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
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: October 31, 2006
Date of reporting period: October 31, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
- -------------------------------------------------------------------------------
ANNUAL REPORT
- -------------------------------------------------------------------------------
AllianceBernstein Municipal Income Fund
National Portfolio
California Portfolio
New York Portfolio
Insured National Portfolio
Insured California Portfolio
Annual Report
October 31, 2006
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
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
AllianceBernsteinR 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 Investments, Inc. is an affiliate of AllianceBernstein L.P.,
the manager of the AllianceBernstein funds, and is a member of the NASD.
AllianceBernsteinR and the AB Logo are registered trademarks and service marks
used by permission of the owner, AllianceBernstein L.P.
December 12, 2006
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, 2006.
Investment Objective and Policies
The investment objective of the five portfolios of this open-end fund is to
earn the highest level of current income, exempt from Federal taxation and, in
the case of the State Portfolios, state taxation of the respective state that
is available without assuming what AllianceBernstein considers to be undue
risk. Each portfolio invests principally in high-yielding, predominantly
investment-grade 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 5-9 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, 2006.
For both the six- and 12-month periods ended October 31, 2006, National,
California and New York Portfolios' Class A shares outperformed the benchmark,
the LB Municipal Index, which represents the municipal market and posted
positive returns of 4.12% and 5.75% for the respective time periods. Insured
California and Insured National Portfolios' Class A shares underperformed the
benchmark during the same time frames.
A description of each Portfolio's relative performance versus the benchmark for
the 12-month period ended October 31, 2006 follows.
National Portfolio--The National Portfolio's stronger relative performance
compared to the benchmark was largely the result of security selection in the
special tax, insured and pre-refunded sectors. Security selection in the power
sector detracted from the Portfolio's performance. The Portfolio's holdings in
lower-rated bonds benefited performance relative to the benchmark.
California Portfolio--The California Portfolio's stronger relative performance
compared to the benchmark was largely the result of security selection in the
pre-refunded, insured, special tax and general obligation sectors. The
Portfolio's relative weight in the industrial revenue bond sector detracted
from the Portfolio's performance. The
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 1
Portfolio's holdings in lower-rated bonds benefited performance relative to the
benchmark.
New York Portfolio--The New York Portfolio's stronger relative performance
compared to the benchmark was largely the result of security selection in the
insured, general obligation, special tax and pre-refunded sectors. Security
selection in the housing and airport sectors detracted from the Portfolio's
performance. The Portfolio's holdings in lower-rated bonds benefited
performance relative to the benchmark.
Insured National Portfolio--The Insured National Portfolio's relative
underperformance compared to the benchmark was largely the result of a lack of
exposure to lower-credit quality bonds.
Insured California Portfolio--The Insured California Portfolio's relative
underperformance compared to the benchmark was largely the result of a lack of
exposure to lower-credit quality bonds.
Market Review and Investment Strategy
The U.S. Federal Reserve (the "Fed") raised the target for the Fed funds rate
six times over the past 12 months and thereby increased it by 1.50% to the
current level of 5.25%. This caused short-term municipal rates to rise. For
instance, since October 31, 2005, one-year municipal bond yields have risen
0.48%. Over the same time period, 20-year municipal bond yields declined by
0.41%. As a result of this rate movement, the difference between municipal
short-and long-term rates is less than it has been in 30 years. In other words,
the municipal yield curve is flatter than it has been in 30 years. U.S.
Treasury bond yields rose more than comparable maturity municipal bond yields,
as one-year U.S. Treasury rates rose 0.77% and 20-year U.S. Treasury yields
rose by 0.19%. As a result of the relative movement, the municipal market
outperformed the U.S. Treasury market; the LB Municipal Index return for the
12-month period was 5.75% versus 4.43% for the LB U.S. Treasury Index. Most of
the return for the municipal market was due to its return of 4.05% during the
past four months after the Fed signaled that it had stopped raising short-term
rates.
Over the 12-month reporting period, municipal bonds issued by lower-credit
quality borrowers continued to outperform bonds issued by high-grade borrowers.
The LB Municipal Non-Investment Grade (High Yield) Index returned 11.87% versus
the 5.75% return for the LB Municipal Index, which represents the overall
investment-grade market. The result of this outperformance has been that the
incremental yield, or credit spread, investors earn by owning lower-rated bonds
is extremely low by historic standards. The performance of the high yield
municipal market has benefited from the strong demand from individual
investors. Investor flows into high yield municipal bond funds continue to
represent about 40% of all municipal bond flows. Despite the fact that the high
2 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
yield municipal market only represents about 4% of the overall municipal
market, the assets in high yield municipal funds now represent over 20% of the
assets in all municipal funds.
With the municipal yield curve flat, and credit spreads low, investors
generally are being rewarded less than the market has historically offered for
taking risk. Accordingly, the Portfolios' Municipal Bond Investment Team (the
"Team") has sought opportunities to raise the overall credit quality of the
Portfolios and to diversify the Portfolios' exposure to individual issuers. In
addition, where possible, the Team has focused new purchases on bonds maturing
in 10-15 years, rather than longer maturity bonds. Both of these strategies
should be beneficial to the Portfolios' performance if the market returns to
more typical relationships.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 3
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 Investments at 800.227.4618. You should read the
prospectus carefully before you invest.
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. Returns for the
different share classes will vary due to different expenses associated with
each class. Performance assumes reinvestment of distributions and does not
account for taxes.
Benchmark Disclosure
The unmanaged 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. The Portfolios may invest in high yield bonds (i.e.,
"junk bonds") which involves a greater risk of default and price volatility
than other bonds. Investing in non-investment grade presents special risks,
including credit risk. 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)
4 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
NATIONAL PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE PORTFOLIO VS. ITS BENCHMARK -----------------------------
PERIODS ENDED OCTOBER 31, 2006 6 Months 12 Months
- -------------------------------------------------------------------------------
National Portfolio
Class A 4.29% 6.43%
Class B 4.04% 5.70%
Class C 3.93% 5.59%
LB Municipal Index 4.12% 5.75%
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
10/31/96 TO 10/31/06
National Portfolio Class A at NAV: $16,473
National Portfolio Class A at Offering: $15,768
LB Municipal Index: $17,662
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
National Portfolio
Class A at Offering LB Municipal Index
- -------------------------------------------------------------------------------
10/31/96 $ 9,575 $ 10,000
10/31/97 $ 10,521 $ 10,849
10/31/98 $ 11,239 $ 11,719
10/31/99 $ 10,797 $ 11,512
10/31/00 $ 11,547 $ 12,491
10/31/01 $ 12,419 $ 13,804
10/31/02 $ 12,428 $ 14,614
10/31/03 $ 13,337 $ 15,361
10/31/04 $ 14,260 $ 16,288
10/31/05 $ 14,824 $ 16,701
10/31/06 $ 15,768 $ 17,662
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund National Portfolio Class A shares (from
10/31/96 to 10/31/06) as compared to the performance of the Portfolio's
benchmark. The chart assumes the reinvestment of dividends and capital gains
distributions.
See Historical Performance and Benchmark disclosures on page 4.
(Historical Performance continued on next page)
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 5
CALIFORNIA PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE PORTFOLIO VS. ITS BENCHMARK -----------------------------
PERIODS ENDED OCTOBER 31, 2006 6 Months 12 Months
- -------------------------------------------------------------------------------
California Portfolio
Class A 4.35% 6.42%
Class B 3.98% 5.69%
Class C 3.98% 5.69%
LB Municipal Index 4.12% 5.75%
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
10/31/96 TO 10/31/06
California Portfolio Class A at NAV: $17,207
California Portfolio Class A at Offering: $16,476
LB Municipal Index: $17,662
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
California Portfolio
Class A at Offering LB Municipal Index
- -------------------------------------------------------------------------------
10/31/96 $ 9,575 $ 10,000
10/31/97 $ 10,539 $ 10,849
10/31/98 $ 11,403 $ 11,719
10/31/99 $ 11,198 $ 11,512
10/31/00 $ 12,135 $ 12,491
10/31/01 $ 12,922 $ 13,804
10/31/02 $ 13,415 $ 14,614
10/31/03 $ 13,839 $ 15,361
10/31/04 $ 14,919 $ 16,288
10/31/05 $ 15,483 $ 16,701
10/31/06 $ 16,476 $ 17,662
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund California Portfolio Class A shares
(from 10/31/96 to 10/31/06) as compared to the performance of the Portfolio's
benchmark. The chart assumes the reinvestment of dividends and capital gains
distributions.
See Historical Performance and Benchmark disclosures on page 4.
(Historical Performance continued on next page)
6 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
NEW YORK PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE PORTFOLIO VS. ITS BENCHMARK -----------------------------
PERIODS ENDED OCTOBER 31, 2006 6 Months 12 Months
- -------------------------------------------------------------------------------
New York Portfolio
Class A 4.19% 6.06%
Class B 3.83% 5.33%
Class C 3.72% 5.32%
LB Municipal Index 4.12% 5.75%
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
10/31/96 TO 10/31/06
New York Portfolio Class A at NAV: $17,172
New York Portfolio Class A at Offering: $16,440
LB Municipal Index: $17,662
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
New York Portfolio
Class A at Offering LB Municipal Index
- -------------------------------------------------------------------------------
10/31/96 $ 9,575 $ 10,000
10/31/97 $ 10,582 $ 10,849
10/31/98 $ 11,356 $ 11,719
10/31/99 $ 10,985 $ 11,512
10/31/00 $ 11,909 $ 12,491
10/31/01 $ 12,845 $ 13,804
10/31/02 $ 13,217 $ 14,614
10/31/03 $ 14,061 $ 15,361
10/31/04 $ 14,987 $ 16,288
10/31/05 $ 15,505 $ 16,701
10/31/06 $ 16,440 $ 17,662
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund New York Portfolio Class A shares (from
10/31/96 to 10/31/06) as compared to the performance of the Portfolio's
benchmark. The chart assumes the reinvestment of dividends and capital gains
distributions.
See Historical Performance and Benchmark disclosures on page 4.
(Historical Performance continued on next page)
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 7
INSURED NATIONAL PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE PORTFOLIO VS. ITS BENCHMARK -----------------------------
PERIODS ENDED OCTOBER 31, 2006 6 Months 12 Months
- -------------------------------------------------------------------------------
Insured National Portfolio
Class A 3.54% 4.98%
Class B 3.29% 4.36%
Class C 3.19% 4.26%
LB Municipal Index 4.12% 5.75%
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
10/31/96 TO 10/31/06
Insured National Portfolio Class A at NAV: $16,546
Insured National Portfolio Class A at Offering: $15,837
LB Municipal Index: $17,662
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Insured National Portfolio
Class A at Offering LB Municipal Index
- -------------------------------------------------------------------------------
10/31/96 $ 9,575 $ 10,000
10/31/97 $ 10,415 $ 10,849
10/31/98 $ 11,160 $ 11,719
10/31/99 $ 10,571 $ 11,512
10/31/00 $ 11,400 $ 12,491
10/31/01 $ 12,552 $ 13,804
10/31/02 $ 12,945 $ 14,614
10/31/03 $ 13,764 $ 15,361
10/31/04 $ 14,647 $ 16,288
10/31/05 $ 15,094 $ 16,701
10/31/06 $ 15,837 $ 17,662
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund Insured National Portfolio Class A
shares (from 10/31/96 to 10/31/06) as compared to the performance of the
Portfolio's benchmark. The chart assumes the reinvestment of dividends and
capital gains distributions.
See Historical Performance and Benchmark disclosures on page 4.
(Historical Performance continued on next page)
8 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
INSURED CALIFORNIA PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE PORTFOLIO VS. ITS BENCHMARK -----------------------------
PERIODS ENDED OCTOBER 31, 2006 6 Months 12 Months
- -------------------------------------------------------------------------------
Insured California Portfolio
Class A 3.99% 5.19%
Class B 3.63% 4.45%
Class C 3.55% 4.46%
LB Municipal Index 4.12% 5.75%
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
10/31/96 TO 10/31/06
Insured California Portfolio Class A at NAV: $16,763
Insured California Portfolio Class A at Offering: $16,054
LB Municipal Index: $17,662
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Insured California Portfolio
Class A at Offering LB Municipal Index
- -------------------------------------------------------------------------------
10/31/96 $ 9,575 $ 10,000
10/31/97 $ 10,454 $ 10,849
10/31/98 $ 11,250 $ 11,719
10/31/99 $ 10,829 $ 11,512
10/31/00 $ 11,914 $ 12,491
10/31/01 $ 13,125 $ 13,804
10/31/02 $ 13,606 $ 14,614
10/31/03 $ 14,067 $ 15,361
10/31/04 $ 14,876 $ 16,288
10/31/05 $ 15,263 $ 16,701
10/31/06 $ 16,054 $ 17,662
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund Insured California Portfolio Class A
shares (from 10/31/96 to 10/31/06) as compared to the performance of the
Portfolio's benchmark. The chart assumes the reinvestment of dividends and
capital gains distributions.
See Historical Performance and Benchmark disclosures on page 4.
(Historical Performance continued on next page)
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 9
NATIONAL PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2006
- -------------------------------------------------------------------------------
Taxable
NAV SEC SEC Equivalent
Returns Returns Yields* Yields**
Class A Shares 4.14% 6.37%
1 Year 6.43% 1.87%
5 Years 4.90% 3.99%
10 Years 5.12% 4.66%
Class B Shares 3.63% 5.58%
1 Year 5.70% 2.70%
5 Years 4.18% 4.18%
10 Years(a) 4.69% 4.69%
Class C Shares 3.63% 5.58%
1 Year 5.59% 4.59%
5 Years 4.16% 4.16%
10 Years 4.40% 4.40%
SEC AVERAGE ANNUAL RETURNS (WITH ANY APPLICABLE SALES CHARGES)
AS OF THE MOST RECENT CALENDAR QUARTER-END (SEPTEMBER 30, 2006)
- -------------------------------------------------------------------------------
SEC Returns
Class A Shares
1 Year 0.66%
5 Years 3.97%
10 Years 4.72%
Class B Shares
1 Year 1.40%
5 Years 4.16%
10 Years(a) 4.76%
Class C Shares
1 Year 3.40%
5 Years 4.15%
10 Years 4.47%
(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, 2006.
** Taxable equivalent yields are based on SEC yields and a 35% marginal
Federal income tax rate and maximum state, city and local taxes where
applicable.
See Historical Performance disclosures on page 4.
(Historical Performance continued on next page)
10 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
CALIFORNIA PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2006
- -------------------------------------------------------------------------------
Taxable
NAV SEC SEC Equivalent
Returns Returns Yields* Yields**
Class A Shares 3.96% 6.79%
1 Year 6.42% 1.92%
5 Years 4.98% 4.07%
10 Years 5.58% 5.12%
Class B Shares 3.45% 5.92%
1 Year 5.69% 2.69%
5 Years 4.25% 4.25%
10 Years(a) 5.13% 5.13%
Class C Shares 3.45% 5.92%
1 Year 5.69% 4.69%
5 Years 4.25% 4.25%
10 Years 4.84% 4.84%
SEC AVERAGE ANNUAL RETURNS (WITH ANY APPLICABLE SALES CHARGES)
AS OF THE MOST RECENT CALENDAR QUARTER-END (SEPTEMBER 30, 2006)
- -------------------------------------------------------------------------------
SEC Returns
Class A Shares
1 Year 0.41%
5 Years 4.12%
10 Years 5.19%
Class B Shares
1 Year 1.18%
5 Years 4.31%
10 Years(a) 5.20%
Class C Shares
1 Year 3.17%
5 Years 4.31%
10 Years 4.92%
(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, 2006.
** Taxable equivalent yields are based on SEC yields and a 35% marginal
Federal income tax rate and maximum state, city and local taxes where
applicable.
See Historical Performance disclosures on page 4.
(Historical Performance continued on next page)
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 11
NEW YORK PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2006
- -------------------------------------------------------------------------------
Taxable
NAV SEC SEC Equivalent
Returns Returns Yields* Yields**
Class A Shares 3.83% 6.38%
1 Year 6.06% 1.50%
5 Years 5.06% 4.15%
10 Years 5.56% 5.10%
Class B Shares 3.31% 5.52%
1 Year 5.33% 2.33%
5 Years 4.31% 4.31%
10 Years(a) 5.09% 5.09%
Class C Shares 3.31% 5.52%
1 Year 5.32% 4.32%
5 Years 4.28% 4.28%
10 Years 4.80% 4.80%
SEC AVERAGE ANNUAL RETURNS (WITH ANY APPLICABLE SALES CHARGES)
AS OF THE MOST RECENT CALENDAR QUARTER-END (SEPTEMBER 30, 2006)
- -------------------------------------------------------------------------------
SEC Returns
Class A Shares
1 Year 0.26%
5 Years 4.23%
10 Years 5.15%
Class B Shares
1 Year 1.10%
5 Years 4.37%
10 Years(a) 5.16%
Class C Shares
1 Year 2.98%
5 Years 4.37%
10 Years 4.86%
(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, 2006.
** Taxable equivalent yields are based on SEC yields and a 35% marginal
Federal income tax rate and maximum state, city and local taxes where
applicable.
See Historical Performance disclosures on page 4.
(Historical Performance continued on next page)
12 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
INSURED NATIONAL PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2006
- -------------------------------------------------------------------------------
Taxable
NAV SEC SEC Equivalent
Returns Returns Yields* Yields**
Class A Shares 3.27% 5.03%
1 Year 4.98% 0.54%
5 Years 4.77% 3.85%
10 Years 5.16% 4.70%
Class B Shares 2.75% 4.23%
1 Year 4.36% 1.36%
5 Years 4.06% 4.06%
10 Years(a) 4.72% 4.72%
Class C Shares 2.75% 4.23%
1 Year 4.26% 3.26%
5 Years 4.06% 4.06%
10 Years 4.44% 4.44%
SEC AVERAGE ANNUAL RETURNS (WITH ANY APPLICABLE SALES CHARGES)
AS OF THE MOST RECENT CALENDAR QUARTER-END (SEPTEMBER 30, 2006)
- -------------------------------------------------------------------------------
SEC Returns
Class A Shares
1 Year -0.58%
5 Years 4.06%
10 Years 4.80%
Class B Shares
1 Year 0.16%
5 Years 4.24%
10 Years(a) 4.82%
Class C Shares
1 Year 2.15%
5 Years 4.23%
10 Years 4.53%
(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, 2006.
** Taxable equivalent yields are based on SEC yields and a 35% marginal
Federal income tax rate and maximum state, city and local taxes where
applicable.
See Historical Performance disclosures on page 4.
(Historical Performance continued on next page)
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 13
INSURED CALIFORNIA PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2006
- -------------------------------------------------------------------------------
Taxable
NAV SEC SEC Equivalent
Returns Returns Yields* Yields**
Class A Shares 3.33% 5.71%
1 Year 5.19% 0.73%
5 Years 4.11% 3.21%
10 Years 5.30% 4.85%
Class B Shares 2.78% 4.77%
1 Year 4.45% 1.47%
5 Years 3.36% 3.36%
10 Years(a) 4.83% 4.83%
Class C Shares 2.79% 4.79%
1 Year 4.46% 3.47%
5 Years 3.34% 3.34%
10 Years 4.54% 4.54%
SEC AVERAGE ANNUAL RETURNS (WITH ANY APPLICABLE SALES CHARGES)
AS OF THE MOST RECENT CALENDAR QUARTER-END (SEPTEMBER 30, 2006)
- -------------------------------------------------------------------------------
SEC Returns
Class A Shares
1 Year -0.82%
5 Years 3.28%
10 Years 4.89%
Class B Shares
1 Year -0.15%
5 Years 3.42%
10 Years(a) 4.90%
Class C Shares
1 Year 1.89%
5 Years 3.42%
10 Years 4.59%
(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, 2006.
** Taxable equivalent yields are based on SEC yields and a 35% marginal
Federal income tax rate and maximum state, city and local taxes where
applicable.
See Historical Performance disclosures on page 4.
14 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
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, 2006 October 31, 2006 During Period*
- --------------------------------------------------------------------------------------------------
Class A
Actual $1,000 $1,042.93 $3.50
Hypothetical (5% return before expenses) $1,000 $1,021.78 $3.47
Class B
Actual $1,000 $1,040.39 $7.10
Hypothetical (5% return before expenses) $1,000 $1,018.25 $7.02
Class C
Actual $1,000 $1,039.32 $7.09
Hypothetical (5% return before expenses) $1,000 $1,018.25 $7.02
California Portfolio
- --------------------------------------------------------------------------------------------------
Class A
Actual $1,000 $1,043.45 $3.97
Hypothetical (5% return before expenses) $1,000 $1,021.32 $3.92
Class B
Actual $1,000 $1,039.83 $7.56
Hypothetical (5% return before expenses) $1,000 $1,017.80 $7.48
Class C
Actual $1,000 $1,039.81 $7.56
Hypothetical (5% return before expenses) $1,000 $1,017.80 $7.48
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 15
Beginning Ending
Account Value Account Value Expenses Paid
New York Portfolio May 1, 2006 October 31, 2006 During Period*
- --------------------------------------------------------------------------------------------------
Class A
Actual $1,000 $1,041.91 $2.99
Hypothetical (5% return before expenses) $1,000 $1,022.28 $2.96
Class B
Actual $1,000 $1,038.34 $6.58
Hypothetical (5% return before expenses) $1,000 $1,018.75 $6.51
Class C
Actual $1,000 $1,037.22 $6.57
Hypothetical (5% return before expenses) $1,000 $1,018.75 $6.51
Insured National Portfolio
- --------------------------------------------------------------------------------------------------
Class A
Actual $1,000 $1,035.38 $5.34
Hypothetical (5% return before expenses) $1,000 $1,019.96 $5.30
Class B
Actual $1,000 $1,032.87 $8.92
Hypothetical (5% return before expenses) $1,000 $1,016.43 $8.84
Class C
Actual $1,000 $1,031.85 $8.91
Hypothetical (5% return before expenses) $1,000 $1,016.43 $8.84
Insured California Portfolio
- --------------------------------------------------------------------------------------------------
Class A
Actual $1,000 $1,039.92 $5.30
Hypothetical (5% return before expenses) $1,000 $1,020.01 $5.24
Class B
Actual $1,000 $1,036.26 $8.93
Hypothetical (5% return before expenses) $1,000 $1,016.43 $8.84
Class C
Actual $1,000 $1,035.54 $8.88
Hypothetical (5% return before expenses) $1,000 $1,016.48 $8.79
* Expenses are equal to the classes' annualized expense ratios, shown in the
table below, multiplied by the average account value over the period,
multiplied by 184/365 (to reflect the one-half year period).
Annualized Expense Ratio
--------------------------------------------------------------------
Insured Insured
National California New York National California
- -------------------------------------------------------------------------------
Class A 0.68% 0.77% 0.58% 1.04% 1.03%
Class B 1.38% 1.47% 1.28% 1.74% 1.74%
Class C 1.38% 1.47% 1.28% 1.74% 1.73%
16 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
BOND RATING SUMMARY*
October 31, 2006
NATIONAL PORTFOLIO
Quality Rating
[ ] 37.0% AAA [PIE CHART OMITTED]
[ ] 21.8% AA
[ ] 10.3% A
[ ] 18.9% BBB
[ ] 11.5% BB
[ ] 0.5% B
CALIFORNIA PORTFOLIO
Quality Rating
[ ] 55.9% AAA [PIE CHART OMITTED]
[ ] 4.0% AA
[ ] 15.7% A
[ ] 17.0% BBB
[ ] 7.4% BB
NEW YORK PORTFOLIO
Quality Rating
[ ] 61.4% AAA [PIE CHART OMITTED]
[ ] 19.4% AA
[ ] 7.8% A
[ ] 6.1% BBB
[ ] 4.7% BB
[ ] 0.6% B
* All data are as of October 31, 2006. 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
BOND RATING SUMMARY*
October 31, 2006
INSURED NATIONAL PORTFOLIO
Quality Rating
[ ] 70.8% AAA [PIE CHART OMITTED]
[ ] 26.8% AA
[ ] 2.3% A
[ ] 0.1% BBB
INSURED CALIFORNIA PORTFOLIO
Quality Rating
[ ] 93.6% AAA [PIE CHART OMITTED]
[ ] 6.4% AA
* All data are as of October 31, 2006. 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.
18 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
NATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 2006
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
MUNICIPAL OBLIGATIONS-99.9%
Long-Term Municipal Bonds-94.9%
Alabama-1.5%
Jefferson Cnty Ltd Oblig Sch Warrants
5.25%, 1/01/18-1/01/23 $ 3,900 $ 4,176,459
Montgomery Spl Care Facs Fin Auth Rev
(Baptist Health)
Ser 04C
5.25%, 11/15/29 2,190 2,417,607
-------------
6,594,066
Alaska-0.5%
Anchorage Waste Wtr Rev
MBIA Ser 04
5.125%, 5/01/29 2,075 2,208,298
Arizona-2.3%
Estrella Mtn Ranch CFD
(Desert Village)
7.375%, 7/01/27 2,694 2,989,828
Phoenix Civic Impt Corp Wastewtr Sys Rev
MBIA Ser 04
5.00%, 7/01/23 1,750 1,862,035
Pima Cnty IDA
(Horizon Cmnty Learning Center)
Ser 05
5.125%, 6/01/20 3,310 3,339,923
Queen Creek Improvement District No 1
5.00%, 1/01/26 1,300 1,330,264
Sundance CFD
Ser 02
7.75%, 7/01/22 825 908,729
-------------
10,430,779
California-3.3%
California Dept of Wtr Res
Ser 02A
5.375%, 5/01/22 2,000 2,206,720
California GO
AMBAC Ser 02B
5.00%, 4/01/27 2,650 2,773,755
5.125%, 2/01/28 1,000 1,054,000
Ser 02
5.25%, 4/01/30 825 871,827
Chula Vista IDR
(San Diego Gas)
Ser 96A
5.30%, 7/01/21 4,000 4,306,120
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 19
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Manteca Uni Sch Dist
MBIA Ser 01
Zero Coupon, 9/01/31 $ 11,910 $ 3,850,622
-------------
15,063,044
Colorado-3.1%
Colorado Ed & Cult Facs Auth Rev
(Knowledge Quest Charter Sch)
Ser 05
6.50%, 5/01/36 500 510,455
Colorado Health Facs Auth
(Evangelical Lutheran)
5.25%, 6/01/19 1,500 1,616,955
Colorado HFA SFMR
(Mtg Rev) AMT
Ser 99A-2
6.45%, 4/01/30 650 669,299
Colorado Hlth Facs Auth Rev
(Parkview Med Ctr)
Ser 04
5.00%, 9/01/25 1,690 1,739,094
Midcities Met Dist No 2
RADIAN
5.125%, 12/01/21 2,000 2,142,180
Park Creek Metro Dist Rev Ltd
(Ref-Sr-Ltd Tax Ppty Tax)
Ser 05
5.50%, 12/01/30 2,400 2,526,504
PV Wtr & San Met Dist Cap Appreciation
Ser 06
Zero Coupon, 12/15/17 4,316 2,268,144
Todd Creek Farms Metro Dist No 1
6.125%, 12/01/22 1,210 1,240,613
Todd Creek Farms Metro Dist No 1 Wtr Rev
(Ref & Impt)
Ser 04
6.125%, 12/01/19 820 866,199
Vista Ridge Met Dist Co
RADIAN
5.00%, 12/01/26 500 525,440
-------------
14,104,883
Connecticut-0.2%
Connecticut Hlth & Ed Facs Auth Rev
(Griffin Hosp)
RADIAN Ser 05B
5.00%, 7/01/23 750 790,920
Florida-13.0%
Beacon Tradeport CDD
Ser 02B
7.25%, 5/01/33 170 183,139
20 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Bonnet Creek Resort CDD
Ser 02
7.25%, 5/01/18 $ 2,000 $ 2,194,820
Clay Cnty CDD
(Crossings at Fleming Island)
Ser 00C
7.05%, 5/01/15 1,830 1,956,910
Collier Cnty IDR
(Southern St Util) AMT
Ser 96
6.50%, 10/01/25 705 715,138
Fiddlers Creek CDD
7.50%, 5/01/18 840 857,716
Gateway CDD
(Sun City Center)
Ser 03B
5.50%, 5/01/10 445 450,362
Indian Trace Dev Dist Spl Assmt
(Wtr Mgmt Spl Benefit)
5.00%, 5/01/22-5/01/23 1,800 1,934,414
Jacksonville Elec Auth
Ser 02A
5.50%, 10/01/41 3,750 3,816,562
Jacksonville Hosp Rev
(Mayo Clinic)
Ser 01C
5.50%, 11/15/36 6,750 7,297,965
Lee Cnty CDD
(Miromar Lakes)
Ser 00A
7.25%, 5/01/12 4,190 4,431,637
Lee Cnty CFD
(Herons Glen)
Ser 99
6.00%, 5/01/29 6,090 6,488,408
Lee Cnty HFA SFMR
(Mtg Rev) AMT
GNMA/FNMA Ser 00A-1
7.20%, 3/01/33 85 85,864
Manatee Cnty CDD
Ser 00A
7.15%, 5/01/31 1,855 1,972,051
Marshall Creek CDD
Ser 02A
6.625%, 5/01/32 1,670 1,779,953
Miami Beach Health Facs Auth Rev
(Mt Sinai Med Ctr)
Ser 01A
6.80%, 11/15/31 3,500 3,864,140
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 21
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Miami-Dade Cnty HFA MFHR
(Marbrisa Apts) AMT
FSA Ser 00-2A
6.15%, 8/01/38 $ 4,200 $ 4,474,092
Orange Cnty HFA MFHR (Seminole Pt Proj)
AMT
Ser 99L
5.80%, 6/01/32 5,000 5,119,150
Orlando Assess Dist
(Conroy Rd Proj)
Ser 98A
5.80%, 5/01/26 3,250 3,330,308
Pasco Cnty HFA MFHR
(Pasco Woods Apts) AMT
Ser 99A
5.90%, 8/01/39 3,690 3,839,002
Pier Park CDD
Ser 02-1
7.15%, 5/01/34 3,245 3,503,886
Preserve at Wildnerness Lake CDD
Ser 02B
6.20%, 11/01/08 90 90,417
Stoneybrook CDD
(Capital Impt Impt Rv)
Ser B
5.70%, 5/01/08 85 85,000
-------------
58,470,934
Illinois-4.2%
Chicago Arpt Rev
(O'Hare Int'l Arpt)
XLCA Ser 03B-1
5.25%, 1/01/34 3,400 3,620,796
Chicago HFA SFMR
(Mtg Rev) AMT
GNMA/FNMA/FHLMC Ser 98A
6.45%, 9/01/29 325 328,351
(Mtg Rev)
GNMA/FNMA/FHLMC Ser 99C
7.05%, 10/01/30 80 81,669
(Mtg Rev) AMT
GNMA/FNMA/FHLMC Ser 98C-1
6.30%, 9/01/29 255 267,431
GNMA/FNMA/FHLMC Ser 99 A
6.35%, 10/01/30 325 343,674
Chicago Il Increment
7.46%, 2/15/26 1,770 1,905,352
22 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Chicago Spec Assess
(Lake Shore East)
Ser 03
6.75%, 12/01/32 $ 3,500 $ 3,802,750
Gilberts Special Service Area No 15 Spl Tax
(Gilberts Town Ctr Proj)
6.00%, 3/01/28 2,430 2,483,825
Hampshire Il Spl Svc Area 14
5.80%, 3/01/26 1,595 1,628,112
Illinois Fin Auth Rev
(Inst of Technology)
Ser 06A
5.00%, 4/01/31 750 777,900
Manhattan
(No 04-1 Brookstone Springs Proj)
Ser 05
5.875%, 3/01/28 1,685 1,744,716
Met Pier & Expo Auth
(McCormick Place)
MBIA Ser 02A
5.25%, 6/15/42 1,750 1,861,195
-------------
18,845,771
Indiana-0.7%
Hendricks Cnty Bldg Facs Corp
5.50%, 7/15/23 1,165 1,279,997
Indiana St Dev Fin Auth Rev
(Exempt Facs Inland Steel)
Ser 97
5.75%, 10/01/11 1,825 1,872,103
-------------
3,152,100
Louisiana-3.0%
De Soto Parish PCR
(Int'l Paper Co)
Ser 02a
5.00%, 10/01/12 2,200 2,304,104
Ernest N Morial-New Orleans
(Exhibit Hall Auth Spl Tax)
5.25%, 7/15/16-7/15/17 2,475 2,646,975
Louisiana Arpt Fac
(Cargo ACQ Grp) AMT
Ser 02
6.65%, 1/01/25 1,035 1,103,072
New Orleans GO
MBIA Ser 05
5.00%, 12/01/29 3,420 3,600,884
5.25%, 12/01/21 3,360 3,645,029
-------------
13,300,064
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 23
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Maryland-2.5%
Maryland CDA SFMR
(Mtg Rev) AMT
Ser 00A
6.10%, 7/01/38 $ 6,285 $ 6,527,098
Maryland IDR
(Med Waste Assoc) AMT
Ser 89
8.75%, 11/15/10(a)(b) 1,225 955,745
Tax Exempt Muni Infrastructure
Ser 04A
3.80%, 5/01/08(c) 3,979 3,953,893
-------------
11,436,736
Massachusetts-7.4%
Massachusetts Dev Fin Agy Hlth Fac
(Seven Hills) Asset Gty
RADIAN Ser 99
5.15%, 9/01/28 6,035 6,193,660
Massachusetts GO
Unrefunded
Ser 02C
5.25%, 11/01/30 1,780 1,931,104
Prerefunded
Ser 02
5.25%, 11/01/30 3,220 3,493,346
Massachusetts Port Auth AMT
Ser 99D
6.00%, 7/01/29 7,500 7,972,500
Massachusetts Port Auth Spec Fac
(Bosfuel Corp) AMT
MBIA Ser 97
6.00%, 7/01/36 11,920 12,254,714
New England Student Loan Rev AMT
Ser 93H
6.90%, 11/01/09 1,500 1,583,850
-------------
33,429,174
Michigan-4.5%
Detroit Tax Increment
(Diamler/Chrysler Assembly Plant)
Ser 98A
5.50%, 5/01/21 530 511,715
Kent Hosp Fin Auth Rev
(Metropolitan Hospital Proj)
Ser 05A
5.75%, 7/01/25 710 770,911
Michigan HDA MFHR
(Rental Rev) AMT
AMBAC Ser 97A
6.10%, 10/01/33 1,000 1,030,470
24 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Michigan Hosp Fin Auth
(Sparrow Med Ctr)
Ser 01
5.625%, 11/15/36 $ 2,650 $ 2,817,613
(Trinity Health)
Ser 00A
6.00%, 12/01/27 4,515 4,943,428
Michigan State Hosp Fin Auth
(Marquette Gen Hosp Oblig Grp)
Ser 05A
5.00%, 5/15/26 1,150 1,179,693
Plymouth Ed Ctr Charter Sch Public Sch
Academy Rev
Ser 05
5.375%, 11/01/30 2,000 2,035,720
Saginaw Hosp Fin Auth
(Convenant Med Ctr)
Ser 00F
6.50%, 7/01/30 6,125 6,744,850
-------------
20,034,400
Minnesota-1.9%
Minneapolis & St. Paul Arpt Rev AMT
FGIC Ser 00B
6.00%, 1/01/21 3,520 3,774,214
Shakopee Health Care Facs
(St Francis Regl Med Center)
Ser 04
5.10%, 9/01/25 2,700 2,827,494
St. Paul Hsg & Redev Auth Hosp Rev
(Healtheast Proj)
Ser 05
6.00%, 11/15/25 500 552,420
Western Minnesota Municipal Pwr Agy
FSA
5.00%, 1/01/17 1,400 1,536,738
-------------
8,690,866
Missouri-0.7%
Kansas City Arpt Fac Rev
(Cargo ACQ Grp)
Ser 02
6.25%, 1/01/30 1,980 2,113,709
Missouri Dev Fin Brd Infrastructure Fac
Rev
(Crackerneck Creek Project)
Ser 05C
5.00%, 3/01/26 1,000 1,031,490
-------------
3,145,199
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 25
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Nevada-0.6%
Carson City Hosp Rev
(Carson-Tahoe Hosp Proj)
RADIAN Ser 03A
5.125%, 9/01/29 $ 2,700 $ 2,807,730
New Hampshire-1.3%
New Hampshire Bus Fin Auth PCR
(Public Service Co) AMT
Ser 93E
6.00%, 5/01/21 4,000 4,173,680
New Hampshire Health & Ed Facs
(Covenant Health)
Ser 04
5.375%, 7/01/24 1,680 1,789,939
-------------
5,963,619
New Jersey-4.6%
Morris-Union Jointure COP
RADIAN Ser 04
5.00%, 5/01/27 5,175 5,422,986
New Jersey Eco Dev Auth Rev
(Sch Facs Constr)
Ser 05
5.25%, 3/01/25 6,200 6,702,944
New Jersey St Edl Facs Auth Rev
AMBAC Ser 02A
5.25%, 9/01/21 8,005 8,710,961
-------------
20,836,891
New York-5.7%
Erie Cnty IDA Sch Fac Rev
(Buffalo Sch Dist Proj)
5.75%, 5/01/25-5/01/26 3,800 4,278,201
Liberty NY Dev Corp
6.125%, 2/15/19(d) 850 882,444
New York City Ed Fac
(Lycee Francais)
ACA Ser 02C
6.80%, 6/01/28 2,500 2,674,900
New York City GO
Ser 04G
5.00%, 12/01/23 895 946,731
Ser 03A
5.50%, 8/01/21 5,000 5,473,200
Ser 03
5.75%, 3/01/15 2,350 2,615,245
Ser 03I
5.75%, 3/01/17 1,900 2,114,453
New York City TFA
Ser 05A-2
5.00%, 11/01/17 5,000 5,437,600
26 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
New York State HFA
(Eco Dev & Hsg)
FGIC Ser 05A
5.00%, 9/15/25 $ 1,200 $ 1,278,408
-------------
25,701,182
North Dakota-0.2%
Ward Cnty ND Health Care Fac
(Trinity Health)
5.125%, 7/01/18-7/01/20(e) 1,000 1,061,449
Ohio-5.5%
Cleveland OH Pub Pwr Sys Rev
FGIC Ser 06A
5.00%, 11/15/18 2,335 2,544,519
Cleveland Cuyahoga Port Auth
Ser 01
7.35%, 12/01/31 5,400 5,833,026
Franklin Cnty
(OCLC Online Computer Library Ctr)
Ser 98A
5.20%, 10/01/20 1,200 1,244,964
Port Auth of Columbiana Cnty SWR
(Apex Environmental LLC) AMT
Ser 04A
7.125%, 8/01/25 1,240 1,262,878
Toledo Lucas Cnty Port Auth Rev
(Crocker Park Proj)
Ser 03
5.375%, 12/01/35 5,000 5,369,150
Toledo Lucas Cnty Port Fac Rev
(CSX Transportation)
Ser 92
6.45%, 12/15/21 6,730 8,266,392
-------------
24,520,929
Oregon-1.3%
Forest Grove Rev
(Ref & Campus Impt Pacific Proj A)
RADIAN Ser 05A
5.00%, 5/01/28 2,995 3,134,178
Oregon Hsg Dev Agy SFMR
(Mtg Rev) AMT
Ser 02B
5.45%, 7/01/32 2,730 2,815,121
-------------
5,949,299
Pennsylvania-5.1%
Ephrata Area Sch Dist
FGIC Ser 05
5.00%, 3/01/22 2,565 2,745,012
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 27
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Harrisburg Arpt Auth
(Susquehanna Arpt Proj) AMT
Ser 99
5.50%, 1/01/24 $ 500 $ 499,375
Montgomery Cnty Hosp Rev
(Abington Mem Hosp)
Ser 02A
5.125%, 6/01/32 2,000 2,085,440
Montgomery Cnty IDA Rev
(Whitemarsh Continuing Care)
6.00%, 2/01/21 1,210 1,286,121
Pennsylvania HFA
Ser 03-1235
8.07%, 6/01/08(c)(f) 365 365,000
Pennsylvania HFA SFMR
(Mtg Rev) AMT
FSA Ser 03
4.08%, 6/01/08(d)(f) 6,397 6,396,594
Pennsylvania Hgr Ed Hosp Rev
(UPMC) Health Sys
Ser 01A
6.00%, 1/15/31 3,845 4,212,505
Philadelphia Auth IDR
(Leadership Learning Partners)
Ser 05A
5.25%, 7/01/24 1,030 1,037,921
South Central Gen Auth Rev
(Wellspan Health)
MBIA Ser 01
5.25%, 5/15/31 685 728,559
South Central Hosp Rev Prerefunded
5.25%, 5/15/31(g) 3,115 3,364,169
-------------
22,720,696
Puerto Rico-1.1%
Puerto Rico Comwlth GO
(Pub Impt)
5.25%, 7/01/23 1,100 1,194,523
(Pub Impt)
Ser 03A
5.25%, 7/01/23 500 532,890
Ser 04A
5.25%, 7/01/19 1,920 2,070,355
Ser 01A
5.50%, 7/01/19 500 565,925
28 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Puerto Rico Comwlth Govt Dev Bank
(Sr Notes)
Ser 06B
5.00%, 12/01/15 $ 500 $ 537,735
-------------
4,901,428
South Carolina-1.3%
Dorchester Cnty Sch Dist No 2
(No 002 Installment Pur Rev)
Ser 06
5.00%, 12/01/30 1,500 1,568,850
Newberry Investing In Childrens Ed
ASSURED GTY
5.00%, 12/01/27 3,890 4,095,742
(Newberry Cnty Sch Dist Proj)
Ser 05
5.00%, 12/01/30 335 344,089
-------------
6,008,681
Tennessee-0.7%
Johnson City Hlth & Ed Facs Hosp Rev
(First Mtg-MTN Sts Hlth)
Ser 06A
5.50%, 7/01/31 1,360 1,462,204
Sullivan Cnty Health Edl
(Wellmont Health Sys Proj)
5.00%, 9/01/22(e) 1,265 1,312,678
(Wellmont Health Sys Proj)
5.25%, 9/01/26(e) 275 288,766
-------------
3,063,648
Texas-13.7%
Brownwood ISD
(Schl Bldg)
5.25%, 2/15/22-2/15/24 3,505 3,826,208
Corpus Christi Arpt Rev
(Corpus Christi Int'l)
FSA Ser 00B
5.375%, 2/15/30 7,100 7,544,460
Dallas-Fort Worth Arpt Rev
(Int'l Arpt)
FGIC Ser 01
5.50%, 11/01/35 13,400 14,146,648
Ector Cnty Sch Dist
PSF-GTD Ser 03
5.25%, 8/15/27 3,000 3,233,610
Garza Cnty Pub Fac Corp
5.50%, 10/01/19 535 562,558
Grapevine Arpt Rev
6.50%, 1/01/24 1,000 1,081,200
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 29
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Guadalupe-Blanco Riv Auth & Surp
(Contract & Sub Wtr Res)
MBIA Ser 04A
5.00%, 8/15/24 $ 1,440 $ 1,503,029
Hidalgo Cnty Health Svcs
(Mission Hosp Inc Proj)
5.00%, 8/15/14-8/15/19 730 750,837
Houston Arpt Rev
(Cargo ACQ Grp) AMT
Ser 02
6.375%, 1/01/23 3,000 3,226,650
Laredo ISD Pub Fac Corp Lease Rev
AMBAC Ser 04A
5.00%, 8/01/24 1,000 1,038,820
Lubbock
(Ctfs Oblig-Tax & Wtrwks Surp)
FSA
5.125%, 2/15/24 3,335 3,580,089
Richardson Hosp Auth Rev
(Richardson Regional)
FSA Ser 04
5.875%, 12/01/24 2,310 2,506,443
Ser 04
6.00%, 12/01/19 1,830 2,008,681
San Antonio GO Unrefunded
Ser 02
5.00%, 2/01/22 3,060 3,204,769
Seguin Hgr Ed Rev
(Texas Lutheran Univ Project)
Ser 04
5.25%, 9/01/28 1,000 1,030,980
Texas Turnpike Auth
AMBAC Ser 02A
5.50%, 8/15/39 7,500 8,095,350
Tyler Hosp Rev
(Mother Francis Regl Hlth)
Ser 01
6.00%, 7/01/31 3,900 4,195,269
-------------
61,535,601
Virgin Islands-1.8%
Virgin Islands Pub Fin Auth
5.00%, 10/01/13-10/01/14 2,025 2,205,559
5.25%, 10/01/15-10/01/17 5,460 6,057,219
-------------
8,262,778
Virginia-1.6%
Arlington IDA Hosp Rev
(Arlington Hlth Sys)
Ser 01
5.25%, 7/01/31 1,000 1,079,530
30 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Bell Creek CDD
Ser 03A
6.75%, 3/01/22 $ 1,462 $ 1,525,071
Broad Street CDD
(Parking Fac)
Ser 03
7.50%, 6/01/33 3,000 3,305,640
Pocahontas Pkwy Assoc Toll Rd Rev
(Cap Appreciation) Sr
Ser 98B
Zero Coupon, 8/15/15 2,000 1,290,500
-------------
7,200,741
Washington-0.7%
Tacoma Solid Waste Util Rev
XLCA Ser 06
5.00%, 12/01/18 2,750 2,966,700
Wisconsin-0.9%
Milwaukee Arpt Rev
(Cargo ACQ Corp) AMT
Ser 02
6.50%, 1/01/25 2,335 2,524,602
Wisconsin Hlth & Ed Fac Auth Rev
(Bell Tower Residence Proj)
Ser 05
5.00%, 7/01/25 1,270 1,307,706
-------------
3,832,308
Total Long-Term Municipal Bonds
(cost $404,145,067) 427,030,914
Short-Term Municipal Notes-5.0%
Alaska-0.2%
Valdez AK Marine Term Rev
3.50%, 12/01/33(h) 1,000 1,000,000
Illinois-0.1%
Illinois Dev Fin Auth
3.64%, 11/01/12(h) 500 500,000
Massachusetts-1.0%
Massachusetts GO
(Central Artery)
Ser 00B
3.63%, 12/01/30(h)(i) 4,500 4,500,000
New York-2.8%
New York City GO
Ser I
3.60%, 4/01/36(h) 2,500 2,500,000
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 31
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
New York City Muni Wtr Fin Auth
Ser 05 AA-1
3.60%, 6/15/32(h) $ 5,000 $ 5,000,000
New York City TFA
3.64%, 5/01/28(h) 5,000 5,000,000
-------------
12,500,000
Oklahoma-0.1%
Tulsa Cnty IDA
(First Mtg Montercau)
Ser 02A
3.64%, 7/01/32(h) 500 500,000
Virginia-0.8%
Loudoun Cnty IDA Rev
(Howard Hughes Med)
Ser 03A
3.64%, 2/15/38(h) 3,400 3,400,000
Total Short-Term Municipal Notes
(cost $22,400,000) 22,400,000
Total Investments-99.9%
(cost $426,545,067) 449,430,914
Other assets less liabilities-0.1% 298,683
Net Assets-100.0% $ 449,729,597
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% $(19,993)
Goldman Sachs 2,300 1/05/07 BMA 3.405% (1,054)
JP Morgan 4,400 4/05/07 BMA 2.988% (12,062)
JP Morgan 2,200 10/01/07 BMA 3.635% 2,338
Merrill Lynch 2,200 7/12/08 BMA 3.815% 13,663
32 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
(a) Illiquid security, valued at fair value. (See note A)
(b) Security is in default of scheduled sinking fund payments.
(c) 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, 2006, the market value of these securities amounted to
$4,318,893 or 1.0% of net assets.
(d) Private Placement.
(e) When-Issued security.
(f) Variable Rate Coupon, rate shown as of October 31, 2006.
(g) Position, or a portion thereof, has been segregated to collateralize
interest rate swaps.
(h) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specific date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). This instrument is payable on demand and is secured by
letters of credit or other credit support agreements from major banks.
(i) Position, or a portion thereof, has been segregated to collateralize when
issued securities.
Glossary:
ACA - American Capital Access Financial Guaranty Corporation
AMBAC - American Bond Assurance Corporation
AMT - Alternative Minimum Tax (subject to)
ASSURED GTY - Assured Guaranty
BMA - Bond Market Association
CDA - Community Development Administration
CDD - Community Development District
CFD - Community Facilities District
COP - Certificate 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
MTN - Medium Term Note
PCR - Pollution Control Revenue
PSF-GTD - (Texas) Permanent Schools Funds
RADIAN - Radian Group, Inc.
SFMR - Single Family Mortgage Revenue
SWR - Solid Waste Revenue
TFA - Transitional Finance Authority
UPMC - University of Pittsburgh Medical Center
XLCA - XL Capital Assurance Inc.
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 33
INSURED NATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 2006
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
MUNICIPAL OBLIGATIONS-100.2%
Long-Term Municipal Bonds-100.2%
Alabama-0.7%
Jefferson Cnty Wtr & Swr Rev
FGIC Ser 02B
5.00%, 2/01/41 $ 625 $ 671,350
FGIC Ser 02B Prerefunded
5.00%, 2/01/41 375 401,805
-------------
1,073,155
Alaska-1.8%
Alaska HFC SFMR
(Mtg Rev)
MBIA Ser 97A
6.00%, 6/01/27 2,635 2,638,926
California-6.5%
California GO
AMBAC Ser 02B
5.00%, 4/01/27 3,000 3,140,100
FSA Ser 03
5.00%, 2/01/29 1,445 1,515,660
5.125%, 2/01/28 1,500 1,581,000
Golden St Tobacco Settlement Bonds
XLCA Ser 03B
5.50%, 6/01/33 2,000 2,220,740
San Bernardino Cnty Redev ETM
(Ontario Proj #1)
MBIA Ser 93
5.80%, 8/01/23 1,000 1,120,720
-------------
9,578,220
Colorado-7.0%
Midcities Met Dist No 2
RADIAN
5.125%, 12/01/21 1,000 1,071,090
Northwest Parkway Toll Rev
FSA Ser 01C
5.80%, 6/15/25(a) 9,000 8,174,340
SBC Met Dist
ACA Ser 05
5.00%, 12/01/29 1,000 1,035,380
-------------
10,280,810
Florida-2.1%
Volusia Cnty Hlth Fac
(John Knox Village)
RADIAN Ser 96A
6.00%, 6/01/17 3,000 3,063,690
34 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Illinois-7.5%
Chicago Arpt Rev
(O'Hare Int'l Arpt)
XLCA Ser 03B-1
5.25%, 1/01/34 $ 1,700 $ 1,810,398
Chicago Stadium Rev
(Soldier Field)
AMBAC Ser 01
5.50%, 6/15/30(a) 8,000 7,379,920
Met Pier & Expo Auth
(McCormick Place)
MBIA Ser 02A
5.25%, 6/15/42 1,750 1,861,195
-------------
11,051,513
Louisiana-1.8%
Ernest N Morial-New Orleans
(Exhibit Hall Auth Spl Tax)
5.25%, 7/15/16-7/15/17 815 871,640
New Orleans GO
MBIA Ser 05
5.00%, 12/01/29 570 600,147
5.25%, 12/01/21 1,135 1,231,282
-------------
2,703,069
Massachusetts-6.2%
Massachusetts Hlth & Ed Fac Hosp Rev
(Berkshire Hlth Sys)
RADIAN Ser 01E
5.70%, 10/01/25 6,800 7,410,980
(Cape Cod Healthcare)
RADIAN Ser 01C
5.25%, 11/15/31 1,600 1,692,192
-------------
9,103,172
Michigan-7.8%
Detroit Wtr Supply Sys
FGIC Ser 01B
5.50%, 7/01/33 1,450 1,584,024
Kalamazoo Hosp Fin Auth Rev
(Borgess Med Ctr)
FGIC Ser 94A ETM
6.708%, 6/01/11(b)(c) 5,140 5,154,803
Michigan
(Trunk Line Fund)
FSA Ser 01A
5.25%, 11/01/30 1,000 1,075,760
Michigan Mun Bd Auth Rev
(Sch Dist City of Detroit)
FSA Ser 05
5.00%, 6/01/20 1,500 1,602,345
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 35
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Pontiac Tax Increment
ACA Ser 02
5.625%, 6/01/22 $ 700 $ 750,701
Royal Oak Hosp Fin Auth Rev
(William Beaumont Hosp)
MBIA Ser 01M
5.25%, 11/15/35 1,300 1,357,135
-------------
11,524,768
Minnesota-4.4%
Waconia Hlth Care Fac Rev
(Ridgeview Med Ctr)
RADIAN Ser 99A
6.125%, 1/01/29 6,095 6,490,565
Nevada-1.5%
Carson City Hosp Rev
(Carson-Tahoe Hosp Proj)
RADIAN Ser 03A
5.125%, 9/01/29 2,100 2,183,790
New Hampshire-1.7%
New Hampshire Hosp Rev
(Mary Hitchcock Hosp)
FSA Ser 02
5.50%, 8/01/27 2,250 2,445,210
New Jersey-4.8%
Morris-Union Jointure COP
RADIAN Ser 04
5.00%, 5/01/27 1,700 1,781,464
New Jersey Ed Facs Auth Rev
(Higher Ed Cap Impt)
AMBAC Ser 02A
5.125%, 9/01/22 2,500 2,704,150
New Jersey St Edl Facs Auth Rev
5.25%, 9/01/21 2,420 2,633,420
-------------
7,119,034
New York-6.5%
Erie Cnty IDA Sch Fac Rev
(Buffalo Sch Dist Proj)
FSA Ser 04
5.75%, 5/01/26 1,300 1,463,072
Nassau Cnty Hlth Fac
(Nassau Hlth Sys Rev)
FSA Ser 99
5.75%, 8/01/29 7,600 8,177,372
-------------
9,640,444
36 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
North Carolina-0.7%
North Carolina Eastern Municipal Pwr Agy
Pwr Sys Rev
AMBAC Ser 05A
5.25%, 1/01/20 $ 1,000 $ 1,094,230
Ohio-9.2%
City of Cleveland OH
FGIC Ser 06A
5.00%, 11/15/18 500 544,865
Hamilton Cnty Sales Tax Rev
AMBAC Ser 00B
5.25%, 12/01/32 7,100 7,470,904
Summit Cnty GO Prerefunded
FGIC Ser 00
6.00%, 12/01/21 5,000 5,508,400
-------------
13,524,169
Pennsylvania-9.7%
Allegheny Cnty Hgr Ed Rev
(Carnegie Mellon Univ)
Ser 02
5.50%, 3/01/28 6,665 7,239,923
Pennsylvania Turnpike Transp Rev
AMBAC Ser 01
5.25%, 7/15/41 6,500 7,035,080
-------------
14,275,003
Puerto Rico-5.1%
Puerto Rico Elec Pwr Auth Rev
XLCA Ser 02-1
5.25%, 7/01/22(d) 6,935 7,505,959
Rhode Island-4.8%
Rhode Island Eco Dev Auth
(Providence Place Mall Proj)
ASSET GTY Ser 00
6.125%, 7/01/20 6,500 7,165,470
South Carolina-2.0%
Dorchester Cnty Sch Dist No 2
ASSURED GTY
5.00%, 12/01/29 400 423,028
Newberry Investing In Childrens Ed
ASSURED GTY
5.00%, 12/01/27 2,335 2,458,498
(Newberry Cnty Sch Dist Proj)
Ser 05
5.00%, 12/01/30 115 118,120
-------------
2,999,646
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 37
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Texas-6.0%
Carrollton Texas
(Ref & Impt)
AMBAC
5.25%, 8/15/25 $ 4,300 $ 4,659,179
Guadalupe-Blanco Riv Auth & Surp
(Contract & Sub Wtr Res)
MBIA Ser 04A
5.00%, 8/15/24 455 474,915
San Antonio GO
Ser 02
5.00%, 2/01/23 1,485 1,551,677
Texas Turnpike Auth
AMBAC Ser 02A
5.50%, 8/15/39 2,000 2,158,760
-------------
8,844,531
Washington-0.6%
Tacoma Solid Waste Util Rev
XLCA Ser 06
5.00%, 12/01/18 865 933,162
West Virginia-1.8%
Fairmont Higher Ed
(Fairmont St Col)
FGIC Ser 02A
5.375%, 6/01/27 2,500 2,707,250
Total Investments-100.2%
(cost $137,770,353) 147,945,786
Other assets less liabilities-(0.2)% (224,521)
Net Assets-100.0% $ 147,721,265
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% $ (6,806)
Goldman Sachs 800 1/05/07 BMA 3.405% (366)
JP Morgan 1,500 4/05/07 BMA 2.988% (4,112)
JP Morgan 800 10/01/07 BMA 3.635% 850
Merrill Lynch 700 7/12/08 BMA 3.815% 4,347
Merrill Lynch 1,000 10/21/16 BMA 4.129% 38,591
Merrill Lynch 2,500 7/30/26 4.090% BMA (76,371)
Merrill Lynch(e) 2,500 11/15/26 4.378% BMA (159,830)
38 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
(a) 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.
(b) Variable rate coupon, rate shown as of October 31, 2006.
(c) Inverse Floater Security--Security with variable or floating interest rate
that moves in the opposite direction of short-term interest rates.
(d) Position, or a portion thereof, has been segregated to collateralize
interest rate swaps.
(e) Represents a forward interest rate swap whose effective date for the
exchange of cash flows is November 15, 2006.
Glossary:
ACA - American Capital Access Financial Guarantee Corporation
AMBAC - American Bond Assurance Corporation
ASSET GTY - Asset Guaranty Insurance Company
ASSURED GTY - Assured Guaranty
BMA - Bond Market Association
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guarantee 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.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 39
NEW YORK PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 2006
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
MUNICIPAL OBLIGATIONS-100.9%
Long-Term Municipal Bonds-93.8%
New York-82.8%
Cattaraugus Cnty Hgr Ed
(Jamestown)
Ser 00A
6.50%, 7/01/30 $ 1,000 $ 1,116,870
Cortland Cnty Hosp Rev
(Cortland Mem Hosp)
RADIAN Ser 02
5.25%, 7/01/32 2,700 2,864,106
Erie Cnty
(Pub Impt)
MBIA Ser 05A
5.00%, 12/01/20 5,990 6,460,994
Erie Cnty IDA Sch Fac Rev
(Buffalo Sch Dist Proj)
FSA Ser 04
5.75%, 5/01/25 1,400 1,577,562
(Buffalo Sch Dist Proj) FHA
FSA
5.75%, 5/01/24 2,400 2,706,072
Glen Cove IDR
(The Regency at Glen Cove) ETM
Ser 92B
Zero Coupon, 10/15/19 11,745 6,952,570
Hempstead Hgr Ed
(Adelphi Univ Civic Fac)
Ser 02
5.50%, 6/01/32 1,000 1,071,710
Herkimer Cnty IDR Hgr Ed
(Herkimer CC Stud Hsg)
Ser 00
6.50%, 11/01/30 2,000 2,202,980
Appleridge Retrmt Cmnty Inc
GNMA Ser 99
5.75%, 9/01/41 4,000 4,265,560
Liberty NY Dev Corp
6.125%, 2/15/19(a) 900 934,353
Long Island Power Auth Elec Rev
FGIC Ser 06A
5.00%, 12/01/19 4,300 4,674,874
FSA Ser 01A
5.25%, 9/01/28 10,000 10,583,800
FGIC Ser 06A
5.00%, 12/01/24 4,000 4,285,920
40 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Monroe Cnty MFHR
(Southview Towers Proj) AMT
SONYMA Ser 00
6.25%, 2/01/31 $ 1,130 $ 1,227,655
Montgomery Cnty IDA Lease Rev
(HFM Boces)
XLCA Ser 05A
5.00%, 7/01/24 1,500 1,584,885
MTA NY Dedicated Tax Fund
MBIA
5.00%, 11/15/18 6,890 7,550,200
MTA NY Dedicated
5.00%, 11/15/21(b)(c) 5,000 5,431,350
MTA of New York Rev
Ser 05F
5.00%, 11/15/30 3,500 3,695,160
New York City Ed Fac
(Lycee Francais)
ACA Ser 02C
6.80%, 6/01/28 2,500 2,674,900
(Magen David Yeshivah Proj)
ACA Ser 02
5.70%, 6/15/27 2,500 2,681,075
(Spence School)
5.20%, 7/01/34 3,155 3,349,853
New York City GO
FSA Ser 04E
5.00%, 11/01/21 4,000 4,274,200
Ser 04G
5.00%, 12/01/23 3,225 3,411,405
Ser 04I
5.00%, 8/01/21 11,400 12,081,948
Ser 05J
5.00%, 3/01/24 5,000 5,289,150
XLCA Ser 04I
5.00%, 8/01/18 10,000 10,742,400
Ser 03
5.75%, 3/01/15 2,350 2,615,244
Ser 03I
5.75%, 3/01/17 1,900 2,114,453
Prerefunded
Ser 01B
5.50%, 12/01/31 11,995 13,113,534
Unrefunded
5.50%, 12/01/31 5 5,389
New York City HDC
(NYC Hsg Auth)
FGIC Ser 05P6-A
5.00%, 7/01/19 10,000 10,725,400
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 41
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
New York City HDC MFHR
(Rental Hsg) AMT
Ser 01C-2
5.40%, 11/01/33 $ 3,030 $ 3,137,323
Ser 02A
5.50%, 11/01/34 1,250 1,296,700
New York City Hlth & Hosp Rev
AMBAC Ser 03A
5.25%, 2/15/22 5,700 6,124,821
New York City Hosp Rev
(Health Sys)
FSA Ser 02A
5.125%, 2/15/23 1,500 1,583,220
New York City IDA
(Brooklyn Navy Yard) AMT
Ser 97
5.75%, 10/01/36 3,000 3,039,570
(Staten Island Hosp)
Ser 01B
6.375%, 7/01/31 1,965 2,056,196
New York City IDA Spl Fac
(Airis JFK Proj)
Ser 01A
5.50%, 7/01/28 9,000 9,233,460
New York City IDA Spl Fac Rev
(Terminal One Group Assc Proj)
Ser 05
5.50%, 1/01/24(b) 800 867,592
New York City Muni Wtr
Ser 03A
5.00%, 6/15/27 1,000 1,049,880
New York City Spec Fac
(Museum of Modern Art)
AMBAC Ser 01D
5.125%, 7/01/31 14,000 14,840,980
New York City TFA
Ser 05A-2
5.00%, 11/01/17 5,000 5,437,600
Ser 02A
5.50%, 11/01/26(b) 5,000 5,409,350
New York City TFA Future Tax Secured
MBIA Ser 03D
5.25%, 2/01/18 10,000 10,804,500
New York City TFA Prerefunded
Ser 00B
6.00%, 11/15/29 6,000 6,551,640
New York Convention Ctr Dev Corp Rev
(Hotel Unit Fee Secured)
AMBAC Ser 05
5.00%, 11/15/30 10,000 10,642,500
42 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
New York State Dorm Auth Rev
(Westchester Cnty Court Facs Lease)
Ser 06A
5.00%, 8/01/17 $ 9,510 $ 10,415,352
New York State Dorm Auth Revs
(Cabrini of Westchester)
5.10%, 2/15/26 1,900 2,064,540
New York State Dorm Auth
(State University Dorm Facilities)
Prerefunded 7/1/12
Ser 02
5.00%, 7/01/32 4,000 4,292,800
New York State Dorm Auth
(FHA Insd Maimonides)
MBIA Ser 04
5.75%, 8/01/29 3,515 3,993,602
New York State Dorm Auth Hlth Fac
(Eger Rehab Ctr) FHA
FHA Ser 00
6.10%, 8/01/37 3,575 3,919,165
(Nursing Home)
FHA Ser 02-34
5.20%, 2/01/32 3,965 4,285,015
New York State Dorm Auth Hosp Rev
(Mem Sloan-Kettering Ctr)
MBIA Ser 03A
5.00%, 7/01/22 5,000 5,295,600
(Mount Sinai NYU Health System)
Ser 00
6.50%, 7/01/25 4,000 4,333,200
New York State Dorm Auth Lease Rev
(Master Boces Program Wayne Finger)
FSA Ser 04
5.00%, 8/15/23 3,175 3,372,263
New York State Dorm Auth MFHR
(Joachim & Anne Residence)
Ser 02
5.25%, 7/01/27 1,000 1,044,670
New York State Dorm Auth Rev
(Leake & Watts Svcs Inc)
5.00%, 7/01/22-7/01/23 3,275 3,476,439
(Montefiore Hosp)
FGIC FHA Ser 04
5.00%, 8/01/23 5,000 5,311,800
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 43
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
New York State Dorm Auth Rev
(New York University)
FGIC Ser 04A
5.00%, 7/01/24 $ 2,240 $ 2,381,882
(University of Rochester)
5.25%, 7/01/21-7/01/24 1,825 1,978,614
New York State Energy Res & Dev Auth
Elec Rev
(Long Island Ltg Co) AMT
Ser 95A
5.30%, 8/01/25 7,500 7,789,800
New York State MTA
Ser 02A
5.125%, 11/15/31 5,500 5,801,565
5.25%, 11/15/30 10,000 10,664,000
Ser 02
5.25%, 11/15/31 5,000 5,315,500
New York State Mtg Agy SFMR
(Mtg Rev) AMT
Ser 01-31A
5.30%, 10/01/31 8,500 8,710,885
Ser 82
5.65%, 4/01/30 3,170 3,178,622
New York State SFMR
(Mtg Rev) AMT
Ser 01-29
5.45%, 4/01/31 9,000 9,291,060
New York State Twy Auth
AMBAC Ser 05B
5.00%, 4/01/21 7,500 8,086,425
FGIC Ser 05B
5.00%, 4/01/17 12,750 13,917,135
New York State Twy Auth (State Pers Income Tax)
AMBAC Ser 04A
5.00%, 3/15/24 5,000 5,323,950
New York State UDC
(Empire State)
Ser 02A
5.25%, 3/15/32 3,945 4,277,958
(State Pers Income Tax)
AMBAC Ser 05A-1
5.00%, 12/15/25 2,450 2,627,772
Niagara Frontier Trans Arpt Rev
(Buffalo Niagara) AMT
MBIA
5.625%, 4/01/29 2,500 2,623,950
Onondaga Cnty IDA Airport Fac
(Cargo ACQ) AMT
Ser 02
6.125%, 1/01/32 1,000 1,061,890
44 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Onondaga Cnty IDA Swr Rev
(Anheuser Busch) AMT
Ser 99
6.25%, 12/01/34 $ 2,000 $ 2,147,600
Onondaga Cnty PCR
(Bristol-Meyers Squibb) AMT
5.75%, 3/01/24 4,000 4,665,640
Port Auth NY & NJ
(JFK Int'l Airport Proj) AMT
MBIA Ser 97-6
5.75%, 12/01/22 6,820 7,086,185
Sachem Cent SD NY Holbrook
5.00%, 10/15/21-10/15/22(c) 5,415 5,875,107
Spencerport Uni Sch Dist
MBIA Ser 02
5.00%, 6/15/21 2,500 2,660,675
Tobacco Settlement Bond
Ser 03A-1
5.50%, 6/01/14 5,000 5,234,250
Western Nassau Cnty Wtr Auth Wtr Sys
Rev
AMBAC Ser 05
5.00%, 5/01/24 1,945 2,079,574
Yonkers IDA Hlth Fac
(Malotz Pavillion Proj)
MBIA FHA Ser 99
5.65%, 2/01/39 700 732,606
-------------
399,657,995
Arizona-0.2%
Goodyear IDA Water & Sewer Rev
(Litchfield Pk Svc Proj) AMT
Ser 01
6.75%, 10/01/31 1,000 1,096,220
California-0.2%
California State GO
Ser 04
5.20%, 4/01/26 350 374,147
Ser 03
5.25%, 11/01/25 650 697,508
-------------
1,071,655
Florida-2.9%
Crossings at Fleming Island CDD
(Eagle Harbor)
Ser 00C
7.10%, 5/01/30 5,500 5,886,870
Fiddlers Creek CDD
Ser 99B
5.80%, 5/01/21 840 868,686
Ser 96
7.50%, 5/01/18 2,630 2,685,467
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 45
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Hammock Bay CDD
(Special Assessment)
Ser 04A
6.15%, 5/01/24 $ 800 $ 861,688
Manatee Cnty CDD
(Heritage Harbor South)
Ser 02B
5.40%, 11/01/08 10 10,052
Marshall Creek CDD
Ser 02A
6.625%, 5/01/32 950 1,012,548
Midtown Miami CDD
Ser 04A
6.00%, 5/01/24 2,500 2,731,725
-------------
14,057,036
Georgia-0.1%
Atlanta Tax Allocation
(Eastside Proj)
Ser 05B
5.60%, 1/01/30 500 521,740
Guam-0.1%
Guam Govt Wtrwks Auth Wtr & Wastewtr
Sys Rev
Ser 05
6.00%, 7/01/25 500 548,445
Illinois-0.9%
Antioch Village Spcl Svc Area
(Clublands Proj)
Ser 03
6.625%, 3/01/33 1,000 1,060,780
Plano Spl Svc Area No. 3 Spl Tax
(Lakewood Springs Proj)
Ser 05A
5.95%, 3/01/28 1,350 1,385,316
Yorkville Spl Svc Area
(Raintree Vlg Proj)
Ser 03
6.875%, 3/01/33 1,951 2,097,930
-------------
4,544,026
Nevada-0.5%
Clark Cnty Impt Dist No. 142
6.10%, 8/01/18 1,500 1,553,220
Henderson Local Impt Dist
5.80%, 3/01/23 895 924,392
-------------
2,477,612
New Jersey-0.4%
Garden St Pres Tr Open Space & Farmland
FSA Ser 05A
5.80%, 11/01/17 1,500 1,735,410
46 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Ohio-0.3%
Port Auth of Columbiana Cnty SWR
(Apex Environmental LLC) AMT
Ser 04A
7.125%, 8/01/25 $ 1,200 $ 1,222,140
Puerto Rico-4.7%
Puerto Rico Comwlth GO
(Pub Impt)
5.25%, 7/01/23 1,600 1,737,488
(Pub Impt)
Ser 01A
5.50%, 7/01/19 915 1,035,643
Puerto Rico Comwlth Govt Dev Bank
(Sr Notes)
Ser 06B
5.00%, 12/01/15 500 537,735
Puerto Rico Elec Pwr Auth Rev
XLCA Ser 02-1
5.25%, 7/01/22(d) 10,000 10,823,300
Puerto Rico HFA
(Cap Fd Prog)
HUD LN
5.00%, 12/01/20 5,215 5,526,961
Puerto Rico HFC SFMR
(Mtg Rev)
GNMA/FNMA/FHLMC Ser 01A
5.20%, 12/01/33 1,720 1,763,946
Puerto Rico Municipal Finance Agency
Ser 05A
5.25%, 8/01/23 935 1,009,005
-------------
22,434,078
Virginia-0.7%
Bell Creek CDD
Ser 03A
6.75%, 3/01/22 487 508,009
Broad Street CDA
(Parking Fac)
Ser 03
7.50%, 6/01/33 2,680 2,953,038
-------------
3,461,047
Total Long-Term Municipal Bonds
(cost $429,918,163) 452,827,404
Short-Term Municipal Notes-7.1%
New York-3.2%
Monroe Cnty NY IDA
3.54%, 1/15/32(e) 2,500 2,500,000
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 47
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
MTA New York Svc Contract
SubSer G-2
3.62%, 11/01/26(e) $ 900 $ 900,000
New York City
3.60%, 8/01/22(e) 1,400 1,400,000
New York City HDC Mtg Rev
(Res E 17th St)
3.61%, 1/01/23(e) 500 500,000
New York City Muni Wtr Fin Auth
Ser 05 AA-1
3.60%, 6/15/32(e) 500 500,000
FGIC
3.62%, 6/15/23(e) 3,500 3,500,000
New York NY Adj-Subser
FSA
3.58%, 11/01/26(e) 1,500 1,500,000
New York NY GO
Ser 94a
3.58%, 8/01/22(e) 2,500 2,500,000
Port Auth NY & NJ Spl Oblig Rev
3.58%, 6/01/20(e) 2,100 2,100,000
-------------
15,400,000
Alaska-1.0%
Valdez Alaska Marine Term Rev
(BP Pipelines, Inc. Proj)
3.64%, 7/01/37(e) 500 500,000
Valdez Marine Term Rev
(BP Pipelines Project)
Ser 03B
3.64%, 7/01/37(e) 4,000 4,000,000
(BP Pipelines, Inc. Proj)
Ser 03C
3.64%, 7/01/37(e) 500 500,000
-------------
5,000,000
Florida-2.0%
Jacksonville FL
MBIA
3.60%, 8/15/19(e) 2,500 2,500,000
Manatee Cnty FL Pollutn
3.62%, 9/01/24(e)(f) 6,910 6,910,000
-------------
9,410,000
South Carolina-0.9%
South Carolina Edl Facs
3.60%, 10/01/39(e)(f) 4,400 4,400,000
Total Short-Term Municipal Notes
(cost $34,210,000) 34,210,000
48 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
U.S. $ Value
- -------------------------------------------------------------------------------
Total Investments-100.9%
(cost $464,128,163) $ 487,037,404
Other assets less liabilities-(0.9)% (4,307,754)
Net Assets-100.0% $ 482,729,650
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% $(20,419)
Citigroup 2,200 1/25/26 BMA 4.108% 68,416
Goldman Sachs 2,400 1/05/07 BMA 3.405% (1,099)
JP Morgan 4,300 4/05/07 BMA 2.988% (11,788)
JP Morgan 2,400 10/01/07 BMA 3.635% 2,550
JP Morgan 4,500 6/15/15 3.777% BMA (57,001)
Merrill Lynch 2,300 7/12/08 BMA 3.815% 14,284
Merrill Lynch 3,100 10/01/16 BMA 4.148% 124,876
(a) Private Placement.
(b) Variable rate coupon, rate shown as of October 31, 2006.
(c) When-Issued security.
(d) Position, or a portion thereof, has been segregated to collateralize
interest rate swaps.
(e) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specific date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). This instrument is payable on demand and is secured by
letters of credit or other credit support agreements from major banks.
(f) Position, or a portion thereof, has been segregated to collateralize when
issued securities.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 49
Glossary:
ACA - American Capital Access Financial Guaranty Corporation
AMBAC - American Bond Assurance Corporation
AMT - Alternative Minimum Tax (subject to)
BMA - Bond Market Association
CCRC - Congregate Care Retirement Center
CDA - Community Development Administration
CDD - Community Development District
ETM - Escrow to Maturity
FGIC - Financial Guarantee Insurance Company
FHA - Federal Housing Administration
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance Inc.
GNMA - Government National Mortgage Association
GO - General Obligation
HDC - Housing Development Corporation
HFA - Housing Finance Authority
HFC - Housing Finance Corporation
HUDLN - Department of Housing and Urban Development
IDA - Industrial Development Authority/Agency
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-Family Housing Revenue
MTA - Metropolitan Transportation Authority
PCR - Pollution Control Revenue
RADIAN - Radian Group, Inc.
SFMR - Single Family Mortgage Revenue
SONYMA - State of New York Mortgage Agency
SWR - Solid Waste Revenue
TFA - Transitional Finance Authority
UDC - Urban Development Corporation
XLCA - XL Capital Assurance Inc.
See notes to financial statements.
50 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
CALIFORNIA PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 2006
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
MUNICIPAL OBLIGATIONS-98.0%
Long-Term Municipal Bonds-96.5%
California-93.7%
Acalanes California Union High Sch Dist
(Ref-2013 Crossover)
FSA Ser 05B
5.25%, 8/01/24(a) $ 3,000 $ 3,316,200
Banning Util Auth Wtr & Enterprise Rev
(Ref & Impt Proj)
FGIC Ser 05
5.25%, 11/01/30 7,265 7,994,551
California Dept of Wtr Res
Ser 02A
5.375%, 5/01/21 3,000 3,310,080
California Ed Facs Auth Rev
(University of Pacific)
Ser 04
5.00%, 11/01/20 1,000 1,055,240
5.00%, 2/01/33 6,925 7,227,899
5.25%, 11/01/34 1,000 1,074,190
(University of Pacific)
5.00%, 11/01/21 990 1,046,539
California GO
5.00%, 2/01/32 13,200 13,742,916
5.125%, 2/01/28-6/01/31 5,230 5,486,193
5.25%, 2/01/30 14,000 14,738,360
California GO
MBIA Ser 02
5.00%, 2/01/32 3,500 3,648,750
MBIA-IBC Ser 03
5.25%, 2/01/16 2,050 2,238,743
Ser 02
5.25%, 4/01/30 1,175 1,241,693
Ser 03
5.25%, 2/01/24 3,500 3,751,895
Ser 04
5.30%, 4/01/29 6,400 6,882,112
California Health Fac Auth
(Cottage Hlth Sys)
MBIA Ser 03B
5.00%, 11/01/23 2,500 2,635,625
(Lucile Salter Packard Hosp)
AMBAC Ser 03C
5.00%, 8/15/21 3,365 3,556,839
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 51
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
California HFA SFMR
(Mtg Rev) AMT
Ser 99A-2
5.25%, 8/01/26 $ 1,705 $ 1,725,426
(Mtg Rev) FHA AMT
FHA Ser 95A-2
6.45%, 8/01/25 265 266,821
California Hgr Ed
(Col of Arts & Crafts)
Ser 01
5.875%, 6/01/30 2,200 2,326,588
California Poll Ctl Fin Auth
(Pacific Gas & Elec) AMT
MBIA Ser 96A
5.35%, 12/01/16 15,500 16,735,815
(So Calif Edison) AMT
MBIA Ser 99C
5.55%, 9/01/31 7,950 8,340,424
(Tracy Material Recovery) AMT
ACA Ser 99A
5.70%, 8/01/14 3,670 3,747,253
California Pub Wks Bd Lease Rev
(Coalinga)
5.50%, 6/01/22-6/01/23 6,790 7,410,752
(Dept of Hlth Svcs-Richmond Lab)
XLCA Ser 05B
5.00%, 11/01/30 1,270 1,338,643
(Univ of Calif Proj)
Ser 05C
5.00%, 4/01/23 3,130 3,328,598
(Various Univ Calif Projs)
Ser 04F
5.00%, 11/01/26 8,065 8,493,655
California Rural MFA SFMR
(Mtg Rev) AMT
GNMA/FNMA Ser 99A
5.40%, 12/01/30 355 363,463
MBIA Ser 99A
5.40%, 12/01/30 875 897,452
GNMA/FNMA Ser 00D
6.00%, 12/01/31 480 480,365
GNMA/FNMA Ser 00B
6.25%, 12/01/31 150 150,421
California State Dept of Wtr Res Pwr Sup
Rev
(Prerefunded)
FGIC Ser 02A
5.125%, 5/01/18 10,000 10,909,400
XLCA Ser A
5.375%, 5/01/17 10,000 11,033,600
52 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
California State University Rev
FGIC Ser 03A
5.00%, 11/01/22 $ 6,000 $ 6,368,340
California Statewide CDA
(Kaiser Hosp)
Ser 01A
5.55%, 8/01/31 18,000 19,273,320
(San Diego Space & Science)
Ser 96
7.50%, 12/01/16 2,570 2,753,575
California Statewide CDA Ed Fac
(Drew College Prep)
Ser 00
7.25%, 10/01/30(b) 8,000 8,589,200
(Saint Mark's Sch)
Ser 01
6.75%, 6/01/28(b) 2,555 2,690,849
(Sonoma Cnty Day Sch)
Ser 99
6.00%, 1/01/29(b) 11,315 12,002,273
(Wildwood Elem Sch)
Ser 01
7.00%, 11/01/29(b) 3,915 4,209,604
(Windward Sch)
Ser 99
6.90%, 9/01/23(b) 1,960 2,009,216
California Statewide CDA Rev
(Daughters of Charity Health)
Ser 05A
5.25%, 7/01/24 3,225 3,432,400
California Statewide MFHR
(Highland Creek Apts) AMT
FNMA Ser 01K
5.40%, 4/01/34 5,745 5,993,471
(Santa Paula Vlg Apt) AMT
FNMA Ser 98D
5.43%, 5/01/28 2,090 2,122,688
California Veterans Hsg
AMBAC Ser 02A
5.35%, 12/01/27 22,320 23,818,118
Carson Assmt Dist
(Dominguez Tech Ctr)
Ser 01-1
6.35%, 9/02/23 3,825 3,955,165
6.375%, 9/02/31 5,000 5,169,200
Castaic Lake Wtr Agy
5.00%, 8/01/16-8/01/18 4,325 4,675,700
MBIA Ser 01A
5.20%, 8/01/30 1,625 1,706,266
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 53
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Chino CFD
(Spectrum South)
Ser 99
6.35%, 9/01/29 $ 3,450 $ 3,533,697
Chino Hills CFD
(Fairfield Ranch)
Ser 00
6.95%, 9/01/30 5,200 5,537,636
Commerce Joint Pwrs Fin Auth Lease Rev
(Cmnty Ctr Proj)
XLCA Ser 04
5.00%, 10/01/34 2,015 2,108,657
Corona CFD
(Eagle Glen)
Ser 98
5.875%, 9/01/23 3,260 3,375,208
ETM
5.875%, 9/01/23 2,910 3,012,839
East Palo Alto Pub Fin Auth Rev
(University Circle Gateway 101)
RADIAN Ser 05A
5.00%, 10/01/25 4,390 4,648,703
Eastern Wtr CFD
(Morningstar Ranch)
6.40%, 9/01/32 3,715 3,811,776
El Centro Fin Auth Hosp Rev
(El Centro Med Ctr)
Ser 01
5.375%, 3/01/26 18,000 18,826,920
Elk Grove Assmt Dist
(E. Franklin Cmnty)
Ser 02
5.80%, 8/01/25 1,000 1,056,060
6.00%, 8/01/33 5,000 5,287,550
Encinitas Rec Rev
(Encinitas Ranch Golf Course)
Ser 04
5.50%, 9/01/23 580 589,205
5.50%, 9/01/24 530 536,710
5.60%, 9/01/26 1,000 1,017,720
Fontana
(Heritage West End)
Ser 99A
6.50%, 9/01/28 8,620 9,145,820
Fontana Pub Fin Auth
(No Fontana Redev Proj)
AMBAC Ser 03A
5.50%, 9/01/32 1,000 1,078,490
54 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Fremont Uni Sch Dist
(Election 2002)
FSA Ser 05B
5.00%, 8/01/26 $ 1,745 $ 1,864,620
Fresno Joint Pwrs Lease Rev
5.25%, 10/01/21-10/01/24 3,425 3,715,985
5.375%, 10/01/17 1,315 1,463,871
Gilroy Uni Sch Dist
FGIC
5.00%, 8/01/27 1,500 1,580,565
Huntington Park Pub Fin Auth Rev
FSA Ser 04A
5.25%, 9/01/17 1,000 1,129,700
Kaweah Delta Health Care Dist
5.25%, 8/01/25-8/01/26 3,780 4,090,988
Kern Cnty
(Tejon Industrial Complex)
7.20%, 9/01/30 9,900 10,213,335
La Verne Spl Tax
Ser 98
5.875%, 3/01/14 4,830 4,972,630
Lammersville Sch Dist CFD
(Mountain House)
Ser 02
6.375%, 9/01/32 4,250 4,614,140
Lancaster Redev Agy Tax Alloc
(Fire Protn Fac Proj)
XLCA Ser 04
5.00%, 12/01/23 1,120 1,184,736
(Sheriffs Fac Proj)
5.00%, 12/01/23 1,875 1,983,375
Loma Linda Hosp Rev
(Loma Linda Univ Med Ctr)
Ser 05A
5.00%, 12/01/23 2,000 2,081,340
Los Angeles Cmnty Redev Agy
Ser 04L
5.00%, 3/01/17 2,565 2,633,357
5.10%, 3/01/19 1,350 1,380,658
(Grand Ctrl Proj) AMT
MFHR
Ser 93A
5.85%, 12/01/26 4,030 4,032,821
Los Angeles Dept of Airports
(Ontario Int'l Arpt) AMT
FGIC Ser 96A
6.00%, 5/15/22 12,780 12,930,548
Los Angeles Cnty MTA
FGIC Ser 00A
5.25%, 7/01/30 2,750 2,944,975
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 55
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Los Angeles Cnty Pub Works
AMBAC Ser 97V-B
5.125%, 12/01/29 $ 3,400 $ 3,496,084
Los Angeles Dept of Wtr & Pwr Sys
MBIA Ser 01A
5.00%, 7/01/24 1,500 1,545,840
Los Angeles Harbor Rev AMT
Los Angeles MFHR
(Park Plaza West) AMT
GNMA
5.50%, 1/20/43 5,000 5,285,100
Los Angeles Uni Sch Dist
MBIA Ser 03A
5.375%, 7/01/16 9,700 10,771,850
Manteca Uni Sch Dist
FSA Ser 04
5.25%, 8/01/22 1,390 1,549,697
Marin Wtr Dist Rev
AMBAC Ser 04
5.25%, 7/01/20 3,040 3,336,795
Murrieta Valley Uni Sch Dist
(Election 2002)
FSA Ser 05B
5.125%, 9/01/29 1,275 1,369,936
Norco Redev Agy Tax Alloc
(Norco Redev Proj No 1)
RADIAN Ser 04
5.00%, 3/01/24 3,060 3,150,576
(Ref Norco Redev Proj Area No 1)
AMBAC Ser 05
5.00%, 3/01/26 1,360 1,438,853
Oakland Uni Sch Dist
MBIA Ser 05
5.00%, 8/01/25 7,455 7,949,043
Ohlone Cmnty College Dist
FSA Ser 05B
5.00%, 8/01/24 1,850 1,982,441
Ontario Assmt Dist
(Calif Commerce Ctr So)
7.70%, 9/02/10 3,170 3,221,988
Ontario COP
(Wtr Sys Impt Proj)
MBIA Ser 04
5.25%, 7/01/21 1,700 1,861,245
56 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Orange Cnty CFD
(Ladera Ranch)
Ser 99A
6.70%, 8/15/29 $ 3,000 $ 3,305,070
Foothill/Eastern
Transportation Corridor Agency ETM
Ser 95A
Zero Coupon, 1/01/24 10,255 4,945,269
Zero Coupon, 1/01/25 15,000 6,908,100
(San Joaquin Hills Transp Corr)
MBIA
Zero Coupon, 1/15/36 47,415 12,637,520
San Joaquin Hills Transportation Corridor
Agency ETM
Ser 93
Zero Coupon, 1/01/19 10,000 6,084,700
Zero Coupon, 1/01/20 20,000 11,608,000
Zero Coupon, 1/01/21 20,000 11,046,200
Zero Coupon, 1/01/23 25,000 12,618,500
Palm Springs COP ETM
Ser 91B
Zero Coupon, 4/15/21 37,500 20,289,375
Palmdale Wtr Dist Rev COP
FGIC Ser 04
5.00%, 10/01/24 1,775 1,885,636
Pittsburg Redev Agy
(Los Medanos Proj)
MBIA Ser 03A
5.00%, 8/01/21 6,410 6,812,548
Placentia-Yorba Linda Uni Sch Dist
FGIC Ser 06
5.00%, 10/01/27 4,200 4,469,976
Port of Oakland AMT
FGIC Ser 02L
5.375%, 11/01/27 2,500 2,670,625
Rancho Cordova CFD
(Sunridge Anatolia)
Ser 03
6.00%, 9/01/28 2,000 2,061,020
Riverside CFD
(MTN Cove)
Ser 00
6.50%, 9/01/25 3,390 3,720,864
Riverside Cmnty College Dist
5.25%, 8/01/25-8/01/26 1,980 2,207,482
Riverside Cnty Pub Fin Auth Tax Alloc
(Redev Proj)
XLCA Ser 04
5.00%, 10/01/35 2,475 2,588,355
Rocklin Uni Sch Dist
MBIA Ser 04
5.00%, 9/01/25 1,000 1,056,730
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 57
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Roseville CFD
(No Central Roseville Highland Park)
Ser 99-A
5.80%, 9/01/17 $ 6,650 $ 6,965,676
Roseville High Sch Dist
Ser 01E
5.25%, 8/01/26 2,435 2,595,174
Sacramento CFD
(N Natomas Drain)
Ser 00B
7.25%, 9/01/30 5,375 6,007,208
Sacramento City Uni Sch Dist
5.25%, 7/01/21-7/01/23 8,525 9,236,103
Sacramento Cnty Hsg Auth MFHR
(Cottage Estates) AMT
FNMA Ser 00B
6.00%, 2/01/33 5,300 5,608,990
(Verandas Apts) AMT
FNMA Ser 00H
5.70%, 3/01/34 2,875 3,011,074
Sacramento Muni Util Dist Elec Rev
MBIA Ser 03S
5.00%, 11/15/17 5,000 5,380,000
MBIA Ser 04R-289-2
5.00%, 8/15/17 10,000 10,735,800
San Bernardino Cnty CFD
(Kaiser Commerce Cntr)
Ser 02-1
5.90%, 9/01/33 4,750 5,082,738
(Rancho Etiwanda)
Ser 01
6.40%, 9/01/31 8,000 8,449,200
(Rancho Etiwanda) ETM
6.40%, 9/01/31 3,135 3,268,865
San Bernardino SFMR
(Mtg Rev) AMT
GNMA/FNMA Ser 01-A1
6.35%, 7/01/34(c) 645 648,367
San Diego Cnty COP
Ser 04A
5.50%, 9/01/44 5,000 5,367,400
San Diego HFA MFHR
(Rental Rev) AMT
GNMA/FNMA Ser 98C
5.25%, 1/20/40 6,105 6,233,877
San Diego Hsg Auth MFHR
(Vista La Rosa Apt) AMT
GNMA Ser 00A
6.00%, 7/20/41 10,230 10,855,667
58 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
San Diego Uni Sch Dist
(Election of 1998)
5.00%, 7/01/23-7/01/24 $ 2,240 $ 2,411,715
San Francisco City & Cnty Int'l Arpt AMT
FSA Ser 00A
6.125%, 1/01/27 1,480 1,538,342
San Francisco Univ Ed Fac
ACA Ser 99
5.25%, 7/01/32 16,650 17,208,108
San Jose Redev Agy Tax Alloc
MBIA Ser 04A
5.25%, 8/01/19 5,000 5,489,200
San Marcos Pub Facs Auth Tax Alloc Rev
(Proj Areas No 1 & 3)
AMBAC Ser 05A
5.00%, 8/01/25 5,715 6,137,453
San Mateo Cnty Cmnty College Dist COP
MBIA Ser 04
5.25%, 10/01/20 2,870 3,205,962
San Mateo Uni Sch Dist
FSA Ser 04
5.00%, 9/01/24 2,000 2,130,400
Santa Margarita Wtr Fac Dist
(Talega)
Ser 99
6.25%, 9/01/29 11,550 12,395,807
Semitropic Impt Dist Wtr Storage
XLCA Ser 04A
5.50%, 12/01/23 1,640 1,825,074
South Gate Pub Fin Auth
(South Gate Redev Proj No 1)
XLCA Ser 02
5.125%, 9/01/24 1,800 1,919,898
Tejon Ranch CFD
Ser 03
6.125%, 9/01/27 1,000 1,027,430
6.20%, 9/01/33 2,375 2,436,584
Torrance COP
(Ref & Pub Imprt Proj)
AMBAC Ser 05B
5.00%, 6/01/24 2,900 3,074,261
University of Calif Regents Hgr Ed
FGIC Ser 01M
5.125%, 9/01/30 12,270 12,804,972
University of Calif Rev
FSA Ser 05B
5.00%, 5/15/24 3,600 3,827,304
West Contra Costa Healthcare Dist COP
5.375%, 7/01/21-7/01/24 4,720 5,153,387
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 59
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
West Kern Cnty Wtr Rev
Ser 01
5.625%, 6/01/31 $ 3,000 $ 3,235,890
Westminster Redev Agy MFHR
(Rose Garden Apt) AMT
Ser 93A
6.75%, 8/01/24 4,300 4,317,673
Yorba Linda Rec Rev
(Black Gold Golf Course Proj Rev)
Ser 00
7.50%, 10/01/30 5,680 6,106,284
-------------
745,217,822
Ohio-0.3%
Port Auth of Columbiana Cnty SWR
(Apex Environmental LLC) AMT
Ser 04A
7.125%, 8/01/25 2,000 2,036,900
Puerto Rico-2.3%
Puerto Rico Comwlth GO
(Pub Impt)
5.25%, 7/01/23 3,000 3,257,790
(Pub Impt)
Ser 03A
5.25%, 7/01/23 800 852,624
Ser 01A
5.50%, 7/01/19 1,880 2,127,878
Puerto Rico Comwlth Govt Dev Bank
(Sr Notes)
Ser 06B
5.00%, 12/01/15 500 537,735
Puerto Rico Convention Ctr
AMBAC
5.00%, 7/01/17 10,730 11,817,271
-------------
18,593,298
Texas-0.2%
Richardson Hosp Auth Rev
(Richardson Regional)
Ser 04
6.00%, 12/01/19 1,715 1,882,452
Total Long-Term Municipal Bonds
(cost $702,965,175) 767,730,472
60 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Short-Term Municipal Notes-1.5%
California-1.2%
California Infrastructure & Econ Dev Bank
Rev
(Rand Corp)
AMBAC Ser B
3.45%, 4/01/42(d) $ 6,445 $ 6,445,000
California State GO
(Daily Kindergarten Univ B2)
3.42%, 5/01/34(d) 1,500 1,500,000
California State Dept of Wtr Res Pwr Sup
Rev
Ser B3
3.42%, 5/01/22(d) 1,500 1,500,000
-------------
9,445,000
Alaska-0.2%
Valdez Marine Term Rev
(BP Pipelines Project)
Ser 3B
3.64%, 7/01/37(d) 1,800 1,800,000
Illinois-0.0%
Illinois Dev Fin Auth PCR
(Illinois Pwr Proj)
AMBAC Ser 01
3.45%, 11/01/28(d) 100 100,000
Nevada-0.1%
Clark Cnty Nev Sch Dist
FSA Ser 01A
3.55%, 6/15/21(d) 500 500,000
New York-0.0%
New York City TFA
3.58%, 2/01/31(d) 200 200,000
Total Short-Term Municipal Notes
(cost $12,045,000) 12,045,000
Total Investments-98.0%
(cost $715,010,175) 779,775,472
Other assets less liabilities-2.0% 16,034,012
Net Assets-100.0% $ 795,809,484
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 61
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% $ (37,009)
Citigroup 5,600 1/25/26 BMA 4.108% 174,151
Goldman Sachs 4,200 1/05/07 BMA 3.405% (1,924)
JP Morgan 8,400 4/05/07 BMA 2.988% (23,027)
JP Morgan 4,100 10/01/07 BMA 3.635% 4,357
Merrill Lynch 3,900 7/12/08 BMA 3.815% 24,221
Merrill Lynch 2,800 10/01/16 BMA 4.148% 112,791
Merrill Lynch 13,800 7/30/26 4.090% BMA (421,567)
Merrill Lynch 10,200 8/09/26 4.063% BMA (268,874)
Merrill Lynch(e) 13,400 11/15/26 4.378% BMA (856,689)
(a) Position, or a portion thereof, has been segregated to collateralize
interest rate swaps.
(b) Private Placement.
(c) Variable rate coupon, rate shown as of October 31, 2006.
(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.
(e) Represents a forward interest rate swap whose effective date for the
exchange of cash flows is November 15, 2006.
62 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Glossary:
ACA - American Capital Access Financial Guarantee Corporation
AMBAC - American Bond Assurance Corporation
AMT - Alternative Minimum Tax (subject to)
BMA - Bond Market Association
CDA - Community Development Administration
CFD - Community Facilities District
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guarantee Insurance Company
FHA - Federal Housing Administration
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance Inc.
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Authority
IBC - International Bancshares Corporation
MBIA - Municipal Bond Investors Assurance
MFA - Mortgage Finanace Authority
MFHR - Multi-Family Housing Revenue
MTA - Metropolitan Transportation Authority
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.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 63
INSURED CALIFORNIA PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 2006
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
MUNICIPAL OBLIGATIONS-102.6%
Long-Term Municipal Bonds-97.0%
California-97.0%
Acalanes California Union High Sch Dist
(Ref-2013 Crossover)
FSA Ser 05B
5.25%, 8/01/24 $ 2,000 $ 2,210,800
Banning Util Auth Wtr & Enterprise Rev
(Ref & Impt Proj)
FGIC Ser 05
5.25%, 11/01/30 1,140 1,254,479
Butte-Glenn Cmnty College Dist
(Election 2002)
MBIA Ser 05B
5.00%, 8/01/25 3,620 3,873,653
California GO Veterans Housing
FSA Ser 01
5.60%, 12/01/32 4,415 4,438,223
California HFA MFHR
(Mtg Rev)
AMBAC Ser 95A
6.25%, 2/01/37 1,235 1,253,797
California Pub Wks Bd Lease Rev
(Dept of Hlth Svcs-Richmond Lab)
XLCA Ser 05B
5.00%, 11/01/30 3,000 3,162,150
Capistrano Uni Sch Dist
FSA Ser 01B
Zero Coupon, 8/01/25 16,000 7,011,840
FGIC Ser 00A
6.00%, 8/01/24 1,550 1,690,973
Central Coast Wtr Auth Ca Rev
FSA
5.00%, 10/01/20 5,000 5,435,500
Chino Redev Agy Spl Tax ETM
AMBAC Ser 01B
5.25%, 9/01/30 5,325 5,629,803
East Palo Alto Pub Fin Auth Rev
(University Circle Gateway 101)
RADIAN Ser 05A
5.00%, 10/01/25 680 720,072
Fontana Pub Fin Auth
(No Fontana Redev Proj)
AMBAC Ser 03A
5.50%, 9/01/32 4,200 4,529,658
64 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Franklin-McKinley Sch Dist
FSA Ser 02B
5.00%, 1/08/27 $ 700 $ 762,559
Fremont Uni Sch Dist
(Election 2002)
FSA Ser B
5.00%, 8/01/27 920 981,668
Golden St Tobacco Settlement Bonds
RADIAN Ser 03
5.50%, 6/01/43 1,400 1,554,518
Jurupa Uni Sch Dist
(Election 2001)
FGIC Ser 04
5.00%, 8/01/22 1,340 1,420,882
Long Beach
(Aquarium of the Pacific Proj)
AMBAC Ser 01
5.25%, 11/01/30 6,500 6,926,985
Los Angeles CA CCD GO
FSA
5.00%, 8/01/22 5,000 5,412,500
Los Angeles Dept of Wtr & Pwr
MBIA Ser 01A
5.00%, 7/01/24 5,900 6,080,304
Los Angeles Unified School District
FSA
5.00%, 7/01/17(a) 4,000 4,398,520
Murrieta Valley Uni Sch Dist
(Election 2002)
FSA Ser 05B
5.125%, 9/01/29 225 241,754
Norco Redev Agy Tax Alloc
(Ref Norco Redev Proj Area No 1)
AMBAC Ser 05
5.00%, 3/01/26 540 571,309
Orange Cnty COP
(Loma Ridge Data Ctr Proj)
AMBAC
6.00%, 6/01/21 1,000 1,152,890
Perris Union High Sch Dist
FGIC Ser 05A
5.00%, 9/01/24 800 854,664
Poway Redev Agy
(Paguay Proj) ETM
AMBAC Ser 01
5.375%, 12/15/31 6,110 6,580,165
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 65
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Rancho Cordova COP
(City Hall Fac Acq Proj)
XLCA Ser 05
5.00%, 2/01/24 $ 2,645 $ 2,796,664
Redding Elec Sys Rev
MBIA Ser 92A
9.156%, 7/01/22(b)(c) 1,850 2,534,352
Riverside Cnty Pub Fin Auth Tax Alloc Rev
(Redev Proj)
XLCA Ser 04
5.00%, 10/01/23 1,955 2,066,024
Riverside Cnty Spl Tax
(Jurupa Valley)
AMBAC Ser 01
5.125%, 10/01/35 5,000 5,271,700
(Jurupa Valley) ETM
5.25%, 10/01/35(d) 8,000 8,551,040
Rowland CA Uni Sch Dist
FSA
5.00%, 8/01/22 4,000 4,313,240
San Diego Uni Sch Dist
(Election of 1998)
MBIA Ser 04E-1
5.00%, 7/01/23 1,000 1,075,280
Southwestern Cmnty College Dist
MBIA Ser 05
5.00%, 8/01/24 1,000 1,085,710
Stockton Public Financing Authority
5.00%, 9/01/17-9/01/21 5,060 5,433,487
Torrance COP
(Ref & Pub Imprt Proj)
AMBAC Ser 05B
5.00%, 6/01/24 465 492,942
University of Calif Rev
FSA Ser 05B
5.00%, 5/15/24 1,400 1,488,396
Total Long-Term Municipal Bonds
(cost $106,451,936) 113,258,501
Short-Term Municipal Notes-5.6%
California-5.6%
California Infrastructure
(Ecasian Art Museum Fndtn)
MBIA
3.47%, 6/01/34(e)(f) 4,000 4,000,000
66 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
California Infrastructure & Econ Dev Bank
Rev
(Rand Corp)
AMBAC Ser B
3.45%, 4/01/42(e)(f) $ 2,500 $ 2,500,000
Total Short-Term Municipal Notes
(cost $6,500,000) 6,500,000
Total Investments-102.6%
(cost $112,951,936) 119,758,501
Other assets less liabilities-(2.6)% (3,060,814)
Net Assets-100.0% $ 116,697,687
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% $ (4,872)
Citigroup 900 1/25/26 BMA 4.108% 26,905
Goldman Sachs 700 1/05/07 BMA 3.405% (321)
JP Morgan 1,300 4/05/07 BMA 2.988% (3,564)
JP Morgan 600 10/01/07 BMA 3.635% 638
Merrill Lynch 600 7/12/08 BMA 3.815% 3,726
Merrill Lynch 3,100 10/21/16 BMA 4.129% 119,632
Merrill Lynch 700 7/30/26 4.090% BMA (21,384)
Merrill Lynch(g) 1,600 11/15/26 4.378% BMA (102,291)
(a) When-Issued security.
(b) Variable rate coupon, rate shown as of October 31, 2006.
(c) Inverse Floater Security--Security with variable or floating interest rate
that moves in the opposite direction of short-term interest rates.
(d) Position, or a portion thereof, has been segregated to collateralize
interest rate swaps.
(e) Position, or a portion thereof, has been segregated to collateralize when
issued securities.
(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.
(g) Represents a forward interest rate swap whose effective date for the
exchange of cash flows is November 15, 2006.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 67
Glossary:
AMBAC - American Bond Assurance Corporation
BMA - Bond Market Association
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guarantee 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.
68 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
STATEMENT OF ASSETS & LIABILITIES
October 31, 2006
Insured
National National
-------------- --------------
Assets
Investments in securities, at value
(cost $426,545,067 and $137,770,353,
respectively) $ 449,430,914 $ 147,945,786
Cash 197,550 -0-
Interest receivable 7,593,993 2,002,223
Receivable for capital stock sold 459,597 689,020
Unrealized appreciation of interest rate
swap contracts 16,001 43,788
Total assets 457,698,055 150,680,817
Liabilities
Due to custodian -0- 1,393,034
Payable for investment securities
purchased 2,639,928 -0-
Payable for capital stock redeemed 618,227 992,134
Interest expense and fees payable 14,948 -0-
Payable for floating rate notes issued 3,784,790 -0-
Dividends payable 455,462 136,660
Distribution fee payable 173,142 51,188
Advisory fee payable 109,595 55,818
Unrealized depreciation of interest rate
swap contracts 33,109 247,485
Administrative fee payable 27,579 27,667
Transfer Agent fee payable 17,120 4,508
Accrued expenses and other liabilities 94,558 51,058
Total liabilities 7,968,458 2,959,552
Net Assets $ 449,729,597 $ 147,721,265
Composition of Net Assets
Capital stock, at par $ 44,012 $ 14,384
Additional paid-in capital 477,509,261 140,062,379
Undistributed/(distributions in excess) of
net investment income (212,080) 218,615
Accumulated net realized loss on
investment transactions (50,497,443) (2,545,849)
Net unrealized appreciation of
investments 22,885,847 9,971,736
$ 449,729,597 $ 147,721,265
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 69
New York California
-------------- --------------
Assets
Investments in securities, at value
(cost $464,128,163 and $715,010,175,
respectively) $ 487,037,404 $ 779,775,472
Cash 78,547 319,033
Interest receivable 6,939,450 10,013,485
Receivable for capital stock sold 1,351,530 2,032,339
Receivable for investment securities sold 665,000 8,570,446
Unrealized appreciation of swap
contracts 210,126 315,520
Total assets 496,282,057 801,026,295
Liabilities
Payable for investment securities
purchased 11,134,840 -0-
Payable for capital stock redeemed 1,460,010 2,078,999
Dividends payable 449,378 785,339
Distribution fee payable 219,079 323,026
Unrealized depreciation of swap
contracts 90,307 1,609,090
Advisory fee payable 89,221 273,127
Administrative fee payable 28,333 28,333
Transfer Agent fee payable 12,567 13,733
Accrued expenses and other liabilities 68,672 105,164
Total liabilities 13,552,407 5,216,811
Net Assets $ 482,729,650 $ 795,809,484
Composition of Net Assets
Capital stock, at par $ 48,437 $ 71,881
Additional paid-in capital 472,512,117 755,278,829
Distributions in excess of net investment
income (389,689) (747,352)
Accumulated net realized loss on
investment transactions (12,470,275) (22,265,601)
Net unrealized appreciation of
investments 23,029,060 63,471,727
$ 482,729,650 $ 795,809,484
See notes to financial statements.
70 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Insured
California
--------------
Assets
Investments in securities, at value (cost $112,951,936) $ 119,758,501
Cash 309,020
Interest receivable 1,293,215
Unrealized appreciation of swap contracts 150,901
Receivable for capital stock sold 15,705
Total assets 121,527,342
Liabilities
Payable for investment securities purchased 4,353,520
Unrealized depreciation of swap contracts 132,432
Dividends payable 93,123
Payable for capital stock redeemed 82,827
Distribution fee payable 46,179
Advisory fee payable 44,874
Administrative fee payable 27,593
Transfer Agent fee payable 3,692
Accrued expenses and other liabilities 45,415
Total liabilities 4,829,655
Net Assets $ 116,697,687
Composition of Net Assets
Capital stock, at par $ 8,364
Additional paid-in capital 108,683,881
Distributions in excess of net investment income (91,165)
Accumulated net realized gain on investment transactions 1,271,573
Net unrealized appreciation of investments 6,825,034
$ 116,697,687
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 71
Net Asset Value Per Share--45,350,000,000 shares of capital stock authorized,
$.001 par value
Shares Net Asset
National Portfolio Net Assets Outstanding Value
- -------------------------------------------------------------------------------
Class A $ 349,883,322 34,233,593 $ 10.22*
Class B $ 37,399,207 3,663,435 $ 10.21
Class C $ 62,447,068 6,114,850 $ 10.21
Insured National Portfolio
- -------------------------------------------------------------------------------
Class A $ 124,966,440 12,163,651 $ 10.27*
Class B $ 11,477,388 1,120,066 $ 10.25
Class C $ 11,277,437 1,100,102 $ 10.25
New York Portfolio
- -------------------------------------------------------------------------------
Class A $ 320,580,260 32,155,447 $ 9.97*
Class B $ 114,127,451 11,461,531 $ 9.96
Class C $ 48,021,939 4,820,145 $ 9.96
California Portfolio
- -------------------------------------------------------------------------------
Class A $ 594,150,127 53,662,509 $ 11.07*
Class B $ 80,928,378 7,311,597 $ 11.07
Class C $ 120,730,979 10,906,576 $ 11.07
Insured California Portfolio
- -------------------------------------------------------------------------------
Class A $ 89,500,992 6,414,140 $ 13.95*
Class B $ 11,012,835 789,637 $ 13.95
Class C $ 16,183,860 1,160,578 $ 13.94
* The maximum offering price per share for Class A shares of National
Portfolio, Insured National Portfolio, New York Portfolio, California Portfolio
and Insured California Portfolio were $10.67, $10.73, $10.41, $11.56 and
$14.57, respectively, which reflects a sales charge of 4.25%.
See notes to financial statements.
72 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
STATEMENT OF OPERATIONS
Year Ended October 31, 2006
Insured
National National
-------------- --------------
Investment Income
Interest $ 23,866,168 $ 7,567,475
Expenses
Advisory fee 2,008,495 675,617
Distribution fee--Class A 1,025,730 374,210
Distribution fee--Class B 430,340 137,575
Distribution fee--Class C 613,883 116,431
Transfer agency--Class A 245,803 73,594
Transfer agency--Class B 34,559 9,274
Transfer agency--Class C 46,011 7,254
Custodian 164,349 123,547
Administrative 80,500 79,500
Audit 46,000 46,000
Printing 44,317 26,198
Registration fees 34,278 33,914
Legal 31,863 23,014
Directors' fees and expenses 6,400 6,400
Miscellaneous 19,051 11,133
Total expenses before interest expense 4,831,579 1,743,661
Interest expense and fees 451,914 -0-
Total expenses 5,283,493 1,743,661
Less: advisory fee waived (see Note B) (1,051,760) (1,929)
Less: expense offset arrangement
(see Note B) (13,806) (3,885)
Net expenses 4,217,927 1,737,847
Net investment income 19,648,241 5,829,628
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized gain (loss) on:
Investment transactions 2,097,509 16,843
Swap contracts (44,886) 111,853
Net change in unrealized
appreciation/depreciation of:
Investments 5,231,440 1,545,999
Swap contracts (14,149) (312,804)
Net gain on investment transactions 7,269,914 1,361,891
Net Increase in Net Assets from
Operations $ 26,918,155 $ 7,191,519
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 73
New York California
-------------- --------------
Investment Income
Interest $ 23,094,095 $ 41,351,998
Expenses
Advisory fee 2,140,117 3,644,747
Distribution fee--Class A 915,788 1,761,139
Distribution fee--Class B 1,236,767 1,006,604
Distribution fee--Class C 466,420 1,222,370
Transfer agency--Class A 177,081 227,390
Transfer agency--Class B 81,165 46,097
Transfer agency--Class C 28,177 49,622
Custodian 159,486 250,229
Administrative 80,500 80,500
Printing 50,075 63,567
Audit 46,000 46,000
Legal 37,766 42,023
Registration fees 18,567 21,813
Directors' fees and expenses 6,400 6,400
Miscellaneous 22,055 31,071
Total expenses 5,466,364 8,499,572
Less: advisory fee waived (see Note B) (1,503,750) (694,135)
Less: expense offset arrangement
(see Note B) (12,010) (8,587)
Net expenses 3,950,604 7,796,850
Net investment income 19,143,491 33,555,148
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized gain (loss) on:
Investment transactions 4,639,910 1,352,171
Futures contracts 25,243 195,867
Swap contracts (26,714) 455,803
Net change in unrealized
appreciation/depreciation of:
Investments 2,743,840 15,052,538
Futures contracts (36,525) (87,539)
Swap contracts 168,494 (1,803,963)
Net gain on investment transactions 7,514,248 15,164,877
Net Increase in Net Assets from
Operations $ 26,657,739 $ 48,720,025
See notes to financial statements.
74 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Insured
California
--------------
Investment Income
Interest $ 6,034,810
Expenses
Advisory fee 556,023
Distribution fee--Class A 279,154
Distribution fee--Class B 132,374
Distribution fee--Class C 172,720
Transfer agency--Class A 35,201
Transfer agency--Class B 6,179
Transfer agency--Class C 6,903
Custodian 117,717
Administrative 80,500
Audit 46,000
Legal 23,075
Registration fees 12,791
Printing 9,041
Directors' fees and expenses 6,400
Miscellaneous 6,341
Total expenses 1,490,419
Less: expense offset arrangement (see Note B) (1,287)
Net expenses 1,489,132
Net investment income 4,545,678
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized gain (loss) on:
Investment transactions 1,630,433
Futures contracts (510,954)
Swap contracts 52,483
Net change in unrealized appreciation/depreciation of:
Investments 165,157
Futures contracts 107,290
Swap contracts (13,824)
Net gain on investment transactions 1,430,585
Net Increase in Net Assets from Operations $ 5,976,263
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 75
STATEMENT OF CHANGES IN NET ASSETS
National
-------------------------------
Year Ended Year Ended
October 31, October 31,
2006 2005
-------------- --------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 19,648,241 $ 20,904,148
Net realized gain on investment
transactions 2,052,623 2,838,059
Net change in unrealized
appreciation/depreciation of
investments 5,217,291 (6,223,658)
Net increase in net assets from
operations 26,918,155 17,518,549
Dividends to Shareholders from
Net investment income
Class A (15,610,866) (15,963,828)
Class B (1,673,575) (2,450,437)
Class C (2,376,466) (2,615,269)
Capital Stock Transactions
Net decrease (6,151,539) (33,454,693)
Total increase (decrease) 1,105,709 (36,965,678)
Net Assets
Beginning of period 448,623,888 485,589,566
End of period (including distributions
in excess of net investment income
of ($212,080) and ($232,554),
respectively) $ 449,729,597 $ 448,623,888
See notes to financial statements.
76 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Insured National
-------------------------------
Year Ended Year Ended
October 31, October 31,
2006 2005
-------------- --------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 5,829,628 $ 6,233,586
Net realized gain on investment
transactions 128,696 1,315,888
Net change in unrealized
appreciation/depreciation of
investments 1,233,195 (3,004,391)
Net increase in net assets from
operations 7,191,519 4,545,083
Dividends to Shareholders from
Net investment income
Class A (4,972,450) (5,178,839)
Class B (454,397) (670,798)
Class C (384,076) (406,577)
Capital Stock Transactions
Net decrease (6,723,688) (10,278,839)
Total decrease (5,343,092) (11,989,970)
Net Assets
Beginning of period 153,064,357 165,054,327
End of period (including undistributed
net investment income of $218,615,
and $218,607, respectively) $ 147,721,265 $ 153,064,357
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 77
New York
-------------------------------
Year Ended Year Ended
October 31, October 31,
2006 2005
-------------- --------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 19,143,491 $ 20,507,437
Net realized gain on investment
transactions 4,638,439 2,666,917
Net change in unrealized
appreciation/depreciation of
investments 2,875,809 (8,464,430)
Net increase in net assets from
operations 26,657,739 14,709,924
Dividends to Shareholders from
Net investment income
Class A (13,024,132) (13,054,686)
Class B (4,435,326) (5,686,805)
Class C (1,666,425) (1,765,080)
Capital Stock Transactions
Net increase 1,490,548 2,697,090
Total increase (decrease) 9,022,404 (3,099,557)
Net Assets
Beginning of period 473,707,246 476,806,803
End of period (including distributions
in excess of net investment income
of ($389,689) and ($380,582),
respectively) $ 482,729,650 $ 473,707,246
See notes to financial statements.
78 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
California
-------------------------------
Year Ended Year Ended
October 31, October 31,
2006 2005
-------------- --------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 33,555,148 $ 36,148,395
Net realized gain on investment
transactions 2,003,841 7,986,016
Net change in unrealized
appreciation/depreciation of
investments 13,161,036 (13,248,681)
Net increase in net assets from
operations 48,720,025 30,885,730
Dividends to Shareholders from
Net investment income
Class A (25,391,256) (25,712,923)
Class B (3,656,739) (5,556,168)
Class C (4,434,967) (4,914,162)
Capital Stock transactions
Net decrease (56,664,848) (61,585,736)
Total decrease (41,427,785) (66,883,259)
Net Assets
Beginning of period 837,237,269 904,120,528
End of period (including distributions
in excess of net investment income
of ($747,352) and ($1,013,494),
respectively) $ 795,809,484 $ 837,237,269
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 79
Insured California
-------------------------------
Year Ended Year Ended
October 31, October 31,
2006 2005
-------------- --------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 4,545,678 $ 5,192,141
Net realized gain on investment
transactions 1,171,962 2,205,455
Net change in unrealized
appreciation/depreciation of
investments 258,623 (4,060,894)
Net increase in net assets from
operations 5,976,263 3,336,702
Dividends and Distributions to
Shareholders from
Net investment income
Class A (3,579,352) (3,949,909)
Class B (416,882) (620,847)
Class C (543,686) (619,928)
Net realized gain on investment
transactions
Class A (1,583,808) -0-
Class B (245,775) -0-
Class C (296,689) -0-
Capital Stock Transactions
Net decrease (13,521,840) (11,812,030)
Total decrease (14,211,769) (13,666,012)
Net Assets
Beginning of period 130,909,456 144,575,468
End of period (including distributions
in excess of net investment income
of ($91,165) and ($142,859),
respectively) $ 116,697,687 $ 130,909,456
See notes to financial statements.
80 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2006
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 the diversified National Portfolio, Insured
National Portfolio, New York Portfolio and California Portfolio and the
non-diversified Insured California Portfolio (the "Portfolios"). 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 the classes bear different distribution and transfer agency
expenses. Each class 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. 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 (other than securities listed on the NASDAQ Stock Market,
Inc. ("NASDAQ")) or on a foreign securities exchange are valued at the last
sale price at the close of the exchange or foreign securities exchange. If
there has been no sale on such day, the securities are valued at the mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities listed only on NASDAQ are valued in
accordance with the NASDAQ Official
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 81
Closing Price; listed put or call options are valued at the last sale price. If
there has been no sale on that day, such securities will be valued at the
closing bid prices on that day; open futures contracts and options thereon are
valued using the closing settlement price or, in the absence of such a price,
the most recent quoted bid price. If there are no quotations available for the
day of valuation, the last available closing settlement price is used;
securities traded in the over-the-counter market, (OTC) are valued at the mean
of the current bid and asked prices as reported by the National Quotation
Bureau or other comparable sources; U.S. government securities and other debt
instruments having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less; or by amortizing
their fair value as of the 61st day prior to maturity if their original term to
maturity exceeded 60 days; fixed-income securities, including mortgage backed
and asset backed securities, may be valued on the basis of prices provided by a
pricing service or at a price obtained from one or more of the major
broker/dealers. In cases where broker/dealer quotes are obtained,
AllianceBernstein L.P. (prior to February 24, 2006 known as Alliance Capital
Management L.P.) (the "Adviser") may establish procedures whereby changes in
market yields or spreads are used to adjust, on a daily basis, a recently
obtained quoted price on a security; and OTC and other derivatives are valued
on the basis of a quoted bid price or spread from a major broker/dealer in such
security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund values its
securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim and may materially affect the
value of those securities.
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 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
Investment Company Act of 1940. Each Portfolio has adopted procedures to
82 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
ensure that all such transactions are done in accordance with the requirements
of Rule 17a-7. Investment gains and losses are determined on the identified
cost basis. The Portfolios amortize premiums and accrete original issue
discount and market discount as adjustments to interest income.
The New York, Insured California and California Portfolios follow an investment
policy of investing primarily in municipal obligations of one state. Economic
changes affecting the state and certain of its public bodies and municipalities
may affect the ability of issuers within the state to pay interest on, or repay
principal of, municipal obligations held by the Portfolios.
4. Class Allocations
All income earned and expenses incurred by the Portfolios are borne on a
pro-rata basis by each settled class of shares, based on proportionate interest
in each Portfolio represented by the net assets of such class, except for class
specific expenses which are allocated to the respective class. Expenses of the
Fund are charged to each Portfolio in proportion to net assets. Realized and
unrealized gains and losses are allocated among the various share classes based
on their respective net assets.
5. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the
ex-dividend date. Income dividends and capital gains distributions are
determined in accordance with federal tax regulations and may differ from those
determined in accordance with U.S. generally accepted accounting principles. To
the extent these differences are permanent, such amounts are reclassified
within the capital accounts based on their federal tax basis treatment;
temporary differences do not require such reclassification.
NOTE 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 83
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:
Portfolio 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, 2006, such reimbursement waivers amounted to
$1,051,760, $1,929, $1,503,750 and $694,135 for National, Insured National, New
York and California Portfolios, respectively.
Pursuant to the advisory agreement, the National, New York, California and
Insured California Portfolios each paid $80,500 and the Insured National
Portfolio paid $79,500 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, 2006.
Each Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.) ("ABIS"), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for each
Portfolio. ABIS may make payments to intermediaries that provide omnibus
account services, sub-accounting services and/or networking services. Such
compensation retained by ABIS amounted to: National Portfolio, $211,496;
Insured National Portfolio, $56,551; New York Portfolio, $158,945; California
Portfolio, $167,938 and Insured California Portfolio, $25,417 for the year
ended October 31, 2006.
For the year ended October 31, 2006, the Fund's expenses were reduced by:
National Portfolio $13,806; Insured National Portfolio $3,885; New York
Portfolio $12,010; California Portfolio $8,587 and Insured California
Portfolio, $1,287 under an expense offset arrangement with ABIS.
AllianceBernstein Investments, Inc. (prior to February 24, 2006 known as
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
84 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
charges imposed upon redemptions by shareholders of Class A, Class B and Class
C shares for the year ended October 31, 2006 as follows:
Front-End Contingent Deferred Sales Charges
Sales Charges -------------------------------------------
Portfolio Class A Class A Class B Class C
- -------------------------------------------------------------------------------
National $ 28,657 $ 5,759 $ 18,316 $ 11,302
Insured National 5,116 6,461 12,508 170
New York 42,667 13,210 90,261 9,903
California 33,367 4,820 28,127 4,302
Insured California 3,458 110 4,345 161
Accrued expenses for the National Portfolio includes $376 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 $ 3,957,640 $ 4,823,324
Insured National 3,636,541 1,954,537
New York 7,451,292 2,821,966
California 7,211,809 5,818,009
Insured California 3,098,481 1,816,867
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 85
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the year ended October 31, 2006 were as follows:
Portfolio Purchases Sales
- --------- -------------- --------------
National $ 98,152,583 $ 121,303,254
Insured National 15,479,799 18,233,578
New York 173,263,585 191,189,613
California 83,037,457 152,459,553
Insured California 29,931,524 40,686,191
There were no purchases or sales of U.S. government and government agency
obligations for the year ended October 31, 2006.
The cost of investments for federal income tax purposes, gross unrealized
appreciation and unrealized depreciation (excluding swap transactions) are as
follows:
Gross Unrealized Net
------------------------------- Unrealized
Portfolio Cost Appreciation (Depreciation) Appreciation
- -------------------------------------------------------------------------------
National $423,110,818 $22,898,687 $ (378,329) $22,520,358
Insured National 137,917,072 10,029,592 (878) 10,028,714
New York 464,329,551 22,707,853 -0- 22,707,853
California 715,286,847 64,599,308 (110,683) 64,488,625
Insured California 112,951,936 6,806,565 -0- 6,806,565
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 with the broker, 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 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.
86 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
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 allocated 9,100,000,000 of authorized shares each to the National
Portfolio and Insured National Portfolio and 9,050,000,000 of authorized shares
each to the New York Portfolio, California Portfolio and Insured Califor-
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 87
nia Portfolio. All shares are divided evenly into three classes. Transactions
in capital shares for each class were as follows:
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
National October 31, October 31, October 31, October 31,
Portfolio 2006 2005 2006 2005
- ----------------- ------------ ------------ -------------- --------------
Class A
Shares sold 4,624,690 2,169,106 $ 46,644,729 $ 22,038,954
Shares issued in
reinvestment of
dividends 1,008,163 1,016,683 10,161,664 10,332,816
Shares converted
from Class B 688,817 1,237,740 6,941,658 12,575,580
Shares redeemed (5,627,894) (4,882,449) (56,668,567) (49,621,231)
Net increase
(decrease) 693,776 (458,920) $ 7,079,484 $ (4,673,881)
Class B
Shares sold 501,985 539,179 $ 5,043,046 $ 5,476,906
Shares issued in
reinvestment of
dividends 112,089 162,344 1,128,277 1,647,470
Shares converted
to Class A (689,549) (1,238,960) (6,941,658) (12,575,580)
Shares redeemed (1,220,094) (1,642,058) (12,266,711) (16,670,311)
Net decrease (1,295,569) (2,179,495) $ (13,037,046) $ (22,121,515)
Class C
Shares sold 1,008,743 496,836 $ 10,155,447 $ 5,044,011
Shares issued in
reinvestment of
dividends 131,083 147,406 1,319,972 1,496,899
Shares redeemed (1,159,156) (1,301,218) (11,669,396) (13,200,207)
Net decrease (19,330) (656,976) $ (193,977) $ (6,659,297)
88 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
Insured National October 31, October 31, October 31, October 31,
Portfolio 2006 2005 2006 2005
- ----------------- ------------ ------------ -------------- --------------
Class A
Shares sold 999,530 880,450 $ 10,164,361 $ 9,056,371
Shares issued in
reinvestment of
dividends 305,448 313,426 3,108,799 3,226,217
Shares converted
from Class B 141,164 294,647 1,437,535 3,029,121
Shares redeemed (1,560,171) (1,833,727) (15,872,188) (18,852,138)
Net decrease (114,029) (345,204) $ (1,161,493) $ (3,540,429)
Class B
Shares sold 82,522 203,316 $ 838,332 $ 2,088,215
Shares issued in
reinvestment of
dividends 29,866 42,968 303,263 441,072
Shares converted
to Class A (141,509) (295,467) (1,437,535) (3,029,121)
Shares redeemed (463,882) (575,604) (4,705,826) (5,908,162)
Net decrease (493,003) (624,787) $ (5,001,766) $ (6,407,996)
Class C
Shares sold 144,344 165,914 $ 1,463,557 $ 1,705,216
Shares issued in
reinvestment of
dividends 14,461 15,550 146,876 159,710
Shares redeemed (213,862) (214,218) (2,170,862) (2,195,340)
Net decrease (55,057) (32,754) $ (560,429) $ (330,414)
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 89
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
New York October 31, October 31, October 31, October 31,
Portfolio 2006 2005 2006 2005
- ----------------- ------------ ------------ -------------- --------------
Class A
Shares sold 5,138,640 3,926,953 $ 50,574,087 $ 39,021,649
Shares issued in
reinvestment of
dividends 960,545 963,742 9,451,279 9,574,279
Shares converted
from Class B 952,725 1,328,078 9,377,623 13,202,828
Shares redeemed (4,860,988) (4,470,905) (47,776,881) (44,406,239)
Net increase 2,190,922 1,747,868 $ 21,626,108 $ 17,392,517
Class B
Shares sold 1,076,970 1,926,045 $ 10,581,875 $ 19,122,910
Shares issued in
reinvestment of
dividends 351,472 432,906 3,453,864 4,294,873
Shares converted
to Class A (953,888) (1,329,811) (9,377,623) (13,202,828)
Shares redeemed (2,661,381) (2,652,730) (26,118,036) (26,320,114)
Net decrease (2,186,827) (1,623,590) $ (21,459,920) $ (16,105,159)
Class C
Shares sold 896,934 676,261 $ 8,835,401 $ 6,723,393
Shares issued in
reinvestment of
dividends 110,958 115,667 1,091,049 1,148,115
Shares redeemed (874,835) (651,483) (8,602,090) (6,461,776)
Net increase 133,057 140,445 $ 1,324,360 $ 1,409,732
90 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
California October 31, October 31, October 31, October 31,
Portfolio 2006 2005 2006 2005
- ----------------- ------------ ------------ -------------- --------------
Class A
Shares sold 3,856,561 4,523,661 $ 42,114,386 $ 49,667,277
Shares issued in
reinvestment of
dividends 1,508,424 1,481,158 16,474,822 16,261,227
Shares converted
from Class B 1,987,879 2,379,633 21,718,870 26,135,781
Shares redeemed (8,008,041) (7,830,684) (87,397,554) (85,984,334)
Net increase
(decrease) (655,177) 553,768 $ (7,089,476) $ 6,079,951
Class B
Shares sold 316,211 369,481 $ 3,451,598 $ 4,060,353
Shares issued in
reinvestment of
dividends 225,289 339,891 2,459,547 3,728,943
Shares converted
to Class A (1,988,528) (2,379,792) (21,718,870) (26,135,781)
Shares redeemed (2,487,349) (3,112,103) (27,114,594) (34,127,186)
Net decrease (3,934,377) (4,782,523) $ (42,922,319) $ (52,473,671)
Class C
Shares sold 1,151,870 639,970 $ 12,593,627 $ 7,015,694
Shares issued in
reinvestment of
dividends 198,555 229,716 2,168,171 2,520,877
Shares redeemed (1,959,634) (2,254,450) (21,414,851) (24,728,587)
Net decrease (609,209) (1,384,764) $ (6,653,053) $ (15,192,016)
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 91
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
Insured California October 31, October 31, October 31, October 31,
Portfolio 2006 2005 2006 2005
- ----------------- ------------ ------------ -------------- --------------
Class A
Shares sold 172,424 393,065 $ 2,384,725 $ 5,586,379
Shares issued in
reinvestment of
dividends 247,752 166,504 3,423,860 2,364,804
Shares converted
from Class B 81,742 84,972 1,136,761 1,209,910
Shares redeemed (1,015,397) (996,530) (14,030,107) (14,120,616)
Net decrease (513,479) (351,989) $ (7,084,761) $ (4,959,523)
Class B
Shares sold 7,424 39,730 $ 103,062 $ 566,584
Shares issued in
reinvestment of
dividends 34,163 28,746 472,054 408,009
Shares converted
to Class A (81,772) (84,985) (1,136,761) (1,209,910)
Shares redeemed (285,833) (386,094) (3,948,935) (5,473,138)
Net decrease (326,018) (402,603) $ (4,510,580) $ (5,708,455)
Class C
Shares sold 41,427 113,212 $ 570,504 $ 1,603,951
Shares issued in
reinvestment of
dividends 37,254 27,382 514,670 388,653
Shares redeemed (217,958) (221,483) (3,011,673) (3,136,656)
Net decrease (139,277) (80,889) $ (1,926,499) $ (1,144,052)
NOTE F
Risks Involved inInvesting 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.
92 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
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, 2006.
NOTE H
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended October
31, 2006 and 2005 were as follows:
National Portfolio 2006 2005
-------------- --------------
Distributions paid from:
Ordinary income $ 144,766 $ 687,169
Tax-exempt income 19,516,141 20,342,365
Total distributions paid $ 19,660,907 $ 21,029,534
As of October 31, 2006, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed tax-exempt net investment income $ 238,367
Accumulated capital and other losses (50,114,090)(a)
Unrealized appreciation 22,507,509(b)
Total accumulated earnings/(deficit) $ (27,368,214)(c)
(a) On October 31, 2006, the Portfolio had a net capital loss carryforward of
$50,114,090, of which $7,845,498 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, 2006, the Portfolio utilized capital loss carryforwards of
$2,019,312.
(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 swap income resulted in a net decrease in distributions in excess
of net investment income, and a net increase in accumulated net realized loss
on investment transactions. This reclassification had no effect on net assets.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 93
Insured National Portfolio 2006 2005
-------------- --------------
Distributions paid from:
Ordinary income $ 3,704 $ 37,917
Tax-exempt income 5,807,219 6,218,297
Total distributions paid $ 5,810,923 $ 6,256,214
As of October 31, 2006, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed tax-exempt net investment income $ 350,303
Accumulated capital and other losses (2,399,129)(a)
Unrealized appreciation 9,829,989(b)
Total accumulated earnings/(deficit) $ 7,781,163(c)
(a) On October 31, 2006, the Portfolio had a net capital loss carryforward of
$2,399,129, of which $385,194 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, 2006, the Portfolio utilized capital loss
carryforwards of $87,017.
(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 swap income resulted in a net decrease in undistributed net
investment income, and a net decrease in accumulated net realized loss on
investment transactions. This reclassification had no effect on net assets.
New York Portfolio 2006 2005
-------------- --------------
Distributions paid from:
Ordinary income $ 32,211 $ 203,413
Tax-exempt income 19,093,672 20,303,158
Total distributions paid $ 19,125,883 $ 20,506,571
As of October 31, 2006, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed tax-exempt net investment income $ 53,368
Accumulated capital and other losses (12,268,887)(a)
Unrealized appreciation/(depreciation) 22,833,993(b)
Total accumulated earnings/(deficit) $ 10,618,474(c)
94 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
(a) On October 31, 2006, the Portfolio had a net capital loss carryforward of
$12,268,887, of which $1,523,575 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, 2006, the Portfolio
utilized capital loss carryforwards of $4,355,137.
(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 swap income resulted in a net increase in distributions in excess
of net investment income, and a net decrease in accumulated net realized loss
on investment transactions. This reclassification had no effect on net assets.
California Portfolio 2006 2005
-------------- --------------
Distributions paid from:
Ordinary income $ 317,409 $ 278,826
Tax-exempt income 33,165,553 35,904,427
Total distributions paid $ 33,482,962 $ 36,183,253
As of October 31, 2006, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Accumulated capital and other losses $ (21,988,929)(a)
Unrealized appreciation/(depreciation) 63,233,044(b)
Total accumulated earnings/(deficit) $ 41,244,115(c)
(a) On October 31, 2006, the Portfolio had a net capital loss carryforward of
$21,988,929 of which $7,074,902 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, 2006, the Portfolio
utilized capital loss carryforwards of $1,223,942.
(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 treament 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, and taxable distributions in excess resulted in a net
decrease in distributions in excess of net investment income, a net decrease in
accumulated net realized loss on investment transactions, and a net decrease in
additional paid in capital. This reclassification had no effect on net assets.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 95
Insured California Portfolio 2006 2005
-------------- --------------
Distributions paid from:
Ordinary income $ 71,548 $ 58,179
Tax-exempt income 4,468,372 5,132,505
Net long term capital gains 2,126,272 -0-
Total distributions paid $ 6,666,192 $ 5,190,684
As of October 31, 2006, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed long term capital gains $ 1,271,573
Unrealized appreciation/(depreciation) 6,826,992(a)
Total accumulated earnings/(deficit) $ 8,098,565(b)
(a) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to tax deferral of losses
on wash sales, and the difference between the book and tax treatment of swap
income.
(b) 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, and taxable distributions in excess resulted in a net
decrease in distributions in excess of net investment income, a net increase in
accumulated net realized gain on investment transactions, and a net decrease in
additional paid in capital. 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 Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
96 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
(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, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have conducted an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel.
On October 2, 2003, a purported class action complaint entitled Hindo, et al.
v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 97
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, 43 additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date. The derivative claims brought on behalf of Alliance Holding remain
pending.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (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
98 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
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 October 19, 2005, the WVAG Complaint was transferred to the
Mutual Fund MDL.
On August 30, 2005, the West Virginia Securities Commissioner 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
NYAGOrder. On January 26, 2006, the Adviser, Alliance Holding, and various
unaffiliated defendants filed a Petition for Writ of Prohibition and Order
Suspending Proceedings in West Virginia state court seeking to vacate the
Summary Order and for other relief. The court denied the writ and in September
2006 the Supreme Court of Appeals declined the defendants' petition for appeal.
On September 22, 2006, Alliance and Alliance Holding filed an answer and motion
to dismiss the Summary Order with the Securities Commissioner.
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 99
certain other defendants. All nine of the lawsuits (i) were brought as class
actions filed in the United States District Court for the Southern District of
New York, (ii) assert claims substantially identical to the Aucoin Complaint,
and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint. On July 5,
2006, plaintiffs filed a notice of appeal. On October 4, 2006 the appeal was
withdrawn by stipulation, with plaintiffs reserving the right to reinstate it
at a later date.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
NOTE J
Recent Accounting Pronouncements
On July 13, 2006, the Financial Accounting Standards Board ("FASB") released
FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN
48"). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in
the course of preparing a Portfolio's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded in the current period. Adoption of FIN 48 is required for
fiscal years beginning after December 15, 2006 and is to be applied to all open
tax years as of the effective date. At this time, management is evaluating the
implications of FIN 48 and its impact on the financial statements has not yet
been determined.
100 o AllianceBernstein Municipal Income Fund
On September 20, 2006, the FASB released Statement of Financial Accounting
Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an
authoritative definition of fair value, sets out a framework for measuring fair
value, and requires additional disclosures about fair-value measurements. The
application of FAS 157 is required for fiscal years beginning after November
15, 2007 and interim periods within those fiscal years. At this time,
management is evaluating the implications of FAS 157 and its impact on the
financial statements has not yet been determined.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 101
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
National Portfolio
---------------------------------------------------------------
Class A
---------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.05 $10.13 $9.96 $9.80 $10.34
Income From Investment
Operations
Net investment income(b)(c) .46 .47 .50 .52 .54
Net realized and unrealized
gain (loss) on investment
transactions .17 (.07) .17 .18 (.53)
Net increase in net asset value
from operations .63 .40 .67 .70 .01
Less: Dividends and
Distributions
Dividends from net
investment income (.46) (.48) (.50) (.54) (.54)
Distributions in excess of
net investment income -0- -0- -0- -0- (.01)
Total dividends and
distributions (.46) (.48) (.50) (.54) (.55)
Net asset value,
end of period $10.22 $10.05 $10.13 $9.96 $9.80
Total Return
Total investment return based
on net asset value(d) 6.43% 3.95% 6.92% 7.32% .06%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $349,884 $337,201 $344,557 $373,416 $411,408
Ratio to average net assets of:
Expenses, net of
fee waivers and
interest expense .68%(e) .68% .68% .68% .65%
Expenses, before
fee waivers 1.01%(e) .93%(f) 1.08% 1.11% 1.07%
Expenses, before
waiver excluding
interest expense .92% .93% 1.08% 1.11% 1.07%
Net investment income(b) 4.56%(e) 4.65% 4.94% 5.25% 5.28%
Portfolio turnover rate 22% 25% 47% 35% 63%
See footnote summary on page 117.
102 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
National Portfolio
---------------------------------------------------------------
Class B
---------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.04 $10.12 $9.95 $9.79 $10.33
Income From Investment
Operations
Net investment income(b)(c) .39 .40 .43 .45 .46
Net realized and unrealized
gain (loss) on investment
transactions .17 (.07) .17 .18 (.52)
Net increase (decrease) in
net asset value from
operations .56 .33 .60 .63 (.06)
Less: Dividends and
Distributions
Dividends from net
investment income (.39) (.41) (.43) (.47) (.47)
Distributions in excess of
net investment income -0- -0- -0- -0- (.01)
Total dividends and
distributions (.39) (.41) (.43) (.47) (.48)
Net asset value,
end of period $10.21 $10.04 $10.12 $9.95 $9.79
Total Return
Total investment return based
on net asset value(d) 5.70% 3.25% 6.18% 6.57% (.62)%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $37,399 $49,801 $72,264 $101,287 $122,656
Ratio to average net assets of:
Expenses, net of
fee waivers and
interest expense 1.38%(e) 1.38% 1.39% 1.39% 1.35%
Expenses, before
fee waivers 1.73%(e) 1.64%(f) 1.79% 1.81% 1.77%
Expenses, before
waiver excluding
interest expense 1.64% 1.64% 1.79% 1.81% 1.77%
Net investment income(b) 3.89%(e) 3.96% 4.24% 4.54% 4.57%
Portfolio turnover rate 22% 25% 47% 35% 63%
See footnote summary on page 117.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 103
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
National Portfolio
---------------------------------------------------------------
Class C
---------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.05 $10.13 $9.95 $9.79 $10.34
Income From Investment
Operations
Net investment income(b)(c) .39 .40 .43 .45 .47
Net realized and unrealized
gain (loss) on investment
transactions .16 (.07) .18 .18 (.54)
Net increase (decrease) in
net asset value from
operations .55 .33 .61 .63 (.07)
Less: Dividends and
Distributions
Dividends from net
investment income (.39) (.41) (.43) (.47) (.47)
Distributions in excess of
net investment income -0- -0- -0- -0- (.01)
Total dividends and
distributions (.39) (.41) (.43) (.47) (.48)
Net asset value,
end of period $10.21 $10.05 $10.13 $9.95 $9.79
Total Return
Total investment return based
on net asset value(d) 5.59% 3.24% 6.28% 6.57% (.72)%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $62,447 $61,622 $68,769 $82,167 $93,032
Ratio to average net assets of:
Expenses, net of
fee waivers and
interest expense 1.38%(e) 1.38% 1.38% 1.38% 1.35%
Expenses, before
fee waivers 1.72%(e) 1.64%(f) 1.78% 1.81% 1.76%
Expenses, before
waiver excluding
interest expense 1.63% 1.64% 1.78% 1.81% 1.76%
Net investment income(b) 3.87%(e) 3.96% 4.24% 4.55% 4.58%
Portfolio turnover rate 22% 25% 47% 35% 63%
See footnote summary on page 117.
104 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Insured National Portfolio
---------------------------------------------------------------
Class A
---------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.18 $10.29 $10.11 $9.92 $10.07
Income From Investment
Operations
Net investment income(b)(c) .41 .42 .44 .47 .45
Net realized and unrealized
gain (loss) on investment
transactions .09 (.11) .20 .14 (.14)
Net increase in net asset value
from operations .50 .31 .64 .61 .31
Less: Dividends and
Distributions
Dividends from net
investment income (.41) (.42) (.46) (.42) (.45)
Distributions in excess of
net investment income -0- -0- -0- -0- (.01)
Total dividends and
distributions (.41) (.42) (.46) (.42) (.46)
Net asset value,
end of period $10.27 $10.18 $10.29 $10.11 $9.92
Total Return
Total investment return based
on net asset value(d) 4.98% 3.05% 6.42% 6.32% 3.13%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $124,967 $124,957 $129,888 $139,179 $164,154
Ratio to average net assets of:
Expenses, net of
fee waivers 1.04%(e) 1.04% 1.03% 1.04% 1.01%
Expenses, before
fee waivers 1.04%(e) 1.04% 1.18% 1.16% 1.13%
Net investment income(b) 4.00%(e) 4.07% 4.28% 4.69% 4.49%
Portfolio turnover rate 10% 17% 12% 28% 43%
See footnote summary on page 117.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 105
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Insured National Portfolio
---------------------------------------------------------------
Class B
---------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.15 $10.26 $10.09 $9.89 $10.05
Income From Investment
Operations
Net investment income(b)(c) .34 .35 .36 .40 .37
Net realized and unrealized
gain (loss) on investment
transactions .10 (.11) .19 .16 (.14)
Net increase in net asset value
from operations .44 .24 .55 .56 .23
Less: Dividends and
Distributions
Dividends from net
investment income (.34) (.35) (.38) (.36) (.38)
Distributions in excess of
net investment income -0- -0- -0- -0- (.01)
Total dividends and
distributions (.34) (.35) (.38) (.36) (.39)
Net asset value,
end of period $10.25 $10.15 $10.26 $10.09 $9.89
Total Return
Total investment return based
on net asset value(d) 4.36% 2.34% 5.60% 5.71% 2.34%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $11,477 $16,375 $22,968 $34,243 $35,048
Ratio to average net assets of:
Expenses, net of
fee waivers 1.74%(e) 1.74% 1.74% 1.75% 1.72%
Expenses, before
fee waivers 1.75%(e) 1.75% 1.89% 1.87% 1.84%
Net investment income(b) 3.32%(e) 3.39% 3.58% 4.00% 3.79%
Portfolio turnover rate 10% 17% 12% 28% 43%
See footnote summary on page 117.
106 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Insured National Portfolio
---------------------------------------------------------------
Class C
---------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.16 $10.27 $10.09 $9.90 $10.05
Income From Investment
Operations
Net investment income(b)(c) .34 .35 .37 .40 .37
Net realized and unrealized
gain (loss) on investment
transactions .09 (.11) .19 .15 (.13)
Net increase in net asset value
from operations .43 .24 .56 .55 .24
Less: Dividends and
Distributions
Dividends from net
investment income (.34) (.35) (.38) (.36) (.38)
Distributions in excess of
net investment income -0- -0- -0- -0- (.01)
Total dividends and
distributions (.34) (.35) (.38) (.36) (.39)
Net asset value,
end of period $10.25 $10.16 $10.27 $10.09 $9.90
Total Return
Total investment return based
on net asset value(d) 4.26% 2.34% 5.71% 5.60% 2.44%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $11,277 $11,732 $12,198 $14,149 $17,592
Ratio to average net assets of:
Expenses, net of
fee waivers 1.74%(e) 1.74% 1.73% 1.74% 1.71%
Expenses, before
fee waivers 1.74%(e) 1.75% 1.88% 1.86% 1.83%
Net investment income(b) 3.31%(e) 3.38% 3.59% 3.98% 3.78%
Portfolio turnover rate 10% 17% 12% 28% 43%
See footnote summary on page 117.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 107
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
New York Portfolio
---------------------------------------------------------------
Class A
---------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $9.81 $9.93 $9.79 $9.69 $9.93
Income From Investment
Operations
Net investment income(b)(c) .42 .46 .48 .50 .53
Net realized and unrealized
gain (loss) on investment
transactions .16 (.12) .15 .11 (.25)
Net increase in net asset value
from operations .58 .34 .63 .61 .28
Less: Dividends
Dividends from net
investment income (.42) (.46) (.49) (.51) (.52)
Total dividends (.42) (.46) (.49) (.51) (.52)
Net asset value,
end of period $9.97 $9.81 $9.93 $9.79 $9.69
Total Return
Total investment return based
on net asset value(d) 6.06% 3.46% 6.58% 6.39% 2.89%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $320,580 $294,005 $280,213 $311,596 $322,621
Ratio to average net assets of:
Expenses, net of
fee waivers .58%(e) .58% .59% .58% .58%
Expenses, before
fee waivers .89%(e) .91% 1.05% 1.06% 1.05%
Net investment income(b) 4.27%(e) 4.62% 4.93% 5.09% 5.42%
Portfolio turnover rate 39% 19% 33% 35% 33%
See footnote summary on page 117.
108 o AllianceBernstein Municipal Income Fund
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
New York Portfolio
---------------------------------------------------------------
Class B
---------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $9.80 $9.92 $9.78 $9.68 $9.93
Income From Investment
Operations
Net investment income(b)(c) .35 .39 .41 .43 .46
Net realized and unrealized
gain (loss) on investment
transactions .16 (.12) .15 .11 (.26)
Net increase in net asset value
from operations .51 .27 .56 .54 .20
Less: Dividends
Dividends from net
investment income (.35) (.39) (.42) (.44) (.45)
Total dividends (.35) (.39) (.42) (.44) (.45)
Net asset value,
end of period $9.96 $9.80 $9.92 $9.78 $9.68
Total Return
Total investment return based
on net asset value(d) 5.33% 2.75% 5.85% 5.64% 2.04%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $114,128 $133,746 $151,474 $171,881 $184,700
Ratio to average net assets of:
Expenses, net of
fee waivers 1.28%(e) 1.28% 1.30% 1.29% 1.29%
Expenses, before
fee waivers 1.60%(e) 1.62% 1.76% 1.77% 1.78%
Net investment income(b) 3.59%(e) 3.93% 4.22% 4.38% 4.70%
Portfolio turnover rate 39% 19% 33% 35% 33%
See footnote summary on page 117.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 109
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
New York Portfolio
---------------------------------------------------------------
Class C
---------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $9.80 $9.92 $9.78 $9.68 $9.94
Income From Investment
Operations
Net investment income(b)(c) .35 .39 .41 .43 .46
Net realized and unrealized
gain (loss) on investment
transactions .16 (.12) .15 .11 (.27)
Net increase in net asset value
from operations .51 .27 .56 .54 .19
Less: Dividends
Dividends from net
investment income (.35) (.39) (.42) (.44) (.45)
Total dividends (.35) (.39) (.42) (.44) (.45)
Net asset value,
end of period $9.96 $9.80 $9.92 $9.78 $9.68
Total Return
Total investment return based
on net asset value(d) 5.32% 2.74% 5.85% 5.64% 1.94%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $48,022 $45,956 $45,121 $52,206 $57,386
Ratio to average net assets of:
Expenses, net of
fee waivers 1.28%(e) 1.28% 1.29% 1.29% 1.29%
Expenses, before
fee waivers 1.60%(e) 1.61% 1.75% 1.77% 1.77%
Net investment income(b) 3.58%(e) 3.92% 4.23% 4.38% 4.71%
Portfolio turnover rate 39% 19% 33% 35% 33%
See footnote summary on page 117.
110 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
California Portfolio
---------------------------------------------------------------
Class A
---------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.86 $10.93 $10.63 $10.84 $11.00
Income From Investment
Operations
Net investment income(b)(c) .47 .48 .51 .53 .55
Net realized and unrealized
gain (loss) on investment
transactions .21 (.07) .30 (.19) (.15)
Net increase in net asset value
from operations .68 .41 .81 .34 .40
Less: Dividends and
Distributions
Dividends from net
investment income (.47) (.48) (.51) (.55) (.54)
Distributions in excess of
net investment income -0- -0- -0- -0- (.02)
Total dividends and
distributions (.47) (.48) (.51) (.55) (.56)
Net asset value,
end of period $11.07 $10.86 $10.93 $10.63 $10.84
Total Return
Total investment return based
on net asset value(d) 6.42% 3.78% 7.80% 3.15% 3.82%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $594,150 $590,042 $587,874 $644,868 $725,242
Ratio to average net assets of:
Expenses, net of
fee waivers .77%(e) .77% .78% .77% .76%
Expenses, before
fee waivers .85%(e) .86% 1.01% 1.02% 1.01%
Net investment income(b) 4.33%(e) 4.36% 4.75% 4.93% 5.05%
Portfolio turnover rate 10% 17% 34% 33% 23%
See footnote summary on page 117.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 111
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
California Portfolio
---------------------------------------------------------------
Class B
---------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.86 $10.93 $10.63 $10.84 $11.00
Income From Investment
Operations
Net investment income(b)(c) .40 .40 .44 .46 .47
Net realized and unrealized
gain (loss) on investment
transactions .21 (.07) .30 (.20) (.14)
Net increase in net asset value
from operations .61 .33 .74 .26 .33
Less: Dividends and
Distributions
Dividends from net
investment income (.40) (.40) (.44) (.47) (.47)
Distributions in excess of
net investment income -0- -0- -0- -0- (.02)
Total dividends and
distributions (.40) (.40) (.44) (.47) (.49)
Net asset value,
end of period $11.07 $10.86 $10.93 $10.63 $10.84
Total Return
Total investment return based
on net asset value(d) 5.69% 3.06% 7.05% 2.43% 3.10%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $80,928 $122,128 $175,215 $237,147 $279,697
Ratio to average net assets of:
Expenses, net of
fee waivers 1.47%(e) 1.47% 1.48% 1.48% 1.46%
Expenses, before
fee waivers 1.56%(e) 1.56% 1.71% 1.73% 1.72%
Net investment income(b) 3.64%(e) 3.66% 4.05% 4.22% 4.35%
Portfolio turnover rate 10% 17% 34% 33% 23%
See footnote summary on page 117.
112 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
California Portfolio
---------------------------------------------------------------
Class C
---------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.86 $10.93 $10.63 $10.84 $11.00
Income From Investment
Operations
Net investment income(b)(c) .40 .40 .44 .46 .47
Net realized and unrealized
gain (loss) on investment
transactions .21 (.07) .30 (.20) (.14)
Net increase in net asset value
from operations .61 .33 .74 .26 .33
Less: Dividends and
Distributions
Dividends from net
investment income (.40) (.40) (.44) (.47) (.47)
Distributions in excess of
net investment income -0- -0- -0- -0- (.02)
Total dividends and
distributions (.40) (.40) (.44) (.47) (.49)
Net asset value,
end of period $11.07 $10.86 $10.93 $10.63 $10.84
Total Return
Total investment return based
on net asset value(d) 5.69% 3.06% 7.05% 2.43% 3.10%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $120,731 $125,067 $141,031 $170,003 $209,008
Ratio to average net assets of:
Expenses, net of
fee waivers 1.47%(e) 1.47% 1.48% 1.47% 1.46%
Expenses, before
fee waivers 1.56%(e) 1.56% 1.71% 1.72% 1.71%
Net investment income(b) 3.64%(e) 3.66% 4.05% 4.23% 4.35%
Portfolio turnover rate 10% 17% 34% 33% 23%
See footnote summary on page 117.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 113
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Insured California Portfolio
---------------------------------------------------------------
Class A
---------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $14.01 $14.21 $14.03 $14.17 $14.45
Income From Investment
Operations
Net investment income(c) .53 .57 .61(b) .60 .62
Net realized and unrealized
gain (loss) on investment
transactions .17 (.20) .18 (.12) (.12)
Net increase in net asset value
from operations .70 .37 .79 .48 .50
Less: Dividends and
Distributions
Dividends from net
investment income (.53) (.57) (.61) (.62) (.62)
Distributions in excess of
net investment income -0- -0- -0- -0- (.04)
Distributions from net realized
gain on investment
transactions (.23) -0- -0- -0- (.12)
Total dividends and
distributions (.76) (.57) (.61) (.62) (.78)
Net asset value,
end of period $13.95 $14.01 $14.21 $14.03 $14.17
Total Return
Total investment return based
on net asset value(d) 5.19% 2.60% 5.75% 3.39% 3.65%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $89,501 $97,079 $103,414 $124,817 $144,973
Ratio to average net assets of:
Expenses, net of
fee waivers 1.03%(e) 1.02% 1.00% 1.07% 1.03%
Expenses, before
fee waivers 1.03%(e) 1.02% 1.07% 1.07% 1.03%
Net investment income 3.85%(e) 3.99% 4.29%(b) 4.24% 4.43%
Portfolio turnover rate 26% 37% 5% 34% 31%
See footnote summary on page 117.
114 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Insured California Portfolio
---------------------------------------------------------------
Class B
---------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $14.01 $14.20 $14.02 $14.16 $14.46
Income From Investment
Operations
Net investment income(c) .44 .47 .50(b) .50 .52
Net realized and unrealized
gain (loss) on investment
transactions .16 (.19) .19 (.12) (.14)
Net increase in net asset value
from operations .60 .28 .69 .38 .38
Less: Dividends and
Distributions
Dividends from net
investment income (.43) (.47) (.51) (.52) (.53)
Distributions in excess of
net investment income -0- -0- -0- -0- (.03)
Distributions from net realized
gain on investment
transactions (.23) -0- -0- -0- (.12)
Total dividends and
distributions (.66) (.47) (.51) (.52) (.68)
Net asset value,
end of period $13.95 $14.01 $14.20 $14.02 $14.16
Total Return
Total investment return based
on net asset value(d) 4.45% 1.96% 5.02% 2.67% 2.76%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $11,013 $15,626 $21,559 $29,285 $33,133
Ratio to average net assets of:
Expenses, net of
fee waivers 1.74%(e) 1.73% 1.71% 1.77% 1.73%
Expenses, before
fee waivers 1.74%(e) 1.73% 1.77% 1.77% 1.73%
Net investment income 3.15%(e) 3.29% 3.58%(b) 3.52% 3.70%
Portfolio turnover rate 26% 37% 5% 34% 31%
See footnote summary on page 117.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 115
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Insured California Portfolio
---------------------------------------------------------------
Class C
---------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $14.00 $14.20 $14.02 $14.16 $14.47
Income From Investment
Operations
Net investment income(c) .43 .47 .51(b) .50 .52
Net realized and unrealized
gain (loss) on investment
transactions .17 (.20) .18 (.12) (.15)
Net increase in net asset value
from operations .60 .27 .69 .38 .37
Less: Dividends and
Distributions
Dividends from net
investment income (.43) (.47) (.51) (.52) (.53)
Distributions in excess of
net investment income -0- -0- -0- -0- (.03)
Distributions from net realized
gain on investment
transactions (.23) -0- -0- -0- (.12)
Total dividends and
distributions (.66) (.47) (.51) (.52) (.68)
Net asset value,
end of period $13.94 $14.00 $14.20 $14.02 $14.16
Total Return
Total investment return based
on net asset value(d) 4.46% 1.88% 5.02% 2.67% 2.69%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $16,184 $18,204 $19,603 $21,951 $22,715
Ratio to average net assets of:
Expenses, net of
fee waivers 1.73%(e) 1.73% 1.70% 1.77% 1.73%
Expenses, before
fee waivers 1.73%(e) 1.73% 1.77% 1.77% 1.73%
Net investment income 3.15%(e) 3.29% 3.59%(b) 3.53% 3.71%
Portfolio turnover rate 26% 37% 5% 34% 31%
See footnote summary on page 117.
116 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
(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.
(e) The ratio includes expenses attributable to cost of proxy solicitation.
(f) During 2006, the Fund determined that the criteria for sale accounting in
Statement of Financial Accounting Standards No. 140 Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities, had not
been met for certain transfers of municipal bonds and that the transfers should
have been accounted for as secured borrowings rather than as sales.
Accordingly, the National Portfolio has restated the expense ratios (see table
next page) for the year ended October 31, 2005 to give effect to recording the
transfers of the municipal bonds as secured borrowings. The effects of the
restatement have no effect on the previously reported net assets.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 117
(Note f continued from previous page)
Class A Class B Class C
-------------------- -------------------- --------------------
Previously Previously Previously
Reported Restated Reported Restated Reported Restated
--------- --------- --------- --------- --------- ---------
Ratio to average net assets of:
Expenses, before fee waivers .93% 1.14% 1.64% 1.85% 1.64% 1.85%
Expenses, before waivers
excluding interest expense N/A .94% N/A 1.65% N/A 1.65%
118 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
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, 2006, 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, 2006 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, 2006, 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.
As discussed in Note F to the Financial Highlights, for the National Portfolio
referred to above, the ratios of expenses to net assets for the year ended
October 31, 2005 have been restated.
/s/ Ernst & Young LLP
New York, New York
January 10, 2007
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 119
TAX INFORMATION
(Unaudited)
In order to meet certain requirements of the Internal Revenue Code, we are
advising you that the Insured California Portfolio paid $2,126,272 of long-term
capital gains distributed during the fiscal year ended October 31, 2006, which
is subject to a maximum tax rate of 15%.
The Portfolios designated the following for the fiscal year ended October 31,
2006:
Exempt-Interest Qualified(a)
Portfolio Dividends Interest Income
- --------- ---------------- ----------------
National $ 19,516,141 90.7%
California $ 33,165,553 100%
New York $ 19,093,672 100%
Insured National $ 5,807,219 --
Insured California $ 4,468,372 100%
(a) Applicable only for ordinary distributions paid to foreign shareholders.
Shareholders should not use the above information to prepare their tax returns.
The information necessary to complete your income tax returns will be included
with your Form 1099-DIV, which will be sent to you separately in January 2007.
120 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
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)
Nancy P. Jacklin(1)
Marshall C. Turner, Jr.(1)
OFFICERS
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer
Robert B. (Guy) Davidson, III(2), Senior Vice President
Douglas J. Peebles, Senior Vice President
Jeffrey S. Phlegar, Senior Vice President
Michael G. Brooks(2), Vice President
Fred S. Cohen(2), Vice President
Terrance T. Hults(2), Vice President
Emilie D. Wrapp, Secretary
Joseph J. Mantineo, Treasurer and Chief Financial Officer
Thomas R. Manley, Controller
Custodian
State Street Bank & Trust Company
One Lincoln Street
Boston, MA 02111
Principal Underwriter
AllianceBernstein Investments, 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
AllianceBernstein Investor Services, Inc.
P.O. Box 786003
San Antonio, TX 78278-6003
Toll-free (800) 221-5672
(1) Member of the Audit Committee, the Governance and Nominating Committee and
the Independent Directors Committee.
(2) The day-to-day management of and investment decisions for the Portfolios'
portfolios are made by the Municipal Bond Investment Team. Messrs. Brooks,
Cohen, Davidson and Hults are the investment professionals with the most
significant responsibility for the day-to-day management of the Portfolios'
portfolios.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 121
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
AGE 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 113 None
P.O. Box 5060 Independent Consultant. He was
Greenwich, CT 06831 formerly Senior Manager of Barrett
74 Associates, Inc., a registered
(1998) investment adviser, with which he
Chairman of the Board had been associated since prior to
2001. He was formerly Deputy
Comptroller and Chief Investment
Officer of the State of New York
and, prior thereto, Chief Investment
Officer of the New York Bank for
Savings.
Ruth Block, #,** Formerly, Executive Vice President 100 None
500 SE Mizner Blvd. and Chief Insurance Officer of The
Boca Raton, FL 33432 Equitable Life Assurance Society
76 of the United States; Chairman and
(1987) Chief 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 112 None
P.O. Box 167 December 1994, he was Senior
Spring Lake, NJ 07762 Vice President of AllianceBernstein
77 Corporation ("AB Corp"), (formerly,
(1987) Alliance Capital Management
Corporation) responsible for mutual
fund administration. Prior to joining
AB Corp. 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.
122 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
AGE OCCUPATION(S) OVERSEEN BY HELD BY
(FIRST YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- ---------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
John H. Dobkin, # Consultant. Formerly President 111 None
P.O. Box 12 of Save Venice, Inc. (preservation
Annandale, NY 12504 organization) from 2001-2002,
64 Senior Advisor from June 1999-
(1998) June 2000 and President of
Historic Hudson Valley (historic
preservation) from December
1989-May 1999. Previously,
Director of the National Academy
of Design and during 1988-1992,
Director and Chairman of the
Audit Committee of AB Corp.
(formerly, Alliance Capital
Management Corporation).
Michael J. Downey, # Consultant since January 2004. 111 Asia Pacific
c/o AllianceBernstein L.P. Formerly managing partner of Fund, Inc.;
Attention: Phil Kirstein 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
62 Mutual Fund Management from
(2005) 1987 to 1993.
D. James Guzy, # Chairman of the Board of PLX 111 Intel Corporation
P.O. Box 128 Technology (semi-conductors) (semi-conductors);
Glenbrook, NV 89413 and of SRC Computers Inc., Cirrus Logic
70 with which he has been associated Corporation
(2005) since prior to 2001. He is also (semi-conductors);
President of the Arbor Company and the
(private family investments). Davis Selected
Advisors Group
of Mutual Funds
Nancy P. Jacklin, # Formerly U.S. Executive Director 111 None
4046 Chancery Court, NW of the International Monetary Fund
Washington, DC 20007 (December 2002-May 2006);
58 Partner, Clifford Chance (1992-
(2006) 2002); Senior Counsel, International
Banking and Finance, and Associate
General Counsel, Citicorp (1985-
1992); Assistant General Counsel
(International), Federal Reserve Board
of Governors (1982-1985); and
Attorney Advisor, U.S. Department of
the Treasury (1973-1982). Member
of the Bar of the District of Columbia
and of New York; and member of the
Council on Foreign Relations.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 123
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
AGE OCCUPATION(S) OVERSEEN BY HELD BY
(FIRST YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- ---------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
Marshall C. Turner, Jr., # Principal of Turner Venture 111 The George
220 Montgomery Street Associates (venture capital and Lucas
Penthouse 10 consulting) since prior to 2001. Educational
San Francisco, From 2003 until May 31, 2006, he Foundation
CA 94104 was CEOof Toppan Photomasks, and National
65 Inc., Austin, Texas (semi-conductor Datacast, Inc.
(2005) manufacturing services).
INTERESTED DIRECTOR
Marc O. Mayer, ++ Executive Vice President of the 111 SCB Partners,
1345 Avenue of the Adviser since 2001 and Executive Inc.; and
Americas Managing Director of AllianceBernstein SCB Inc.
New York, NY 10105 Investments, Inc. ("ABI") since 2003;
49 prior thereto he was head of
(2003) AllianceBernstein Institutional
Investments, a unit of the Adviser,
from 2001-2003. Prior thereto, Chief
Executive Officer of Sanford C. Bernstein
& Co., LLC (institutional research and
brokerage arm of Bernstein & Co. LLC)
("SCB & Co.") and its predecessor since
prior to 2001.
* 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 person", as defined in the 1940 Act, due to his
position as an Executive Vice President of the Adviser.
124 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Officer Information
Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) PRINCIPAL OCCUPATION(S)
AND AGE HELD WITH FUND DURING PAST 5 YEARS
- --------------------------------------------------------------------------------------------------------------
Marc O.Mayer President and Chief See biography above.
49 Executive Officer
Philip L. Kirstein Senior Vice President Senior Vice President and Independent
61 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 2001 until March 2003.
Robert B. (Guy) Davidson, III Senior Vice President Senior Vice President of the Adviser**,
45 with which he has been associated
since prior to 2001.
Douglas J. Peebles Senior Vice President Executive Vice President of the
41 Adviser**, with which he has been
associated since prior to 2001.
Jeffrey S. Phlegar Senior Vice President Executive Vice President of the
40 Adviser**, with which he has been
associated since prior to 2001.
Michael G. Brooks Vice President Senior Vice President of the Adviser**,
58 with which he has been associated
since prior to 2001.
Fred S. Cohen Vice President Senior Vice President of the Adviser**,
48 with which he has been associated
since prior to 2001.
Terrance T. Hults Vice President Senior Vice President of the Adviser**,
40 with which he has been associated
since prior to 2001.
Emilie D. Wrapp Secretary Senior Vice President, Assistant
51 General Counsel and Assistant
Secretary of ABI**, with which she has
been associated since prior to 2001.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 125
Officer Information
Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) PRINCIPAL OCCUPATION(S)
AND AGE HELD WITH FUND DURING PAST 5 YEARS
- --------------------------------------------------------------------------------------------------------------
Joseph J. Mantineo Treasurer and Chief Senior Vice President of ABIS**,
47 Financial Office with which he has been associated
since prior to 2001.
Thomas R. Manley Controller Vice President of the Adviser**, with
55 which he has been associated since
prior to 2001.
* The address for each of the Fund's Officers is 1345 Avenue of the Americas,
New York, NY 10105.
** The Adviser, ABI, ABIS 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 AllianceBernstein
at (800) 227-4618 for a free prospectus or SAI.
126 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
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 13, 2006.
In preparation for the meeting, the directors had requested from the Adviser
and received and evaluated extensive materials, including performance and
expense information for other investment companies with similar investment
objectives as the Portfolios 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 September 2004 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 a
private session 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:
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 127
1. information comparing the performance of the Portfolio 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 the
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 the Portfolio and to all investment companies in the
AllianceBernstein Funds complex;
5. comparative fee and expense data for the 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 Portfolio;
8. information about "revenue sharing" arrangements that the Adviser has
entered into in respect of the Portfolio;
9. portfolio turnover rates for the Portfolio compared to other investment
companies with similar investment objectives;
10. fall-out benefits that the Adviser and its affiliates receive from their
relationships with the Portfolio;
11. the Adviser's representation that there are no institutional products
managed by it which have a substantially similar investment style as the
Portfolio;
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 the Portfolio's
portfolio management team and other senior personnel of the Adviser; and
14. the terms of the Advisory Agreement.
128 o AllianceBernstein Municipal Income Fund
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 registered investment companies
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 different directors may
have attributed different weights to the various factors. The directors
evaluated all information available to them on a portfolio-by-portfolio 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 oversight 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 Fund.
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
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 129
"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 2004 and 2005 that had been prepared with an updated expense allocation
methodology. The directors noted that the updated methodology differed in
various respects from the methodology used in prior years. 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 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 Adviser's
relationships with the Portfolios before taxes and distribution expenses.
130 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
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. The directors noted that the Adviser's relationship with the New
York Portfolio was not profitable to it in calendar 2005.
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 plan
and retains a portion of such 12b-1 fees, 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 the Adviser's affiliates did not receive the benefits described above.
The directors understood that the Adviser also might derive 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 the Lehman Brothers Municipal Bond Index (the "Index").
California Portfolio
The directors reviewed information showing performance for Class A shares of
the California Portfolio as compared to a Performance Group of 12 to 9 funds
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 131
(depending on the year) in its Lipper category selected by Lipper and as
compared to a Performance Universe of 34 to 25 funds (depending on the year) in
its Lipper category selected by Lipper for periods ended June 30, 2006 over the
1-, 3-, 5- and 10-year periods, and as compared to the Index for periods ended
June 30, 2006 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 California Portfolio
was in the 2nd quintile in the 1- and 3-year periods and 3rd quintile in the
5-year period, and in the 10-year period the California Portfolio was in the
3rd quintile in the Performance Group comparison and 2nd quintile in the
Performance Universe comparison. 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 4 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
June 30, 2006 over the 1-, 3-, 5- and 10-year periods, and as compared to the
Index for periods ended June 30, 2006 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 Group comparison the Fund was 4 out of
4 in the 1-, 3- and 5-year periods and 2 out of 4 in the 10-year period, and in
the Performance Universe comparison the Fund was in the 5th quintile in all
periods reviewed. The comparative information showed that the Insured
California Portfolio underperformed the Index in all periods reviewed. Based on
their review and their discussion with the portfolio manager of the Insured
California Portfolio, the directors concluded that the Insured California
Portfolio's relative performance over time was understandable.
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 9 funds in
its Lipper category selected by Lipper and as compared to a Performance
Universe of 22 to 21 funds (depending on the year) in its Lipper category
selected by Lipper for periods ended June 30, 2006 over the 1-, 3-, 5- and
10-year periods, and as compared to the Index for periods ended June 30, 2006
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 National Portfolio was in the
2nd quintile in the 1- and 5-year periods and 1st quintile in the 3-year
period, and in the 10-year period the Insured National Portfolio was in the 3rd
quintile
132 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
in the Performance Group comparison and 2nd quintile in the Performance
Universe comparison. The comparative information showed that the Insured
National Portfolio outperformed the Index in the 3-year period 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 15 to 13 funds
(depending on the year) in its Lipper category selected by Lipper and as
compared to a Performance Universe of 73 to 51 funds (depending on the year) in
its Lipper category selected by Lipper for periods ended June 30, 2006 over the
1-, 3-, 5- and 10-year periods, and as compared to the Index for periods ended
June 30, 2006 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 National Portfolio was in the 1st quintile in
the 1- and 3-year periods, 4th quintile in the 5-year period and 3rd quintile
in the 10-year period, and in the Performance Universe comparison the National
Portfolio was in the 1st quintile in the 1- and 3-year periods and 3rd quintile
in the 5- and 10-year periods. The comparative information showed that the
National 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 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 11 funds in its
Lipper category selected by Lipper and as compared to a Performance Universe of
30 to 25 funds (depending on the year) in its Lipper category selected by
Lipper for periods ended June 30, 2006 over the 1-, 3-, 5- and 10-year periods,
and as compared to the Index for periods ended June 30, 2006 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
New York Portfolio was in the 2nd quintile in the 1- and 10-year periods, 1st
quintile in the 3-year period and 3rd quintile in the 5-year period, and in the
Performance Universe comparison the New York Portfolio was in the 1st quintile
in the 1- and 3-year periods, 3rd quintile in the 5-year period and 2nd
quintile in the 10-year period. The comparative information showed that the New
York 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 New York Portfolio's
relative performance over time was satisfactory.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 133
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
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 Adviser informed the directors that there are no institutional products
managed by it that have a substantially similar investment style as the
Portfolios. 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 securities of the same type that the Portfolios
invest in (i.e., fixed income municipal securities although such securities are
of a shorter duration than the Portfolios invest in). They had previously
received an oral presentation from the Adviser that supplemented such
information.
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
directors noted that because of the small number of funds in the Insured
California Portfolio and Insured National Portfolio Lipper category, at the
request of the Adviser and the Fund's Senior Officer, Lipper had expanded the
Expense Group of the Insured California Portfolio to include peers that had a
similar (but not the same) Lipper
134 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
investment objective/classification, and the Expense Group of the Insured
National Portfolio to include funds with different load types (front-end and no
load funds). The Expense Universe for these two Portfolios had also been
expanded by Lipper pursuant to Lipper's standard guidelines and not at the
request of the Adviser or the Fund's Senior Officer. 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 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 slightly lower than the Expense Group
median and somewhat lower than the Expense Universe median. 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 of 50 basis points
received by the Adviser from the Insured California Portfolio pursuant to the
Advisory Agreement was 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 Expense Group and Expense Universe
medians. The directors further 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
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 135
National Portfolio pursuant to the Advisory Agreement was 5 basis points and
that as a result the total compensation of 50 basis points received by the
Adviser from the Insured National Portfolio pursuant to the Advisory Agreement
was somewhat 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 materially higher than the Expense Group and Expense Universe
medians. The directors further 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 National
Portfolio's expense ratio was acceptable.
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 materially lower than the Expense Group median. The directors noted that
the latest fiscal year administrative expense reimbursement by the National
Portfolio 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 Expense Group median
and materially lower than the Expense Universe median. The directors concluded
that the National Portfolio's expense ratio was 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 of 47 basis points received by the Adviser from the New
York Portfolio pursuant to the Advisory Agreement was 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 Expense Group and Expense Universe medians. The directors
concluded that the New York Portfolio's expense ratio was 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
136 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
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.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 137
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 AllianceBernstein L.P. (the "Adviser") and AllianceBernstein
Municipal Income Fund, Inc. (the "Fund"), in respect of the following
Portfolios:(2)
- -- California Portfolio
- -- Insured California Portfolio
- -- Insured National Portfolio
- -- National Portfolio
- -- New York Portfolio
The evaluation of the Investment Agreement was prepared by Philip L. Kirstein,
the Senior Officer of the Fund, for the Directors of the Fund, as required by
an August 2004 agreement between the Adviser and the New York State Attorney
General (the "NYAG"). The Senior Officer's evaluation of the Investment
Advisory Agreement is not meant to diminish the responsibility or authority of
the Board of Directors of the Fund to perform its duties pursuant to Section 15
of the Investment Company Act of 1940 (the '40 Act) and applicable state law.
The purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees proposed to
be paid by the Portfolios which was provided to the Directors in connection
with their review of the proposed approval of the continuance of the Investment
Advisory Agreement. The Senior Officer's evaluation considered the following
factors:
1. Advisory fees charged to institutional and other clients of the Adviser for
like services;
2. Advisory fees charged by other mutual fund companies for like services;
3. Costs to the Adviser and its affiliates of supplying services pursuant to
the advisory agreements, excluding any intra-corporate profit;
4. Profit margins of the Adviser and its affiliates from supplying such
services;
(1) It should be noted that the information in the fee summary was completed
on October 23, 2006 and presented to the Board of Directors on October
31-November 2, 2006.
(2) Future references to the Portfolios do not include "AllianceBernstein."
References in the fee summary pertaining to performance and expense ratios
refer to the Class A shares of the Portfolios.
138 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
5. Possible economies of scale as the Portfolios grow larger; and
6. Nature and quality of the Adviser's services including the performance of
the Portfolios.
PORTFOLIO ADVISORY FEES, EXPENSE CAPS, REIMBURSEMENTS, & RATIOS
The Adviser proposed that the Portfolios pay the advisory fee set forth in the
table below for receiving the services to be provided pursuant to the
Investment Advisory Agreement. The fee schedule below, implemented in January
2004 in consideration of the Adviser's settlement with the NYAG in December
2003 is based on a master schedule that contemplates eight categories of funds
with almost all funds in each category having the same advisory fee schedule.(3)
Category Advisory Fee Fund
- -------------------------------------------------------------------------------
Low Risk Income 45 bp on 1st $2.5 billion Municipal Income Fund, Inc.
40 bp on next $2.5 billion
35 bp on the balance
The Portfolios' net assets on September 30, 2006 are set forth below:
Portfolio Net Assets ($MM)
- -------------------------------------------------------------------------------
California Portfolio $796.9
Insured California Portfolio $118.7
Insured National Portfolio $148.5
National Portfolio $449.7
New York Portfolio $481.9
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative, and other services
provided to the Portfolios. Indicated below are the reimbursement amounts which
the Adviser received from the Portfolios during their most recently completed
fiscal year; expressed in dollars and as a percentage of average daily net
assets:
As a % of Average
Portfolio Amount Daily Net Assets
- -------------------------------------------------------------------------------
California Portfolio $72,500 0.01%
Insured California Portfolio $72,500 0.05%
Insured National Portfolio $72,500 0.05%
National Portfolio $72,500 0.02%
New York Portfolio $72,500 0.02%
The Adviser has agreed to waive that portion of its advisory fees and/or
reimburse certain of the Portfolios for that portion of the Portfolios' total
operating
(3) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the NYAG.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 139
expenses to the degree necessary to limit each Portfolio's expense ratios to
the amounts set forth below for each Portfolio's current fiscal year. The
waiver agreement is terminable by the Adviser at the end of the Portfolios'
fiscal year upon at least 60 days written notice. In addition, set forth below
are the gross expense ratios of the Portfolios as of the Portfolios' most
recent semi-annual period:
Expense Cap Pursuant to Gross Fiscal
Expense Limitation Expense Year
Portfolio Undertaking Ratio(4) End
- -------------------------------------------------------------------------------
California Portfolio Class A 0.77% 0.87% October 31
Class B 1.47% 1.57%
Class C 1.47% 1.57%
Insured National Portfolio Class A 1.04% 1.05% October 31
Class B 1.74% 1.76%
Class C 1.74% 1.75%
National Portfolio Class A 0.68% 0.93% October 31
Class B 1.38% 1.64%
Class C 1.38% 1.63%
New York Portfolio Class A 0.58% 0.90% October 31
Class B 1.28% 1.61%
Class C 1.28% 1.61%
The table below shows the expense ratio of Insured California Portfolio, which
does not have an expense limitation undertaking as of the Portfolio's most
recent semi-annual period:
Total Fiscal
Expense Year
Portfolio Ratios(4) End
- -------------------------------------------------------------------------------
Insured California Portfolio Class A 1.03% October 31
Class B 1.74%
Class C 1.73%
I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The advisory fees charged to investment companies which the Adviser manages and
sponsors are normally higher than those charged to similar sized institutional
accounts, including pension plans and sub-advised investment companies. The fee
differential reflects, among other things, different services provided to such
clients, and different liabilities assumed. Services provided by the Adviser to
the Portfolios that are not provided to non-investment company clients include
providing office space and personnel to serve as Fund Officers, who among other
responsibilities make the certifications required under the Sarbanes-Oxley Act
of 2002, and coordinating with and monitoring the Portfolios' third party
service providers such as Fund counsel, auditors, custodians, transfer agents
and pricing services. The accounting, administrative, legal and compliance
requirements for
(4) Annualized.
140 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
the Portfolios 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 Portfolios
to the Adviser. Also, retail mutual funds managed by the Adviser are widely
held. Servicing the Portfolios' investors is more time consuming and labor
intensive compared to institutional clients since the Adviser needs to
communicate with a more extensive network of financial intermediaries and
shareholders. In addition, managing the cash flow of an investment company may
be more difficult than that of a stable pool of assets, such as an
institutional account with little cash movement in either direction,
particularly, if a fund is in net redemption and the Adviser is frequently
forced to sell securities to raise cash for redemptions. However, managing a
fund with positive cash flow may be easier at times than managing a stable pool
of assets. Finally, in recent years, investment advisers have been sued by
institutional clients and have suffered reputational damage both by the
attendant publicity and outcomes other than complete victories. Accordingly,
the legal and reputational risks associated with institutional accounts are
greater than previously thought, although still not equal to those related to
the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with substantially similar
investment styles as the Portfolios. However, with respect to the Portfolios,
the Adviser represented that there is no institutional product in the Form ADV
that has a substantially similar investment style as any of the Portfolios. It
should be noted that the Adviser has represented that it does not manage any
separately managed accounts that that have similar investment guidelines as any
of the Portfolios. The Adviser does manage separately managed accounts that
invest principally in municipal securities but those mandates have
substantially lower risk profile (credit and interest rate risk) than the
Portfolios.
The Adviser manages Sanford C. Bernstein Fund, Inc. ("SCB Fund"), an open-end
management investment company. Several portfolios of SCB Fund have a somewhat
similar investment styles as certain of the Portfolios and their advisory fee
schedules are set forth below:
Portfolio SCB Fund Portfolio Fee Schedule
- --------------------------------------------------------------------------------------------
California Portfolio Short Duration California Municipal 50 bp on 1st $250 million
National Portfolio Short Duration Diversified Municipal 45 bp on next $500 million
New York Portfolio Short Duration New York Municipal 40 bp thereafter
California Portfolio California Municipal 50 bp on 1st $1 billion
National Portfolio Diversified Municipal 45 bp on next $2 billion
New York Portfolio New York Municipal 40 bp on next $2 billion
35 bp thereafter
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 141
The Adviser represented that it does not sub-advise any registered investment
company that has a similar investment strategy as any of the Portfolios.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUNDS COMPANIES FOR LIKE SERVICES.
Lipper, Inc. ("Lipper"), an analytical service that is not affiliated with the
Adviser, compared the fees charged to the Portfolios with fees charged to other
investment companies for similar services by other investment advisers.
Lipper's analysis included each Portfolio's ranking with respect to the
proposed advisory fee relative to the median of each Portfolio's Lipper Expense
Group ("EG")(5) at the approximate current asset level of the subject
Portfolio.(6)
Lipper describes an EG as a representative sample of comparable funds. Lipper's
standard methodology for screening funds to be included in an EG entails the
consideration of several fund criteria, including fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. An EG will
typically consist of seven to twenty funds. However, because certain of the
Portfolios had original EGs with an insufficient number of peers, at the
request of the Adviser and the Senior Officer, Lipper expanded each of those
Portfolios' EGs to include peers that had a similar (but not the same) Lipper
investment classification/objective (with respect to Insured California
Portfolio) or load type (with respect to Insured National Portfolio). However,
because Lipper had expanded the EGs of those Portfolios, under Lipper's
standard guidelines, each of those Portfolios' Lipper Expense Universe ("EU")
were also expanded to include the universes of those peers that had a similar
(but not the same) Lipper investment classification/objective (with respect to
Insured California Portfolio) or load type (with respect to Insured National
Portfolio).(7) A "normal" EU will include funds that have the same investment
classification/objective and load type as the subject Portfolio.(8)
(5) It should be noted that Lipper does not consider average account size when
constructing EGs. Funds with relatively small average account sizes tend to
have a higher transfer agent expense ratio than comparable sized funds that
have relatively large average account sizes. Note that there are limitations on
Lipper expense category data because different funds categorize expense
differently.
(6) The contractual management fee is calculated by Lipper using each
Portfolio's contractual management fee rate at a hypothetical asset level. The
hypothetical asset level is based on the combined net assets of all classes of
the Portfolio, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Portfolio has the lowest effective fee
rate in the Lipper peer group.
(7) It should be noted that the expansion of the Portfolios' EUs was not
requested by the Adviser or the Senior Officer. They requested that only the
EGs be expanded.
(8) Except for asset (size) comparability, Lipper uses the same criteria for
selecting an EG when selecting an EU. Unlike the EG, the EU allows for the same
adviser to be represented by more than just one fund.
142 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
Contractual Lipper
Management Expense Group
Portfolio Fee(9) Median Rank
- -------------------------------------------------------------------------------
California Portfolio 0.450 0.497 4/12
Insured California Portfolio(10) 0.450 0.550 1/7
Insured National Portfolio(11) 0.450 0.534 1/10
National Portfolio 0.450 0.550 3/15
New York Portfolio 0.450 0.500 3/11
Set forth below is a comparison of the Portfolios' total expense ratios and the
medians of the Portfolios' EGs and EUs. The Portfolios' total expense ratio
rankings are also shown. With respect to Insured National Portfolio, because
funds with a different load type are included in the Fund's EG/EU, supplemental
information showing the Fund's total expense ratio excluding 12b-1/non-12b-1
service fees is also provided below (shown in bold and italicized).
Lipper
Expense Lipper Exp. Lipper Expense Lipper
Ratio Group Group Universe Universe
Portfolio (%)(12) Median(%) Rank Median(%) Rank
- --------------------------------------------------------------------------------------------
California Portfolio 0.770 0.785 6/12 0.845 10/29
Insured California Portfolio(13) 1.026 0.883 7/7 0.863 24/26
Insured National Portfolio(14) 1.040 0.879 10/10 0.876 20/22
Insured National Portfolio
(Excluding 12b-1/Non 12b-1
Service Fee) 0.740 0.681 9/10 0.650 18/22
National Portfolio 0.680 0.857 2/15 0.844 6/62
New York Portfolio 0.580 0.840 1/11 0.838 1/28
Based on this analysis, except for National Portfolio and New York Portfolio,
which have a more favorable ranking for total expense ratio basis compared to
management fee basis, the Portfolios have a more favorable ranking on a
management fee basis than they do on a total expense ratio basis.
(9) The contractual management fee rate for the Portfolio does not reflect any
expense reimbursements made by the Portfolio to the Adviser for certain
clerical, legal, accounting, administrative, and other services. In addition,
the contractual management fee does not reflect any management waivers or
expense reimbursements for expense caps that effectively reduce the effective
(actual) advisory fee rate.
(10) The Portfolio's EG includes the Portfolio, three other California Insured
Municipal Debt funds and three Insured Municipal Debt funds.
(11) Nine front end load and one no-load fund were considered for inclusion in
the Portfolio's EG.
(12) Most recently completed fiscal year Class A share total expense ratio.
(13) The Portfolio's EU includes all other Insured California Municipal Debt
funds and Insured Municipal Debt funds, excluding outliers.
(14) The Portfolio's EU includes all other Insured Municipal Debt funds with a
load type of front-end load and no-load, excluding outliers.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 143
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE ADVISORY FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
A consultant was retained by the Senior Officer to work with the Adviser's
personnel to align the Adviser's two profitability reporting systems. The
alignment, which now has been completed, allows the Adviser's management and
the Directors to receive consistent presentations of the financial results and
profitability although the two profitability reporting systems operate
independently. See Section IV for additional discussion.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The Adviser's profitability information for the Portfolios prepared by the
Adviser for the Board of Directors was reviewed by the Senior Officer and the
consultant. Except for National Portfolio and New York Portfolio, the Adviser's
profitability from providing investment advisory services to the Portfolios
increased during the calendar year 2005, relative to 2004.
In addition to the Adviser's direct profits from managing the Portfolios,
certain of the Adviser's affiliates have business relationships with the
Portfolios and may earn a profit from providing other services to the
Portfolios. 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 Portfolios and the
Adviser. Neither case law nor common business practice precludes the Adviser's
affiliates from earning a reasonable profit on this type of relationship. These
affiliates provide transfer agent and distribution related services to the
Portfolios and receive transfer agent fees, Rule 12b-1 payments, front-end
sales loads and contingent deferred sales charges ("CDSC").
AllianceBernstein Investments, Inc. ("ABI"), an affiliate of the Adviser, is
the Portfolios' principal underwriter. ABI and the Adviser have disclosed in
the Portfolios' prospectus that they may make revenue sharing payments from
their own resources, in addition to resources derived from sales loads and Rule
12b-1 fees, to firms that sell shares of the Portfolios. In 2005, ABI paid
approximately 0.042% of the average monthly assets of the AllianceBernstein
Mutual Funds or approximately $18.0 million for distribution services and
educational support (revenue sharing payments). For 2006, it is anticipated,
ABI will pay approximately 0.04% of the average monthly assets of the
AllianceBernstein Mutual Funds or approximately $17.5 million.(15)
(15) ABI currently inserts the "Advance" in quarterly account statements and
pays the incremental costs associated with the mailing. The incremental cost is
less than what an "independent mailing" would cost.
144 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
ABI retained the following amounts for Class A front-end load sales charges
from sales of the Portfolios' Class A shares during the Portfolios' most
recently completed fiscal year:
Portfolio Amount Received
- -------------------------------------------------------------------------------
California Portfolio $ 37,213
Insured California Portfolio $ 5,566
Insured National Portfolio $ 7,563
National Portfolio $ 24,475
New York Portfolio $ 41,670
ABI received the following Rule 12b-1 fees and CDSC for the Portfolios during
the Portfolios' most recently completed fiscal year:
12b-1 Fee CDSC
Portfolio Received Received
- -------------------------------------------------------------------------------
California Portfolio $ 4,623,655 $ 68,445
Insured California Portfolio $ 674,159 $ 15,618
Insured National Portfolio $ 697,374 $ 22,308
National Portfolio $ 2,294,625 $ 31,938
New York Portfolio $ 2,743,713 $ 67,517
Fees and reimbursements for out of pocket expenses charged by AllianceBernstein
Investor Services, Inc. ("ABIS"), the affiliated transfer agent for the
Portfolios, are charged on a per account basis, based on the level of the
service provided and the class of share held by the account. ABIS also receives
a fee per shareholder sub-account for each account maintained by an
intermediary on an omnibus basis. ABIS' after-tax profitability increased in
2005 in comparison to 2004. Set forth below are the net fees which ABIS
retained from the Portfolios during the Portfolios' most recently completed
fiscal year:(16)
Portfolio ABIS Fee Expense Offset
- -------------------------------------------------------------------------------
California Portfolio $ 193,014 $ 1,639
Insured California Portfolio $ 29,743 $ 189
Insured National Portfolio $ 70,628 $ 471
National Portfolio $ 227,951 $ 1,638
New York Portfolio $ 169,841 $ 1,322
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule being
proposed 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
(16) The fees disclosed are net of any expense offsets with ABIS. An expense
offset is created by the interest earned on the positive cash balance that
occur within the transfer agent account as there is a one day lag with regards
to money movement from the shareholder's account to the transfer agent's
account and then from the transfer agent's account to the Portfolio's account.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 145
economies of scale exist, they may more often exist across a fund family as
opposed to a specific fund. This is because the costs incurred by the Adviser,
such as investment research or technology for trading or compliance systems can
be spread across a greater asset base as the fund family increases in size. It
is also possible that as the level of services required to operate a successful
investment company has increased over time, and advisory firms have made such
investments in their business to provide improved services, there may be a
sharing of economies of scale without a reduction in advisory fees.
An independent consultant, retained by the Senior Officer, made a presentation
to the Board of Directors regarding possible economies of scale or scope in the
mutual fund industry. Based on the presentation, it was evident that fund
management companies benefit from economies of scale. However, due to lack of
cost data, economists, who have written on this subject, had to infer facts
about the costs from the behavior of fund expenses; there was a lack of
consensus among economists as to whether economies of scale were being passed
on to the shareholders. In the meantime, it is clear that to the extent a
fund's assets were to exceed the initial breakpoint its shareholders benefit
from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE PORTFOLIOS.
With assets under management of $659 billion as of September 30, 2006, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section I) to the Portfolios.
The information in the table below shows the 1, 3, 5 and 10 year performance
returns and rankings of the Portfolios(17) relative to their Lipper Performance
Group ("PG") and Lipper Performance Universe ("PU")(18) for the periods ended
June 30, 2006.(19)
(17) The performance returns and rankings are for the Class A shares of the
Fund. It should be noted that the performance returns of the Fund that is shown
was provided by the Adviser. Lipper maintains its own database that includes
the Fund's performance returns. However, differences in the distribution price
(ex-date versus payable date) and rounding differences may cause the Adviser's
own performance returns of the Fund to be one or two basis points different
from Lipper. To maintain consistency in this evaluation, the performance
returns of the Fund, as reported by the Adviser, are provided instead of Lipper.
(18) A Portfolio's PG and PU may not necessarily be identical to its
respective EG and EU. Outliers and funds with negative management fees are
excluded from EGs and EUs but not necessarily from PGs and PUs. In addition,
PGs and PUs only include funds of the same Lipper investment
classification/objective as the Portfolios, in contrast to certain of the
Portfolios' EGs and EUs, which may include funds of similar but not the same
investment classification/objective.
(19) Note that the current Lipper investment classification/objective dictates
that the PG and PU throughout the life of each Portfolio even if a Portfolio
may have had a different investment classification/objective at a different
point in time.
146 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
California Portfolio PG PU PG PU
Portfolio Return Median Median Rank Rank
- -------------------------------------------------------------------------------
1 year 1.51 1.14 1.07 4/12 10/34
3 year 4.04 3.46 3.38 3/11 7/33
5 year 4.87 4.84 4.78 5/10 13/29
10 year 5.62 5.59 5.45 4/9 6/25
Insured
California Portfolio PG PU PG PU
Portfolio Return Median Median Rank Rank
- -------------------------------------------------------------------------------
1 year -0.16 0.20 0.36 4/4 6/6
3 year 2.38 2.78 2.78 4/4 5/6
5 year 4.28 4.61 4.66 4/4 6/6
10 year 5.36 5.26 5.37 2/4 4/6
Insured
National Portfolio PG PU PG PU
Portfolio Return Median Median Rank Rank
- -------------------------------------------------------------------------------
1 year 0.67 0.14 0.29 3/9 7/22
3 year 3.74 2.43 2.58 1/9 1/22
5 year 4.77 4.42 4.43 2/9 6/21
10 year 5.24 5.11 5.11 4/9 7/21
National Portfolio PG PU PG PU
Portfolio Return Median Median Rank Rank
- -------------------------------------------------------------------------------
1 year 1.61 0.91 0.60 3/15 14/73
3 year 4.51 3.63 3.05 2/15 5/72
5 year 4.44 4.68 4.62 12/15 40/67
10 year 5.13 5.13 5.12 7/13 24/51
New York Portfolio PG PU PG PU
Portfolio Return Median Median Rank Rank
- -------------------------------------------------------------------------------
1 year 1.26 0.77 0.61 4/11 6/30
3 year 4.01 3.11 2.73 2/11 3/30
5 year 4.50 4.49 4.34 6/11 12/27
10 year 5.55 5.23 5.23 4/11 7/25
Set forth below are the 1, 3, 5, 10 year and since inception performance
returns of the Portfolios (in bold) versus their benchmarks:(20) Note that each
Portfolio's benchmark is the Lehman Brothers Municipal Bond Index.(21)
Periods Ending June 30, 2006
Annualized Performance
- ------------------------------------------------------------------------------------------
1 3 5 10 Since
Portfolios Year Year Year Year Inception
- ------------------------------------------------------------------------------------------
California Portfolio 1.51 4.04 4.87 5.62 6.67
Lehman Brothers Municipal Bond Index 0.89 3.23 5.05 5.79 6.71
(20) The Adviser provided Portfolio and benchmark performance return
information for periods through June 30, 2006.
(21) The Lehman Brother's Municipal 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 bonds, and pre-funded bonds. The index represents a
national municipal bond index as opposed to a specific state index.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 147
Periods Ending June 30, 2006
Annualized Performance
- ------------------------------------------------------------------------------------------
1 3 5 10 Since
Portfolios Year Year Year Year Inception
- ------------------------------------------------------------------------------------------
Insured California Portfolio -0.16 2.38 4.28 5.36 6.54
Lehman Brothers Municipal Bond Index 0.89 3.23 5.05 5.79 7.30
Insured National Portfolio 0.67 3.74 4.77 5.24 6.37
Lehman Brothers Municipal Bond Index 0.89 3.23 5.05 5.79 6.71
National Portfolio 1.61 4.51 4.44 5.13 6.50
Lehman Brothers Municipal Bond Index 0.89 3.23 5.05 5.79 6.71
New York Portfolio 1.26 4.01 4.50 5.55 6.22
Lehman Brothers Municipal Bond Index 0.89 3.23 5.05 5.79 6.71
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed advisory fees for the Portfolios 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 Portfolios is
based on an evaluation of all of these factors and no single factor was
dispositive.
Dated: December 1, 2006
148 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
THIS PAGE IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
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
- --------------------------------------------
Global Government Income Trust*
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Intermediate Bond Portfolio*
Short Duration Portfolio
U.S. Government Portfolio
- --------------------------------------------
Municipal Bond Funds
- --------------------------------------------
National Michigan
Insured National Minnesota
Arizona New Jersey
California New York
Insured California Ohio
Florida Pennsylvania
Massachusetts 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
- --------------------------------------------
Retirement Strategies Funds
- --------------------------------------------
2000 Retirement Strategy
2005 Retirement Strategy
2010 Retirement Strategy
2015 Retirement Strategy
2020 Retirement Strategy
2025 Retirement Strategy
2030 Retirement Strategy
2035 Retirement Strategy
2040 Retirement Strategy
2045 Retirement Strategy
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 website 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 February 1, 2006, Global Government Income Trust was named Americas
Government Income Trust and Intermediate Bond Portfolio was named Quality Bond
Portfolio.
** 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.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND o 149
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
MI-0151-1006
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer and principal accounting
officer. A copy of the registrant's code of ethics is filed herewith as
Exhibit 12(a)(1).
(b) During the period covered by this report, no material amendments were made
to the provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers
to the provisions of the code of ethics adopted in 2(a) above were granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors has determined that independent directors
David H. Dievler and William H. Foulk, Jr. qualify as audit committee financial
experts.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) - (c) The following table sets forth the aggregate fees billed by the
independent registered public accounting firm 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 2005 $29,500 $3,329 $13,737
2006 31,100 4,745 13,433
- -Insured California Portfolio 2005 29,500 3,329 13,737
2006 31,100 4,745 12,407
- -Insured National Portfolio 2005 29,500 3,329 13,737
2006 31,100 4,745 12,443
- -National Portfolio 2005 29,500 3,329 13,737
2006 31,100 4,745 12,885
- -New York Portfolio 2005 29,500 3,329 13,737
2006 31,100 4,745 12,932
(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 Audit
All Fees for 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 2005 896,062 (184,769)
(171,032)
(13,737)
2006 1,028,066 (149,693)
(136,260)
(13,433)
- -Insured California Portfolio 2005 896,062 (184,769)
(171,032)
(13,737)
2006 1,027,040 (148,667)
(136,260)
(12,407)
- -Insured National Portfolio 2005 896,062 (184,769)
(171,032)
(13,737)
2006 1,027,076 (148,703)
(136,260)
(12,443)
- -National Portfolio 2005 896,062 (184,769)
(171,032)
(13,737)
2006 1,027,518 (149,145)
(136,260)
(12,885)
- -New York Portfolio 2005 896,062 (184,769)
(171,032)
(13,737)
2006 1,027,565 (149,192)
(136,260)
(12,932)
(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 auditor's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the registrant.
ITEM 6. SCHEDULE OF INVESTMENTS.
Please see Schedule of Investments contained in the Report to Shareholders
included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Fund's Board of Directors since the Fund last
provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and procedures
(as defined in Rule 30a-3 (c) under the Investment Company Act of 1940, as
amended) are effective at the reasonable assurance level based on their
evaluation of these controls and procedures as of a date within 90 days of the
filing date of this document.
(b) Management of the Fund is responsible for establishing and maintaining
effective internal control over financial reporting. In fulfilling this
responsibility, estimates and judgments by management are required to assess
the expected benefits and related costs of controls. A company's internal
control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with accounting
principles generally accepted in the United States of America ("generally
accepted accounting principles"). Such internal control includes policies and
procedures that provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of a fund's assets
that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
A control deficiency exists when the design or operation of a control does not
allow management or employees, in the normal course of performing their
assigned functions, to prevent or detect misstatements on a timely basis. A
significant deficiency is a control deficiency, or combination of control
deficiencies, that adversely affects the Fund's ability to initiate, authorize,
record, process or report external financial data reliably in accordance with
generally accepted accounting principles such that there is more than a remote
likelihood that a misstatement of the Fund's annual or interim financial
statements that is more than inconsequential will not be prevented or detected.
A material weakness is a significant deficiency, or combination of significant
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be
prevented or detected.
Subsequent to the Fund's fiscal year ended October 31, 2005, there was the
following control deficiency that was determined to be a material weakness, as
defined above, in the Fund's internal control over financial reporting. The
Fund's controls related to the review and analysis of the relevant terms and
conditions of certain transfers of securities did not operate effectively to
appropriately determine whether the transfers qualified for sale accounting
under the provisions of Statement of Financial Accounting Standards No. 140
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." As a result of this material weakness, the expense ratios to
average net assets in the financial highlights for the year ended October 31,
2005 were restated in order to appropriately account for such transfers of
securities as secured borrowings and report the related interest income and
expense. Fund Management is taking such actions as is necessary to revise its
internal controls over financial reporting to seek to increase the control's
effectiveness. Following a review of financial statements of other investment
companies investing in similar instruments and consultation with others in the
investment company industry, including through the facility of the Investment
Company Institute, Fund Management believes that in general other investment
companies investing in similar investments over the same time periods accounted
for such investments in a similar manner as the Fund prior to the Fund's
restatement and, accordingly, such other investment companies investing in such
investments to a material extent are also confronting the same issue. Fund
Management believes that the restatement is consistent with the broader
investment company industry reevaluation of accounting interpretation for such
investments and that the approach taken therein appropriately reflects this
currently ongoing change in prevailing industry practice.
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: January 11, 2007
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: January 11, 2007
By: /s/ Joseph J. Mantineo
----------------------
Joseph J. Mantineo
Treasurer and Chief Financial Officer
Date: January 11, 2007