Bond Index is a rules-based, market-value-weighted
index engineered for the long-term tax-exempt bond market. To be included, bonds
must be investment grade and be at least one year from maturity. The index has
four main sectors: general obligation bonds, revenue bonds, insured
(13) The performance rankings are for the Class A shares of the Funds.
(14) The Funds' performance returns are for the Class A shares of the Funds.
(15) The Adviser provided Fund and benchmark performance return information for
periods through May 31, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 137
bonds and pre-funded bonds. The index represents a national municipal bond index
as opposed to a specific state index.
Periods Ending May 31, 2005
Annualized Performance
- --------------------------------------------------------------------------------
1 2 5 10 Since
Funds Year Year Year Year Inception
- --------------------------------------------------------------------------------
California Portfolio 9.41 6.01 6.48 5.98 6.89
Lehman Brothers Municipal Bond Index 7.96 6.00 7.30 6.22 7.03
Insured California Portfolio 7.94 5.39 6.78 5.67 6.88
Lehman Brothers Municipal Bond Index 7.96 6.00 7.30 6.22 7.64
National Municipal Portfolio 8.99 5.48 6.49 5.45 6.75
Lehman Brothers Municipal Bond Index 7.96 6.00 7.30 6.22 7.03
Insured National Portfolio 8.44 5.98 7.13 5.66 6.72
Lehman Brothers Municipal Bond Index 7.96 6.00 7.30 6.22 7.03
New York Portfolio 8.70 5.88 6.69 5.90 6.48
Lehman Brothers Municipal Bond Index 7.96 6.00 7.30 6.22 7.03
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that the
proposed fees for the Funds are reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Funds is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: October 12, 2005
- --------------------------------------------------------------------------------
138 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
NOTES
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 139
NOTES
- --------------------------------------------------------------------------------
140 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO] ALLIANCEBERNSTEIN(R)
Investment Research and Management
MUNIAR1005
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer and principal accounting
officer. A copy of the registrant's code of ethics is filed herewith as
Exhibit 12(a)(1).
(b) During the period covered by this report, no material amendments were made
to the provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers
to the provisions of the code of ethics adopted in 2(a) above were granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors has determined that independent directors
David H. Dievler and William H. Foulk, Jr. qualify as audit committee financial
experts.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) - (c) The following table sets forth the aggregate fees billed by the
independent registered public accounting firm Ernst & Young LLP, for the Fund's
last two fiscal years for professional services rendered for: (i) the audit of
the Fund's annual financial statements included in the Fund's annual report to
stockholders; (ii) assurance and related services that are reasonably related
to the performance of the audit of the Fund's financial statements and are not
reported under (i), which include advice and education related to accounting
and auditing issues and quarterly press release review (for those Funds which
issue press releases), and preferred stock maintenance testing (for those Funds
that issue preferred stock); and (iii) tax compliance, tax advice and tax
return preparation.
Audit-Related
Audit Fees Fees Tax Fees
---------- ------------- --------
California Portfolio 2004 $28,500 $2,398 $30,702
2005 29,500 3,329 13,737
Insured California Portfolio 2004 28,500 2,398 11,193
2005 29,500 3,329 13,737
Insured National Portfolio 2004 28,500 2,398 11,442
2005 29,500 3,329 13,737
National Portfolio 2004 28,500 2,398 19,621
2005 29,500 3,329 13,737
New York Portfolio 2004 28,500 2,398 19,009
2005 29,500 3,329 13,737
(d) Not applicable.
(e) (1) Beginning with audit and non-audit service contracts entered into on
or after May 6, 2003, the Fund's Audit Committee policies and procedures
require the pre-approval of all audit and non-audit services provided to the
Fund by the Fund's independent registered public accounting firm. The Fund's
Audit Committee policies and procedures also require pre-approval of all audit
and non-audit services provided to the Adviser and Service Affiliates to the
extent that these services are directly related to the operations or financial
reporting of the Fund.
(e) (2) All of the amounts for Audit Fees, Audit-Related Fees and Tax Fees in
the table under Item 4 (a) - (c) are for services pre-approved by the Fund's
Audit Committee.
(f) Not applicable.
(g) The following table sets forth the aggregate non-audit services provided to
the Fund, the Fund's Adviser and entities that control, are controlled by or
under common control with the Adviser that provide ongoing services to the
Fund, which include preparing an annual internal control report pursuant to
Statement on Auditing Standards No. 70 ("Service Affiliates"):
Total Amount of
Foregoing Column
Pre-approved by the
All Fees for Audit Committee
Non-Audit Services (Portion Comprised of
Provided to the Audit Related Fees)
Portfolio, the Adviser (Portion Comprised of
and Service Affiliates Tax Fees)
---------------------- ---------------------
California Portfolio 2004 $1,134,832 [ $183,100 ]
( 152,398 )
( 30,702 )
2005 896,062 [ 184,769 ]
( 171,032 )
( 13,737 )
Insured California Portfolio 2004 1,115,323 [ 163,591 ]
( 152,398 )
( 11,193 )
2005 896,062 [ 184,769 ]
( 171,032 )
( 13,737 )
Insured National Portfolio 2004 1,115,572 [ 163,840 ]
( 152,398 )
( 11,442 )
2005 896,062 [ 184,769 ]
( 171,032 )
( 13,737 )
National Portfolio 2004 1,123,751 [ 172,019 ]
( 152,398 )
( 19,621 )
2005 896,062 [ 184,769 ]
( 171,032 )
( 13,737 )
New York Portfolio 2004 1,123,139 [ 171,407 ]
( 152,398 )
( 19,009 )
2005 896,062 [ 184,769 ]
( 171,032 )
( 13,737 )
(h) The Audit Committee of the Fund has considered whether the provision of
any non-audit services not pre-approved by the Audit Committee provided by the
Fund's independent registered public accounting firm to the Adviser and Service
Affiliates is compatible with maintaining the independent registered public
accounting firm's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the registrant.
ITEM 6. SCHEDULE OF INVESTMENTS.
Please see Schedule of Investments contained in the Report to Shareholders
included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Fund's Board of Directors since the Fund last
provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and procedures
(as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as
amended) are effective at the reasonable assurance level based on their
evaluation of these controls and procedures as of a date within 90 days of the
filing date of this document.
(b) There were no changes in the registrant's internal controls over financial
reporting that occurred during the second fiscal quarter of the period that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
12 (a) (1) Code of Ethics that is subject to the disclosure of
Item 2 hereof
12 (b) (1) Certification of Principal Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
12 (b) (2) Certification of Principal Financial Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
12 (c) Certification of Principal Executive Officer and
Principal Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): AllianceBernstein Municipal Income Fund, Inc.
By: /s/ Marc O. Mayer
-------------------
Marc O. Mayer
President
Date: December 29, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Marc O. Mayer
-------------------
Marc O. Mayer
President
Date: December 29, 2005
By: /s/ Mark D. Gersten
-------------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: December 29, 2005