UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR/A
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-07618
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Mark R. Manley
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: September 30, 2006
Date of reporting period: September 30, 2006
This Form N-CSR/A amends the Form N-CSR of the registrant for the fiscal year
and reporting period ended September 30, 2006 filed with the Securities and
Exchange Commission on December 11, 2006. Subsequent to the filing of the
September 30, 2006 Form N-CSR, 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. As a result, the statement of operations for each of Florida
Portfolio's, Massachusetts Portfolio's, Minnesota Portfolio's, Pennsylvania
Portfolio's and Virginia Portfolio's year ended September 30, 2006 and expense
ratios to average net assets in the financial highlights for the years ended
September 30, 2006, September 30, 2005 and September 30, 2004 (and with respect
to the Minnesota portfolio for the year ended September 30, 2003) have been
restated in order to appropriately account for such transfers of securities as
secured borrowings and report the related interest income and expense. With
respect to the New Jersey Portfolio, the statement of assets and liabilities
and the portfolio of investments as of September 30, 2006, the statements of
operations and changes in net assets for the year then ended and the financial
highlights for each of the four years then ended have been restated in order to
appropriately account for such transfers of securities as secured borrowings
and the related interest income and expense.
ITEM 1. REPORTS TO STOCKHOLDERS.
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ANNUAL REPORT
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AllianceBernstein Municipal Income Fund II
Arizona Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
Annual Report
September 30, 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
AllianceBernstein(R) 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.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
November 20, 2006
Annual Report
This report provides management's discussion of fund performance for the
portfolios of AllianceBernstein Municipal Income Fund II (the "Portfolios") for
the annual reporting period ended September 30, 2006.
Investment Objectives and Policies
The nine portfolios of this open-end fund, by investing principally in
high-yielding, predominantly investment grade municipal securities, seek to
provide their shareholders with the highest level of income exempt from Federal
and state personal income tax that is available without assuming undue risk.
Investment Results
The tables on pages 5-13 show performance for each Portfolio compared to its
benchmark, the Lehman Brothers (LB) Municipal Index, for the six- and 12-month
periods ended September 30, 2006. For the 12-month period ended September 30,
2006, Class A shares of the Florida, New Jersey, Pennsylvania and Virginia
Portfolios outperformed the benchmark, the LB Municipal Index, which represents
the broad municipal market and posted a positive return of 4.45%, while the
Arizona, Massachusetts, Michigan, Minnesota and Ohio Portfolios underperformed
the benchmark.
A description of each Portfolio's relative performance versus the benchmark for
the 12-month reporting period ended September 30, 2006 follows.
Arizona Portfolio-The Arizona Portfolio's relative underperformance compared to
the benchmark was largely the result of security selection in the pre-refunded
sector, in addition to the Portfolio's relative weight in the industrial
revenue bond and insured sectors. Security selection in the hospital sector was
beneficial to performance.
Florida Portfolio-The Florida Portfolio's stronger relative performance
compared to the benchmark was largely the result of security selection in the
insured, housing and special tax sectors. The Portfolio's relative weight in
the housing, pre-refunded and hospital sectors also contributed to positive
relative performance. The Portfolio's relative weight in the industrial revenue
bond sector detracted from performance.
Massachusetts Portfolio-The Massachusetts Portfolio's relative underperformance
compared to the benchmark was largely the result of security selection in the
transportation, insured and housing sectors. The Portfolio's relative weight in
the pre-refunded and hospital sectors contributed positively to performance.
Security selection in the special tax sector also benefited performance.
Michigan Portfolio-The Michigan Portfolio's relative underperformance compared
to the benchmark was largely the result of security selection in the insured,
education, hospital and power sectors. Security selection in the pre-refunded
and special tax sectors contributed positively to performance.
Minnesota Portfolio-The Minnesota Portfolio's relative underperformance
compared to the benchmark was largely the result of security selection in the
insured, housing and pre-refunded sectors. The Portfolio's relative weight in
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 1
the pre-refunded, housing and hospital sectors contributed positively to
performance.
New Jersey Portfolio-The New Jersey Portfolio's stronger relative performance
compared to the benchmark was largely the result of its relative weight in the
pre-refunded and hospital sectors. Security selection in the special tax sector
also contributed to positive relative performance, while security selection in
the insured and hospital sectors detracted from the Portfolio's performance.
Ohio Portfolio-The Ohio Portfolio's relative underperformance compared to the
benchmark was largely the result of security selection in the industrial
revenue bond, hospital, pre-refunded and special tax sectors. The Portfolio's
relative weight in the pre-refunded, housing and industrial revenue bond
sectors contributed positively to performance.
Pennsylvania Portfolio-The Pennsylvania Portfolio's stronger relative
performance compared to the benchmark was largely the result of its relative
weight in the pre-refunded, hospital and housing sectors. The Portfolio also
benefited from security selection in the insured and special tax sectors.
Security selection in the housing sector detracted from the Portfolio's
performance.
Virginia Portfolio-The Virginia Portfolio's stronger relative performance
compared to the benchmark was largely the result of its relative weight in the
general obligation and pre-refunded sectors. Security selection in the
education, housing, leasing and special tax sectors also contributed to
positive relative performance.
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 September 30, 2005, one-year municipal bond yields have risen
0.61%. Over the same time period, 20-year municipal bond yields declined by
0.19%. 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 0.85% 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 4.45% versus 3.09% for the LB U.S. Treasury Index. Most of
the return for the municipal market was due to its return of 3.41% during the
past three 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 10.73% versus
the 4.45% return for the LB Municipal Index, which represents the overall
investment-grade
2 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
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 historical 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 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 II 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 website 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 fluctuations may be caused by changes in the general level of interest
rates or changes in bond credit quality ratings. Please note, as interest rates
rise, existing bond prices fall and can cause the value of an investment in the
Portfolios to decline. Changes in interest rates have a greater effect on bonds
with longer maturities than on those with shorter maturities. The 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 II
ARIZONA PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE PORTFOLIO VS. ITS BENCHMARK -----------------------------
PERIODS ENDED SEPTEMBER 30, 2006 6 Months 12 Months
- -------------------------------------------------------------------------------
Arizona Portfolio
Class A 3.17% 4.28%
Class B 2.81% 3.56%
Class C 2.81% 3.56%
LB Municipal Index 3.44% 4.45%
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
9/30/96 TO 9/30/06
Arizona Portfolio Class A at NAV: $17,883
Arizona Portfolio Class A at Offering: $17,118
LB Municipal Index: $17,746
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Arizona Portfolio
Class A at Offering LB Municipal Index
- -------------------------------------------------------------------------------
9/30/96 $ 9,575 $ 10,000
9/30/97 $ 10,584 $ 10,902
9/30/98 $ 11,594 $ 11,852
9/30/99 $ 11,542 $ 11,769
9/30/00 $ 12,254 $ 12,495
9/30/01 $ 13,304 $ 13,794
9/30/02 $ 14,279 $ 15,026
9/30/03 $ 14,615 $ 15,611
9/30/04 $ 15,585 $ 16,329
9/30/05 $ 16,421 $ 16,990
9/30/06 $ 17,118 $ 17,746
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund II Arizona Portfolio Class A shares
(from 9/30/96 to 9/30/06) 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 II o 5
FLORIDA PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE PORTFOLIO VS. ITS BENCHMARK -----------------------------
PERIODS ENDED SEPTEMBER 30, 2006 6 Months 12 Months
- -------------------------------------------------------------------------------
Florida Portfolio
Class A 3.58% 5.00%
Class B 3.12% 4.17%
Class C 3.12% 4.17%
LB Municipal Index 3.44% 4.45%
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
9/30/96 TO 9/30/06
Florida Portfolio Class A at NAV: $17,670
Florida Portfolio Class A at Offering: $16,922
LB Municipal Index: $17,746
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Florida Portfolio
Class A at Offering LB Municipal Index
- -------------------------------------------------------------------------------
9/30/96 $ 9,575 $ 10,000
9/30/97 $ 10,546 $ 10,902
9/30/98 $ 11,493 $ 11,852
9/30/99 $ 11,334 $ 11,769
9/30/00 $ 11,912 $ 12,495
9/30/01 $ 13,069 $ 13,794
9/30/02 $ 14,011 $ 15,026
9/30/03 $ 14,506 $ 15,611
9/30/04 $ 15,344 $ 16,329
9/30/05 $ 16,113 $ 16,990
9/30/06 $ 16,922 $ 17,746
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund II Florida Portfolio Class A shares
(from 9/30/96 to 9/30/06) 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 II
MASSACHUSETTS PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE PORTFOLIO VS. ITS BENCHMARK -----------------------------
PERIODS ENDED SEPTEMBER 30, 2006 6 Months 12 Months
- -------------------------------------------------------------------------------
Massachusetts Portfolio
Class A 3.12% 4.06%
Class B 2.76% 3.35%
Class C 2.76% 3.35%
LB Municipal Index 3.44% 4.45%
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
9/30/96 TO 9/30/06
Massachusetts Portfolio Class A at NAV: $17,267
Massachusetts Portfolio Class A at Offering: $16,535
LB Municipal Index: $17,746
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Massachusetts Portfolio
Class A at Offering LB Municipal Index
- -------------------------------------------------------------------------------
9/30/96 $ 9,575 $ 10,000
9/30/97 $ 10,642 $ 10,902
9/30/98 $ 11,620 $ 11,852
9/30/99 $ 11,476 $ 11,769
9/30/00 $ 12,033 $ 12,495
9/30/01 $ 13,228 $ 13,794
9/30/02 $ 13,952 $ 15,026
9/30/03 $ 14,285 $ 15,611
9/30/04 $ 15,161 $ 16,329
9/30/05 $ 15,889 $ 16,990
9/30/06 $ 16,535 $ 17,746
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund II Massachusetts Portfolio Class A
shares (from 9/30/96 to 9/30/06) 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 II o 7
MICHIGAN PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE PORTFOLIO VS. ITS BENCHMARK -----------------------------
PERIODS ENDED SEPTEMBER 30, 2006 6 Months 12 Months
- -------------------------------------------------------------------------------
Michigan Portfolio
Class A 3.08% 4.38%
Class B 2.72% 3.66%
Class C 2.72% 3.56%
LB Municipal Index 3.44% 4.45%
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
9/30/96 TO 9/30/06
Michigan Portfolio Class A at NAV: $18,229
Michigan Portfolio Class A at Offering: $17,453
LB Municipal Index: $17,746
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Michigan Portfolio
Class A at Offering LB Municipal Index
- -------------------------------------------------------------------------------
9/30/96 $ 9,575 $ 10,000
9/30/97 $ 10,633 $ 10,902
9/30/98 $ 11,599 $ 11,852
9/30/99 $ 11,602 $ 11,769
9/30/00 $ 12,343 $ 12,495
9/30/01 $ 13,591 $ 13,794
9/30/02 $ 14,660 $ 15,026
9/30/03 $ 15,049 $ 15,611
9/30/04 $ 15,900 $ 16,329
9/30/05 $ 16,720 $ 16,990
9/30/06 $ 17,453 $ 17,746
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund II Michigan Portfolio Class A shares
(from 9/30/96 to 9/30/06) 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 II
MINNESOTA PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE PORTFOLIO VS. ITS BENCHMARK -----------------------------
PERIODS ENDED SEPTEMBER 30, 2006 6 Months 12 Months
- -------------------------------------------------------------------------------
Minnesota Portfolio
Class A 3.06% 4.29%
Class B 2.69% 3.56%
Class C 2.69% 3.55%
LB Municipal Index 3.44% 4.45%
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
9/30/96 TO 9/30/06
Minnesota Portfolio Class A at NAV: $17,312
Minnesota Portfolio Class A at Offering: $16,569
LB Municipal Index: $17,746
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Minnesota Portfolio
Class A at Offering LB Municipal Index
- -------------------------------------------------------------------------------
9/30/96 $ 9,575 $ 10,000
9/30/97 $ 10,527 $ 10,902
9/30/98 $ 11,362 $ 11,852
9/30/99 $ 11,307 $ 11,769
9/30/00 $ 11,996 $ 12,495
9/30/01 $ 13,128 $ 13,794
9/30/02 $ 14,107 $ 15,026
9/30/03 $ 14,538 $ 15,611
9/30/04 $ 15,179 $ 16,329
9/30/05 $ 15,895 $ 16,990
9/30/06 $ 16,569 $ 17,746
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund II Minnesota Portfolio Class A shares
(from 9/30/96 to 9/30/06) 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 II o 9
NEW JERSEY PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE PORTFOLIO VS. ITS BENCHMARK -----------------------------
PERIODS ENDED SEPTEMBER 30, 2006 6 Months 12 Months
- -------------------------------------------------------------------------------
New Jersey Portfolio
Class A 3.37% 4.65%
Class B 3.01% 3.91%
Class C 3.00% 3.92%
LB Municipal Index 3.44% 4.45%
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
9/30/96 TO 9/30/06
New Jersey Portfolio Class A at NAV: $16,603
New Jersey Portfolio Class A at Offering: $15,902
LB Municipal Index: $17,746
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
New Jersey Portfolio
Class A at Offering LB Municipal Index
- -------------------------------------------------------------------------------
9/30/96 $ 9,575 $ 10,000
9/30/97 $ 10,533 $ 10,902
9/30/98 $ 11,414 $ 11,852
9/30/99 $ 11,381 $ 11,769
9/30/00 $ 11,985 $ 12,495
9/30/01 $ 12,864 $ 13,794
9/30/02 $ 13,432 $ 15,026
9/30/03 $ 13,753 $ 15,611
9/30/04 $ 14,463 $ 16,329
9/30/05 $ 15,191 $ 16,990
9/30/06 $ 15,902 $ 17,746
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund II New Jersey Portfolio Class A shares
(from 9/30/96 to 9/30/06) 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)
10 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
OHIO PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE PORTFOLIO VS. ITS BENCHMARK -----------------------------
PERIODS ENDED SEPTEMBER 30, 2006 6 Months 12 Months
- -------------------------------------------------------------------------------
Ohio Portfolio
Class A 3.29% 4.40%
Class B 2.94% 3.67%
Class C 3.04% 3.78%
LB Municipal Index 3.44% 4.45%
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
9/30/96 TO 9/30/06
Ohio Portfolio Class A at NAV: $17,280
Ohio Portfolio Class A at Offering: $16,539
LB Municipal Index: $17,746
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Ohio Portfolio
Class A at Offering LB Municipal Index
- -------------------------------------------------------------------------------
9/30/96 $ 9,575 $ 10,000
9/30/97 $ 10,687 $ 10,902
9/30/98 $ 11,574 $ 11,852
9/30/99 $ 11,493 $ 11,769
9/30/00 $ 12,014 $ 12,495
9/30/01 $ 12,980 $ 13,794
9/30/02 $ 13,703 $ 15,026
9/30/03 $ 14,416 $ 15,611
9/30/04 $ 15,140 $ 16,329
9/30/05 $ 15,847 $ 16,990
9/30/06 $ 16,539 $ 17,746
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund II Ohio Portfolio Class A shares (from
9/30/96 to 9/30/06) 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 II o 11
PENNSYLVANIA PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE PORTFOLIO VS. ITS BENCHMARK -----------------------------
PERIODS ENDED SEPTEMBER 30, 2006 6 Months 12 Months
- -------------------------------------------------------------------------------
Pennsylvania Portfolio
Class A 3.36% 4.57%
Class B 3.01% 3.84%
Class C 3.00% 3.84%
LB Municipal Index 3.44% 4.45%
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
9/30/96 TO 9/30/06
Pennsylvania Portfolio Class A at NAV: $17,536
Pennsylvania Portfolio Class A at Offering: $16,785
LB Municipal Index: $17,746
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Pennsylvania Portfolio
Class A at Offering LB Municipal Index
- -------------------------------------------------------------------------------
9/30/96 $ 9,575 $ 10,000
9/30/97 $ 10,614 $ 10,902
9/30/98 $ 11,539 $ 11,852
9/30/99 $ 11,259 $ 11,769
9/30/00 $ 11,861 $ 12,495
9/30/01 $ 13,179 $ 13,794
9/30/02 $ 14,086 $ 15,026
9/30/03 $ 14,589 $ 15,611
9/30/04 $ 15,327 $ 16,329
9/30/05 $ 16,055 $ 16,990
9/30/06 $ 16,785 $ 17,746
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund II Pennsylvania Portfolio Class A
shares (from 9/30/96 to 9/30/06) 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)
12 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
VIRGINIA PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE PORTFOLIO VS. ITS BENCHMARK -----------------------------
PERIODS ENDED SEPTEMBER 30, 2006 6 Months 12 Months
- -------------------------------------------------------------------------------
Virginia Portfolio
Class A 3.02% 4.61%
Class B 2.67% 3.89%
Class C 2.59% 3.90%
LB Municipal Index 3.44% 4.45%
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
9/30/96 TO 9/30/06
Virginia Portfolio Class A at NAV: $17,841
Virginia Portfolio Class A at Offering: $17,082
LB Municipal Index: $17,746
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Virginia Portfolio
Class A at Offering LB Municipal Index
- -------------------------------------------------------------------------------
9/30/96 $ 9,575 $ 10,000
9/30/97 $ 10,660 $ 10,902
9/30/98 $ 11,689 $ 11,852
9/30/99 $ 11,561 $ 11,769
9/30/00 $ 12,241 $ 12,495
9/30/01 $ 13,137 $ 13,794
9/30/02 $ 14,134 $ 15,026
9/30/03 $ 14,793 $ 15,611
9/30/04 $ 15,538 $ 16,329
9/30/05 $ 16,332 $ 16,990
9/30/06 $ 17,082 $ 17,746
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Municipal Income Fund II Virginia Portfolio Class A shares
(from 9/30/96 to 9/30/06) 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 II o 13
ARIZONA PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2006
- --------------------------------------------------------------
NAV Returns SEC Returns
Class A Shares
1 Year 4.28% -0.15%
5 Years 5.18% 4.27%
10 Years 5.99% 5.52%
SEC Yield* 3.44%
Taxable Equivalent Yield** 5.57%
Class B Shares
1 Year 3.56% 0.56%
5 Years 4.46% 4.46%
10 Years(a) 5.55% 5.55%
SEC Yield* 2.91%
Taxable Equivalent Yield** 4.71%
Class C Shares
1 Year 3.56% 2.56%
5 Years 4.46% 4.46%
10 Years 5.26% 5.26%
SEC Yield* 2.91%
Taxable Equivalent Yield** 4.71%
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 -0.15%
5 Years 4.27%
10 Years 5.52%
Class B Shares
1 Year 0.56%
5 Years 4.46%
10 Years(a) 5.55%
Class C Shares
1 Year 2.56%
5 Years 4.46%
10 Years 5.26%
(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 September 30, 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)
14 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
FLORIDA PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2006
- --------------------------------------------------------------
NAV Returns SEC Returns
Class A Shares
1 Year 5.00% 0.51%
5 Years 5.30% 4.39%
10 Years 5.86% 5.40%
SEC Yield* 3.55%
Taxable Equivalent Yield** 5.46%
Class B Shares
1 Year 4.17% 1.17%
5 Years 4.55% 4.55%
10 Years(a) 5.41% 5.41%
SEC Yield* 3.01%
Taxable Equivalent Yield** 4.63%
Class C Shares
1 Year 4.17% 3.17%
5 Years 4.55% 4.55%
10 Years 5.10% 5.10%
SEC Yield* 3.01%
Taxable Equivalent Yield** 4.63%
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 0.51%
5 Years 4.39%
10 Years 5.40%
Class B Shares
1 Year 1.17%
5 Years 4.55%
10 Years(a) 5.41%
Class C Shares
1 Year 3.17%
5 Years 4.55%
10 Years 5.10%
(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 September 30, 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 II o 15
MASSACHUSETTS PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2006
- --------------------------------------------------------------
NAV Returns SEC Returns
Class A Shares
1 Year 4.06% -0.39%
5 Years 4.56% 3.66%
10 Years 5.61% 5.16%
SEC Yield* 3.36%
Taxable Equivalent Yield** 5.46%
Class B Shares
1 Year 3.35% 0.36%
5 Years 3.85% 3.85%
10 Years(a) 5.19% 5.19%
SEC Yield* 2.83%
Taxable Equivalent Yield** 4.60%
Class C Shares
1 Year 3.35% 2.35%
5 Years 3.85% 3.85%
10 Years 4.90% 4.90%
SEC Yield* 2.83%
Taxable Equivalent Yield** 4.60%
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 -0.39%
5 Years 3.66%
10 Years 5.16%
Class B Shares
1 Year 0.36%
5 Years 3.85%
10 Years(a) 5.19%
Class C Shares
1 Year 2.35%
5 Years 3.85%
10 Years 4.90%
(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 September 30, 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)
16 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
MICHIGAN PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2006
- --------------------------------------------------------------
NAV Returns SEC Returns
Class A Shares
1 Year 4.38% -0.03%
5 Years 5.13% 4.22%
10 Years 6.19% 5.73%
SEC Yield* 3.24%
Taxable Equivalent Yield** 5.19%
Class B Shares
1 Year 3.66% 0.66%
5 Years 4.40% 4.40%
10 Years(a) 5.74% 5.74%
SEC Yield* 2.69%
Taxable Equivalent Yield** 4.31%
Class C Shares
1 Year 3.56% 2.56%
5 Years 4.39% 4.39%
10 Years 5.45% 5.45%
SEC Yield* 2.69%
Taxable Equivalent Yield** 4.31%
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 -0.03%
5 Years 4.22%
10 Years 5.73%
Class B Shares
1 Year 0.66%
5 Years 4.40%
10 Years(a) 5.74%
Class C Shares
1 Year 2.56%
5 Years 4.39%
10 Years 5.45%
(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 September 30, 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 II o 17
MINNESOTA PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2006
- --------------------------------------------------------------
NAV Returns SEC Returns
Class A Shares
1 Year 4.29% -0.13%
5 Years 4.77% 3.86%
10 Years 5.64% 5.18%
SEC Yield* 3.27%
Taxable Equivalent Yield** 5.46%
Class B Shares
1 Year 3.56% 0.56%
5 Years 4.07% 4.07%
10 Years(a) 5.19% 5.19%
SEC Yield* 2.72%
Taxable Equivalent Yield** 4.54%
Class C Shares
1 Year 3.55% 2.55%
5 Years 4.04% 4.04%
10 Years 4.91% 4.91%
SEC Yield* 2.71%
Taxable Equivalent Yield** 4.52%
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 -0.13%
5 Years 3.86%
10 Years 5.18%
Class B Shares
1 Year 0.56%
5 Years 4.07%
10 Years(a) 5.19%
Class C Shares
1 Year 2.55%
5 Years 4.04%
10 Years 4.91%
(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 September 30, 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)
18 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
NEW JERSEY PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2006
- --------------------------------------------------------------
NAV Returns SEC Returns
Class A Shares
1 Year 4.65% 0.19%
5 Years 4.33% 3.42%
10 Years 5.20% 4.75%
SEC Yield* 3.44%
Taxable Equivalent Yield** 5.81%
Class B Shares
1 Year 3.91% 0.91%
5 Years 3.59% 3.59%
10 Years(a) 4.76% 4.76%
SEC Yield* 2.89%
Taxable Equivalent Yield** 4.88%
Class C Shares
1 Year 3.92% 2.92%
5 Years 3.59% 3.59%
10 Years 4.45% 4.45%
SEC Yield* 2.90%
Taxable Equivalent Yield** 4.90%
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 0.19%
5 Years 3.42%
10 Years 4.75%
Class B Shares
1 Year 0.91%
5 Years 3.59%
10 Years(a) 4.76%
Class C Shares
1 Year 2.92%
5 Years 3.59%
10 Years 4.45%
(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 September 30, 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 II o 19
OHIO PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2006
- --------------------------------------------------------------
NAV Returns SEC Returns
Class A Shares
1 Year 4.40% -0.04%
5 Years 4.97% 4.07%
10 Years 5.62% 5.16%
SEC Yield* 3.38%
Taxable Equivalent Yield** 5.60%
Class B Shares
1 Year 3.67% 0.67%
5 Years 4.23% 4.23%
10 Years(a) 5.18% 5.18%
SEC Yield* 2.84%
Taxable Equivalent Yield** 4.71%
Class C Shares
1 Year 3.78% 2.78%
5 Years 4.23% 4.23%
10 Years 4.89% 4.89%
SEC Yield* 2.84%
Taxable Equivalent Yield** 4.71%
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 -0.04%
5 Years 4.07%
10 Years 5.16%
Class B Shares
1 Year 0.67%
5 Years 4.23%
10 Years(a) 5.18%
Class C Shares
1 Year 2.78%
5 Years 4.23%
10 Years 4.89%
(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 September 30, 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)
20 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
PENNSYLVANIA PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2006
- --------------------------------------------------------------
NAV Returns SEC Returns
Class A Shares
1 Year 4.57% 0.10%
5 Years 4.96% 4.06%
10 Years 5.78% 5.32%
SEC Yield* 3.31%
Taxable Equivalent Yield** 5.25%
Class B Shares
1 Year 3.84% 0.84%
5 Years 4.25% 4.25%
10 Years(a) 5.33% 5.33%
SEC Yield* 2.76%
Taxable Equivalent Yield** 4.38%
Class C Shares
1 Year 3.84% 2.84%
5 Years 4.25% 4.25%
10 Years 5.03% 5.03%
SEC Yield* 2.76%
Taxable Equivalent Yield** 4.38%
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 0.10%
5 Years 4.06%
10 Years 5.32%
Class B Shares
1 Year 0.84%
5 Years 4.25%
10 Years(a) 5.33%
Class C Shares
1 Year 2.84%
5 Years 4.25%
10 Years 5.03%
(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 September 30, 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 II o 21
VIRGINIA PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2006
- --------------------------------------------------------------
NAV Returns SEC Returns
Class A Shares
1 Year 4.61% 0.17%
5 Years 5.40% 4.48%
10 Years 5.96% 5.50%
SEC Yield* 3.45%
Taxable Equivalent Yield** 5.63%
Class B Shares
1 Year 3.89% 0.89%
5 Years 4.65% 4.65%
10 Years(a) 5.53% 5.53%
SEC Yield* 2.91%
Taxable Equivalent Yield** 4.75%
Class C Shares
1 Year 3.90% 2.90%
5 Years 4.67% 4.67%
10 Years 5.24% 5.24%
SEC Yield* 2.91%
Taxable Equivalent Yield** 4.75%
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 0.17%
5 Years 4.48%
10 Years 5.50%
Class B Shares
1 Year 0.89%
5 Years 4.65%
10 Years(a) 5.53%
Class C Shares
1 Year 2.90%
5 Years 4.67%
10 Years 5.24%
(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 September 30, 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.
22 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
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 Annualized
Arizona Portfolio April 1, 2006 September 30, 2006 During Period* Expense Ratio*
- ------------------------------------------------------------------------------------------------
Class A
Actual $1,000 $1,031.67 $3.97 0.78%
Hypothetical** $1,000 $1,021.16 $3.95 0.78%
Class B
Actual $1,000 $1,028.11 $7.52 1.48%
Hypothetical** $1,000 $1,017.65 $7.49 1.48%
Class C
Actual $1,000 $1,028.13 $7.52 1.48%
Hypothetical** $1,000 $1,017.65 $7.49 1.48%
(Fund Expenses continued on next page)
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 23
FUND EXPENSES
(continued from previous page)
Beginning Ending
Florida Account Value Account Value Expenses Paid Annualized
Portfolio April 1, 2006 September 30, 2006 During Period* Expense Ratio*
- ------------------------------------------------------------------------------------------------
Class A
Actual $1,000 $1,035.81 $3.98 0.78%
Hypothetical** $1,000 $1,021.16 $3.95 0.78%
Class B
Actual $1,000 $1,031.18 $7.54 1.48%
Hypothetical** $1,000 $1,017.65 $7.49 1.48%
Class C
Actual $1,000 $1,031.18 $7.54 1.48%
Hypothetical** $1,000 $1,017.65 $7.49 1.48%
Beginning Ending
Massachusetts Account Value Account Value Expenses Paid Annualized
Portfolio April 1, 2006 September 30, 2006 During Period* Expense Ratio*
- ------------------------------------------------------------------------------------------------
Class A
Actual $1,000 $1,031.18 $4.18 0.82%
Hypothetical** $1,000 $1,020.96 $4.15 0.82%
Class B
Actual $1,000 $1,027.64 $7.73 1.52%
Hypothetical** $1,000 $1,017.45 $7.69 1.52%
Class C
Actual $1,000 $1,027.63 $7.73 1.52%
Hypothetical** $1,000 $1,017.45 $7.69 1.52%
Beginning Ending
Michigan Account Value Account Value Expenses Paid Annualized
Portfolio April 1, 2006 September 30, 2006 During Period* Expense Ratio*
- ------------------------------------------------------------------------------------------------
Class A
Actual $1,000 $1,030.77 $4.99 0.98%
Hypothetical** $1,000 $1,020.16 $4.96 0.98%
Class B
Actual $1,000 $1,027.23 $8.59 1.69%
Hypothetical** $1,000 $1,016.60 $8.54 1.69%
Class C
Actual $1,000 $1,027.23 $8.54 1.68%
Hypothetical** $1,000 $1,016.65 $8.49 1.68%
(Fund Expenses continued on next page)
24 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
FUND EXPENSES
(continued from previous page)
Beginning Ending
Minnesota Account Value Account Value Expenses Paid Annualized
Portfolio April 1, 2006 September 30, 2006 During Period* Expense Ratio*
- ------------------------------------------------------------------------------------------------
Class A
Actual $1,000 $1,030.57 $4.58 0.90%
Hypothetical** $1,000 $1,020.56 $4.56 0.90%
Class B
Actual $1,000 $1,026.93 $8.13 1.60%
Hypothetical** $1,000 $1,017.05 $8.09 1.60%
Class C
Actual $1,000 $1,026.92 $8.13 1.60%
Hypothetical** $1,000 $1,017.05 $8.09 1.60%
Beginning Ending
New Jersey Account Value Account Value Expenses Paid Annualized
Portfolio April 1, 2006 September 30, 2006 During Period* Expense Ratio*
- ------------------------------------------------------------------------------------------------
Class A
Actual $1,000 $1,033.69 $4.44 0.87%
Hypothetical** $1,000 $1,020.71 $4.41 0.87%
Class B
Actual $1,000 $1,030.05 $7.99 1.57%
Hypothetical** $1,000 $1,017.20 $7.94 1.57%
Class C
Actual $1,000 $1,030.02 $7.99 1.57%
Hypothetical** $1,000 $1,017.20 $7.94 1.57%
Beginning Ending
Account Value Account Value Expenses Paid Annualized
Ohio Portfolio April 1, 2006 September 30, 2006 During Period* Expense Ratio*
- ------------------------------------------------------------------------------------------------
Class A
Actual $1,000 $1,032.93 $4.33 0.85%
Hypothetical** $1,000 $1,020.81 $4.31 0.85%
Class B
Actual $1,000 $1,029.35 $7.89 1.55%
Hypothetical** $1,000 $1,017.30 $7.84 1.55%
Class C
Actual $1,000 $1,030.37 $7.89 1.55%
Hypothetical** $1,000 $1,017.30 $7.84 1.55%
(Fund Expenses continued on next page)
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 25
FUND EXPENSES
(continued from previous page)
Beginning Ending
Pennsylvania Account Value Account Value Expenses Paid Annualized
Portfolio April 1, 2006 September 30, 2006 During Period* Expense Ratio*
- ------------------------------------------------------------------------------------------------
Class A
Actual $1,000 $1,033.63 $4.84 0.95%
Hypothetical** $1,000 $1,020.31 $4.81 0.95%
Class B
Actual $1,000 $1,030.06 $8.40 1.65%
Hypothetical** $1,000 $1,016.80 $8.34 1.65%
Class C
Actual $1,000 $1,030.03 $8.40 1.65%
Hypothetical** $1,000 $1,016.80 $8.34 1.65%
Beginning Ending
Virginia Account Value Account Value Expenses Paid Annualized
Portfolio April 1, 2006 September 30, 2006 During Period* Expense Ratio*
- ------------------------------------------------------------------------------------------------
Class A
Actual $1,000 $1,030.24 $3.66 0.72%
Hypothetical** $1,000 $1,021.46 $3.65 0.72%
Class B
Actual $1,000 $1,026.72 $7.21 1.42%
Hypothetical** $1,000 $1,017.95 $7.18 1.42%
Class C
Actual $1,000 $1,025.85 $7.21 1.42%
Hypothetical** $1,000 $1,017.95 $7.18 1.42%
* Expenses are equal to each Class' annualized expense ratio, multiplied by
the average account value over the period, multiplied by 183/365 (to reflect
the one-half year period).
** Assumes 5% return before expenses.
26 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
BOND RATING SUMMARY*
September 30, 2006
ARIZONA PORTFOLIO
Quality Rating
[ ] 64.5% AAA [PIE CHART OMITTED]
[ ] 8.2% AA
[ ] 6.2% A
[ ] 17.6% BBB
[ ] 3.5% BB
FLORIDA PORTFOLIO
Quality Rating
[ ] 55.6% AAA [PIE CHART OMITTED]
[ ] 14.9% AA
[ ] 9.7% A
[ ] 11.1% BBB
[ ] 8.5% BB
[ ] 0.2% B
MASSACHUSETTS PORTFOLIO
Quality Rating
[ ] 67.3% AAA [PIE CHART OMITTED]
[ ] 18.0% AA
[ ] 2.7% A
[ ] 7.5% BBB
[ ] 4.1% BB
[ ] 0.4% B
* All data are as of September 30, 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 II o 27
BOND RATING SUMMARY*
September 30, 2006
MICHIGAN PORTFOLIO
Quality Rating
[ ] 56.4% AAA [PIE CHART OMITTED]
[ ] 25.3% AA
[ ] 3.3% A
[ ] 9.4% BBB
[ ] 5.6% BB
MINNESOTA PORTFOLIO
Quality Rating
[ ] 54.5% AAA [PIE CHART OMITTED]
[ ] 19.1% AA
[ ] 18.7% A
[ ] 5.6% BBB
[ ] 2.1% BB
NEW JERSEY PORTFOLIO
Quality Rating
[ ] 51.6% AAA [PIE CHART OMITTED]
[ ] 21.5% AA
[ ] 13.4% A
[ ] 8.8% BBB
[ ] 4.7% BB
* All data are as of September 30, 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.
28 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
BOND RATING SUMMARY*
September 30, 2006
OHIO PORTFOLIO
Quality Rating
[ ] 58.3% AAA [PIE CHART OMITTED]
[ ] 10.0% AA
[ ] 17.1% A
[ ] 10.0% BBB
[ ] 4.6% BB
PENNSYLVANIA PORTFOLIO
Quality Rating
[ ] 58.3% AAA [PIE CHART OMITTED]
[ ] 11.9% AA
[ ] 11.4% A
[ ] 10.0% BBB
[ ] 8.1% BB
[ ] 0.3% B
VIRGINIA PORTFOLIO
Quality Rating
[ ] 53.0% AAA [PIE CHART OMITTED]
[ ] 26.5% AA
[ ] 7.4% A
[ ] 5.7% BBB
[ ] 7.4% BB
* All data are as of September 30, 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 II o 29
ARIZONA PORTFOLIO
PORTFOLIO OF INVESTMENTS
September 30, 2006
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES-98.9%
Long-Term Municipal Bonds-94.8%
Arizona-78.3%
Arizona Cap Facs Fin Corp Student Hsg Rev
(Arizona State University Proj) Ser 00
6.25%, 9/01/32 $ 2,000 $ 2,077,800
Arizona Health Facs Auth Rev
(Blood System, Inc.) Ser 04
5.00%, 4/01/19 750 780,398
Arizona Sch Brd Fac Rev
Ser 01
5.00%, 7/01/19 6,730 7,149,076
Arizona State Trans Brd Hwy Rev
Ser 04B
5.00%, 7/01/24 4,300 4,560,064
Arizona State University COP
(Research Infrastucture Projs)
AMBAC Ser 05A
5.00%, 9/01/23 2,000 2,123,940
Arizona Student Loan Auth
(Student Loan Rev)
Ser 99B-1 AMT
5.90%, 5/01/24 1,500 1,587,555
Arizona Tourism & Sports Auth Tax Rev
(Multipurpose Stadium Fac) MBIA Ser 03A
5.00%, 7/01/25 2,400 2,515,872
Arizona Wtr Infrastructure Fin Auth Rev
(Wtr Quality) Ser 06A
5.00%, 10/01/24 4,000 4,306,280
Estrella Mtn Ranch Cmnty Fac Dist
(Desert Village)
7.375%, 7/01/27 1,822 2,017,282
(Golf Village) Ser 01A
7.875%, 7/01/25 3,408 3,778,688
Gilbert Wtr Res Municipal Ppty Corp.
(Wastewater Sys & Util Rev) Ser 04
4.90%, 4/01/19 2,500 2,520,725
Glendale Indl Dev Auth
(John C Lincoln Health) Ser 05B
5.25%, 12/01/22 1,000 1,054,960
Glendale Indl Dev Auth Ed Fac
(Midwestern University)
Ser 01A
5.875%, 5/15/31 3,770 4,061,647
CONNIE LEE Ser 96A
6.00%, 5/15/26 475 485,669
Goodyear Cmnty Fac Dist
(Palm Valley) Ser 96C
7.25%, 7/01/16 2,900 2,960,494
30 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Goodyear Indl Dev Auth Water & Sewer Rev
(Litchfield Pk Svc Proj) Ser 99 AMT
5.95%, 10/01/23 $ 3,160 $ 3,298,345
Greater Arizona Dev Auth Infrastructure Rev
MBIA Ser 05A
5.00%, 8/01/21 1,600 1,711,760
MBIA Ser 05B
5.00%, 8/01/25 4,320 4,582,224
Hassayampa Cmnty Fac Dist
Ser 96
7.75%, 7/01/21 2,670 2,750,768
Hassayampa Cmnty Fac Dist No. 2
(Forest Ridge Estates) Ser 00
7.50%, 7/01/24 785 854,088
Maricopa Cnty SFMR
(Mortgage Rev)
GNMA/FNMA/FHLMC AMT
Ser 00-1C
6.25%, 12/01/30 50 50,125
Ser 01
5.63%, 3/01/33 775 805,024
Ser 02-B1
6.20%, 3/01/34 255 258,825
Mesa Cnty Indl Dev Auth Health Fac
(Discovery Health Sys) MBIA Ser 99A
5.75%, 1/01/25 15,000 16,115,849
Mohave Cnty Indl Dev Auth MFHR
(Chris & Silver Ridge) GNMA Ser 96
6.375%, 11/01/31 295 304,472
Nogales Municipal Dev Auth
AMBAC Ser 05
5.00%, 6/01/27 1,000 1,057,510
Northern Arizona University COP
(Northern Arizona University Research Projs)
AMBAC Ser 04
5.125%, 9/01/21-9/01/24 7,140 7,723,078
Phoenix Civic Impt Corp Excise Tax Rev
(Civic Plaza Exp Proj) Sub Ser 05A
5.00%, 7/01/23 5,500 5,872,735
Phoenix Civic Impt Corp Wtr Sys Rev
5.00%, 7/01/18 6,555 7,089,428
Phoenix Health Facs Auth Hosp Rev
(Children's Hosp) Ser 02A
6.00%, 2/15/32 5,700 6,069,132
Phoenix Indl Dev Auth
(Capital Mall LLC Proj) AMBAC Ser 05
5.00%, 9/15/25 5,935 6,299,587
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 31
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Phoenix Indl Dev Auth SFMR
(Mortgage Rev) GNMA Ser 02A-1 AMT
5.75%, 9/01/33 $ 115 $ 116,619
Pima Cnty Indl Dev Auth MFHR
(La Hacienda) GNMA Ser 99
7.00%, 12/20/31 1,290 1,393,548
Pima Cnty Indl Dev Auth SFMR
(Mortgage Rev) GNMA/FNMA AMT
Ser 99B-1
6.10%, 5/01/31 110 110,144
Ser 01A-1
5.35%, 11/01/24 70 70,111
Pima Cnty Indl Dev Auth Ed Rev
(Horizon Cmnty Learning Ctr) Ser 05
5.125%, 6/01/20 1,500 1,508,910
Pinal Cnty COP
Ser 04
5.00%, 12/01/24 3,780 3,931,200
Pinal Cnty Indl Dev Auth Correctional
Facs Contract
(Florence West Prison Proj) Ser 06A ACA
5.25%, 10/01/22 1,400 1,491,868
Pinal Cnty Prop Corp.
AMBAC Ser 01
5.125%, 6/01/21 1,000 1,060,460
Queen Creek Impt Dist No. 001
5.00%, 1/01/26 600 611,880
Show Low Assessment Dist No. 6
(Torreon) ACA Ser 00
6.00%, 1/01/18 955 1,016,827
Show Low Indl Dev Auth Hosp Rev
(Navapache Regl Med Ctr) RADIAN Ser 05
5.00%, 12/01/25 1,415 1,487,066
Stoneridge Cmnty Fac Dist
Ser 01
6.75%, 7/15/26 1,650 1,829,190
Sundance Cmnty Fac Dist
Ser 02
7.75%, 7/01/22 2,475 2,717,798
Tax Exempt Municipal Infrastructure Trust
Ser 04B Class A
4.05%, 12/01/08(a) 4,470 4,370,498
Tempe Excise Tax Rev
5.00%, 7/01/24 1,035 1,102,006
Tolleson Indl Dev Auth MFHR
(Copper Cove) GNMA Ser 01A AMT
5.50%, 11/20/41 5,825 6,067,670
Tuscon & Pima Cnty Indl Dev Auth SFMA
(Mtg Bkd Secs Prog) GNMA/FNMA/FHLMC
Ser 01A-1 AMT
6.35%, 1/01/34 955 958,686
32 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Tucson & Pima Hsg Fin Auth SFMR
(Mortgage Rev) GNMA
Ser 02A AMT
5.50%, 1/01/35 $ 550 $ 559,350
Tucson Airport Auth Rev
AMBAC Ser 01 AMT
5.35%, 6/01/31 6,475 6,733,935
Tucson COP
MBIA Ser 04A
5.00%, 7/01/23-7/01/24 6,100 6,466,731
Tucson Higher Ed
(University of Arizona) AMBAC Ser 02A
5.00%, 7/15/32 1,000 1,038,540
University Med Ctr Corp Hosp Rev
5.00%, 7/01/35 3,500 3,586,940
University of Arizona COP
(University of Arizona Projs) Ser 03B
5.00%, 6/01/12 3,040 3,246,355
5.25%, 6/01/14-6/01/15 5,000 5,479,600
West Campus Hsg LLC Student Hsg Rev
(Arizona State University West Campus)
AMBAC Ser 05
5.00%, 7/01/30 1,500 1,579,095
Yavapai Cnty Hosp Rev
(Regl Med Ctr)
RADIAN Ser 03A
5.25%, 8/01/21 4,000 4,212,800
-------------
169,571,227
California-0.7%
California State GO
5.00%, 2/01/33 1,405 1,457,210
Florida-0.8%
Double Branch Cmnty Dev Dist
(Oakleaf Village) Ser 02A
6.70%, 5/01/34 990 1,087,367
Fiddler's Creek Cmnty Dev Dist
Ser 99B
5.80%, 5/01/21 570 588,593
-------------
1,675,960
Puerto Rico-14.1%
Puerto Rico Comwlth GO
(Pub Impt)
Ser 01A
5.50%, 7/01/19 500 563,070
Ser 03A
5.25%, 7/01/23 500 529,910
Ser 06A
5.25%, 7/01/23 575 621,868
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 33
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Puerto Rico Comwlth Govt Dev Bank
Ser 06B
5.00%, 12/01/15 $ 500 $ 536,020
Puerto Rico Convention Ctr Dist Auth
Health Occupancy Tax Rev
Ser 06A AMBAC
5.00%, 7/01/18 6,000 6,555,780
Puerto Rico Elec Pwr Auth Rev
XLCA Ser 02-1
5.25%, 7/01/22(b) 8,000 8,640,080
Puerto Rico GO
FGIC Ser 02A
5.00%, 7/01/32 2,500 2,688,000
Puerto Rico Hsg Fin Auth
(Cap Funding Prog)
5.00%, 12/01/17 4,870 5,141,405
Puerto Rico Hwy & Trans Auth Rev
FSA Ser 02D
5.00%, 7/01/32 3,400 3,547,866
Puerto Rico Ind Fin Auth Health Fac
(Ascension Health) Ser 00A
6.125%, 11/15/30 1,500 1,658,940
-------------
30,482,939
Texas-0.9%
Texas Turnpike Auth Rev
AMBAC Ser 02A
5.50%, 8/15/39 1,750 1,888,758
Total Long-Term Municipal Bonds
(cost $197,288,361) 205,076,094
Short-Term Municipal Notes(c)-4.1%
Alaska-1.4%
Valdez Marine Term Rev
(BP Pipelines, Inc. Proj)
Ser 03A
3.85%, 6/01/37 500 500,000
Ser 03 B
3.85%, 7/01/37 2,500 2,500,000
-------------
3,000,000
Oklahoma-1.6%
Tulsa Cnty Indl Auth Rev
(First Mtge) Ser 02A
3.86%, 7/01/32 3,500 3,500,000
Utah-1.1%
Salt Lake Cnty PCR
(Service Station Holdings Proj)
3.85%, 2/01/08 2,500 2,500,000
34 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Total Short-Term Municipal Notes
(cost $9,000,000) $ 9,000,000
Total Municipal Bonds & Notes
(cost $206,288,361) 214,076,094
SHORT-TERM INVESTMENT-0.2%
Time Deposit-0.2%
The Bank of New York
4.25%, 10/02/06
(cost $427,000) $427 427,000
Total Investments-99.1%
(cost $206,715,361) 214,503,094
Other assets less liabilities-0.9% 1,892,365
Net Assets-100% $ 216,395,459
INTEREST RATE SWAP CONTRACTS (see Note D)
Rate Type
-------------------------
Payment Payment
Notional made received Unrealized
Swap Amount Termination by the by the Appreciation/
Counterparty (000) Date Portfolio Portfolio (Depreciation)
- --------------------------------------------------------------------------------------------
Citigroup, Inc. $ 1,900 6/22/07 BMA* 2.962% $ (8,641)
Goldman Sachs & Co. 1,000 1/05/07 BMA* 3.405% (1,195)
JPMorgan Chase & Co. 1,800 4/05/07 BMA* 2.988% (8,256)
JPMorgan Chase & Co. 1,000 10/01/07 BMA* 3.635% 1,091
Merrill Lynch 1,100 7/12/08 BMA* 3.815% 7,300
Merrill Lynch 1,000 8/09/26 BMA* 4.063% (11,328)
Morgan Stanley 1,000 10/06/06 BMA* 3.217% (925)
* Variable interest based on the BMA (Bond Market Association)
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 35
(a) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security is considered liquid and may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
September 30, 2006, the aggregate market value of this security amounted to
$4,370,498 or 2.0% of net assets.
(b) Represents entire or partial position segregated as collateral for
interest rate swap contracts.
(c) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specific date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). This instrument is payable on demand and is secured by
letters of credit or other credit support agreements from major banks.
Glossary of Terms:
ACA - American Capital Access
AMBAC - American Municipal Bond Assurance Corporation
AMT - Alternative Minimum Tax
CONNIE LEE - Connie Lee Insurance Company
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
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-Family Housing Revenue
PCR - Pollution Control Revenue
RADIAN - Radian Group, Inc.
SFMR - Single Family Mortgage Revenue
XLCA - XL Capital Assurance, Inc.
See notes to financial statements.
36 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
FLORIDA PORTFOLIO
PORTFOLIO OF INVESTMENTS
September 30, 2006
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES-97.8%
Long-Term Municipal Bonds-95.4%
Florida-86.2%
Beacon Tradeport Cmnty Dev Dist
Ser 02B
7.25%, 5/01/33 $ 970 $ 1,041,790
Bonnet Creek Resort Cmnty Dev Dist
Ser 02
7.25%, 5/01/18 2,000 2,188,860
Brevard Cnty Loc Opt Fuel Tax Rev
FGIC Ser 05
5.00%, 8/01/25 3,290 3,492,203
Capital Trust Agy Arpt Fac
(Cargo Acq Grp)
Ser 02 AMT
6.25%, 1/01/19 500 532,260
Ser 03 AMT
5.75%, 1/01/32 2,000 2,095,140
Concorde Estates Cmnty Dev Dist
Ser 04B
5.00%, 5/01/11 900 905,364
Crossings at Fleming Island Cmnty Dev Dist
(Eagle Harbor) Ser 00C
7.10%, 5/01/30 2,240 2,367,994
Dade Cnty Hsg Fin Auth MFHR
(Golden Lakes Apts) Ser 97A AMT
6.00%, 11/01/32 250 256,388
6.05%, 11/01/39 750 770,003
Deltona Util Sys Rev
MBIA Ser 03
5.125%, 10/01/27 2,440 2,589,157
Florida Hsg Fin Agy MFHR
(Turtle Creek Apts) AMBAC Ser 96C AMT
6.20%, 5/01/36 3,245 3,312,756
Florida Hsg Fin Corp MFHR
(Cobblestone Apts)
GNMA Ser 00K-1 AMT
6.10%, 6/01/42 7,755 8,327,707
(Logans Pointe Apts) FSA Ser 99 AMT
6.00%, 6/01/39(a) 5,080 5,329,530
(Mystic Pointe II) GNMA Ser 00 AMT
6.30%, 12/01/41 1,165 1,241,680
(Sabal Chase Apts) FSA Ser 00 AMT
6.00%, 5/01/40 3,650 3,863,416
(Spring Harbor Apts) Ser 99C-1 AMT
5.90%, 8/01/39 2,540 2,628,595
(Walker Ave Club) FSA Ser 00L-1 AMT
6.00%, 12/01/38 3,435 3,580,575
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 37
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
(Waverly Apts) FSA Ser 00C-1 AMT
6.50%, 7/01/40 $ 2,790 $ 2,960,999
Florida State Brd of Ed GO
MBIA Ser 02A
5.00%, 6/01/32(b) 2,500 2,622,375
Florida State Brd of Ed Lottery Rev
Ser 03A
5.00%, 7/01/19 4,890 5,265,454
Florida State Correctional Privatization
Comm COP
AMBAC Ser 04B
5.00%, 8/01/24 3,330 3,537,859
Gateway Cmnty Dev Dist
(Sun City) Ser 03B
5.50%, 5/01/10 425 429,794
Hamal Cmnty Dev Dist
Ser 01
6.65%, 5/01/21 1,100 1,246,674
Herons Glen Recreation Dist
Ser 99
5.90%, 5/01/19 2,680 2,835,708
Highlands Cnty Health Facs Auth
(Adventist/Sunbelt Hosp) Ser 01A
6.00%, 11/15/31 2,000 2,237,960
Indian River Cnty Sch Brd COP
Ser 05
5.00%, 7/01/23 2,480 2,629,346
Indian Trace Dev Dist Spl Assesment
(Water Management Spl Benefit)
MBIA Ser 05
5.00%, 5/01/22 680 729,048
Jacksonville Elec Auth
AMBAC Ser 02B
5.00%, 10/01/26 3,925 4,117,364
MBIA Ser 02A
5.50%, 10/01/41 5,000 5,043,900
Ser 02A
5.50%, 10/01/41 3,750 3,821,738
Lakeland Wtr & Wastewater Rev
5.25%, 10/01/32 10,000 10,654,600
Lee Cnty Arpt Rev
(Southwest Int'l Arpt) FSA Ser 00A AMT
6.00%, 10/01/32 13,500 14,643,854
Lee Cnty Health Facs Auth Rev
(Shell Point) Ser 99A
5.50%, 11/15/29 2,000 2,049,020
Manatee Cnty Hsg Fin Agy SFMR
(Mortgage Rev) GNMA
Ser 99 AMT
6.25%, 11/01/28 425 425,612
38 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Marshall Creek Cmnty Dev Dist
Ser 02A
6.625%, 5/01/32 $ 1,000 $ 1,061,830
Miami Beach Health Facs Auth Rev
(Mt Sinai Med Ctr) Ser 01A
6.80%, 11/15/31 1,600 1,775,168
Miami-Dade Cnty Hsg Fin Agy MFHR
(Cntry Club Villas Apts) Ser 99A AMT
6.20%, 10/01/39 5,145 5,377,708
(Marbrisa Apts) FSA Ser 00-2A AMT
6.15%, 8/01/38 1,515 1,610,839
Miami-Dade Cnty Hsg Fin Auth SFMR
(Home Ownership Mortgage) GNMA/FNMA
Ser 00A-1 AMT
6.00%, 10/01/32 950 959,415
Miromar Lakes Cmnty Dev Dist
Ser 00A
7.25%, 5/01/12 3,215 3,391,696
North Broward Hosp Dist Rev
Ser 01
Prerefunded
6.00%, 1/15/31 1,500 1,647,525
Unrefunded
6.00%, 1/15/31 200 216,120
North Miami Health Facs Auth Rev
(Catholic Health Svcs Oblig Grp)
6.00%, 8/15/24 1,200 1,230,300
Northern Palm Beach Assessment Dist
(Unit Dev 27B) Ser 02
6.40%, 8/01/32 1,110 1,152,968
Northern Palm Beach Cnty Impt Dist
(Mirasol Unit No. 43)
6.10%, 8/01/21 655 685,287
6.125%, 8/01/31 1,000 1,042,370
Orange Cnty Hosp Rev
(Orlando Regl) Ser 02
5.75%, 12/01/32 1,320 1,472,354
Orange Cnty Hsg Fin Auth MFHR
(Loma Vista Proj) Ser 99G AMT
5.50%, 3/01/32 2,000 2,018,560
Orange Cnty Health Facs Auth Rev
(Mayflower Retirement Proj)
Asset Gty Ser 99
5.25%, 6/01/29 1,060 1,099,591
Orlando Util Cmnty Wtr & Elec Rev
Ser 02C
5.00%, 10/01/27 7,000 7,346,850
Palm Beach Cnty Ind Dev Rev
(Lourdes-McKeen Residence) Ser 96
6.625%, 12/01/26 4,000 4,099,080
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 39
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Palm Beach Cnty Pub Impt Rev
(Biomedical Research Pk Proj) Ser 05A
5.00%, 6/01/22 $ 7,000 $ 7,454,930
Preserve at Wilderness Lake
Cmnty Dev Dist
Ser 02A
7.10%, 5/01/33 1,470 1,605,740
South Miami Health Facs Hosp Rev
(Baptist Health)
5.25%, 11/15/33 2,000 2,095,100
St. Johns Cmnty Dev Dist
(Julington Creek Plantation) Ser 97
7.125%, 5/01/19 7,725 8,035,545
St. Johns Riv Pwr Pk Sys Rev
Ser 21
5.00%, 10/01/20 6,000 6,432,840
Tallahassee Hosp Rev
(Tallahassee Memorial) Ser 00
6.375%, 12/01/30 2,750 2,926,220
Tampa Higher Ed
(Tampa University Proj) RADIAN Ser 02
5.625%, 4/01/32 3,175 3,433,604
Village Ctr Cmnty Dev Dist
5.125%, 10/01/28 1,000 1,065,740
Volusia Cnty Ed Fac Auth
(Embry Riddle Aero University) Ser 99A
5.75%, 10/15/29 2,000 2,085,800
Waterlefe Cmnty Dev Dist
Ser 01
6.95%, 5/01/31 695 741,530
West Palm Beach Cmnty Redev Agy
(Northwood-Pleasant Cmnty Redev)
5.00%, 3/01/25-3/01/29 3,640 3,788,913
-------------
185,628,346
Arizona-0.3%
Queen Creek Impt Dist No. 001
5.00%, 1/01/26 600 611,880
Colorado-0.2%
Vista Ridge Met Dist
(Ltd Tax) Ser 06A RADIAN
5.00%, 12/01/26 500 523,080
Illinois-1.2%
Chicago Increment Allocation Rev
(Diversey/Narragansett Prog)
7.46%, 2/15/26 830 891,203
Hampshire Spl Svc Area No. 14 Spl Tax
(Lakewood Crossing Subdivision)
5.80%, 3/01/26 775 785,300
40 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Manhattan
(No. 04-1-Brookstone Springs Proj) Ser 05
5.875%, 3/01/28 $ 775 $ 797,057
-------------
2,473,560
Louisiana-0.6%
Ernest N Morial Exhibit Hall Auth Spl Tax
Sub-Ser 03A
5.25%, 7/15/16-7/15/17 1,185 1,265,290
Minnesota-0.7%
St. Paul Hsg & Redev Auth Hosp Rev
(Healtheast Proj) Ser 05
6.00%, 11/15/25 500 544,790
Western Minnesota Mun Pwr Agy
Ser 06A FSA
5.00%, 1/01/17 900 985,266
-------------
1,530,056
New Jersey-1.3%
Garden State Preservation Trust
(Open Space & Farmland)
FSA Ser 05A
5.80%, 11/01/16 2,400 2,779,416
New York-0.2%
New York Liberty Dev Corp Rev
(National Sports Museum Proj) Ser 06A
6.125%, 2/15/19(c) 500 517,385
Ohio-1.5%
Cleveland Cuyahoga Port Auth
Ser 01
7.35%, 12/01/31 3,000 3,230,460
Puerto Rico-1.0%
Puerto Rico Comwlth GO
(Pub Impt)
Ser 01A
5.50%, 7/01/19 500 563,070
Ser 04A
5.25%, 7/01/19 960 1,031,875
Ser 06A
5.25%, 7/01/23 600 648,906
-------------
2,243,851
Washington-2.2%
King Cnty Sch Dist No. 414 Lake
Washington MBIA
5.00%, 12/01/24 4,500 4,810,320
Total Long-Term Municipal Bonds
(cost $196,018,375) 205,613,644
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 41
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Short-Term Municipal Notes(d)-2.4%
Florida-2.4%
Jacksonville Health Facs Auth Hosp Rev
Ser 03A
3.84%, 8/15/33 $ 4,145 $ 4,145,000
Sarasota-Manatee Arpt Auth Arpt Rev
3.84%, 8/01/14 1,000 1,000,000
Total Short-Term Municipal Notes
(cost $5,145,000) 5,145,000
Total Municipal Bonds & Notes
(cost $201,163,375) 210,758,644
SHORT-TERM INVESTMENT-0.1%
Time Deposit-0.1%
The Bank of New York
4.25%, 10/02/06
(cost $186,000) 186 186,000
Total Investments-97.9%
(cost $201,349,375) 210,944,644
Other assets less liabilities-2.1% 4,449,295
Net Assets-100% $ 215,393,939
FINANCIAL FUTURES CONTRACTS (see Note D)
Value at
Number of Expiration Original September 30, Unrealized
Type Contracts Position Month Value 2006 Appreciation
- -------------------------------------------------------------------------------------------------------
U.S. Treasury Note December
10 Yr Futures 74 Long 2006 $7,917,121 $7,996,625 $79,504
INTEREST RATE SWAP CONTRACTS (see Note D)
Rate Type
------------------------
Payment Payment
Notional made received Unrealized
Swap Amount Termination by the by the Appreciation/
Counterparty (000) Date Portfolio Portfolio (Depreciation)
- --------------------------------------------------------------------------------------------
Citigroup, Inc. $ 2,200 6/22/07 BMA* 2.962% $ (10,005)
Goldman Sachs & Co. 1,100 1/05/07 BMA* 3.405% (1,315)
JPMorgan Chase & Co. 2,000 4/05/07 BMA* 2.988% (9,173)
JPMorgan Chase & Co. 1,100 10/01/07 BMA * 3.635% 1,200
Merrill Lynch 1,100 7/12/08 BMA* 3.815% 7,300
Merrill Lynch 5,300 10/21/16 BMA* 4.129% 167,350
Morgan Stanley 1,100 10/06/06 BMA* 3.217% (1,018)
* Variable interest based on the BMA (Bond Market Association)
42 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
(a) Represents entire or partial position segregated as collateral for
interest rate swap contracts.
(b) Position, or portion thereof with an aggregate market value of $136,364
has been segregated to collateralize margin requirements for open futures
contracts.
(c) Private Placement.
(d) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specific date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). This instrument is payable on demand and is secured by
letters of credit or other credit support agreements from major banks.
Glossary of Terms:
AMBAC - American Municipal Bond Assurance Corporation
AMT - Alternative Minimum Tax
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Company
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance, Inc.
GNMA - Government National Mortgage Association
GO - General Obligation
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-Family Housing Revenue
RADIAN - Radian Group, Inc.
SFMR - Single Family Mortgage Revenue
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 43
MASSACHUSETTS PORTFOLIO
PORTFOLIO OF INVESTMENTS
September 30, 2006
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES-98.8%
Long-Term Municipal Bonds-88.2%
Massachusetts-65.3%
Massachusetts Bay Trans Auth
Ser 04A
5.25%, 7/01/21(a) $ 2,000 $ 2,212,580
Massachusetts Dev Fin Agy
(Massachusetts Biomedical) Ser 00C
6.25%, 8/01/20 3,000 3,260,550
(Worcester Redev) Asset Gty Ser 99
5.25%, 6/01/19 2,350 2,461,390
Massachusetts Ed Fac
(Massachusetts College of Pharmacy)
Ser 99B
6.75%, 7/01/30 3,350 3,706,273
(Suffolk University) Ser 99
5.85%, 7/01/29 1,375 1,466,726
Massachusetts Ed Fin Auth
(Educational Loan) MBIA Ser 00G AMT
6.00%, 12/01/16 975 1,000,789
Massachusetts Health & Edl Fac Auth
(Berkshire Healthcare) Asset Gty Ser 01E
5.70%, 10/01/25 4,000 4,352,920
(Cape Cod Healthcare) Asset Gty Ser 01C
5.25%, 11/15/31 2,600 2,744,144
(Covenant Med Ctr) Ser 02
6.00%, 7/01/31 2,500 2,730,900
(New England Med Ctr) FGIC Ser 02H
5.00%, 5/15/25 2,000 2,092,420
(Partners Healthcare Sys) Ser 01C
5.75%, 7/01/32 4,000 4,312,720
(University of Massachusetts Proj) MBIA
Ser 02C
5.25%, 10/01/31(b) 6,440 6,893,439
(Winchester Hosp) Ser 00E
6.75%, 7/01/30 4,500 4,977,270
Massachusetts Hsg Fin Agy MFHR
(Rental Mtg) AMT
AMBAC Ser 95E
6.00%, 7/01/41 4,125 4,384,421
MBIA Ser 00H
6.65%, 7/01/41 4,750 5,080,458
Massachusetts Ind Fin Agy MFHR
(Heights Crossing) FHA Ser 95 AMT
6.15%, 2/01/35 6,000 6,106,740
44 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Massachusetts Port Auth Spl Fac
(Bosfuel Corp.) MBIA Ser 97 AMT
6.00%, 7/01/36 $ 6,155 $ 6,333,803
(US Air Proj) MBIA Ser 96A AMT
5.875%, 9/01/23 2,000 2,043,100
Massachusetts State Dev Fin Agy
(Pharmacy & Allied Health) Ser 05D
5.00%, 7/01/24 3,500 3,666,320
Massachusetts State GO
Ser 02
Prerefunded
5.25%, 11/01/30 3,075 3,333,854
Ser 05A
5.00%, 3/01/17 5,000 5,394,600
Massachusetts State Sch Bldg Auth
(Dedicated Sales Tax Rev) Ser 05A
5.00%, 8/15/19 7,000 7,550,269
Massachusetts State Spl Oblig Rev
(Cons Ln) Ser 05A
5.00%, 6/01/23 1,500 1,603,125
Massachusetts State Wtr Pollutn Abatement
(Pool Proj Bds) Ser 10
5.00%, 8/01/24 5,000 5,312,100
-------------
93,020,911
Arizona-1.9%
Goodyear Indl Dev Auth Wtr & Sewer Rev
(Litchfield Pk Svc Proj) Ser 01 AMT
6.75%, 10/01/31 1,160 1,270,467
Stoneridge Cmnty Fac Dist
Ser 01
6.75%, 7/15/26 1,265 1,402,379
-------------
2,672,846
California-0.7%
California State GO
5.25%, 11/01/25 1,000 1,069,970
Colorado-0.4%
Murphy Creek Met Dist No. 3
(Ref & Impt) Ser 06
6.00%, 12/01/26 500 531,310
Florida-1.3%
Crossings at Fleming Island
Cmnty Dev Dist
(Eagle Harbor) Ser 00C
7.10%, 5/01/30 1,750 1,849,995
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 45
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Georgia-0.4%
Atlanta Tax Allocation
(Eastside Proj) Ser 05B
5.60%, 1/01/30 $ 500 $ 518,665
Illinois-0.6%
Bolingbrook Sales Tax Rev
6.25%, 1/01/24 500 480,270
Plano Spl Svc Area No. 3 Spl Tax
(Lakewood Springs Proj) Ser 05A
5.95%, 3/01/28 395 402,592
-------------
882,862
Nevada-1.4%
Clark Cnty Impt Dist No. 142
Ser 03
6.10%, 8/01/18 1,000 1,037,020
Henderson Loc Impt Dist
Ser 03
5.80%, 3/01/23 920 950,848
-------------
1,987,868
New Jersey-2.0%
Garden State Presevation Trust
(Open Space & Farmland) Ser 05A
5.80%, 11/01/17 2,500 2,884,825
Puerto Rico-14.2%
Puerto Rico Comwlth GO
(Pub Impt)
Ser 01A
5.50%, 7/01/19 500 563,070
Ser 06A
5.25%, 7/01/22 500 541,585
Puerto Rico Comwlth Govt Dev Bank
Ser 06B
5.00%, 12/01/15 500 536,020
Puerto Rico Comwlth Hwy & Trans Auth Rev
FGIC Ser 03G
5.25%, 7/01/14 4,225 4,630,811
FGIC Subordiante Ser 03
5.25%, 7/01/14 4,410 4,833,581
Puerto Rico Elec Pwr Auth Rev
XLCA Ser 02-1
5.25%, 7/01/22 6,400 6,912,063
Puerto Rico Hsg Fin Auth
(Cap Fd Prog) HUD LN
5.00%, 12/01/20 1,740 1,836,205
Puerto Rico Municipal Fin Agy
Ser 05A
5.25%, 8/01/23 275 295,675
-------------
20,149,010
46 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Total Long-Term Municipal Bonds
(cost $118,898,725) $ 125,568,262
Short-Term Municipal Notes(c)-10.6%
Alaska-1.8%
Valdez Marine Term Rev
(BP Pipelines, Inc. Proj)
Ser 03B
3.85%, 7/01/37 $ 1,000 1,000,000
Ser 03C
3.85%, 7/01/37 1,500 1,500,000
-------------
2,500,000
Massachusetts-7.0%
Massachusetts Dev Fin Agy Rev
(Higher Ed-Smith College) Ser 02
3.65%, 7/01/29 4,000 4,000,000
Massachusetts Health & Edl Facs Auth Rev
(Cap Asset Prog)
Ser 85C
3.80%, 7/01/10 500 500,000
Ser 85E
3.80%, 1/01/35 500 500,000
(Harvard University) Ser 99R
3.84%, 11/01/49 4,000 4,000,000
Massachusetts State GO
Ser 06A
3.82%, 3/01/26 1,000 1,000,000
-------------
10,000,000
New York-1.8%
New York City Mun Wtr Fin Auth Wtr & Swr
Sys Rev
(2nd Gen Resolution) Ser 05 AA-1
3.84%, 6/15/32 2,500 2,500,000
Total Short-Term Municipal Notes
(cost $15,000,000) 15,000,000
Total Municipal Bonds & Notes
(cost $133,898,725) 140,568,262
SHORT-TERM INVESTMENT-0.0%
Time Deposit-0.0%
The Bank of New York
4.25%, 10/02/06
(cost $102,000) 102 102,000
Total Investments-98.8%
(cost $134,000,725) 140,670,262
Other assets less liabilities-1.2% 1,672,016
Net Assets-100% $ 142,342,278
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 47
FINANCIAL FUTURES CONTRACTS (see Note D)
Value at
Number of Expiration Original September 30, Unrealized
Type Contracts Position Month Value 2006 Appreciation
- -------------------------------------------------------------------------------------------------------
U.S. Treasury Note December
10 Yr Futures 30 Long 2006 $3,209,644 $3,241,875 $32,231
INTEREST RATE SWAP CONTRACTS (see Note D)
Rate Type
------------------------
Payment Payment
Notional made received Unrealized
Swap Amount Termination by the by the Appreciation/
Counterparty (000) Date Portfolio Portfolio (Depreciation)
- --------------------------------------------------------------------------------------------
Citigroup, Inc. $1,400 6/22/07 BMA* 2.962% $ (6,367)
Goldman Sachs & Co. 700 1/05/07 BMA* 3.405% (836)
JPMorgan Chase & Co. 700 10/01/07 BMA* 3.635% 764
Merrill Lynch 700 7/12/08 BMA* 3.815% 4,645
Merrill Lynch 5,100 10/01/16 BMA* 4.148% 170,002
Morgan Stanley 700 10/06/06 BMA* 3.217% (648)
Morgan Stanley 1,200 4/05/07 BMA* 2.988% (5,504)
* Variable interest based on the BMA (Bond Market Association)
(a) Position, or portion thereof with an aggregate market value of $66,377,
has been segregated to collateralize margin requirements for open future
contracts.
(b) Represents entire or partial position segregated as collateral for
interest rate swap contracts.
(c) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specific date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). This instrument is payable on demand and is secured by
letters of credit or other credit support agreements from major banks.
Glossary of Terms:
AMBAC - American Municipal Bond Assurance Corporation
AMT - Alternative Minimum Tax
FGIC - Financial Guaranty Insurance Company
FHA - Federal Housing Authority
GO - General Obligation
HUD LN - Department of Housing and Urban Development
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-Family Housing Revenue
XLCA - XL Capital Assurance, Inc.
See notes to financial statements.
48 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
MICHIGAN PORTFOLIO
PORTFOLIO OF INVESTMENTS
September 30, 2006
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
MUNICIPAL BONDS-97.1%
Long-Term Municipal Bonds-97.1%
Michigan-75.1%
Allen Park Pub Sch Dist GO
(Sch Bldg & Site) Ser 03
5.00%, 5/01/13-5/01/22 $15,510 $ 16,566,555
Cedar Springs Pub Sch Dist
Ser 03
5.00%, 5/01/28 1,835 1,920,658
Charles Stewart Mott Cmnty College
(Cmnty College Facs) MBIA
5.00%, 5/01/21 1,675 1,786,756
Detroit GO AMBAC
Ser 04A-1
5.25%, 4/01/22 6,930 7,402,696
Detroit Sch Brd
(Sch Brd Loan Fund) FSA Ser 01A
5.125%, 5/01/31 2,900 3,115,441
Detroit Tax Increment
(Daimler/Chrysler Assembly Plant)
Ser 98A
5.50%, 5/01/21 1,625 1,554,833
Detroit Water Supply Sys
FGIC Ser 01B
5.50%, 7/01/33 3,550 3,877,878
Genesee Cnty GO
(Water Supply Sys) AMBAC Ser 04
5.00%, 11/01/26 3,000 3,177,570
Kalamazoo Hosp Fin Auth
(Borgess Med Ctr) FGIC Ser 94A
6.71%, 6/01/11(a) 2,360 2,373,499
Kent Hosp Fin Auth Rev
(Metropolitan Hosp Proj) Ser 05A
5.75%, 7/01/25 210 227,048
Lansing Water & Elec Sys
FSA Ser 03A
5.00%, 7/01/25 2,200 2,311,496
Michigan Higher Ed Fac
(Hope College) Ser 02A
5.90%, 4/01/32 3,465 3,710,876
Michigan Higher Ed Student Loan Auth
AMBAC Ser 17G AMT
5.20%, 9/01/20 3,500 3,671,990
Michigan Hosp Fin Auth
(Crittenton Hosp) Ser 02A
5.625%, 3/01/27 1,250 1,340,300
(Trinity Health) Ser 00A
6.00%, 12/01/27 1,485 1,623,387
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 49
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Michigan Hosp Fin Auth Rev
(Chelsea Cmnty Hosp Oblig)
5.00%, 5/15/25 $ 415 $ 423,715
(Marquette Gen Hosp Oblig Grp A)
5.00%, 5/15/26 785 801,485
Michigan Hsg Dev Auth MFHR
(Arbor Pointe) GNMA Ser 99
5.40%, 6/20/40 1,810 1,856,698
(Danbury Manor) FNMA Ser 02A AMT
5.30%, 6/01/35(a) 2,490 2,583,275
(Oakbrook Village Proj) GNMA Ser 00A AMT
6.50%, 1/20/42 2,970 3,170,148
(Rental Rev) AMBAC Ser 97A AMT
6.10%, 10/01/33(b) 5,400 5,573,719
(Rental Rev) Ser 02A AMT
5.50%, 10/20/43 1,950 2,030,496
Michigan Municipal Bond Auth Rev
(Sch Dist City Of Detroit) FSA
5.00%, 6/01/20 2,000 2,128,480
Michigan State
(Trunk Line Fund) FSA
Ser 01A
5.25%, 11/01/30 4,000 4,301,600
Michigan Strategic Fund
(Detroit Edison) XLCA Ser 02C AMT
5.45%, 12/15/32 3,000 3,195,810
Michigan Strategic Fund Health Fac
(Autumn Wood) GNMA Ser 02A
5.20%, 12/20/22 3,000 3,183,510
(Holland Home) Ser 98
5.75%, 11/15/18-11/15/28 2,000 2,105,660
North Muskegon Sch Dist
Ser 03
5.25%, 5/01/28 1,500 1,641,885
Olivet Sch Brd Fund
Ser 02
5.125%, 5/01/28 1,065 1,153,491
Ovid Elsie Schs Brd Fund
Ser 02
5.00%, 5/01/25 2,650 2,852,248
Plymouth Edl Ctr Chrtr Sch Pub Sch
Academy Rev
Ser 05
5.125%, 11/01/18 1,050 1,068,333
Pontiac Tax Increment Fin Auth
(Dev Area No. 3) Ser 02
6.25%, 6/01/22 1,280 1,379,814
Royal Oak Hosp Fin Auth
(William Beaumont Hosp) MBIA Ser 01M
5.25%, 11/15/35 3,200 3,326,176
50 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Saginaw Hosp Fin Auth
(Convenant Med Ctr) Ser 00F
6.50%, 7/01/30 $ 1,770 $ 1,947,212
Southfield Michigan Libr Bldg Auth MBIA
5.00%, 5/01/25 3,340 3,523,232
-------------
102,907,970
California-1.7%
California Health Fac Fin Auth
(Sutter Health) Ser 00A
6.25%, 8/15/35 1,100 1,217,161
California State GO
5.25%, 11/01/25 1,000 1,069,970
-------------
2,287,131
Florida-4.3%
Collier Cnty Cmnty Dist
(Fiddlers Creek) Ser 96
7.50%, 5/01/18 1,275 1,303,509
Crossings at Fleming Island Cmnty Dev Dist
(Eagle Harbor) Ser 00C
7.10%, 5/01/30 1,835 1,939,852
Double Branch Cmnty Dev Dist
(Oakleaf Village) Ser 02A
6.70%, 5/01/34 975 1,070,891
Gateway Cmnty Dev Dist
(Sun City) Ser 03B
5.50%, 5/01/10 420 424,738
Northern Palm Beach Assessment Dist
(Unit Dev 27B) Ser 02
6.40%, 8/01/32 780 810,194
Waterlefe Cmnty Dev Dist
Ser 01B
6.25%, 5/01/10 385 388,403
-------------
5,937,587
Illinois-1.1%
Antioch Village Spcl Svc Area
(Clublands Proj) Ser 03
6.625%, 3/01/33 500 527,565
(Deercrest Proj) Ser 03
6.625%, 3/01/33 500 527,565
Plano Spl Svc Area No. 3 Spl Tax
(Lakewood Springs Proj) Ser 05A
5.95%, 3/01/28 395 402,592
-------------
1,457,722
Puerto Rico-14.9%
Puerto Rico Comwlth GO
(Pub Impt)
Ser 01A
5.50%, 7/01/19 500 563,070
Ser 06A
5.25%, 7/01/22 500 541,585
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 51
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Puerto Rico Elec Pwr Auth Rev
XLCA Ser 02-1
5.25%, 7/01/22 $ 5,000 $ 5,400,049
Puerto Rico Hsg Fin Auth
5.00%, 12/01/17 3,160 3,336,107
Puerto Rico Hsg Fin Corp SFMR
(Mortgage Rev) AMT
Ser 01B GNMA
5.50%, 12/01/23 2,010 2,061,235
(Mortgage Rev) Ser 01C AMT
5.30%, 12/01/28 1,770 1,805,683
Puerto Rico Ind Fin Auth Health Fac
(Ascension Health) Ser 00A
6.125%, 11/15/30 3,000 3,317,880
Puerto Rico Municipal Fin Agy
Ser 05A
5.25%, 8/01/23 275 295,675
Puerto Rico Pub Fin Corp.
MBIA Ser 01A
5.00%, 8/01/31 2,875 3,063,485
-------------
20,384,769
Total Long-Term Municipal Bonds
(cost $127,146,084) 132,975,179
SHORT-TERM INVESTMENT -0.1%
Time Deposit-0.1%
The Bank of New York
4.25%, 10/02/06
(cost $187,000) 187 187,000
Total Investments-97.2%
(cost $127,333,084) 133,162,179
Other assets less liabilities-2.8% 3,844,730
Net Assets-100% $ 137,006,909
INTEREST RATE SWAP CONTRACTS (see Note D)
Rate Type
------------------------
Payment Payment
Notional made received Unrealized
Swap Amount Termination by the by the Appreciation/
Counterparty (000) Date Portfolio Portfolio (Depreciation)
- --------------------------------------------------------------------------------------------
Citigroup, Inc. $ 1,400 6/22/07 BMA* 2.962% $ (6,367)
Goldman Sachs & Co. 700 1/05/07 BMA* 3.405% (837)
JPMorgan Chase & Co. 1,300 4/05/07 BMA* 2.988% (5,962)
JPMorgan Chase & Co. 700 10/01/07 BMA* 3.635% 764
Merrill Lynch 700 7/12/08 BMA* 3.815% 4,645
Merrill Lynch 6,200 10/01/16 BMA* 4.148% 206,669
Morgan Stanley 700 10/06/06 BMA* 3.217% (648)
* Variable interest based on the BMA (Bond Market Association)
52 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
(a) Inverse floater--security with variable or floating interest rate that
moves in opposite direction of short-term interest rates.
(b) Represents entire or partial position segregated as collateral for
interest rate swap contracts.
Glossary of Terms:
AMBAC - American Municipal Bond Assurance Corporation
AMT - Alternative Minimum Tax
FGIC - Financial Guaranty Insurance Company
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance, Inc.
GNMA - Government National Mortgage Association
GO - General Obligation
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-Family Housing Revenue
SFMR - Single Family Mortgage Revenue
XLCA - XL Capital Assurance, Inc.
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 53
MINNESOTA PORTFOLIO
PORTFOLIO OF INVESTMENTS
September 30, 2006
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES-102.9%
Long-Term Municipal Bonds-97.6%
Minnesota-97.6%
Bemidji Health Fac
(North Country Health Svcs) RADIAN Ser 02
5.00%, 9/01/31 $ 1,500 $ 1,549,470
Brooklyn Park MFHR
(Brooks Landing) FNMA Ser 99A AMT
5.50%, 7/01/19 1,355 1,408,658
Cass Lake Sch Dist FGIC
5.00%, 2/01/26 1,760 1,851,379
Chaska Elec Rev
(Generating Facs) Ser 05A
5.25%, 10/01/25 1,000 1,079,510
Farmington Indpt Sch Dist No. 192
FSA Ser 05B
5.00%, 2/01/24 3,875 4,124,278
Golden Valley Health Fac
(Convenant Retirement Cmnty) Ser 99A
5.50%, 12/01/29 1,000 1,035,340
Little Canada MFHR
(Cedars Lakeside Apts) GNMA Ser 97A
5.95%, 2/01/32 2,650 2,713,097
Minneapolis & St. Paul Arpt Rev
FGIC Ser 00B AMT
6.00%, 1/01/21 3,455 3,703,069
MBIA Ser 03A
5.00%, 1/01/28 1,500 1,564,350
Minneapolis Common Bond Fund
Ser 97-2 AMT
6.20%, 6/01/17 1,325 1,346,876
Ser 01G-3
5.45%, 12/01/31 1,500 1,628,760
Minneapolis Health Care Sys Rev
(Fairview Health Svcs) Ser 05D
5.00%, 11/15/30 1,000 1,056,910
Minneapolis Hosp Rev
(Allina Health Sys) Ser 02A
5.75%, 11/15/32 1,500 1,618,275
Minneapolis MFHR
(Bottineau Commons Proj) GNMA Ser 02 AMT
5.45%, 4/20/43 2,000 2,060,620
(Sumner Field) GNMA Ser 02 AMT
5.60%, 11/20/43 2,505 2,589,995
Minneapolis Pkg Assmt GO
MBIA Ser 02
5.25%, 12/01/26 2,000 2,178,420
54 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Minnesota Agric & Eco Dev
(Small Business Loan Proj) AMT
Ser 00C
7.25%, 8/01/20 $ 1,000 $ 1,055,520
Ser 00D
7.25%, 8/01/20 1,000 1,055,520
Minnesota Agric & Eco Dev Health Fac
(Benedictine Health Sys) MBIA Ser 99
5.125%, 2/15/29(a)(b) 4,000 4,157,239
(Evangelical Lutheran Proj) Ser 02
6.00%, 2/01/22-2/01/27 2,880 3,131,475
(Prerefunded-Health Care Sys) Ser 00A
6.375%, 11/15/29 1,700 1,894,174
Minnesota Higher Ed Fac Auth
(College Art & Design) Ser 00-5D
6.75%, 5/01/26 1,000 1,103,340
(Hamline University) Ser 99-5B
6.00%, 10/01/29 1,250 1,313,713
(St. Catherine College)
5.375%, 10/01/32 1,000 1,052,470
(University of St. Thomas) Ser 04-5
5.00%, 10/01/24 1,000 1,053,140
5.25%, 10/01/34 1,000 1,064,370
Minnesota Hsg Fin Agy SFMR
Ser 96F AMT
6.30%, 1/01/28 655 663,358
Ser 96G AMT
6.25%, 7/01/26 1,015 1,027,931
Ser 98H AMT
6.05%, 7/01/31 1,880 1,915,513
Minnesota Municipal Pwr Agy Elec
Ser 04A
5.25%, 10/01/24 500 536,730
Minnesota Municipal Pwr Agy Elec Rev
5.25%, 10/01/21 3,000 3,259,620
Minnetonka MFHR
(Archer Heights Apts Proj)
GNMA Ser 99A AMT
5.30%, 1/20/27 1,620 1,672,277
North St. Paul Maplewood Indpt Sch Dist No. 622
Ser 06B FSA
5.00%, 8/01/20(c) 3,425 3,710,474
Prior Lake Indpt Sch Dist No. 719
(School Bldg) Ser 05B FSA
5.00%, 2/01/23 3,350 3,570,397
Seaway Port Auth Duluth
Indl Dev Dock & Wharf
(Cargill, Inc. Proj) Ser 04
4.20%, 5/01/13 2,150 2,148,710
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 55
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Shakopee Health Care Facs
(St. Francis Regl Med Ctr) Ser 04
5.10%, 9/01/25 $ 600 $ 625,734
Shoreview MFHR
(Lexington Shores Proj)
GNMA Ser 01A AMT
5.55%, 8/20/42 1,445 1,486,789
St. Paul Recreational Facs Gross Rev
(Highland National Proj)
5.00%, 10/01/20-10/01/25 2,750 2,939,033
St. Cloud Hosp Rev
(Saint Cloud Hosp) FSA Ser 00A
5.875%, 5/01/30 3,750 4,035,262
St. Paul Hsg & Redev Auth Hosp Rev
(Healtheast Proj) Ser 05
6.00%, 11/15/25 500 544,790
St. Paul MFHR
(Burlington Apt-8) GNMA
5.35%, 5/01/31 1,550 1,565,531
St. Paul Pkg Auth Rev
(Block 19 Ramp) FSA Ser 02A
5.35%, 8/01/29 3,075 3,280,656
St. Paul Port Auth Lease Rev
(Cedar Street Office Building) Ser 03
5.00%, 12/01/23 1,000 1,053,390
Ser 02
5.25%, 12/01/27 1,725 1,829,984
Waconia Health Care Fac Rev
(Ridgeview Med Ctr) RADIAN Ser 99A
6.125%, 1/01/29 3,415 3,645,103
Western Municipal Pwr Agy
Ser 06A FSA
5.00%, 1/01/17 700 766,318
Western Power Agy
MBIA Ser 03A
5.00%, 1/01/26-1/01/30 3,100 3,247,896
White Bear Lake MFHR
(Renova Partners Proj)
FNMA Ser 01 AMT
5.60%, 10/01/30 1,000 1,035,650
Willmar Hosp Rev
(Rice Mem Hosp Proj) FSA Ser 02
5.00%, 2/01/32 2,000 2,090,220
Total Long-Term Municipal Bonds
(cost $90,698,689) 95,041,334
Short-Term Municipal Notes(d)-5.3%
Massachusetts-0.2%
Massachusetts Health & Edl Facs Auth Rev
(Capital Asset Prog) Ser 85C
3.80%, 7/01/10 200 200,000
56 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Minnesota-4.6%
Minnesota Higher Ed Facs Auth Rev
(Carleton College) Ser 05D
3.55%, 4/01/35 $ 4,500 $ 4,500,000
Oklahoma-0.5%
Tulsa Cnty Indl Auth Rev
(First Mtge) Ser 02A
3.86%, 7/01/32 500 500,000
Total Short-Term Municipal Notes
(cost $5,200,000) 5,200,000
Total Municipal Bonds & Notes
(cost $95,898,689) 100,241,334
SHORT-TERM INVESTMENT-0.2%
Time Deposit-0.2%
The Bank of New York
4.25%, 10/02/06
(cost $156,000) 156 156,000
Total Investments-103.1%
(cost $96,054,689) 100,397,334
Other assets less liabilities-(3.1%) (3,013,403)
Net Assets-100% $ 97,383,931
INTEREST RATE SWAP CONTRACTS (see Note D)
Rate Type
------------------------
Payment Payment
Notional made received Unrealized
Swap Amount Termination by the by the Appreciation/
Counterparty (000) Date Portfolio Portfolio (Depreciation)
- --------------------------------------------------------------------------------------------
Citigroup, Inc. $1,000 6/22/07 BMA* 2.962% $ (4,548)
Goldman Sachs & Co. 500 1/05/07 BMA* 3.405% (597)
JPMorgan Chase & Co. 900 4/05/07 BMA* 2.988% (4,128)
JPMorgan Chase & Co. 500 10/01/07 BMA* 3.635% 545
Merrill Lynch 500 7/12/08 BMA* 3.815% 3,318
Merrill Lynch 3,500 8/01/16 BMA* 4.071% 99,091
Morgan Stanley 500 10/06/06 BMA* 3.217% (463)
* Variable interest based on the BMA (Bond Market Association)
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 57
(a) Represents entire or partial position segregated as collateral for
interest rate swap contracts.
(b) Represents entire or partial position segregated as collateral for when
issued and delayed delivery securities.
(c) When-Issued security.
(d) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specific date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). This instrument is payable on demand and is secured by
letters of credit or other credit support agreements from major banks.
Glossary of Terms:
AMT - Alternative Minimum Tax
FGIC - Financial Guaranty Insurance Company
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance, Inc.
GNMA - Government National Mortgage Association
GO - General Obligation
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-Family Housing Revenue
RADIAN - Radian Group, Inc.
SFMR - Single Family Mortgage Revenue
See notes to financial statements.
58 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
NEW JERSEY PORTFOLIO
PORTFOLIO OF INVESTMENTS (As Restated-See Note K)
September 30, 2006
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES-103.3%
Long-Term Municipal Bonds-101.7%
New Jersey-89.6%
Bergen Cnty Impt Auth Sch
(Wyckoff Twp Brd Ed Proj) Ser 05
5.00%, 4/01/25 $ 1,555 $ 1,651,068
Hoboken Parking Auth
AMBAC Ser 01A
5.30%, 5/01/27 3,700 4,032,445
Lafayette Yard Com Dev Corp.
(Conv Ctr Hotel Proj) MBIA Ser 00
5.80%, 4/01/35 2,100 2,273,166
Middlesex Cnty MFHR
FNMA Ser 01 AMT
5.25%, 7/01/21 750 795,735
Morris-Union Jointure Commn COP
RADIAN Ser 04
5.00%, 5/01/24 2,200 2,302,960
New Jersey Eco Dev Auth
(American Wtr Co.) FGIC AMT
6.875%, 11/01/34 5,000 5,011,650
(Anheuser-Busch) Ser 95 AMT
5.85%, 12/01/30 2,500 2,539,750
(Hackensack Wtr Co.)
MBIA Ser 94B AMT
5.90%, 3/01/24 4,000 4,035,880
(Kapkowski Rd) Ser 98B
6.50%, 4/01/28 4,500 5,467,770
(Liberty State Park Proj) Ser A
5.00%, 3/01/24 1,500 1,587,405
(Masonic Charity Foundation Proj)
Ser 01
5.50%, 6/01/31 1,000 1,072,670
Ser 02
5.25%, 6/01/24 540 577,130
(NUI Corp.) ACA Ser 98A AMT
5.25%, 11/01/33 3,700 3,789,688
(Pub Svc Elec & Gas) MBIA Ser 94A AMT
6.40%, 5/01/32 5,000 5,006,600
(Sch Facs Construction)
5.25%, 3/01/25 3,300 3,557,763
New Jersey Eco Dev Auth Sch Fac
2001 Series A
5.00%, 6/15/21(c) 9,000 9,555,570
5.25%, 9/01/24 2,510 2,781,808
New Jersey Health Care Fac
(Atlantic City Med Ctr) Ser 02
5.75%, 7/01/25 1,875 1,995,206
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 59
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
(Bayshore Cmnty Hosp) RADIAN Ser 02
5.125%, 7/01/32 $ 9,250 $ 9,626,105
(Capital Health Sys) Ser 03
5.00%, 7/01/26 1,250 1,289,575
(Good Shepherd) RADIAN Ser 01A
5.20%, 7/01/31 1,350 1,410,359
(Kennedy Health Sys) Ser 01
5.625%, 7/01/31 2,700 2,867,238
(Newton Memorial Hosp) FSA Ser 01
5.00%, 7/01/26 1,500 1,565,160
(Palisades Med Ctr) ACA Ser 99
5.25%, 7/01/28 1,000 1,024,450
(Southern Ocean County Hosp) RADIAN
Ser 01
5.125%, 7/01/31 4,500 4,682,880
(Wood Johnson) Ser 00
5.75%, 7/01/31 3,350 3,597,398
New Jersey Health Care Facs Fin Auth Rev
(St. Clare's Hosp, Inc.) RADIAN Ser 04A
5.25%, 7/01/23 2,085 2,214,124
New Jersey Higher Ed
(Student Loan) MBIA Ser 00A AMT
6.15%, 6/01/19 870 893,603
New Jersey Hsg & Mtg Fin Agy MFHR
(Rental Hsg) FSA Ser 00A1 AMT
6.35%, 11/01/31 2,000 2,100,140
New Jersey State Ed Facs Auth Rev
(Higher Ed Cap Impt) Ser 02A
5.125%, 9/01/22 2,500 2,657,425
(Princeton University) Ser 05A
5.00%, 7/01/23 3,480 3,729,064
(Ramapo College of New Jersey)
AMBAC Ser 01D
5.00%, 7/01/31 1,000 1,039,680
FGIC Ser 04E
5.00%, 7/01/23-07/01/28 3,250 3,449,325
New Jersey State Trans Auth
(Trans Sys) Ser 03C
5.50%, 6/15/24 3,750 4,165,725
New Jersey Trans Trust Fund
FGIC Ser 06A
5.00%, 6/15/18 3,400 3,682,234
Newark Hsg Auth
(Newark Marine Terminal) MBIA Ser 04
5.25%, 1/01/21-1/01/22(a) 3,580 3,891,567
North Hudson Swr Auth
MBIA Ser 01A
Zero coupon, 8/01/24 12,340 5,592,118
Port Auth of NY & NJ
(121st) MBIA Ser 00
5.375%, 10/15/35 5,000 5,135,600
60 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
(126th) FGIC Ser 02
5.25%, 5/15/37 $ 2,500 $ 2,638,200
(JFK Int'l Arpt Proj) MBIA Ser 97-6 AMT
5.75%, 12/01/22 7,675 7,987,756
Salem Cnty PCR
(PSE&G Pwr) Ser 01A AMT
5.75%, 4/01/31 1,500 1,608,885
South Jersey Port Corp.
(Marine Terminal) AMT
5.20%, 1/01/23 1,000 1,048,190
South Jersey Trans Auth
(Raytheon Aircraft Svcs) Ser 97A AMT
6.15%, 1/01/22 335 340,132
Union Cnty Impt Auth
MBIA Ser 03A
5.25%, 8/15/23 2,885 3,122,839
Vineland Swr Rev
(Landis Sewerage) FGIC Ser 93C
7.935%, 9/19/19 3,250 3,965,910
-------------
143,359,946
California-0.7%
California State GO
5.25%, 11/01/25 1,000 1,069,970
Colorado-0.3%
Northwest Met Dist No. 3 GO
6.125%, 12/01/25 500 530,570
Florida-3.4%
Crossings at Fleming Island Cmnty Dev Dist
(Eagle Harbor) Ser 00C
7.10%, 5/01/30 2,500 2,642,850
Double Branch Cmnty Dev Dist
(Oakleaf Village) Ser 02A
6.70%, 5/01/34 990 1,087,367
Hammock Bay Cmnty Dev Dist
(Spl Assessment) Ser 04A
6.15%, 5/01/24 300 321,453
Northern Palm Beach Assessment Dist
(Unit Dev 27B) Ser 02
6.40%, 8/01/32 1,265 1,313,968
-------------
5,365,638
Guam-0.3%
Guam Govt Wtrwks Auth Wtr & Wastewtr Sys Rev
6.00%, 7/01/25 500 546,930
Illinois-1.0%
Antioch Village Spl Svc Area
(Clublands Proj) Ser 03
6.625%, 3/01/33 1,000 1,055,130
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 61
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Plano Spl Svc Area No. 3 Spl Tax
(Lakewood Springs Proj) Ser 05A
5.95%, 3/01/28 $ 550 $ 560,571
-------------
1,615,701
Nevada-0.6%
Henderson Loc Impt Dist
Ser 03
5.80%, 3/01/23 885 914,674
Ohio-0.3%
Port Auth Columbiana Cnty
Ohio Solid Waste Fac Rev
(Apex Environmental LLC) Ser 04A AMT
7.125%, 8/01/25 500 507,860
Pennsylvania-1.1%
Delaware Riv Jt Toll Bridge Rev
(PA/NJ Bridge) Ser 03
5.00%, 7/01/28 1,625 1,693,754
Puerto Rico-3.6%
Puerto Rico Comwlth GO
(Pub Impt)
Ser 01A
5.50%, 7/01/19 500 563,070
Ser 04A
5.25%, 7/01/19 710 763,158
Ser 06A
5.25%, 7/01/22 500 541,585
Puerto Rico Hsg Fin Auth Rev
5.00%, 12/01/17 3,665 3,869,250
-------------
5,737,063
Virginia-0.8%
Broad Street Cmnty Dev Dist
(Parking Fac) Ser 03
7.50%, 6/01/33 1,200 1,316,928
Total Long-Term Municipal Bonds
(cost $152,961,107) 162,659,034
Short-Term Municipal Notes(b)-1.6%
Massachusetts-1.3%
Massachusetts State GO
(Central Artery) Ser 00A
3.85%, 12/01/30 2,000 2,000,000
Virginia-0.3%
Loudoun Cnty Indl Dev Auth Rev
(Howard Hughes Med) Ser 03A
3.84%, 2/15/38 500 500,000
62 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Value
- -------------------------------------------------------------------------------
Total Short-Term Municipal Notes
(cost $2,500,000) $ 2,500,000
Total Investments-103.3%
(cost $155,461,107) 165,159,034
Other assets less liabilities-(3.3)% (5,263,241)
Net Assets-100% $ 159,895,793
INTEREST RATE SWAP CONTRACTS (see Note D)
Rate Type
------------------------
Payment Payment
Notional made received Unrealized
Swap Amount Termination by the by the Appreciation/
Counterparty (000) Date Portfolio Portfolio (Depreciation)
- --------------------------------------------------------------------------------------------
Citigroup, Inc. $1,800 6/22/07 BMA* 2.962% $ (8,186)
Goldman Sachs & Co. 900 1/05/07 BMA* 3.405% (1,076)
JPMorgan Chase & Co. 1,700 4/05/07 BMA* 2.988% (7,797)
JPMorgan Chase & Co. 800 10/01/07 BMA* 3.635% 873
Merrill Lynch 800 7/12/08 BMA* 3.815% 5,309
Merrill Lynch 3,000 10/21/16 BMA* 4.129% 94,726
Morgan Stanley 900 10/06/06 BMA* 3.217% (833)
* Variable interest based on the BMA (Bond Market Association)
(a) Represents entire or partial position segregated as collateral for
interest rate swap contracts.
(b) 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.
(c) As restated, see Note K.
Glossary of Terms:
ACA - American Capital Access
AMBAC - American Municipal Bond Assurance Corporation
AMT - Alternative Minimum Tax
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Company
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance, Inc.
GO - General Obligation
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-Family Housing Revenue
PCR - Pollution Control Revenue
RADIAN - Radian Group, Inc.
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 63
OHIO PORTFOLIO
PORTFOLIO OF INVESTMENTS
September 30, 2006
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES-98.4%
Long-Term Municipal Bonds-96.5%
Ohio-82.5%
Akron GO
MBIA Ser 02
5.00%, 12/01/23 $ 1,000 $ 1,049,050
Akron Stadium Rev
(Canal Park) Ser 96
6.90%, 12/01/16 5,000 5,125,999
Brookville Sch Dist GO
FSA Ser 03
5.00%, 12/01/26 2,000 2,105,500
Canton City Sch Dist
MBIA Ser 04B
5.00%, 12/01/22-12/01/23 2,150 2,287,779
Central Ohio Solid Waste Auth
AMBAC Ser 04B
5.00%, 12/01/21 2,035 2,169,514
Cincinnati Tech & Cmnty College
AMBAC Ser 02
5.00%, 10/01/28 5,000 5,249,449
Cleveland Cuyahoga Port Auth
(Rita Proj) RADIAN Ser 04
5.00%, 11/15/19 1,850 1,945,590
Ser 01
7.35%, 12/01/31 2,000 2,153,640
Cleveland GO
Ser 02 MBIA
5.25%, 12/01/27 4,380 4,663,692
Ser 04 AMBAC
5.25%, 12/01/24 1,200 1,299,996
Cleveland Pub Pwr Sys Rev FGIC
Ser 06A
5.00%, 11/15/18 2,165 2,349,177
Columbus Sch Dist
FGIC Ser 03
5.00%, 12/01/24-12/01/25 4,730 4,971,475
Cuyahoga Cnty Hosp Rev
(UHHS) Ser 00
7.50%, 1/01/30 1,900 2,129,691
Cuyahoga Cnty MFHR
(Livingston Park Apts) GNMA Ser 02A
5.45%, 9/20/39 1,500 1,551,810
(Longwood Proj) GNMA Ser 01 AMT
5.60%, 1/20/43 3,620 3,766,791
Dayton Arpt Rev
(James M Cox Dayton Intl) RADIAN Ser 03A
5.00%, 12/01/23 1,280 1,329,830
64 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Dayton Sch Dist
(Administrative Fac Proj) Ser 03
6.00%, 12/01/19-12/01/21 $ 3,040 $ 3,381,571
Delaware Sch Dist
MBIA Ser 04
5.00%, 12/01/19 1,340 1,438,209
Dublin Sch Dist GO
FSA Ser 03
5.00%, 12/01/22 1,500 1,588,665
Erie Cnty Hosp Rev
(Firelands Med Ctr) Ser 02A
5.625%, 8/15/32 1,500 1,599,990
Fairfield Cnty Hosp Facs Rev
(Fairfield Med Ctr Proj) RADIAN Ser 03
5.00%, 6/15/24 1,000 1,029,370
Franklin Cnty
(Online Computer Library Ctr) Ser 98A
5.20%, 10/01/20 2,800 2,905,392
Franklin Cnty MFHR
(Agler Green) GNMA Ser 02A AMT
5.65%, 5/20/32 770 809,339
5.80%, 5/20/44 1,150 1,205,442
Greater Cleveland Regl Tran Auth
MBIA Ser 04
5.00%, 12/01/24 1,350 1,432,499
Hamilton City Sch Dist MBIA
5.00%, 12/01/24 1,000 1,060,500
Hamilton Cnty Convention Facs Auth Rev
FGIC Ser 04
5.00%, 12/01/23 1,330 1,408,816
Hamilton Cnty Health Fac
(Twin Towers) Ser 99A
5.80%, 10/01/23 1,775 1,813,997
Hamilton Cnty Sales Tax
AMBAC Ser 00B
5.25%, 12/01/32(a) 13,185 13,870,883
Lucas Cnty Health Fac
(Altenheim Proj) GNMA Ser 99
5.50%, 7/20/40 3,200 3,374,080
Madeira City Sch Dist GO
MBIA Ser 04
5.00%, 12/01/22-12/01/23 2,665 2,836,266
Oak Hills Loc Sch Dist
FSA Ser 05
5.00%, 12/01/25 1,000 1,062,590
Ohio Air Quality Dev Auth PCR
(Toledo Edison Co) Ser 97A AMT
6.10%, 8/01/27 2,500 2,592,700
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 65
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Ohio Hsg Fin Agy MFHR
(Park Trails Apt) AMBAC Ser 01A AMT
5.50%, 12/01/34 $ 1,480 $ 1,531,593
Ohio Hsg Fin Agy SFMR
(Mortgage Rev) GNMA AMT
Ser 02
5.375%, 9/01/33 1,740 1,774,069
Ser 02-A2
5.60%, 9/01/34 370 380,390
Ser 02-A3
5.50%, 9/01/34 1,285 1,308,798
Ohio State Bldg Auth
(Adult Correctl Proj) MBIA Ser 04A
5.00%, 4/01/22 2,975 3,158,022
(State Facs-Admin Bldg Fd Proj) Ser 05A
5.00%, 4/01/24 1,500 1,592,670
Ohio State GO
Ser 04A
5.00%, 6/15/22 3,000 3,196,890
Ohio State Higher Ed Fac Cmnty
(Denison University Proj) Ser 04
5.00%, 11/01/21-11/01/24 3,440 3,659,295
Ohio State University
MBIA Ser 04
5.00%, 12/01/22 1,950 2,072,148
Ohio Swr & Solid Waste Disp Facs
(Anheuser-Busch) Ser 01 AMT
5.50%, 11/01/35 3,000 3,154,080
Ohio Wtr Dev Auth
(Anheuser-Busch) Ser 99 AMT
6.00%, 8/01/38 2,250 2,320,965
Ohio Wtr Dev Auth PCR
(Cleveland Electric) Ser 97A AMT
6.10%, 8/01/20 2,000 2,069,180
Pinnacle Cmnty Fin Auth
Ser A
6.00%, 12/01/22 2,155 2,259,367
Port Auth Columbiana Cnty Solid Waste Fac Rev
(Apex Environmental LLC) Ser 04A AMT
7.125%, 8/01/25 500 507,860
Princeton Sch Dist
MBIA Ser 03
5.00%, 12/01/24 1,600 1,687,456
Riversouth Auth Rev
(Area Redevelopment)
Ser 04A
5.25%, 12/01/21-12/01/22 2,000 2,162,720
Ser 05A
5.00%, 12/01/24 3,590 3,811,897
Steubenville Hosp Rev
(Trinity Health) Ser 00
6.50%, 10/01/30 2,500 2,736,175
66 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Toledo Sch Dist
FGIC Ser 03B
5.00%, 12/01/23 $ 2,940 $ 3,098,819
Toledo-Lucas Cnty Port Auth
(Cargill, Inc. Proj) Ser 04B
4.50%, 12/01/15 2,500 2,573,675
(Crocker Park Proj) Ser 03
5.375%, 12/01/35 2,000 2,133,140
Toledo-Lucas Cnty Port Fac
(CSX Trans) Ser 92
6.45%, 12/15/21 1,270 1,549,857
University of Cincinnati COP
(University Cincinnati Ctr Proj) MBIA
5.00%, 6/01/24 4,470 4,723,761
Youngstown City Sch Dist
(Classroom Facs & Sch Impt) FSA
5.00%, 12/01/25 2,155 2,277,512
-------------
143,299,631
California-1.8%
California State GO
5.20%, 4/01/26 1,000 1,065,690
5.25%, 4/01/29 2,000 2,135,100
-------------
3,200,790
Colorado-0.3%
Northwest Met Dist No. 3 GO
6.125%, 12/01/25 500 530,570
-------------
Florida-3.0%
Collier Cnty Cmnty Dev Dist
(Fiddlers Creek) Ser 96
7.50%, 5/01/18 1,255 1,283,062
Collier Cnty Ind Dev Rev
(Southern States Utils) Ser 96 AMT
6.50%, 10/01/25 200 203,318
Crossings at Fleming Island Cmnty Dev Dist
(Eagle Harbor) Ser 00C
7.10%, 5/01/30 2,000 2,114,279
Double Branch Cmnty Dev Dist
(Oakleaf Village) Ser 02A
6.70%, 5/01/34 950 1,043,433
Hammock Bay Cmnty Dev Dist-Fla Spl
Assmt Rev
Ser 04A
6.15%, 5/01/24 400 428,604
Manatee Cnty Cmnty Dev Dist
(Heritage Harbor South) Ser 02B
5.40%, 11/01/08 55 55,305
-------------
5,128,001
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 67
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Georgia-0.3%
Atlanta Tax Allocation
(Eastside Proj) Ser 05B
5.60%, 1/01/30 $ 500 $ 518,665
Illinois-0.9%
Antioch Village Spl Svc Area
(Deercrest Proj) Ser 03
6.625%, 3/01/33 1,000 1,055,130
Plano Spl Svc Area No. 3 Spl Tax
(Lakewood Springs Proj) Ser 05A
5.95%, 3/01/28 565 575,859
-------------
1,630,989
Puerto Rico-7.7%
Puerto Rico Comwlth GO
(Pub Impt)
Ser 01A
5.50%, 7/01/19 500 563,070
Ser 06A
5.25%, 7/01/22 500 541,585
Puerto Rico Comwlth Govt Dev Bank
Ser 06B
5.00%, 12/01/15 500 536,020
Puerto Rico Convention Ctr Dist Auth AMBAC
(Hotel Occupancy Tax) Ser 06A
5.00%, 7/01/18-7/01/19 6,370 6,938,853
Puerto Rico Municipal Fin Agy GO
Ser 05A
5.25%, 8/01/23 375 403,193
Puerto Rico Tobacco Settlement Rev
(Childrens Trust Fund) Ser 00
6.00%, 7/01/26 4,000 4,334,440
-------------
13,317,161
Total Long-Term Municipal Bonds
(cost $160,247,365) 167,625,807
Short-Term Municipal Notes(b)-1.9%
Missouri-1.1%
Missouri State Health & Edl Facs Auth Facs Rev
(Cox Health Sys)
3.86%, 6/01/22 2,000 2,000,000
New Mexico-0.6%
Hurley PCR
(Updates-Kennecott Santa Fe)
3.85%, 12/01/15 1,000 1,000,000
Ohio-0.2%
Butler County Healthcare Facs Rev
(Lifesphere Proj)
3.78%, 5/01/27 265 265,000
68 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Value
- -------------------------------------------------------------------------------
Total Short-Term Municipal Notes
(cost $3,265,000) $ 3,265,000
Total Investments-98.4%
(cost $163,512,365) 170,890,807
Other assets less liabilities-1.6% 2,836,263
Net Assets-100% $ 173,727,070
INTEREST RATE SWAP CONTRACTS (see Note D)
Rate Type
------------------------
Payment Payment
Notional made received Unrealized
Swap Amount Termination by the by the Appreciation/
Counterparty (000) Date Portfolio Portfolio (Depreciation)
- --------------------------------------------------------------------------------------------
Citigroup, Inc. $ 2,000 6/22/07 BMA* 2.962% $ (9,096)
Goldman Sachs & Co. 900 1/05/07 BMA * 3.405% (1,075)
JPMorgan Chase & Co. 1,800 4/05/07 BMA* 2.988% (8,256)
JPMorgan Chase & Co. 900 10/01/07 BMA* 3.635% 982
Merrill Lynch 900 7/12/08 BMA* 3.815% 5,973
Merrill Lynch 3,600 8/01/16 BMA* 4.071% 101,922
Morgan Stanley 900 10/06/06 BMA* 3.217% (833)
* Variable interest based on the BMA (Bond Market Association)
(a) Represents entire or partial position segregated as collateral for
interest rate swap contracts.
(b) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specific date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). This instrument is payable on demand and is secured by
letters of credit or other credit support agreements from major banks.
Glossary of Terms:
AMBAC - American Municipal Bond Assurance Corporation
AMT - Alternative Minimum Tax
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Company
FSA - Financial Security Assurance, Inc.
GNMA - Government National Mortgage Association
GO - General Obligation
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-Family Housing Revenue
PCR - Pollution Control Revenue
RADIAN - Radian Group, Inc.
SFMR - Single Family Mortgage Revenue
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 69
PENNSYLVANIA PORTFOLIO
PORTFOLIO OF INVESTMENTS
September 30, 2006
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES-98.6%
Long-Term Municipal Bonds-95.1%
Pennsylvania-77.0%
Allegheny Cnty Arpt Rev
MBIA Ser 97 AMT
5.75%, 1/01/10 $ 2,540 $ 2,685,593
Allegheny Cnty GO
FGIC Ser 05C-57
5.00%, 11/01/23 6,390 6,786,244
Allegheny Cnty Health Fac
(South Hills Health) Ser 00B
6.75%, 5/01/25 1,555 1,678,871
Allegheny Cnty Health Rev
(Residential Resources) Ser 01
6.60%, 9/01/31 1,540 1,741,663
Allegheny Cnty Higher Ed
(Thiel College) ACA Ser 99A
5.375%, 11/15/19-11/15/29 2,500 2,569,175
Allegheny Cnty Indl Dev Auth Lease Rev
(Residential Resources Proj)
5.00%, 9/01/21 500 507,490
Allegheny Cnty PCR
(USX Corp.) Ser 98
5.50%, 12/01/29 2,680 2,801,538
Allegheny Cnty Redev Auth Rev
(Pittsburgh Mills Proj)
5.60%, 7/01/23 1,500 1,585,035
Allegheny Cnty San Auth Swr Rev
MBIA Ser 05A
5.00%, 12/01/24 7,490 7,964,716
Butler Cnty
FGIC Ser 03
5.25%, 7/15/26 1,625 1,782,901
Chester Upland Sch Dist
4.30%, 5/15/14 1,705 1,719,134
Crawford Cnty Health Fac
(Wesbury Methodist) Ser 99
6.25%, 8/15/29 1,600 1,638,992
Delaware Cnty Higher Ed
(Eastern College) Ser 99
5.625%, 10/01/28 2,500 2,535,300
Ephrata Area Sch Dist FGIC
5.00%, 3/01/22 1,000 1,066,360
Harrisburg Arpt Auth
(Susquehanna Arpt Proj) Ser 99 AMT
5.50%, 1/01/24 3,490 3,461,731
Lancaster Swr Auth Rev
MBIA Ser 04
5.00%, 4/01/22 1,330 1,408,297
70 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Lehigh Northampton Arpt Rev
MBIA Ser 00 AMT
6.00%, 5/15/30 $ 4,400 $ 4,677,948
Lycoming Cnty Higher Ed
(College of Technology) AMBAC Ser 02
5.25%, 5/01/32 2,250 2,363,985
McKean Cnty Hosp Auth Rev
(Bradford Hosp Proj) ACA
5.00%, 10/01/17 1,205 1,260,948
Meadville GO XLCA
5.00%, 10/01/25 3,080 3,270,036
Montgomery Cnty Higher Ed
(Beaver College) RADIAN Ser 99
5.70%, 4/01/27 6,000 6,309,420
Montgomery Cnty Hosp Rev
(Abington Memorial Hosp) Ser 02A
5.125%, 6/01/32 3,000 3,115,410
Montgomery Cnty Indl Dev Auth Rev
(Whitemarsh Continuing Care)
6.00%, 2/01/21 415 439,875
Pennsylvania Eco Dev Auth
(30th St Station) ACA Ser 02 AMT
5.875%, 6/01/33 3,485 3,775,963
(Amtrak) Ser 01A AMT
6.375%, 11/01/41 3,000 3,267,570
Pennsylvania Higher Ed
(Dickinson College) RADIAN Ser 03AA-1
5.00%, 11/01/26 1,000 1,033,650
(UPMC Health Sys) Ser 01A
6.00%, 1/15/31 2,405 2,630,517
Pennsylvania Higher Edl Facs Auth Rev
(University Health Sys) AMBAC Ser 05A
5.00%, 8/15/20 2,000 2,132,540
Philadelphia Auth Indl Dev Lease Rev
FSA Ser 01B
5.25%, 10/01/30 8,000 8,401,999
Philadelphia Auth Indl Dev Revs
(Leadership Learning Partners) Ser 05A
5.25%, 7/01/24 350 350,389
Philadephia Gas Wks Rev
Ser 04A-1
5.25%, 9/01/19 1,015 1,092,414
Philadelphia Sch Dist Lease Rev
FSA Ser 03
5.25%, 6/01/26(a) 5,000 5,352,850
Pittsburgh GO
Ser 06C
5.25%, 9/01/17 5,000 5,545,850
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 71
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Pittsburgh Pub Pkg Auth Pkg Rev
FGIC Ser 05A
5.00%, 12/01/19-12/01/25 $ 3,435 $ 3,665,624
Pittsburgh Urban Redev Auth SFMR
(Mortgage Rev) FHA AMT
Ser 97A
6.25%, 10/01/28 790 810,153
Potter Cnty Hosp Rev
(Charles Cole Memorial) RADIAN Ser 96
6.05%, 8/01/24 4,340 4,433,180
Southcentral Gen Auth Rev
(Hanover Hosp, Inc.) RADIAN
5.00%, 12/01/25 1,570 1,635,485
(Pre-refunded Wellspan Health)
5.25%, 5/15/31 3,905 4,216,541
(Wellspan Health)
5.25%, 5/15/31 795 844,505
State Pub Sch Bldg Auth Sch Rev
(Colonial Northampton Inter Unit 20)
FGIC Ser 05
5.00%, 5/15/26 2,025 2,147,006
-------------
114,706,898
California-0.7%
California State GO
5.00%, 2/01/33 1,000 1,037,160
Colorado-0.4%
Northwest Met Dist No. 3 GO
6.125%, 12/01/25 500 530,570
Florida-4.1%
Collier Cnty Cmnty Dev Dist
(Fiddlers Creek) Ser 96
7.50%, 5/01/18 1,060 1,083,702
Collier Cnty Ind Dev Rev
(Southern States Utils) Ser 96 AMT
6.50%, 10/01/25 400 406,636
Crossings at Fleming Island Cmnty Dev Dist
(Eagle Harbor) Ser 00C
7.10%, 5/01/30 2,000 2,114,279
Double Branch Cmnty Dev Dist
(Oakleaf Village) Ser 02A
6.70%, 5/01/34 1,030 1,131,301
Hammock Bay Cmnty Dev Dist-Fla Spl
Assmt Rev
Ser 04A
6.15%, 5/01/24 430 460,749
Northern Palm Beach Assessment Dist
(Unit Dev 27B) Ser 02
6.40%, 8/01/32 935 971,194
-------------
6,167,861
72 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Guam-0.7%
Guam Govt Wtrwks Auth
(Water & Waste Sys Rev) Ser 05
6.00%, 7/01/25 $ 500 $ 546,930
Guam Intl Arpt Auth
MBIA Ser 03B
5.25%, 10/01/23 500 539,370
-------------
1,086,300
Illinois-1.7%
Antioch Village Spl Svc Area
(Deercrest Proj) Ser 03
6.625%, 3/01/33 1,000 1,055,130
Plano Spl Svc Area No. 3 Spl Tax
(Lakewood Springs Proj) Ser 05A
5.95%, 3/01/28 465 473,937
Yorkville Cmnty Fac Dist
(Raintree Village Proj) Ser 03
6.875%, 3/01/33 900 963,837
-------------
2,492,904
Puerto Rico-8.6%
Puerto Rico Comwlth GO
(Pub Impt)
Ser 01A
5.50%, 7/01/19 500 563,070
Ser 06A
5.25%, 7/01/23 500 540,755
Puerto Rico Comwlth Hwy & Trans Auth Rev
FGIC Ser 03G
5.25%, 7/01/14 3,195 3,501,880
FGIC Sub Ser 03
5.25%, 7/01/14 3,335 3,655,327
FSA Ser 02D
5.00%, 7/01/27 4,000 4,198,960
Puerto Rico Municipal Fin Agy GO
Ser 05A
5.25%, 8/01/23 300 322,554
-------------
12,782,546
Virgin Islands-1.9%
Virgin Islands Pub Fin Auth Rev
(Gross Rcpts Taxes) Ser 03 FSA
5.00%, 10/01/13-10/01/14 675 734,245
5.25%, 10/01/15-10/01/17 1,840 2,036,286
-------------
2,770,531
Total Long-Term Municipal Bonds
(cost $134,195,170) 141,574,770
Short-Term Municipal Notes(b)-3.5%
Alaska-0.3%
Valdez Marine Term Rev
(BP Pipelines, Inc. Proj) Ser 03B
3.85%, 7/01/37 500 500,000
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 73
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Pennsylvania-3.2%
Delaware Cnty Indl Dev Auth PCR
3.86%, 4/01/21 $ 500 $ 500,000
Pennsylvania Hsg Fin Agy
(Mortgage Rev) FSA Ser 03 AMT
4.26%, 4/01/32(c) 3,300 3,300,000
Philadelphia Hosps & Higher Ed Facs Auth Rev
(Childrens Hosp Proj)
Ser 02C
3.88%, 7/01/31 500 500,000
Ser 02D
3.88%, 7/01/31 500 500,000
-------------
4,800,000
Total Short-Term Municipal Notes
(cost $5,300,000) 5,300,000
Total Investments-98.6%
(cost $139,495,170) 146,874,770
Other assets less liabilities-1.4% 2,056,237
Net Assets-100% $ 148,931,007
INTEREST RATE SWAP CONTRACTS (see Note D)
Rate Type
------------------------
Payment Payment
Notional made received Unrealized
Swap Amount Termination by the by the Appreciation
Counterparty (000) Date Portfolio Portfolio (Depreciation)
- --------------------------------------------------------------------------------------------
Citigroup, Inc. $ 1,600 6/22/07 BMA* 2.962% $ (7,276)
Goldman Sachs & Co. 800 1/05/07 BMA* 3.405% (956)
JPMorgan Chase & Co. 1,500 4/05/07 BMA* 2.988% (6,880)
JPMorgan Chase & Co. 800 10/01/07 BMA* 3.635% 873
Merrill Lynch 700 7/12/08 BMA* 3.815% 4,645
Morgan Stanley 800 10/06/06 BMA* 3.217% (740)
* Variable interest based on the BMA (Bond Market Association)
74 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
(a) Represents entire or partial position segregated as collateral for
interest rate swap contracts.
(b) 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.
(c) Private Placement.
Glossary of Terms:
ACA - American Capital Access
AMBAC - American Municipal Bond Assurance Corporation
AMT - Alternative Minimum Tax
FGIC - Financial Guaranty Insurance Company
FHA - Federal Housing Authority
FSA - Financial Security Assurance, Inc.
GO - General Obligation
MBIA - Municipal Bond Investors Assurance
PCR - Pollution Control Revenue
RADIAN - Radian Group, Inc.
SFMR - Single Family Mortgage Revenue
XLCA - XL Capital Assurance, Inc.
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 75
VIRGINIA PORTFOLIO
PORTFOLIO OF INVESTMENTS
September 30, 2006
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES-96.5%
Long-Term Municipal Bonds-88.8%
Virginia-75.6%
Albemarle Cnty Ed Fac
(The Convent Sch) Ser 01A
7.75%, 7/15/32 $ 4,260 $ 4,697,971
Alexandria MFHR
(Buckingham Village Apts) Ser 96A AMT
6.15%, 1/01/29 4,000 4,050,360
Arlington Cnty Hosp Rev
(Arlington Health Sys) Ser 01
5.25%, 7/01/31 5,900 6,367,693
Arlington Cnty Indl Dev Rev Swr Rev
(Ogden Martin) FSA Ser 98B AMT
5.25%, 1/01/09 2,295 2,367,224
Arlington Cnty MFHR
(Arlington View Terrace)
FNMA Ser 01 AMT
5.15%, 11/01/31 1,550 1,611,365
Bell Creek Cmnty Dev Dist
Ser 03A
6.75%, 3/01/22 500 519,060
Broad Street Cmnty Dev Dist
(Parking Fac) Ser 03
7.50%, 6/01/33 1,500 1,646,160
Celebrate North Cmnty Dev Dist
Ser 03B
6.60%, 3/01/25 1,250 1,329,713
Chesterfield Cnty
(Elec & Pwr Co.) Ser 02
5.875%, 6/01/17 3,800 4,158,340
Dinwiddie Cnty Indl Dev Auth
(Lease Rev) MBIA Ser 04B
5.00%, 2/15/24 3,200 3,368,832
Dulles Town Cmnty Dev Auth
(Dulles Town Ctr Proj) Ser 98
6.25%, 3/01/26 2,050 2,121,135
Fairfax Wtr Auth Rev
Ser 02
5.00%, 4/01/32(a) 3,380 3,516,417
Greater Richmond Hotel Tax Rev
(Convention Ctr Proj) Ser 00
6.25%, 6/15/32 6,000 6,611,160
Hampton Convention Ctr Rev
AMBAC Ser 02
5.00%, 1/15/35(b) 5,150 5,372,171
Harrisonburg MFHR
(Greens of Salem Run) FSA Ser 97 AMT
6.30%, 4/01/29 1,110 1,146,563
76 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Henry Cnty Hosp Rev
(Memorial Hosp Martinsville & Henry) Ser 97
6.00%, 1/01/27 $ 1,250 $ 1,269,663
James City Cnty Solid Waste Rev
(Anheuser Busch Proj) Ser 97 AMT
6.00%, 4/01/32 4,200 4,285,386
Metropolitan Washington Arpt Rev
Ser 97B AMT
5.50%, 10/01/23 9,410 9,671,597
New Port Cmnty Dev Auth
(Spl Assessment) Ser 06
5.50%, 9/01/26 1,000 1,029,500
Newport News Health Care Fac
(Mennowood) GNMA Ser 96A
6.25%, 8/01/36 2,580 2,685,135
Newport News MFHR
(Walker Village Proj) GNMA Ser 02A AMT
5.55%, 9/20/34 1,880 1,953,282
5.65%, 3/20/44 1,660 1,719,312
Norfolk Arpt Auth Rev
(Air Cargo) Ser 02 AMT
6.25%, 1/01/30 995 1,059,197
FGIC Ser 01B AMT
5.30%, 7/01/25 10,000 10,463,399
Northwestern Regl Jail Auth Facs Rev MBIA
5.00%, 7/01/25 1,500 1,590,330
Pocahontas Pkwy Assoc Toll Rd Rev
Ser 98B
Zero coupon, 8/15/15 750 483,060
Portsmouth GO
FGIC Ser 01B
Prerefunded
5.00%, 6/01/26 1,405 1,438,833
Unrefunded
5.00%, 6/01/26 95 96,765
Prince William MFHR
(Woodwind Gables)
AMBAC Ser 01A AMT
5.30%, 12/01/34 2,860 2,958,784
Richmond FSA
Ser 05A
5.00%, 7/15/22 2,500 2,681,525
Upper Occoquan Swr Auth Rev FSA
5.00%, 7/01/25 2,500 2,669,425
Virginia Beach MFHR
(Beth Sholom Terrace) GNMA Ser 02
5.40%, 4/01/44 2,900 3,083,367
Virginia Beach Wtr & Swr Rev
5.00%, 10/01/30 2,000 2,114,180
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 77
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Virginia Biotechnology Auth
(Consolidated Laboratories Proj) Ser 01
5.00%, 9/01/21 $ 4,170 $ 4,380,585
Virginia College Bldg Auth Facs Rev
(Pub Higher Ed Financing Prog) Ser 05A
5.00%, 9/01/16-9/01/17 11,725 12,802,595
Virginia Hsg Dev Auth MFHR
(Rental Hsg)
Ser 99 AMT
5.95%, 2/01/23 5,525 5,724,563
Ser 02B AMT
5.50%, 4/01/27 5,000 5,164,350
Virginia Hsg Dev Auth SFMR
(Mortgage Rev) Ser 01D AMT
5.40%, 6/01/24 3,155 3,252,868
Virginia Port Auth Rev
(Newport News) Ser 02 AMT
5.00%, 7/01/27 1,000 1,039,940
5.125%, 7/01/24 4,000 4,207,800
-------------
136,709,605
California-0.6%
California State GO
5.25%, 4/01/29 1,000 1,067,550
Colorado-0.3%
Northwest Met Dist No. 3 GO
6.125%, 12/01/25 500 530,570
Florida-1.8%
Fleming Island Plantation Cmnty Dev Dist
Ser 00B
7.375%, 5/01/31 3,000 3,210,870
Georgia-0.3%
Atlanta Tax Allocation
(Eastside Proj) Ser 05B
5.60%, 1/01/30 500 518,665
Illinois-0.8%
Plano Spl Svc Area No. 3 Spl Tax
(Lakewood Springs Proj) Ser 05A
5.95%, 3/01/28 465 473,937
Yorkville Cmnty Fac Dist
(Raintree Village Proj) Ser 03
6.875%, 3/01/33 1,000 1,070,930
-------------
1,544,867
New Jersey-2.9%
Garden State Preservation Trust
(Open Space & Farmland)
FSA Ser 05A
5.80%, 11/01/16 4,500 5,211,405
78 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Puerto Rico-6.5%
Puerto Rico Comwlth Govt Dev Bank
Ser 06B
5.00%, 12/01/15 $ 500 $ 536,020
Puerto Rico Comwlth Hwy & Trans Auth Rev
FGIC Ser 03G
5.25%, 7/01/14 3,600 3,945,780
Puerto Rico Comwlth
(Pub Impt) Ser 01A
5.50%, 7/01/19 500 563,070
Puerto Rico Elec Pwr Auth Rev
XLCA Ser 02-1
5.25%, 7/01/22 1,100 1,188,011
Puerto Rico HFA
(Capital Fund Prg)
5.00%, 12/01/20 4,870 5,139,263
Puerto Rico Municipal Fin Agy GO
Ser 05A
5.25%, 8/01/23 340 365,561
-------------
11,737,705
Total Long-Term Municipal Bonds
(cost $153,149,329) 160,531,237
Short-Term Municipal Notes(c)-7.7%
Illinois-0.8%
Will Cnty Exempt Facs Rev
(BP Amoco Chemical Co. Proj) Ser 01
3.90%, 7/01/31 1,500 1,500,000
Massachusetts-0.3%
Massachusetts Dev Fin Agy Rev
(Harvard Univ) Ser 06B-1
3.75%, 7/15/36 500 500,000
New York-1.4%
New York City Municipal Wtr Fin Auth Wtr &
Swr Sys Rev
FGIC Ser 94G
3.80%, 6/15/24 500 500,000
New York City Transitional Fin Auth Rev
(NYC Recovery) Ser 1
3.80%, 11/01/22 2,000 2,000,000
-------------
2,500,000
Texas-1.1%
Harris Cnty Health Facs Dev Corp Rev
(Spl Facs-Texas Med Ctr Proj)
MBIA Ser 01
3.89%, 9/01/31 1,500 1,500,000
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 79
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Lower Neches Valley Auth Indl Dev Corp
(Exxonmobil Proj) Ser 03A-2
3.70%, 8/01/22 $ 500 $ 500,000
-------------
2,000,000
Virginia-4.1%
Loudon Cnty Indl Dev Auth Rev
(Howard Hughes Med)
Ser 03A
3.84%, 2/15/38 4,200 4,200,000
Ser 03C
3.82%, 2/15/38 1,000 1,000,000
Richmond Indl Dev Auth
(Church Schs)
3.78%, 5/01/35 1,800 1,800,000
Roanoke Indl Dev Auth Hosp Rev
(Carilion Health Sys) FSA Ser 05C-1
3.89%, 7/01/27 500 500,000
-------------
7,500,000
Total Short-Term Municipal Notes
(cost $14,000,000) 14,000,000
Total Municipal Bonds & Notes
(cost $167,149,329) 174,531,237
SHORT-TERM INVESTMENT-0.1%
Time Deposit-0.1%
The Bank of New York
4.25%, 10/02/06
(cost $166,000) 166 166,000
Total Investments-96.6%
(cost $167,315,329) 174,697,237
Other assets less liabilities-3.4% 6,195,302
Net Assets-100% $ 180,892,539
FINANCIAL FUTURES CONTRACTS (see Note D)
Value at
Number of Expiration Original September 30, Unrealized
Type Contracts Position Month Value 2006 Appreciation
- -------------------------------------------------------------------------------------------------------
U.S. Treasury Note December
10 Yr Futures 25 Long 2006 $2,674,703 $2,701,563 $26,859
80 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
INTEREST RATE SWAP CONTRACTS (see Note D)
Rate Type
------------------------
Payment Payment
Notional made received Unrealized
Swap Amount Termination by the by the Appreciation
Counterparty (000) Date Portfolio Portfolio (Depreciation)
- --------------------------------------------------------------------------------------------
Citigroup, Inc. $ 1,600 6/22/07 BMA* 2.962% $ (7,277)
Goldman Sachs & Co. 800 1/05/07 BMA* 3.405% (956)
JPMorgan Chase & Co. 1,500 4/05/07 BMA* 2.988% (6,880)
JPMorgan Chase & Co. 900 10/01/07 BMA* 3.635% 982
Merrill Lynch 900 7/12/08 BMA* 3.815% 5,973
Morgan Stanley 800 10/06/06 BMA* 3.217% (740)
* Variable interest based on the BMA (Bond Market Association)
(a) Position, or position thereof, with an aggregate market value of $130,045
has been segregated to collateralize margin requirements for open futures
contracts.
(b) Represents entire or partial position segregated as collateral for
interest rate swap contracts.
(c) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specific date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). This instrument is payable on demand and is secured by
letters of credit or other credit support agreements from major banks.
Glossary of Terms:
AMBAC - American Municipal Bond Assurance Corporation
AMT - Alternative Minimum Tax
FGIC - Financial Guaranty Insurance Company
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance, Inc.
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Agency/Authority
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-Family Housing Revenue
SFMR - Single Family Mortgage Revenue
XLCA - XL Capital Assurance, Inc.
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 81
STATEMENT OF ASSETS & LIABILITIES
September 30, 2006
Arizona Florida
-------------- --------------
Assets
Investments in securities, at value (cost:
$206,715,361 and $201,349,375,
respectively) $ 214,503,094 $ 210,944,644
Cash 8,320 8,254
Unrealized appreciation of interest rate swap
contracts 8,391 175,850
Interest receivable 2,784,160 4,129,772
Receivable for shares of beneficial interest
sold 533,021 667,426
Receivable for investment securities sold -0- 2,869,556
Total assets 217,836,986 218,795,502
Liabilities
Unrealized depreciation of interest rate swap
contracts 30,345 21,511
Payable for investment securities purchased 611,862 1,597,556
Payable for shares of beneficial interest
redeemed 347,489 1,290,226
Dividends payable 218,570 243,507
Distribution fee payable 97,864 98,043
Advisory fee payable 50,167 51,070
Administrative fee payable 20,250 21,250
Transfer Agent fee payable 6,501 6,242
Variation margin on futures contracts -0- 6,937
Accrued expenses and other liabilities 58,479 65,221
Total liabilities 1,441,527 3,401,563
Net Assets $ 216,395,459 $ 215,393,939
Composition of Net Assets
Shares of beneficial interest, at par $ 195,583 $ 208,715
Additional paid-in capital 209,653,888 213,465,907
Distributions in excess of net investment
income (198,261) (223,391)
Accumulated net realized loss on investment
transactions (1,021,530) (7,886,404)
Net unrealized appreciation of investments 7,765,779 9,829,112
$ 216,395,459 $ 215,393,939
Net Asset Value Per Share--unlimited shares authorized, $.01 par value
Shares Net Asset
Arizona Portfolio Net Assets Outstanding Value
- -------------------------------------------------------------------------------
Class A $ 138,880,346 12,545,367 $11.07*
Class B $ 52,069,913 4,710,770 $11.05
Class C $ 25,445,200 2,302,185 $11.05
Florida Portfolio
- -------------------------------------------------------------------------------
Class A $ 138,307,225 13,404,155 $10.32*
Class B $ 38,045,175 3,685,817 $10.32
Class C $ 39,041,539 3,781,499 $10.32
* The maximum offering price per share for Class A shares of Arizona Portfolio
and Florida Portfolio were $11.56 and $10.78, respectively, which reflects a
sales charge of 4.25%.
See notes to financial statements.
82 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Massachusetts Michigan
-------------- --------------
Assets
Investments in securities, at value (cost:
$134,000,725 and $127,333,084,
respectively) $ 140,670,262 $ 133,162,179
Unrealized appreciation of interest rate swap
contracts 175,411 212,078
Interest receivable 1,797,220 2,419,325
Receivable for shares of beneficial interest
sold 356,379 250,119
Receivable for investment securities sold -0- 1,615,000
Total assets 142,999,272 137,658,701
Liabilities
Due to custodian 3,008 2,993
Unrealized depreciation of interest rate swap
contracts 13,355 13,814
Payable for shares of beneficial interest
redeemed 315,359 318,593
Dividends payable 138,904 127,417
Distribution fee payable 79,855 75,462
Advisory fee payable 30,428 50,556
Administrative fee payable 21,294 -0-
Transfer Agent fee payable 5,895 7,824
Variation margin on futures contracts 2,812 -0-
Accrued expenses and other liabilities 46,084 55,133
Total liabilities 656,994 651,792
Net Assets $ 142,342,278 $ 137,006,909
Composition of Net Assets
Shares of beneficial interest, at par $ 130,266 $ 125,671
Additional paid-in capital 145,057,932 130,491,013
Distributions in excess of net investment
income (133,973) (124,882)
Accumulated net realized gain (loss) on
investment transactions (9,575,771) 487,748
Net unrealized appreciation of investments 6,863,824 6,027,359
$ 142,342,278 $ 137,006,909
Net Asset Value Per Share--unlimited shares authorized, $.01 par value
Shares Net Asset
Massachusetts Portfolio Net Assets Outstanding Value
- -------------------------------------------------------------------------------
Class A $ 63,120,402 5,770,654 $10.94*
Class B $ 41,221,337 3,775,716 $10.92
Class C $ 38,000,539 3,480,269 $10.92
Michigan Portfolio
- -------------------------------------------------------------------------------
Class A $ 64,920,248 5,949,569 $10.91*
Class B $ 30,813,012 2,829,066 $10.89
Class C $ 41,273,649 3,788,474 $10.89
* The maximum offering price per share for Class A shares of Massachusetts
Portfolio and Michigan Portfolio were $11.43 and $11.39, respectively, which
reflects a sales charge of 4.25%.
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 83
Minnesota New Jersey+
-------------- --------------
Assets
Investments in securities, at value (cost:
$96,054,689 and $155,461,107,
respectively) $ 100,397,334 $ 165,159,034
Unrealized appreciation of interest rate swap
contracts 102,954 100,908
Interest receivable 1,389,235 2,374,787
Receivable for shares of beneficial interest
sold 329,588 448,967
Total assets 102,219,111 168,083,696
Liabilities
Due to custodian 9,570 232,849
Unrealized depreciation of interest rate swap
contracts 9,736 17,892
Payable for floating rate note issued -0- 6,743,437
Interest expense and fees payable -0- 6,563
Payable for investment securities purchased 4,383,362 -0-
Payable for shares of beneficial interest
redeemed 213,279 789,247
Dividends payable 99,343 166,076
Distribution fee payable 39,204 84,120
Advisory fee payable 27,009 47,970
Transfer Agent fee payable 4,834 9,842
Administrative fee payable -0- 20,250
Accrued expenses and other liabilities 48,843 69,657
Total liabilities 4,835,180 8,187,903
Net Assets $ 97,383,931 $ 159,895,793
Composition of Net Assets
Shares of beneficial interest, at par $ 95,439 $ 161,050
Additional paid-in capital 94,665,036 163,751,634
Distributions in excess of net investment
income (100,545) (162,716)
Accumulated net realized loss on investment
transactions (1,711,862) (13,635,118)
Net unrealized appreciation of investments 4,435,863 9,780,943
$ 97,383,931 $ 159,895,793
Net Asset Value Per Share--unlimited shares authorized, $.01 par value
Shares Net Asset
Minnesota Portfolio Net Assets Outstanding Value
- -------------------------------------------------------------------------------
Class A $ 71,171,594 6,975,750 $10.20*
Class B $ 10,577,163 1,036,949 $10.20
Class C $ 15,635,174 1,531,171 $10.21
New Jersey Portfolio
- -------------------------------------------------------------------------------
Class A $ 83,087,604 8,370,748 $ 9.93*
Class B $ 42,766,124 4,306,925 $ 9.93
Class C $ 34,042,065 3,427,302 $ 9.93
+ As restated, see Note K.
* The maximum offering price per share for Class A shares of Minnesota
Portfolio and New Jersey Portfolio were $10.65 and$10.37, respectively, which
reflects a sales charge of 4.25%.
See notes to financial statements.
84 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Ohio Pennsylvania
-------------- --------------
Assets
Investments in securities, at value (cost:
$163,512,365 and $139,495,170,
respectively) $ 170,890,807 $ 146,874,770
Cash 266,661 70,632
Unrealized appreciation of interest rate swap
contracts 108,877 5,518
Interest receivable 2,785,367 2,428,533
Receivable for shares of beneficial interest
sold 571,779 661,918
Total assets 174,623,491 150,041,371
Liabilities
Unrealized depreciation of interest rate swap
contracts 19,260 15,852
Payable for shares of beneficial interest
redeemed 477,479 741,866
Dividends payable 173,140 144,149
Distribution fee payable 92,488 76,102
Advisory fee payable 54,119 45,081
Administrative fee payable 19,629 20,250
Transfer Agent fee payable 8,164 8,347
Accrued expenses and other liabilities 52,142 58,717
Total liabilities 896,421 1,110,364
Net Assets $ 173,727,070 $ 148,931,007
Composition of Net Assets
Shares of beneficial interest, at par $ 171,025 $ 140,749
Additional paid-in capital 172,815,241 143,744,590
Distributions in excess of net investment
income (131,139) (126,580)
Accumulated net realized loss on investment
transactions (6,596,116) (2,197,018)
Net unrealized appreciation of investments 7,468,059 7,369,266
$ 173,727,070 $ 148,931,007
Net Asset Value Per Share--unlimited shares authorized, $.01 par value
Shares Net Asset
Ohio Portfolio Net Assets Outstanding Value
- -------------------------------------------------------------------------------
Class A $ 87,902,325 8,650,876 $10.16*
Class B $ 41,801,733 4,117,267 $10.15
Class C $ 44,023,012 4,334,400 $10.16
Pennsylvania Portfolio
- -------------------------------------------------------------------------------
Class A $ 81,150,835 7,669,666 $10.58*
Class B $ 33,448,342 3,160,770 $10.58
Class C $ 34,331,830 3,244,438 $10.58
* The maximum offering price per share for Class A shares of Ohio Portfolio
and Pennsylvania Portfolio were $10.61 and $11.05, respectively, which reflects
a sales charge of 4.25%.
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 85
Virginia
-------------
Assets
Investments in securities, at value (cost $167,315,329) $ 174,697,237
Cash 3,276
Unrealized appreciation of interest rate swap contracts 6,955
Receivable for investment securities sold 3,717,900
Interest receivable 2,537,043
Receivable for shares of beneficial interest sold 1,087,315
Total assets 182,049,726
Liabilities
Unrealized depreciation of interest rate swap contracts 15,853
Payable for shares of beneficial interest redeemed 757,584
Dividends payable 193,651
Distribution fee payable 85,678
Advisory fee payable 36,521
Transfer Agent fee payable 5,920
Variation margin on futures contracts 2,344
Accrued expenses and other liabilities 59,636
Total liabilities 1,157,187
Net Assets $ 180,892,539
Composition of Net Assets
Shares of beneficial interest, at par $ 166,997
Additional paid-in capital 176,084,425
Undistributed net investment income 138,028
Accumulated net realized loss on investment transactions (2,896,780)
Net unrealized appreciation of investments 7,399,869
$ 180,892,539
Net Asset Value Per Share--unlimited shares authorized, $.01 par value
Shares Net Asset
Virginia Portfolio Net Assets Outstanding Value
- -------------------------------------------------------------------------------
Class A $ 109,342,926 10,085,972 $10.84*
Class B $ 37,005,979 3,419,274 $10.82
Class C $ 34,543,634 3,194,499 $10.81
* The maximum offering price per share for Class A shares of Virginia
Portfolio was $11.32 which reflects a sales charge of 4.25%.
See notes to financial statements.
86 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
STATEMENT OF OPERATIONS
Year Ended September 30, 2006
Arizona Florida+
-------------- --------------
Investment Income
Interest $ 10,089,022 $ 11,746,871
Expenses
Advisory fee 928,156 990,955
Distribution fee--Class A 367,826 406,629
Distribution fee--Class B 580,097 450,895
Distribution fee--Class C 256,384 395,799
Transfer agency--Class A 39,886 34,117
Transfer agency--Class B 24,799 15,864
Transfer agency--Class C 9,172 10,713
Custodian 131,060 132,891
Administrative 80,500 80,500
Audit 41,506 41,835
Legal 32,410 27,441
Registration 20,586 12,708
Printing 20,565 20,628
Trustees' fees 3,500 3,500
Miscellaneous 11,808 10,992
Total expenses, before interest expense 2,548,255 2,635,467
Interest expense and fees -0- 111,252
Total expenses 2,548,255 2,746,719
Less: expenses waived and reimbursed
by the Adviser (see Note B) (352,127) (323,677)
Less: expense offset arrangement
(see Note B) (1,787) (1,448)
Net expenses 2,194,341 2,421,594
Net investment income 7,894,681 9,325,277
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized gain (loss) on:
Investment transactions 168,638 1,267,576
Futures contracts 183,815 (170,683)
Swap contracts (239,646) (42,438)
Net change in unrealized
appreciation/depreciation of:
Investments 313,422 (630,145)
Futures contracts (55,152) 79,504
Swap contracts (22,509) 142,356
Net gain on investment transactions 348,568 646,170
Net Increase in Net Assets from
Operations $ 8,243,249 $ 9,971,447
+ As restated, see Note K.
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 87
Massachusetts+ Michigan
-------------- --------------
Investment Income
Interest $ 7,020,011 $ 6,958,861
Expenses
Advisory fee 622,352 637,450
Distribution fee--Class A 166,307 186,000
Distribution fee--Class B 455,954 372,161
Distribution fee--Class C 372,691 424,394
Transfer agency--Class A 25,742 36,291
Transfer agency--Class B 25,003 24,724
Transfer agency--Class C 18,145 26,246
Custodian 123,140 129,874
Administrative 80,500 80,500
Audit 38,676 34,189
Legal 30,155 29,888
Registration 20,115 17,176
Printing 9,313 28,946
Trustees' fees 3,500 3,500
Miscellaneous 11,056 2,062
Total expenses before interest expense 2,002,649 2,033,401
Interest expense and fees 97,966 -0-
Total expenses 2,100,615 2,033,401
Less: expenses waived and reimbursed
by the Adviser (see Note B) (286,710) (80,500)
Less: expense offset arrangement
(see Note B) (1,825) (2,237)
Net expenses 1,812,080 1,950,664
Net investment income 5,207,931 5,008,197
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized gain (loss) on:
Investment transactions 563,325 548,588
Futures contracts (28,326) -0-
Swap contracts (38,008) 10,071
Net change in unrealized
appreciation/depreciation of:
Investments (975,266) (360,693)
Futures contracts 32,231 -0-
Swap contracts 164,743 196,308
Net gain (loss) on investment
transactions (281,301) 394,274
Net Increase in Net Assets from
Operations $ 4,926,630 $ 5,402,471
+ As restated, see Note K.
See notes to financial statements.
88 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Minnesota+ New Jersey+
-------------- --------------
Investment Income
Interest $ 5,020,077 $ 8,704,374
Expenses
Advisory fee 444,056 743,921
Distribution fee--Class A 210,758 239,621
Distribution fee--Class B 120,526 505,298
Distribution fee--Class C 163,736 349,124
Transfer agency--Class A 34,059 43,363
Transfer agency--Class B 7,046 31,977
Transfer agency--Class C 8,344 19,873
Custodian 117,352 137,201
Administrative 80,500 80,500
Audit 37,138 40,911
Legal 16,018 27,657
Printing 12,789 16,929
Registration 7,184 10,850
Trustees' fees 3,500 3,500
Miscellaneous 10,444 8,354
Total expenses before interest expense 1,273,450 2,259,079
Interest expense and fees 83,052 241,024
Total expenses 1,356,502 2,500,103
Less: expenses waived and reimbursed
by the Adviser (see Note B) (184,989) (220,183)
Less: expense offset arrangement
(see Note B) (1,367) (2,554)
Net expenses 1,170,146 2,277,366
Net investment income 3,849,931 6,427,008
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized gain (loss) on:
Investment transactions 254,430 955,495
Futures contracts -0- 324,770
Swap contracts (76,057) (137,968)
Net change in unrealized
appreciation/depreciation of:
Investments (206,760) (689,780)
Futures contracts -0- (118,986)
Swap contracts 93,138 80,801
Net gain on investment transactions 64,751 414,332
Net Increase in Net Assets from
Operations $ 3,914,682 $ 6,841,340
+ As restated, see Note K.
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 89
Ohio Pennsylvania+
-------------- --------------
Investment Income
Interest $ 8,963,208 $ 7,645,164
Expenses
Advisory fee 811,544 679,190
Distribution fee--Class A 260,063 237,305
Distribution fee--Class B 483,242 374,557
Distribution fee--Class C 453,311 343,742
Transfer agency--Class A 44,381 39,206
Transfer agency--Class B 28,994 21,077
Transfer agency--Class C 24,229 17,892
Custodian 131,162 117,724
Administrative 80,500 80,500
Audit 39,425 34,083
Printing 24,836 21,876
Legal 21,090 28,998
Registration 12,542 11,674
Trustees' fees 3,500 3,500
Miscellaneous 7,438 8,966
Total expenses before interest expense 2,426,257 2,020,290
Interest expense and fees -0- 167,298
Total expenses 2,426,257 2,187,588
Less: expenses waived and reimbursed
by the Adviser (see Note B) (235,427) (81,355)
Less: expense offset arrangement
(see Note B) (2,328) (2,276)
Net expenses 2,188,502 2,103,957
Net investment income 6,774,706 5,541,207
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized gain (loss) on:
Investment transactions 902,507 280,580
Futures contracts 40,917 -0-
Swap contracts (172,442) (7,202)
Net change in unrealized
appreciation/depreciation of:
Investments (528,578) 426,753
Futures contracts (33,607) -0-
Swap contracts 74,292 (21,822)
Net gain on investment transactions 283,089 678,309
Net Increase in Net Assets from
Operations $ 7,057,795 $ 6,219,516
+ As restated, see Note K.
See notes to financial statements.
90 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Virginia+
-------------
Investment Income
Interest $ 8,711,550
Expenses
Advisory fee 772,255
Distribution fee--Class A 295,555
Distribution fee--Class B 416,944
Distribution fee--Class C 313,995
Transfer agency--Class A 46,072
Transfer agency--Class B 21,504
Transfer agency--Class C 15,138
Custodian 132,096
Administrative 80,500
Audit 37,837
Legal 30,401
Printing 20,166
Registration 13,752
Trustees' fees 3,500
Miscellaneous 12,614
Total expenses before interest expense 2,212,329
Interest expense and fees 38,332
Total expenses 2,250,661
Less: expenses waived and reimbursed by the Adviser
(see Note B) (463,470)
Less: expense offset arrangement (see Note B) (1,594)
Net expenses 1,785,597
Net investment income 6,925,953
Realized and Unrealized Gain (Loss) on Investment
Transactions
Net realized gain (loss) on:
Investment transactions 91,195
Futures contracts (80,008)
Swap contracts 2,571
Net change in unrealized appreciation/depreciation of:
Investments 417,093
Futures contracts 42,859
Swap contracts (14,650)
Net gain on investment transactions 459,060
Net Increase in Net Assets from Operations $ 7,385,013
+ As restated, see Note K.
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 91
STATEMENT OF CHANGES IN NET ASSETS
Arizona
-------------------------------
Year Ended Year Ended
September 30, September 30,
2006 2005
-------------- --------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 7,894,681 $ 7,437,553
Net realized gain on investment
transactions 112,807 1,717,335
Net change in unrealized
appreciation/depreciation
of investments 235,761 26,873
Net increase in net assets from
operations 8,243,249 9,181,761
Dividends to Shareholders from
Net investment income
Class A (5,034,561) (4,128,486)
Class B (1,986,406) (2,535,386)
Class C (877,013) (783,563)
Transactions in Shares of
Beneficial Interest
Net increase 16,165,619 12,193,038
Total increase 16,510,888 13,927,364
Net Assets
Beginning of period 199,884,571 185,957,207
End of period (including distributions in
excess of net investment income of
$(198,261) and $(207,498),
respectively) $ 216,395,459 $ 199,884,571
See notes to financial statements.
92 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Florida
-------------------------------
Year Ended Year Ended
September 30, September 30,
2006 2005
-------------- --------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 9,325,277 $ 9,204,863
Net realized gain on investment
transactions 1,054,455 1,516,604
Net change in unrealized
appreciation/depreciation
of investments (408,285) (889,013)
Net increase in net assets from
operations 9,971,447 9,832,454
Dividends to Shareholders from
Net investment income
Class A (6,108,809) (4,995,087)
Class B (1,715,989) (2,662,613)
Class C (1,505,113) (1,551,635)
Transactions in Shares of
Beneficial Interest
Net increase (decrease) (6,734,730) 898,587
Total increase (decrease) (6,093,194) 1,521,706
Net Assets
Beginning of period 221,487,133 219,965,427
End of period (including distributions in
excess of net investment income of
$(223,391) and $(254,651),
respectively) $ 215,393,939 $ 221,487,133
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 93
Massachusetts
-------------------------------
Year Ended Year Ended
September 30, September 30,
2006 2005
-------------- --------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 5,207,931 $ 5,243,913
Net realized gain on investment
transactions 496,991 1,186,775
Net change in unrealized
appreciation/depreciation
of investments (778,292) (756,714)
Net increase in net assets from
operations 4,926,630 5,673,974
Dividends to Shareholders from
Net investment income
Class A (2,314,758) (1,900,538)
Class B (1,593,222) (2,117,577)
Class C (1,299,532) (1,271,360)
Transactions in Shares of
Beneficial Interest
Net increase (decrease) 4,595,839 (1,134,517)
Total increase (decrease) 4,314,957 (750,018)
Net Assets
Beginning of period 138,027,321 138,777,339
End of period (including distributions in
excess of net investment income of
$(133,973) and $(145,290),
respectively) $ 142,342,278 $ 138,027,321
See notes to financial statements.
94 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Michigan
-------------------------------
Year Ended Year Ended
September 30, September 30,
2006 2005
-------------- --------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 5,008,197 $ 5,165,876
Net realized gain on investment
transactions 558,659 1,502,788
Net change in unrealized
appreciation/depreciation
of investments (164,385) (287,093)
Net increase in net assets from
operations 5,402,471 6,381,571
Dividends to Shareholders from
Net investment income
Class A (2,433,142) (2,048,050)
Class B (1,204,158) (1,583,188)
Class C (1,373,126) (1,567,468)
Net realized gain on investments
Class A (57,135) -0-
Class B (37,261) -0-
Class C (39,589) -0-
Transactions in Shares of
Beneficial Interest
Net increase (decrease) (2,627,344) 1,844,200
Total increase (decrease) (2,369,284) 3,027,065
Net Assets
Beginning of period 139,376,193 136,349,128
End of period (including distributions in
excess of net investment income of
$(124,882) and $(149,734),
respectively) $ 137,006,909 $ 139,376,193
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 95
Minnesota
-------------------------------
Year Ended Year Ended
September 30, September 30,
2006 2005
-------------- --------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 3,849,931 $ 3,874,918
Net realized gain on investment
transactions 178,373 252,581
Net change in unrealized
appreciation/depreciation
of investments (113,622) 254,911
Net increase in net assets from
operations 3,914,682 4,382,410
Dividends to Shareholders from
Net investment income
Class A (2,885,957) (2,767,647)
Class B (411,238) (544,815)
Class C (557,346) (564,193)
Transactions in Shares of
Beneficial Interest
Net increase (decrease) (3,427,560) 2,020,229
Total increase (decrease) (3,367,419) 2,525,984
Net Assets
Beginning of period 100,751,350 98,225,366
End of period (including distributions in
excess of net investment income of
$(100,545) and $(109,318),
respectively) $ 97,383,931 $ 100,751,350
See notes to financial statements.
96 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
New Jersey
-------------------------------
Year Ended Year Ended
September 30, September 30,
2006+ 2005
-------------- --------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 6,427,008 $ 7,154,352
Net realized gain on investment
transactions 1,142,297 1,135,308
Net change in unrealized
appreciation/depreciation
of investments (727,965) 216,483
Net increase in net assets from
operations 6,841,340 8,506,143
Dividends to Shareholders from
Net investment income
Class A (3,396,985) (3,280,121)
Class B (1,796,564) (2,637,795)
Class C (1,239,006) (1,323,005)
Transactions in Shares of
Beneficial Interest
Net decrease (12,068,085) (27,635,191)
Total decrease (11,659,300) (26,369,969)
Net Assets
Beginning of period 171,555,093 197,925,062
End of period (including distributions in
excess of net investment income of
$(162,716) and $(185,196),
respectively) $ 159,895,793 $ 171,555,093
+ As restated, see Note K.
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 97
Ohio
-------------------------------
Year Ended Year Ended
September 30, September 30,
2006 2005
-------------- --------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 6,774,706 $ 7,368,221
Net realized gain on investment
transactions 770,982 575,008
Net change in unrealized
appreciation/depreciation
of investments (487,893) 201,731
Net increase in net assets from
operations 7,057,795 8,144,960
Dividends to Shareholders from
Net investment income
Class A (3,573,196) (3,437,306)
Class B (1,655,774) (2,219,109)
Class C (1,552,095) (1,669,222)
Transactions in Shares of
Beneficial Interest
Net decrease (15,019,332) (8,887,469)
Total decrease (14,742,602) (8,068,146)
Net Assets
Beginning of period 188,469,672 196,537,818
End of period (including distributions in
excess of net investment income of
$(131,139) and $(164,470),
respectively) $ 173,727,070 $ 188,469,672
See notes to financial statements.
98 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Pennsylvania
-------------------------------
Year Ended Year Ended
September 30, September 30,
2006 2005
-------------- --------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 5,541,207 $ 6,128,191
Net realized gain on investment
transactions 273,378 2,167,675
Net change in unrealized
appreciation/depreciation
of investments 404,931 (1,445,750)
Net increase in net assets from
operations 6,219,516 6,850,116
Dividends to Shareholders from
Net investment income
Class A (3,169,657) (3,168,680)
Class B (1,239,222) (1,703,571)
Class C (1,136,126) (1,220,485)
Transactions in Shares of
Beneficial Interest
Net decrease (6,680,062) (11,672,434)
Total decrease (6,005,551) (10,915,054)
Net Assets
Beginning of period 154,936,558 165,851,612
End of period (including distributions in
excess of net investment income of
$(126,580) and $(157,228),
respectively) $ 148,931,007 $ 154,936,558
See notes to financial statements.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 99
Virginia
-------------------------------
Year Ended Year Ended
September 30, September 30,
2006 2005
-------------- --------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 6,925,953 $ 6,676,372
Net realized gain on investment
transactions 13,758 1,112,181
Net change in unrealized
appreciation/depreciation
of investments 445,302 (400,972)
Net increase in net assets from
operations 7,385,013 7,387,581
Dividends to Shareholders from
Net investment income
Class A (4,266,428) (3,470,089)
Class B (1,519,323) (2,174,673)
Class C (1,143,354) (1,075,706)
Transactions in Shares of
Beneficial Interest
Net increase 15,931,078 5,117,842
Total increase 16,386,986 5,784,955
Net Assets
Beginning of period 164,505,553 158,720,598
End of period (including undistributed
net investment income of
$138,028 and $115,304,
respectively) $ 180,892,539 $ 164,505,553
See notes to financial statements.
100 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
Notes to Financial Statements
NOTE A
Significant Accounting Policies
AllianceBernstein Municipal Income Fund II (the "Fund"), which is a
Massachusetts Business Trust, is registered under the Investment Company Act of
1940, as an open-end management investment company. The Arizona Portfolio,
Florida Portfolio, Massachusetts Portfolio, Michigan Portfolio, Minnesota
Portfolio and New Jersey Portfolio are each diversified Portfolios. Each of the
other Portfolios is non-diversified. The Fund operates as a series company
currently comprised of nine portfolios: Arizona Portfolio, Florida Portfolio,
Massachusetts Portfolio, Michigan Portfolio, Minnesota Portfolio, New Jersey
Portfolio, Ohio Portfolio, Pennsylvania Portfolio and Virginia Portfolio (the
"Portfolios"). Each series is considered to be a separate entity for financial
reporting and tax purposes. Each portfolio offers 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 and the same terms and conditions, 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
the 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 value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange (other than securities listed on The NASDAQ Stock Market,
Inc. ("NASDAQ")) or on a foreign securities exchange are valued at the last
sale price at the close of the exchange or foreign securities exchange. If
there has been no
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 101
sale on such day, the securities are valued at the mean of the closing bid and
asked prices on such day. Securities listed on more than one exchange are
valued by reference to the principal exchange on which the securities are
traded; securities listed only on NASDAQ are valued in accordance with the
NASDAQ Official Closing Price; listed put or call options are valued at the
last sale price. If there has been no sale on that day, such securities will be
valued at the closing bid prices on that day; open futures contracts and
options thereon are valued using the closing settlement price or, in the
absence of such a price; the most recent quoted bid price. If there are no
quotations available for the day of valuation, the last available closing
settlement price is used; securities traded in the over-the-counter market,
("OTC") are valued at the mean of the current bid and asked prices as reported
by the National Quotation Bureau or other comparable sources; U.S. Government
securities and other debt instruments having 60 days or less remaining until
maturity are valued at amortized cost if their original maturity was 60 days or
less; or by amortizing their fair value as of the 61st day prior to maturity if
their original term to maturity exceeded 60 days; fixed-income securities,
including mortgage backed and asset backed securities, may be valued on the
basis of prices provided by a pricing service or at a price obtained from one
or more of the major broker/dealers. In cases where broker/dealer quotes are
obtained, AllianceBernstein L.P. (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 the policy of each Portfolio 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 to its
shareholders. Therefore, no provisions for federal income or excise taxes are
required. The Fund may be subject to taxes imposed by countries in which it
invests. Such taxes are generally based on income and/or capital gains earned
or repatriated.
102 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Taxes accrued and applied to net investment income, net realized gains and net
unrealized appreciation/depreciation as such income and/or gains are earned.
3. Investment Income and Investment Transactions
Interest income is accrued daily. Investment transactions are accounted for on
the date securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. As described more fully in the
prospectus for the Portfolios, each Portfolio may buy and sell securities from
other affiliated funds in accordance with the requirements of Rule 17a-7 of the
Investment Company Act of 1940. Each Portfolio has adopted procedures to ensure
that all such transactions are done in accordance with the requirements of Rule
17a-7. The Portfolios amortize premium and accrete original issue discount and
market discount as adjustments to interest income.
The Portfolios follow an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations held
by the Portfolios.
4. Class Allocations
All income earned and expenses incurred by the Portfolios are borne on a
pro-rata basis by each settled class of shares, based on the proportionate
interest in the Portfolios represented by the net assets of such class, except
for class specific expenses which are allocated to the respective class.
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 are recorded on the ex-dividend
date. Income 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 the average daily
net assets of each Portfolio. Prior to September 7, 2004, the Fund paid the
Adviser an advisory fee at an annual rate of .625% of each Portfolio's average
daily net assets. Such fees are accrued daily and paid monthly.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 103
The Adviser has voluntarily agreed to waive its fees and bear certain expenses
to the extent necessary to limit the total portfolio operating expenses on an
annual basis as follows:
Portfolios Class A Class B Class C
- -------------------------------------------------------------------------------
Arizona 0.78% 1.48% 1.48%
Florida 0.78% 1.48% 1.48%
Massachusetts 0.82% 1.52% 1.52%
Michigan 1.01% 1.71% 1.71%
Minnesota 0.90% 1.60% 1.60%
New Jersey 0.87% 1.57% 1.57%
Ohio 0.85% 1.55% 1.55%
Pennsylvania 0.95% 1.65% 1.65%
Virginia 0.72% 1.42% 1.42%
For the year ended September 30, 2006, the Adviser has voluntarily agreed to
waive a portion of its advisory fees. The aggregate amounts of such fee waivers
were as follows: Arizona Portfolio, $352,127; Florida Portfolio, $323,677;
Massachusetts Portfolio, $286,710; Michigan Portfolio, $0; Minnesota Portfolio,
$104,489; New Jersey Portfolio, $220,183; Ohio Portfolio, $235,427;
Pennsylvania Portfolio, $81,355; and Virginia Portfolio, $382,970.
Pursuant to the advisory agreement, the Arizona, Florida, Massachusetts, New
Jersey, Ohio and Pennsylvania Portfolios each paid $80,500 to the Adviser
representing the cost of certain legal and accounting services provided to
these Portfolios by the Adviser for the year ended September 30, 2006.
Additionally, the Adviser voluntarily agreed to waive all such fees for these
services for the Michigan, Minnesota and Virginia Portfolios in the aggregate
amount of $80,500 for each of these Portfolios.
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. For the
year ended September 30, 2006, such compensation retained by ABIS amounted to:
Arizona Portfolio, $37,864; Florida Portfolio, $33,893; Massachusetts
Portfolio, $35,074; Michigan Portfolio, $47,048; Minnesota Portfolio, $28,398;
New Jersey Portfolio, $54,295; Ohio Portfolio, $48,076; Pennsylvania Portfolio,
$49,558; and Virginia Portfolio, $36,574.
For the year ended September 30, 2006, each Portfolio's expenses were reduced
under an expense offset arrangement with ABIS, as follows: Arizona Portfolio,
by $1,787; Florida Portfolio, by $1,448; Massachusetts Portfolio, by $1,825;
Michigan Portfolio, by $2,237; Minnesota Portfolio, by $1,367; New Jersey
104 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Portfolio, by $2,554; Ohio Portfolio, by $2,328; Pennsylvania Portfolio, by
$2,276; and Virginia Portfolio, by $1,594.
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 retained front-end sales charges from sales of Class A shares and received
contingent deferred sales charges imposed upon redemptions by shareholders of
Class A, Class B and Class C shares for each Portfolio for the year ended
September 30, 2006 as follows:
Front End Contingent Deferred Sales Charges
Sales Charges ---------------------------------------------
Portfolio Class A Class A Class B Class C
- -------------------------------------------------------------------------------
Arizona $ 47,909 $ 4 $ 15,341 $ 15,816
Florida 20,683 6,093 21,143 9,505
Massachusetts 12,980 3,535 19,626 5,998
Michigan 13,670 22,133 21,757 10,167
Minnesota 8,111 -0- 5,912 4,476
New Jersey 10,044 -0- 17,546 1,609
Ohio 12,123 -0- 25,508 3,902
Pennsylvania 10,735 -0- 8,019 1,646
Virginia 24,168 345 19,492 2,927
NOTE C
Distribution Services Agreement
Each Portfolio 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 each Portfolio's average daily
net assets attributable to Class A shares and 1% of each Portfolio's average
daily net assets attributable to both Class B and Class C shares. Such 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
- -------------------------------------------------------------------------------
Arizona $ 3,985,633 $ 1,274,511
Florida 4,188,598 2,761,411
Massachusetts 3,805,158 2,889,035
Michigan 3,408,483 3,447,835
Minnesota 2,739,066 2,229,877
New Jersey 5,608,358 2,892,858
Ohio 4,705,282 3,090,008
Pennsylvania 3,818,632 2,762,253
Virginia 3,922,932 2,081,483
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 105
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.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) for the year ended September 30, 2006 were as
follows:
Portfolio Purchases Sales
- -------------------------------------------------------------------------------
Arizona $ 52,146,474 $ 39,888,370
Florida 58,511,509 56,411,773
Massachusetts 32,816,764 45,263,559
Michigan 22,223,252 23,013,956
Minnesota 12,618,111 15,237,395
New Jersey 10,235,281 25,137,248
Ohio 18,867,851 35,895,960
Pennsylvania 31,455,484 38,624,887
Virginia 49,767,899 49,602,826
There were no purchases or sales of U.S. government and government agency
obligations during the period.
At September 30, 2006, the cost of investments for federal income tax purposes,
gross unrealized appreciation, gross unrealized depreciation and net unrealized
appreciation/depreciation of investments for each Portfolio were as follows
(excluding futures and swap contracts):
Gross Unrealized Gross Unrealized Net Unrealized
Portfolio Tax Cost Appreciation Depreciation Appreciation
- -------------------------------------------------------------------------------
Arizona $ 206,732,145 $ 7,959,506 $ 188,557 $ 7,770,949
Florida 201,423,306 9,548,165 26,827 9,521,338
Massachusetts 134,074,977 6,595,285 -0- 6,595,285
Michigan 127,359,251 5,839,255 36,327 5,802,928
Minnesota 96,081,167 4,327,233 11,066 4,316,167
New Jersey 148,925,041 9,483,993 -0- 9,483,993
Ohio 163,512,365 7,398,410 19,968 7,378,442
Pennsylvania 139,496,258 7,389,849 11,337 7,378,512
Virginia 167,559,873 7,149,750 12,386 7,137,364
1. Swap Agreements
The Portfolios 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
106 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
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 interest payment
to be received by the Portfolios, and/or the termination value at the end of
the contract. Therefore, the Portfolios consider 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.
The Portfolios accrue 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
swaps contracts on the statements of operations. Fluctuations in the value of
swap contracts are recorded as a component of net change in unrealized
appreciation/depreciation of investments.
The Portfolios may enter into credit default swaps. The Portfolios may purchase
credit protection on the referenced obligation of the credit default swap ("Buy
Contract") or provide credit protection on the referenced obligation of the
credit default swap ("Sale Contract"). A sale/(buy) in a credit default swap
provides upon the occurrence of a credit event, as defined in the swap
agreement, for the Portfolio to buy/(sell) from/(to) the counterparty at the
notional amount (the "Notional Amount") and receive/(deliver) the principal
amount of the referenced obligation. If a credit event occurs, the maximum
payout amount for a Sale Contract is limited to the Notional Amount of the swap
contract ("Maximum Payout Amount"). During the term of the swap agreement, the
Portfolio receives/(pays) semi-annual fixed payments from/(to) the respective
counterparty, calculated at the agreed upon interest rate applied to the
Notional Amount. These interim payments are recorded within unrealized
appreciation/depreciation of swap contracts on the statement of assets and
liabilities.
Credit default swaps may involve greater risks than if a Portfolio had invested
in the referenced obligation directly. Credit default swaps are subject to
general market risk, liquidity risk, counterparty risk and credit risk. If the
Portfolio is a buyer and no credit event occurs, it will lose its investment.
In addition, if the Portfolio is a seller and a credit event occurs, the value
of the referenced obligation received by the Portfolio coupled with the
periodic payments previously received, may be less than the Maximum Payout
Amount it pays to the buyer, resulting in a loss to the Portfolio.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 107
2. Financial Futures Contracts
The Portfolios may buy or sell financial futures contracts for the purpose of
hedging its portfolio against adverse affects of anticipated movements in the
market. The Portfolios bear 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
securities hedged or used to cover.
At the time the Portfolios enter into a futures contract, the Portfolios
deposit and maintain as collateral an initial margin with the broker, as
required by the exchange on which the transaction is affected. Pursuant to the
contract, the Portfolios agree 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
Portfolios as unrealized gains or losses. Risk may arise from the potential
inability of a counterparty to meet the terms of a contract. When the contract
is closed, the Portfolios record 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.
NOTE E
Shares of Beneficial Interest
Transactions in shares of beneficial interest for each Portfolio were as
follows:
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
Arizona Portfolio 2006 2005 2006 2005
- ----------------- ------------ ------------ -------------- --------------
Class A
Shares sold 3,812,913 3,113,599 $ 41,789,746 $ 34,510,747
Shares issued in
reinvestment of
dividends 298,106 265,134 3,271,392 2,937,022
Shares converted
from Class B 234,967 581,305 2,582,561 6,441,636
Shares redeemed (1,900,622) (1,959,807) (20,856,830) (21,672,509)
Net increase 2,445,364 2,000,231 $ 26,786,869 $ 22,216,896
Class B
Shares sold 193,507 347,941 $ 2,122,269 $ 3,851,908
Shares issued in
reinvestment of
dividends 122,439 174,462 1,342,312 1,929,149
Shares converted
to Class A (235,327) (582,252) (2,582,561) (6,441,636)
Shares redeemed (1,097,963) (1,248,248) (12,005,729) (13,807,130)
Net decrease (1,017,344) (1,308,097) $ (11,123,709) $ (14,467,709)
108 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
Arizona Portfolio 2006 2005 2006 2005
- ----------------- ------------ ------------ -------------- --------------
Class C
Shares sold 551,969 753,354 $ 6,044,324 $ 8,347,411
Shares issued in
reinvestment of
dividends 59,236 50,413 649,141 557,696
Shares redeemed (566,353) (403,172) (6,191,006) (4,461,256)
Net increase 44,852 400,595 $ 502,459 $ 4,443,851
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
Florida Portfolio 2006 2005 2006 2005
- ----------------- ------------ ------------ -------------- --------------
Class A
Shares sold 2,976,910 3,054,191 $ 30,460,070 $ 31,538,480
Shares issued in
reinvestment of
dividends 350,468 277,465 3,584,428 2,860,377
Shares converted
from Class B 506,116 1,201,167 5,173,470 12,402,455
Shares redeemed (2,832,605) (2,036,995) (28,963,898) (20,972,424)
Net increase 1,000,889 2,495,828 $ 10,254,070 $ 25,828,888
Class B
Shares sold 193,103 395,639 $ 1,977,737 $ 4,081,616
Shares issued in
reinvestment of
dividends 111,772 171,181 1,143,612 1,764,739
Shares converted
to Class A (505,887) (1,200,412) (5,173,470) (12,402,455)
Shares redeemed (1,361,792) (1,846,855) (13,913,644) (19,026,418)
Net decrease (1,562,804) (2,480,447) $ (15,965,765) $ (25,582,518)
Class C
Shares sold 540,218 558,919 $ 5,529,081 $ 5,767,085
Shares issued in
reinvestment of
dividends 96,314 96,268 985,512 992,651
Shares redeemed (737,749) (592,144) (7,537,628) (6,107,519)
Net increase
(decrease) (101,217) 63,043 $ (1,023,035) $ 652,217
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 109
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
Massachusetts September 30, September 30, September 30, September 30,
Portfolio 2006 2005 2006 2005
- -------------- ------------ ------------ -------------- --------------
Class A
Shares sold 1,545,223 1,113,609 $ 16,810,875 $ 12,245,067
Shares issued in
reinvestment of
dividends 150,045 123,249 1,629,355 1,354,163
Shares converted
from Class B 186,197 537,902 2,019,260 5,914,420
Shares redeemed (950,867) (573,238) (10,314,160) (6,289,262)
Net increase 930,598 1,201,522 $ 10,145,330 $ 13,224,388
Class B
Shares sold 194,913 285,376 $ 2,114,973 $ 3,124,965
Shares issued in
reinvestment of
dividends 113,372 148,378 1,229,113 1,626,839
Shares converted
to Class A (186,522) (538,867) (2,019,260) (5,914,420)
Shares redeemed (936,177) (1,120,985) (10,138,969) (12,282,946)
Net decrease (814,414) (1,226,098) $ (8,814,143) $ (13,445,562)
Class C
Shares sold 845,015 403,369 $ 9,161,295 $ 4,423,251
Shares issued in
reinvestment of
dividends 92,443 87,872 1,002,006 963,499
Shares redeemed (637,698) (574,758) (6,898,649) (6,300,093)
Net increase
(decrease) 299,760 (83,517) $ 3,264,652 $ (913,343)
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
Michigan September 30, September 30, September 30, September 30,
Portfolio 2006 2005 2006 2005
- -------------- ------------ ------------ -------------- --------------
Class A
Shares sold 1,640,644 1,427,432 $ 17,742,353 $ 15,559,730
Shares issued in
reinvestment of
dividends 183,274 142,408 1,980,782 1,551,292
Shares converted
from Class B 146,144 130,504 1,580,451 1,419,836
Shares redeemed (1,040,006) (885,446) (11,213,786) (9,645,744)
Net increase 930,056 814,898 $ 10,089,800 $ 8,885,114
110 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
Michigan September 30, September 30, September 30, September 30,
Portfolio 2006 2005 2006 2005
- -------------- ------------ ------------ -------------- --------------
Class B
Shares sold 146,209 264,822 $ 1,577,811 $ 2,879,800
Shares issued in
reinvestment of
dividends 90,368 113,996 975,048 1,239,254
Shares converted
to Class A (146,387) (130,719) (1,580,451) (1,419,836)
Shares redeemed (1,082,297) (845,977) (11,661,405) (9,199,199)
Net decrease (992,107) (597,878) $ (10,688,997) $ (6,499,981)
Class C
Shares sold 413,350 654,424 $ 4,460,531 $ 7,118,899
Shares issued in
reinvestment of
dividends 106,400 120,364 1,148,273 1,308,696
Shares redeemed (708,791) (824,478) (7,636,951) (8,968,528)
Net decrease (189,041) (49,690) $ (2,028,147) $ (540,933)
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
Minnesota September 30, September 30, September 30, September 30,
Portfolio 2006 2005 2006 2005
- -------------- ------------ ------------ -------------- --------------
Class A
Shares sold 1,026,728 1,005,853 $ 10,384,436 $ 10,290,189
Shares issued in
reinvestment of
dividends 146,849 143,633 1,486,649 1,468,164
Shares converted
from Class B 91,735 95,260 930,243 972,353
Shares redeemed (1,076,264) (853,580) (10,873,082) (8,730,657)
Net increase 189,048 391,166 $ 1,928,246 $ 4,000,049
Class B
Shares sold 27,475 59,851 $ 271,900 $ 610,556
Shares issued in
reinvestment of
dividends 27,937 37,033 282,790 378,375
Shares converted
to Class A (91,749) (95,282) (930,243) (972,353)
Shares redeemed (342,173) (260,907) (3,459,151) (2,665,925)
Net decrease (378,510) (259,305) $ (3,834,704) $ (2,649,347)
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 111
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
Minnesota September 30, September 30, September 30, September 30,
Portfolio 2006 2005 2006 2005
- -------------- ------------ ------------ -------------- --------------
Class C
Shares sold 243,427 247,982 $ 2,465,544 $ 2,537,909
Shares issued in
reinvestment of
dividends 42,970 40,700 435,381 416,410
Shares redeemed (436,628) (223,533) (4,422,027) (2,284,792)
Net increase
(decrease) (150,231) 65,149 $ (1,521,102) $ 669,527
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
New Jersey September 30, September 30, September 30, September 30,
Portfolio 2006 2005 2006 2005
- -------------- ------------ ------------ -------------- --------------
Class A
Shares sold 1,437,584 698,884 $ 14,103,550 $ 6,934,437
Shares issued in
reinvestment of
dividends 221,462 212,447 2,177,303 2,109,626
Shares converted
from Class B 449,383 852,780 4,418,293 8,474,476
Shares redeemed (1,576,537) (1,668,847) (15,490,295) (16,555,950)
Net increase 531,892 95,264 $ 5,208,851 $ 962,589
Class B
Shares sold 229,392 363,143 $ 2,257,148 $ 3,606,473
Shares issued in
reinvestment of
dividends 149,007 208,665 1,465,862 2,071,969
Shares converted
to Class A (449,255) (852,370) (4,418,293) (8,474,476)
Shares redeemed (1,552,323) (2,309,239) (15,256,345) (22,929,685)
Net decrease (1,623,179) (2,589,801) $ (15,951,628) $ (25,725,719)
Class C
Shares sold 406,393 303,012 $ 3,995,670 $ 3,014,021
Shares issued in
reinvestment of
dividends 92,196 99,506 909,188 988,708
Shares redeemed (634,079) (692,695) (6,230,166) (6,874,790)
Net decrease (135,490) (290,177) $ (1,325,308) $ (2,872,061)
112 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
Ohio Portfolio 2006 2005 2006 2005
- -------------- ------------ ------------ -------------- --------------
Class A
Shares sold 1,246,323 1,499,480 $ 12,560,794 $ 15,258,582
Shares issued in
reinvestment of
dividends 267,765 261,022 2,693,831 2,657,680
Shares converted
from Class B 359,115 511,564 3,615,913 5,209,768
Shares redeemed (1,682,953) (1,555,717) (16,910,019) (15,860,873)
Net increase 190,250 716,349 $ 1,960,519 $ 7,265,157
Class B
Shares sold 160,497 338,582 $ 1,614,314 $ 3,441,546
Shares issued in
reinvestment of
dividends 125,529 176,471 1,261,972 1,794,778
Shares converted
to Class A (359,374) (511,963) (3,615,913) (5,209,768)
Shares redeemed (1,251,239) (1,512,207) (12,566,978) (15,387,457)
Net decrease (1,324,587) (1,509,117) $ (13,306,605) $ (15,360,901)
Class C
Shares sold 375,360 679,901 $ 3,775,137 $ 6,922,394
Shares issued in
reinvestment of
dividends 113,660 120,262 1,143,033 1,223,960
Shares redeemed (854,251) (880,040) (8,591,416) (8,938,079)
Net decrease (365,231) (79,877) $ (3,673,246) $ (791,725)
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
Pennsylvania September 30, September 30, September 30, September 30,
Portfolio 2006 2005 2006 2005
- -------------- ------------ ------------ -------------- --------------
Class A
Shares sold 859,609 720,496 $ 8,998,699 $ 7,598,951
Shares issued in
reinvestment of
dividends 233,653 225,234 2,445,046 2,377,548
Shares converted
from Class B 321,265 567,538 3,363,475 5,992,252
Shares redeemed (1,198,167) (1,133,334) (12,522,458) (11,941,959)
Net increase 216,360 379,934 $ 2,284,762 $ 4,026,792
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 113
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
Pennsylvania September 30, September 30, September 30, September 30,
Portfolio 2006 2005 2006 2005
- -------------- ------------ ------------ -------------- --------------
Class B
Shares sold 118,943 220,882 $ 1,244,478 $ 2,332,381
Shares issued in
reinvestment of
dividends 97,721 129,930 1,022,909 1,371,107
Shares converted
to Class A (321,167) (567,461) (3,363,475) (5,992,252)
Shares redeemed (700,464) (1,117,373) (7,327,059) (11,785,503)
Net decrease (804,967) (1,334,022) $ (8,423,147) $ (14,074,267)
Class C
Shares sold 324,629 295,817 $ 3,398,081 $ 3,115,893
Shares issued in
reinvestment of
dividends 79,133 83,409 828,250 880,384
Shares redeemed (455,281) (533,727) (4,768,008) (5,621,236)
Net decrease (51,519) (154,501) $ (541,677) $ (1,624,959)
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
Virginia September 30, September 30, September 30, September 30,
Portfolio 2006 2005 2006 2005
- -------------- ------------ ------------ -------------- --------------
Class A
Shares sold 2,697,272 1,852,144 $ 29,061,573 $ 20,080,730
Shares issued in
reinvestment of
dividends 293,204 225,838 3,160,065 2,448,903
Shares converted
from Class B 425,979 1,040,313 4,588,717 11,278,931
Shares redeemed (1,522,250) (878,123) (16,385,521) (9,519,221)
Net increase 1,894,205 2,240,172 $ 20,424,834 $ 24,289,343
Class B
Shares sold 169,150 246,812 $ 1,818,350 $ 2,669,914
Shares issued in
reinvestment of
dividends 117,556 165,916 1,265,032 1,794,786
Shares converted
to Class A (426,683) (1,042,236) (4,588,717) (11,278,931)
Shares redeemed (746,049) (1,203,697) (8,022,307) (13,017,637)
Net decrease (886,026) (1,833,205) $ (9,527,642) $ (19,831,868)
114 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
Virginia September 30, September 30, September 30, September 30,
Portfolio 2006 2005 2006 2005
- -------------- ------------ ------------ -------------- --------------
Class C
Shares sold 773,375 520,792 $ 8,313,101 $ 5,635,955
Shares issued in
reinvestment of
dividends 91,728 85,500 986,085 924,567
Shares redeemed (396,742) (547,340) (4,265,300) (5,900,155)
Net increase 468,361 58,952 $ 5,033,886 $ 660,367
NOTE F
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 September 30, 2006.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 115
NOTE G
Distributions To Shareholders
The tax character of distributions paid during the fiscal years ended September
30, 2006 and September 30, 2005 were as follows:
Arizona Portfolio 2006 2005
-------------- --------------
Distributions paid from:
Tax-exempt income $ 7,890,473 $ 7,400,654
Ordinary income 7,507 46,781
Total distributions paid $ 7,897,980 $ 7,447,435
As of September 30, 2006, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed Tax-Exempt Income $ 16,112
Accumulated capital and other losses (1,004,746)(a)
Unrealized appreciation/(depreciation) 7,753,192(b)
Total accumulated earnings/(deficit) $ 6,764,558(c)
(a) On September 30, 2006, the Portfolio had a net capital loss carryforward
for federal income tax purposes of $856,546 of which $385,413 expires in the
year 2008, $383,250 expires in the year 2010 and $87,883 expires in the year
2011. To the extent future capital gains are offset by capital loss
carryforwards, such gains will not be distributed. During the fiscal year ended
September 30, 2006, the Portfolio utilized capital loss carryforwards of
$191,728. For fiscal year ended September 30, 2006, the Portfolio deferred to
October 1, 2006 post October capital losses of $148,200.
(b) The differences between book-basis and tax-basis unrealized
appreciation/(depreciation) are attributable primarily to the tax deferral of
losses on wash sales, the realization for tax purposes gains/losses on certain
derivative instruments and the difference between the book and tax treatment of
swap income.
(c) The difference between book-basis and tax-basis components of accumulated
earnings/(deficit) is attributable to dividends payable.
During the current fiscal year, permanent differences primarily due to the tax
treatment of swaps resulted in a net decrease in distributions in excess of net
investment income and an increase in accumulated net realized loss on
investment transactions. This reclassification had no effect on net assets.
116 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Florida Portfolio 2006 2005
-------------- --------------
Distributions paid from:
Tax-exempt income $ 9,306,646 $ 9,106,816
Ordinary income 23,265 102,519
Total distributions paid $ 9,329,911 $ 9,209,335
As of September 30, 2006, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed Tax-Exempt Income $ 16,192
Accumulated capital and other losses (7,732,969)(a)
Unrealized appreciation/(depreciation) 9,679,601(b)
Total accumulated earnings/(deficit) $ 1,962,824(c)
(a) On September 30, 2006, the Portfolio had a net capital loss carryforward
for federal income tax purposes of $7,732,969 of which $4,253,064 expires in
the year 2008, $3,475,986 expires in the year 2009 and $3,919 expires in the
year 2010. To the extent future capital gains are offset by capital loss
carryforwards, such gains will not be distributed. During the fiscal year ended
September 30, 2006, the Portfolio utilized capital loss carryforwards of
$1,026,501.
(b) The differences between book-basis and tax-basis unrealized
appreciation/(depreciation) are 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 to dividends payable.
During the current fiscal year, permanent differences primarily due to the tax
treatment of swaps resulted in a net decrease in distributions in excess of net
investment income and an increase in accumulated net realized loss on
investment transactions. This reclassification had no effect on net assets.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 117
Massachusetts Portfolio 2006 2005
-------------- --------------
Distributions paid from:
Tax-exempt income $ 5,201,319 $ 5,160,022
Ordinary income 6,193 129,453
Total distributions paid $ 5,207,512 $ 5,289,475
As of September 30, 2006, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed Tax-Exempt Income $ 2,537
Accumulated capital and other losses (9,469,288)(a)
Unrealized appreciation/(depreciation) 6,759,736(b)
Total accumulated earnings/(deficit) $ (2, 707,015)(c)
(a) On September 30, 2006, the Portfolio had a net capital loss carryforward
for federal income tax purposes of $9,469,288 of which $5,690,960 expires in
the year 2008, $1,585,051 expires in the year 2009 and $2,193,277 expires in
the year 2011. To the extent future capital gains are offset by capital loss
carryforwards, such gains will not be distributed. During the fiscal year ended
September 30, 2006, the Portfolio utilized capital loss carryforwards of
$518,324.
(b) The differences between book-basis and tax-basis unrealized
appreciation/(depreciation) are attributable primarily to the tax deferral of
losses on wash sales and the difference between the book and tax treatment of
swap income and the tax treatment of open futures contracts.
(c) The difference between book-basis and tax-basis components of accumulated
earnings/(deficit) is attributable to dividends payable.
During the current fiscal year, permanent differences primarily due to the tax
treatment of swaps resulted in a net decrease in distributions in excess of net
investment income and an increase in accumulated net realized loss on
investment transactions. This reclassification had no effect on net assets.
118 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Michigan Portfolio 2006 2005
-------------- --------------
Distributions paid from:
Tax-exempt income $ 4,978,179 $ 5,052,285
Ordinary income 13,541 46,347
Long term capital gains 152,691 100,074
Total distributions paid $ 5,144,411 $ 5,198,706
As of September 30, 2006, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Long term capital gains $ 513,915
Unrealized appreciation/(depreciation) 6,003,727(a)
Total accumulated earnings/(deficit) $ 6,517,642(b)
(a) The differences between book-basis and tax-basis unrealized
appreciation/(depreciation) are attributable primarily to the 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 to dividends payable.
During the current fiscal year, permanent differences primarily due to the tax
treatment of swaps and a dividend reclassification resulted in a net decrease
in distributions in excess of net investment income and a decrease in
accumulated net realized gain on investment transactions. This reclassification
had no effect on net assets.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 119
Minnesota Portfolio 2006 2005
-------------- --------------
Distributions paid from:
Tax-exempt income $ 3,831,101 $ 3,772,527
Ordinary income 23,440 104,128
Total distributions paid $ 3,854,541 $ 3,876,655
As of September 30, 2006, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Accumulated capital and other losses $ (1,685,384)(a)
Unrealized appreciation/(depreciation) 4,408,183(b)
Total accumulated earnings/(deficit) $ 2,722,799(c)
(a) On September 30, 2006, the Portfolio had a net capital loss carryforward
for federal income tax purposes of $1,685,384 of which $879,267 expires in the
year 2008, $160,146 expires in the year 2009, $46,432 expires in the year 2010,
$179,795 expires in the year 2011, $142,635 expires in the year 2012 and
$277,109 expires in the year 2013. To the extent future capital gains are
offset by capital loss carryforwards, such gains will not be distributed.
During the fiscal year ended September 30, 2006, the Portfolio utilized capital
loss carryforward of $172,429.
(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 to dividends payable.
During the current fiscal year, permanent differences primarily due to tax
treatment of swaps and a taxable over distribution resulted in a net decrease
in distributions in excess of net investment income, an increase in accumulated
net realized loss on investment transactions and a decrease in additional
paid-in capital. This reclassification had no effect on net assets.
120 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
New Jersey Portfolio 2006 2005
-------------- --------------
Distributions paid from:
Tax-exempt income $ 6,402,977 $ 6,957,994
Ordinary income 29,578 282,927
Total distributions paid $ 6,432,555 $ 7,240,921
As of September 30, 2006, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Accumulated capital and other losses $ (13,421,185)(a)
Unrealized appreciation/(depreciation) 9,570,370(b)
Total accumulated earnings/(deficit) $ (3,850,815)(c)
(a) On September 30, 2006, the Portfolio had a net capital loss carryforward
for federal income tax purposes of $13,421,185 of which $1,673,160 expires in
the year 2008, $1,077,263 expires in the year 2009, $4,688,584 expires in the
year 2010, $5,617,272 expires in the year 2011 and $364,906 expires in the year
2012. To the extent future capital gains are offset by capital loss
carryforwards, such gains will not be distributed. During the fiscal year ended
September 30, 2006, the Portfolio utilized capital loss carryforwards of
$1,121,603.
(b) The differences between book-basis and tax-basis unrealized
appreciation/(depreciation) are attributable primarily to the tax deferral of
losses on wash sales, the realization for tax purposes of gains/losses on
certain derivative instruments, and the difference between book and the
treatment of swap income.
(c) The difference between book-basis and tax-basis components of accumulated
earnings/(deficit) is attributable to dividends payable.
During the current fiscal year, permanent differences primarily due to tax
treatment of swaps and a taxable over distribution resulted in a net decrease
in distributions in excess of net investment income, an increase to accumulated
net realized loss on investment transactions, and a corresponding decrease to
additional paid-in capital. This reclassification had no effect on net assets.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 121
Ohio Portfolio 2006 2005
-------------- --------------
Distributions paid from:
Tax-exempt income $ 6,727,534 $ 7,265,838
Ordinary income 53,531 59,799
Total distributions paid $ 6,781,065 $ 7,325,637
As of September 30, 2006, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed tax exempt income $ 41,580
Accumulated capital and other losses (6,596,116)(a)
Unrealized appreciation/(depreciation) 7,468,480(b)
Total accumulated earnings/(deficit) $ 913,944(c)
(a) On September 30, 2006, the Portfolio had a net capital loss carryforward
for federal income tax purposes of $6,596,116 of which $1,299,298 expires in
the year 2008, $1,639,021 expires in the year 2009, $3,620,192 expires in the
year 2011 and $37,605 expires in the year 2012. To the extent future capital
gains are offset by capital loss carryforwards, such gains will not be
distributed. During the fiscal year ended September 30, 2006 the Portfolio
utilized capital loss carryforwards of $653,132.
(b) The differences between book-basis and tax-basis unrealized
appreciation/(depreciation) are attributable primarily to the difference
between book and tax treatment of swap income.
(c) The difference between book-basis and tax-basis components of accumulated
earnings/(deficit) is attributable to dividends payable.
During the current fiscal year, permanent differences primarily due to the tax
treatment of swaps resulted in a net decrease in distributions in excess of net
investment income and an increase in accumulated net realized loss on
investment transactions. This reclassification had no effect on net assets.
122 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Pennsylvania Portfolio 2006 2005
-------------- --------------
Distributions paid from:
Tax-exempt income $ 5,491,025 $ 6,033,362
Ordinary income 53,980 59,374
Total distributions paid $ 5,545,005 $ 6,092,736
As of September 30, 2006, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed Tax Exempt Income $ 14,595
Accumulated capital and other losses (2,195,930)(a)
Unrealized appreciation/(depreciation) 7,371,152(b)
Total accumulated earnings/(deficit) $ 5,189,817(c)
(a) On September 30, 2006, the Portfolio had a net capital loss carryforward
for federal income tax purposes of $2,195,930 of which $1,475,398 expires in
the year 2008, $274,791 expires in the year 2010 and $445,741 expires in the
year 2011. To the extent future capital gains are offset by capital loss
carryforwards, such gains will not be distributed. During the fiscal year ended
September 30, 2006, the Portfolio utilized capital loss carryforwards of
$224,553.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation)are attributable primarily to the tax deferral of
losses on wash sales, and the difference between book and tax treatment of swap
income.
(c) The difference between book-basis and tax-basis components of accumulated
earnings/(deficit) is attributable to dividends payable.
During the current fiscal year, permanent differences primarily due to the tax
treatment of swaps resulted in a net decrease in distributions in excess of net
investment income and an increase in accumulated net realized loss on
investment transactions. This reclassification had no effect on net assets.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 123
Virginia Portfolio 2006 2005
-------------- --------------
Distributions paid from:
Tax-exempt income $ 6,880,113 $ 6,674,553
Ordinary income 48,992 45,915
Total distributions paid $ 6,929,105 $ 6,720,468
As of September 30, 2006, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed tax-exempt income $ 328,822
Accumulated capital and other losses (2,625,377)(a)
Unrealized appreciation/(depreciation) 7,131,322(b)
Total accumulated earnings/(deficit) $ 4,834,767(c)
(a) On September 30, 2006, the Portfolio had a net capital loss carryforward
for federal income tax purposes of $2,625,377 of which $599,723 expires in the
year 2008, $1,200,330 expires in the year 2009, $793,446 expires in the year
2010 and $31,878 expires in the year 2014. To the extent future capital gains
are offset by capital loss carryforwards, such gains will not be distributed.
(b) The differences between book-basis and tax-basis unrealized
appreciation/(depreciation) are attributable primarily to the tax deferral of
losses on wash sales the realization for tax purposes of gains/losses on
certain derivative instruments, and the difference between book and tax
treatment of swap income.
(c) The difference between book-basis and tax-basis components of accumulated
earnings/(deficit) is attributable to dividends payable.
During the current fiscal year, permanent differences primarily due to the tax
treatment of swaps resulted in a net increase to undistributed net investment
income and an increase to accumulated net realized loss on investment
transactions. This reclassification had no effect on net assets.
NOTE H
Risks Involved in Investing in the Fund
Credit Risk--The Portfolios of the AllianceBernstein Municipal Income Fund II
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 persuant to these contracts and expects the risk of loss
thereunder to be remote.
124 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
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:
(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.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 125
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 Trustees of the Trust ("the Independent Trustees")
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 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.
126 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
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 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
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 127
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 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
128 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
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 the 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 as a tax benefit or expense in the current year.
Adoption of FIN 48 is required for fiscal years beginning after December 15,
2006 and is to be applied to all open tax years as of the effective date. At
this time, management is evaluating the implications of FIN 48 and its impact
on the financial statements has not yet been determined.
On September 20, 2006, the FASB released Statement of Financial Accounting
Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an
authoritative definition of fair value, sets out a framework for measuring fair
value, and requires additional disclosures about fair-value measurements. The
application of FAS 157 is required for fiscal years beginning after November
15, 2007 and interim periods within those fiscal years. At this time,
management is evaluating the implications of FAS 157 and its impact on the
financial statements has not yet been determined.
NOTE K
Subsequent to the issuance of its September 30, 2006 financial statements, 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 New
Jersey Porfolio has restated the statement of assets and liablities, including
the portfolio of investments as of September 30, 2006 and the statements of
operations and changes in net assets for the year ended September 30, 2006 and
the financial highlights for each of the four years then ended to give effect
to recording the transfers of the municipal bonds as secured borrowings. The
Florida, Massachusetts, Minnesota, Pennsylvania and Virginia Portfolios have
restated their statements of operations for the year ended September 30, 2006
and expense ratios for the periods indicated below. The effects of the
restatement have no effect on previously reported net assets.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 129
(Note K continued)
New Jersey
----------------------------
Previously
Reported Restated
------------ -----------
Statement of Assets and
Liabilities as of September 30, 2006
Cost of investments in securities $148,823,337 $155,461,107
Investments in securities, at value 158,409,034 165,159,034
Total Assets 161,333,696 168,083,696
Payable for floating rate notes issued -0- 6,743,437
Interest expense and fees payable -0- 6,563
Total Liabilities 1,437,903 8,187,903
Composition of Net Assets
Accumulated net realized loss on
investment transactions (13,522,888) (13,635,118)
Net unrealized appreciation of
investments -0- -0-
Statement of Operations
for the year ended September 30, 2006
Investment income
Interest $8,463,350 $8,704,374
Interest expense and fees -0- 241,024
Total expenses 2,259,079 2,500,103
Net expenses 2,036,342 2,277,366
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized gain (loss) on investment
transactions 1,067,725 955,495
Net change in unrealized
appreciation/depreciation
of investments (802,010) (689,780)
Statement of Changes in Net Assets
for the year ended September 30, 2006
Net realized gain on investment
transactions $1,254,527 $1,142,297
Net change in unrealized
appreciation/depreciation
of investments (840,195) (727,965)
130 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
(Note K continued)
Florida Portfolio
Financial Highlights for the years ended
September 30, 2006, 2005 and 2004
2006 2005 2004
---------------------- ---------------------- ----------------------
Previously Previously Previously
Reported Restated Reported Restated Reported Restated
---------------------- ---------------------- ----------------------
Class A
Ratio to average net assets of:
Expenses, before fee
waivers/reimbursments 0.93%(a) 0.98%(a) 0.97% 1.08% 1.10% 1.12%
Expenses, before fee
waivers/reimbursments
excluding interest expense N/A(b) 0.94%(a) N/A(b) 0.98% N/A(b) 1.11%
Class B
Ratio to average net assets of:
Expenses, before fee
waivers/reimbursments 1.64%(a) 1.69%(a) 1.67% 1.78% 1.81% 1.83%
Expenses, before fee
waivers/reimbursments
excluding interest expense N/A(b) 1.65%(a) N/A(b) 1.68% N/A(b) 1.82%
Class C
Ratio to average net assets of:
Expenses, before fee
waivers/reimbursments 1.63%(a) 1.68%(a) 1.67% 1.78% 1.81% 1.83%
Expenses, before fee
waivers/reimbursments
excluding interest expense N/A(b) 1.64%(a) N/A(b) 1.68% N/A(b) 1.82%
Massachusetts Portfolio
Financial Highlights for the years ended
September 30, 2006, 2005 and 2004
2006 2005 2004
---------------------- ---------------------- ----------------------
Previously Previously Previously
Reported Restated Reported Restated Reported Restated
---------------------- ---------------------- ----------------------
Class A
Ratio to average net assets of:
Expenses, before fee
waivers/reimbursments 1.02%(a) 1.09%(a) 1.02% 1.17% 1.19% 1.25%
Expenses, before fee
waivers/reimbursments
excluding interest expense N/A(b) 1.03%(a) N/A(b) 1.03% N/A(b) 1.20%
Class B
Ratio to average net assets of:
Expenses, before fee
waivers/reimbursments 1.74%(a) 1.81%(a) 1.73% 1.88% 1.90% 1.96%
Expenses, before fee
waivers/reimbursments
excluding interest expense N/A(b) 1.75%(a) N/A(b) 1.74% N/A(b) 1.91%
Class C
Ratio to average net assets of:
Expenses, before fee
waivers/reimbursments 1.73%(a) 1.80%(a) 1.73% 1.88% 1.89% 1.95%
Expenses, before fee
waivers/reimbursments
excluding interest expense N/A(b) 1.74%(a) N/A(b) 1.74% N/A(b) 1.90%
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 131
(Note K continued)
Minnesota Portfolio
Financial Highlights for the years ended
September 30, 2006, 2005, 2004 and 2003
2006 2005 2004 2003
---------------------- ---------------------- ---------------------- ----------------------
Previously Previously Previously Previously
Reported Restated Reported Restated Reported Restated Reported Restated
---------------------- ---------------------- ---------------------- ----------------------
Class A
Ratio to average
net assets of:
Expenses, before
fee waivers/
reimbursments 1.09%(a) 1.17%(a) 1.12% 1.26% 1.27% 1.32% 1.19% 1.22%
Expenses, before
fee waivers/
reimbursments
excluding interest
expense N/A(b) 1.10%(a) N/A(b) 1.13% N/A(b) 1.28% N/A(b) 1.20%
Class B
Ratio to average
net assets of:
Expenses, before
fee waivers/
reimbursments 1.80%(a) 1.88%(a) 1.83% 1.97% 1.99% 2.04% 1.90% 1.93%
Expenses, before
fee waivers/
reimbursments
excluding interest
expense N/A(b) 1.81%(a) N/A(b) 1.84% N/A(b) 2.00% N/A(b) 1.91%
Class C
Ratio to average
net assets of:
Expenses, before
fee waivers/
reimbursments 1.79%(a) 1.87%(a) 1.82% 1.96% 1.98% 2.03% 1.89% 1.92%
Expenses, before
fee waivers/
reimbursments
excluding interest
expense N/A(b) 1.80%(a) N/A(b) 1.83% N/A(b) 1.99% N/A(b) 1.90%
132 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
(Note K continued)
New Jersey Portfolio
Financial Highlights for the years ended
September 30, 2006, 2005, 2004 and 2003
2006 2005 2004 2003
---------------------- ---------------------- ---------------------- ----------------------
Previously Previously Previously Previously
Reported Restated Reported Restated Reported Restated Reported Restated
---------------------- ---------------------- ---------------------- ----------------------
Class A
Ratio to average
net assets of:
Expenses, before
fee waivers/
reimbursments 1.00%(a) 1.15%(a) 1.01% 1.16% 1.16% 1.23% 1.13% 1.16%
Expenses, before
fee waivers/
reimbursments
excluding interest
expense N/A(b) 1.01%(a) N/A(b) 1.02% N/A(b) 1.17% N/A(b) 1.14%
Class B
Ratio to average
net assets of:
Expenses, before
fee waivers/
reimbursments 1.71%(a) 1.86%(a) 1.72% 1.87% 1.87% 1.94% 1.84% 1.87%
Expenses, before
fee waivers/
reimbursments
excluding interest
expense N/A(b) 1.72%(a) N/A(b) 1.73% N/A(b) 1.88% N/A(b) 1.85%
Class C
Ratio to average
net assets of:
Expenses, before
fee waivers/
reimbursments 1.70%(a) 1.85%(a) 1.71% 1.86% 1.86% 1.93% 1.83% 1.86%
Expenses, before
fee waivers/
reimbursments
excluding interest
expense N/A(b) 1.71%(a) N/A(b) 1.72% N/A(b) 1.87% N/A(b) 1.84%
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 133
(Note K continued)
Pennsylvania Portfolio
Financial Highlights for the years ended
September 30, 2006, 2005 and 2004
2006 2005 2004
---------------------- ---------------------- ----------------------
Previously Previously Previously
Reported Restated Reported Restated Reported Restated
---------------------- ---------------------- ----------------------
Class A
Ratio to average net assets of:
Expenses, before fee
waivers/reimbursments 1.00%(a) 1.11%(a) 1.03% 1.20% 1.17% 1.24%
Expenses, before fee
waivers/reimbursments
excluding interest expense N/A(b) 1.01%(a) N/A(b) 1.04% N/A(b) 1.18%
Class B
Ratio to average net assets of:
Expenses, before fee
waivers/reimbursments 1.71%(a) 1.82%(a) 1.73% 1.90% 1.88% 1.95%
Expenses, before fee
waivers/reimbursments
excluding interest expense N/A(b) 1.72%(a) N/A(b) 1.74% N/A(b) 1.89%
Class C
Ratio to average net assets of:
Expenses, before fee
waivers/reimbursments 1.71%(a) 1.82%(a) 1.73% 1.90% 1.87% 1.94%
Expenses, before fee
waivers/reimbursments
excluding interest expense N/A(b) 1.72%(a) N/A(b) 1.74% N/A(b) 1.88%
134 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
(Note K continued)
Virginia Portfolio
Financial Highlights for the years ended
September 30, 2006, 2005 and 2004
2006 2005 2004
---------------------- ---------------------- ----------------------
Previously Previously Previously
Reported Restated Reported Restated Reported Restated
---------------------- ---------------------- ----------------------
Class A
Ratio to average net assets of:
Expenses, before fee
waivers/reimbursments 0.99%(a) 1.01%(a) 0.99% 1.09% 1.17% 1.18%
Expenses, before fee
waivers/reimbursments
excluding interest expense N/A(b) 1.00%(a) N/A(b) 1.00% N/A(b) 1.18%
Class B
Ratio to average net assets of:
Expenses, before fee
waivers/reimbursments 1.70%(a) 1.72%(a) 1.70% 1.80% 1.88% 1.89%
Expenses, before fee
waivers/reimbursments
excluding interest expense N/A(b) 1.71%(a) N/A(b) 1.71% N/A(b) 1.89%
Class C
Ratio to average net assets of:
Expenses, before fee
waivers/reimbursments 1.69%(a) 1.71%(a) 1.69% 1.79% 1.87% 1.88%
Expenses, before fee
waivers/reimbursments
excluding interest expense N/A(b) 1.70%(a) N/A(b) 1.70% N/A(b) 1.88%
(a) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(b) Not previously reported.
For the Florida, Massachusetts, Minnesota, New Jersey, Pennsylvania and
Virginia Portfolios, the Statements of Assets and Liabilities as of September
30, 2005, 2004 and 2003 (not presented herein) have not been reissued to give
effect to the restatement. The principal effects of the restatement would be to
increase investments and payable for floating rate notes issued by
corresponding amounts each year, with no effect on previously reported net
assets. The Statements of Operations for the years ended September 30, 2005,
2004 and 2003 (not presented herein) have not been reissued to give effect to
the restatement, but the principal effects of the restatement would be to
increase interest income and interest expense and fees by corresponding amounts
each year, with no effect on the previously reported net increase in net assets
resulting from operations.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 135
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Arizona Portfolio
---------------------------------------------------------------
Class A
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $11.06 $10.95 $10.76 $11.02 $10.80
Income From Investment
Operations
Net investment income(b)(c) .45 .47 .51 .51 .51
Net realized and unrealized
gain (loss) on investment
transactions .01 .11 .19 (.26) .26
Net increase in net asset value
from operations .46 .58 .70 .25 .77
Less: Dividends and
Distributions
Dividends from net investment
income (.45) (.47) (.51) (.51) (.51)
Distributions in excess of net
investment income -0- -0- -0- -0- (.04)
Total dividends and
distributions (.45) (.47) (.51) (.51) (.55)
Net asset value, end of period $11.07 $11.06 $10.95 $10.76 $11.02
Total Return
Total investment return based
on net asset value(d) 4.28% 5.36% 6.64% 2.35% 7.33%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $138,880 $111,704 $88,701 $101,040 $121,245
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements .78%(e) .78% .78% .78% .78%
Expenses, before waivers/
reimbursements .95%(e) .97% 1.13% 1.11% 1.12%
Net investment income,
net of waivers/
reimbursements 4.11%(e) 4.22% 4.69% 4.72% 4.73%
Portfolio turnover rate 20% 25% 28% 28% 11%
See footnote summary on page 163.
136 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Arizona Portfolio
---------------------------------------------------------------
Class B
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $11.04 $10.94 $10.74 $11.00 $10.78
Income From Investment
Operations
Net investment income(b)(c) .38 .39 .43 .43 .43
Net realized and unrealized
gain (loss) on investment
transactions -0- .10 .20 (.26) .27
Net increase in net asset value
from operations .38 .49 .63 .17 .70
Less: Dividends and
Distributions
Dividends from net investment
income (.37) (.39) (.43) (.43) (.43)
Distributions in excess of net
investment income -0- -0- -0- -0- (.05)
Total dividends and
distributions (.37) (.39) (.43) (.43) (.48)
Net asset value, end of period $11.05 $11.04 $10.94 $10.74 $11.00
Total Return
Total investment return based
on net asset value(d) 3.56% 4.56% 5.98% 1.62% 6.65%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $52,070 $63,255 $76,951 $89,938 $92,349
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.48%(e) 1.48% 1.48% 1.48% 1.48%
Expenses, before waivers/
reimbursements 1.66%(e) 1.68% 1.84% 1.82% 1.82%
Net investment income,
net of waivers/
reimbursements 3.42%(e) 3.54% 4.00% 4.03% 4.02%
Portfolio turnover rate 20% 25% 28% 28% 11%
See footnote summary on page 163.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 137
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Arizona Portfolio
---------------------------------------------------------------
Class C
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $11.04 $10.94 $10.74 $11.00 $10.78
Income From Investment
Operations
Net investment income(b)(c) .37 .39 .43 .43 .43
Net realized and unrealized
gain (loss) on investment
transactions .01 .10 .20 (.26) .27
Net increase in net asset value
from operations .38 .49 .63 .17 .70
Less: Dividends and
Distributions
Dividends from net investment
income (.37) (.39) (.43) (.43) (.43)
Distributions in excess of net
investment income -0- -0- -0- -0- (.05)
Total dividends and
distributions (.37) (.39) (.43) (.43) (.48)
Net asset value, end of period $11.05 $11.04 $10.94 $10.74 $11.00
Total Return
Total investment return based
on net asset value(d) 3.56% 4.56% 5.98% 1.62% 6.65%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $25,445 $24,926 $20,305 $25,110 $24,258
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.48%(e) 1.48% 1.48% 1.48% 1.48%
Expenses, before waivers/
reimbursements 1.65%(e) 1.67% 1.84% 1.82% 1.82%
Net investment income,
net of waivers/
reimbursements 3.42%(e) 3.53% 4.00% 4.03% 4.00%
Portfolio turnover rate 20% 25% 28% 28% 11%
See footnote summary on page 163.
138 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Florida Portfolio
---------------------------------------------------------------
Class A
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.28 $10.25 $10.17 $10.34 $10.16
Income From Investment
Operations
Net investment income(b)(c) .46 .47 .49 .49 .52
Net realized and unrealized
gain (loss) on investment
transactions .04 .03 .08 (.13) .19
Net increase in net asset value
from operations .50 .50 .57 .36 .71
Less: Dividends and
Distributions
Dividends from net investment
income (.46) (.47) (.49) (.53) (.52)
Distributions in excess of net
investment income -0- -0- -0- -0- (.01)
Total dividends and
distributions (.46) (.47) (.49) (.53) (.53)
Net asset value, end of period $10.32 $10.28 $10.25 $10.17 $10.34
Total Return
Total investment return based
on net asset value(d) 5.00% 5.01% 5.78% 3.54% 7.21%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $138,307 $127,541 $101,529 $109,543 $109,373
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements and interest
expense .78%(e) .78% .78% .78% .78%
Expenses, before waivers/
reimbursements .98%(e)+ 1.08%+ 1.12%+ 1.11% 1.09%
Net investment income,
net of waivers/
reimbursements 4.51%(e) 4.60% 4.83% 4.80% 5.18%
Portfolio turnover rate 27% 23% 22% 30% 20%
+ As restated, see Note K.
See footnote summary on page 163.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 139
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Florida Portfolio
---------------------------------------------------------------
Class B
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.29 $10.26 $10.18 $10.35 $10.17
Income From Investment
Operations
Net investment income(b)(c) .39 .40 .42 .42 .45
Net realized and unrealized
gain (loss) on investment
transactions .03 .03 .08 (.14) .18
Net increase in net asset value
from operations .42 .43 .50 .28 .63
Less: Dividends
Dividends from net investment
income (.39) (.40) (.42) (.45) (.45)
Net asset value, end of period $10.32 $10.29 $10.26 $10.18 $10.35
Total Return
Total investment return based
on net asset value(d) 4.17% 4.29% 4.96% 2.82% 6.45%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $38,045 $53,996 $79,266 $104,874 $105,583
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements and interest
expense 1.48%(e) 1.48% 1.48% 1.48% 1.48%
Expenses, before waivers/
reimbursements 1.69%(e)+ 1.78%+ 1.83%+ 1.81% 1.79%
Net investment income,
net of waivers/
reimbursements 3.80%(e) 3.91% 4.12% 4.09% 4.47%
Portfolio turnover rate 27% 23% 22% 30% 20%
+ As restated, see Note K.
See footnote summary on page 163.
140 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Florida Portfolio
---------------------------------------------------------------
Class C
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.29 $10.25 $10.18 $10.35 $10.17
Income From Investment
Operations
Net investment income(b)(c) .39 .40 .42 .42 .45
Net realized and unrealized
gain (loss) on investment
transactions .03 .04 .07 (.14) .18
Net increase in net asset value
from operations .42 .44 .49 .28 .63
Less: Dividends
Dividends from net investment
income (.39) (.40) (.42) (.45) (.45)
Net asset value, end of period $10.32 $10.29 $10.25 $10.18 $10.35
Total Return
Total investment return based
on net asset value(d) 4.17% 4.38% 4.96% 2.82% 6.45%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $39,042 $39,950 $39,170 $46,929 $49,102
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements and interest
expense 1.48%(e) 1.48% 1.48% 1.48% 1.48%
Expenses, before waivers/
reimbursements 1.68%(e)+ 1.78%+ 1.83%+ 1.81% 1.79%
Net investment income,
net of waivers/
reimbursements 3.80%(e) 3.90% 4.13% 4.09% 4.47%
Portfolio turnover rate 27% 23% 22% 30% 20%
+ As restated, see Note K.
See footnote summary on page 163.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 141
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Massachusetts Portfolio
---------------------------------------------------------------
Class A
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.96 $10.92 $10.79 $11.06 $11.05
Income From Investment
Operations
Net investment income(b)(c) .45 .47 .51 .51 .54
Net realized and unrealized
gain (loss) on investment
transactions (.02) .05 .13 (.26) .04
Net increase in net asset value
from operations .43 .52 .64 .25 .58
Less: Dividends and
Distributions
Dividends from net investment
income (.45) (.48) (.51) (.52) (.54)
Distributions in excess of net
investment income -0- -0- -0- -0- (.03)
Total dividends and
distributions (.45) (.48) (.51) (.52) (.57)
Net asset value, end of period $10.94 $10.96 $10.92 $10.79 $11.06
Total Return
Total investment return based
on net asset value(d) 4.06% 4.80% 6.13% 2.39% 5.46%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $63,120 $53,035 $39,749 $46,342 $66,197
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements and interest
expense .82%(e) .82% .82% .82% .82%
Expenses, before waivers/
reimbursements 1.09%(e)+ 1.17%+ 1.25%+ 1.17% 1.12%
Net investment income,
net of waivers/
reimbursements 4.18%(e) 4.29% 4.73% 4.71% 4.97%
Portfolio turnover rate 25% 25% 26% 28% 27%
+ As restated, see Note K.
See footnote summary on page 163.
142 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Massachusetts Portfolio
---------------------------------------------------------------
Class B
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.94 $10.91 $10.77 $11.03 $11.03
Income From Investment
Operations
Net investment income(b)(c) .38 .40 .44 .44 .47
Net realized and unrealized
gain (loss) on investment
transactions (.02) .03 .14 (.25) .03
Net increase in net asset value
from operations .36 .43 .58 .19 .50
Less: Dividends and
Distributions
Dividends from net investment
income (.38) (.40) (.44) (.45) (.47)
Distributions in excess of net
investment income -0- -0- -0- -0- (.03)
Total dividends and
distributions (.38) (.40) (.44) (.45) (.50)
Net asset value, end of period $10.92 $10.94 $10.91 $10.77 $11.03
Total Return
Total investment return based
on net asset value(d) 3.35% 4.00% 5.38% 1.76% 4.69%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $41,221 $50,203 $63,430 $73,979 $79,216
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements and interest
expense 1.52%(e) 1.52% 1.52% 1.52% 1.52%
Expenses, before waivers/
reimbursements 1.81%(e)+ 1.88%+ 1.96%+ 1.89% 1.83%
Net investment income,
net of waivers/
reimbursements 3.49%(e) 3.61% 4.04% 4.02% 4.28%
Portfolio turnover rate 25% 25% 26% 28% 27%
+ As restated, see Note K.
See footnote summary on page 163.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 143
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Massachusetts Portfolio
---------------------------------------------------------------
Class C
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.94 $10.91 $10.77 $11.03 $11.03
Income From Investment
Operations
Net investment income(b)(c) .38 .40 .44 .44 .47
Net realized and unrealized
gain(loss) on investment
transactions (.02) .03 .14 (.25) .03
Net increase in net asset value
from operations .36 .43 .58 .19 .50
Less: Dividends and
Distributions
Dividends from net investment
income (.38) (.40) (.44) (.45) (.47)
Distributions in excess of net
investment income -0- -0- -0- -0- (.03)
Total dividends and
distributions (.38) (.40) (.44) (.45) (.50)
Net asset value, end of period $10.92 $10.94 $10.91 $10.77 $11.03
Total Return
Total investment return based
on net asset value(d) 3.35% 3.99% 5.38% 1.76% 4.69%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $38,001 $34,789 $35,598 $46,542 $53,156
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements and interest
expense 1.52%(e) 1.52% 1.52% 1.52% 1.52%
Expenses, before waivers/
reimbursements 1.80%(e)+ 1.88%+ 1.95%+ 1.88% 1.82%
Net investment income,
net of waivers/
reimbursements 3.49%(e) 3.61% 4.04% 4.02% 4.28%
Portfolio turnover rate 25% 25% 26% 28% 27%
+ As restated, see Note K.
See footnote summary on page 163.
144 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Michigan Portfolio
---------------------------------------------------------------
Class A
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.88 $10.79 $10.69 $10.91 $10.63
Income From Investment
Operations
Net investment income(b)(c) .43 .46 .48 .47 .49
Net realized and unrealized
gain (loss) on investment
transactions .03 .09 .11 (.17) .32
Net increase in net asset value
from operations .46 .55 .59 .30 .81
Less: Dividends and
Distributions
Dividends from net investment
income (.42) (.46) (.49) (.52) (.49)
Distributions in excess of net
investment income (.01) -0- -0- -0- (.04)
Total dividends and
distributions (.43) (.46) (.49) (.52) (.53)
Net asset value, end of period $10.91 $10.88 $10.79 $10.69 $10.91
Total Return
Total investment return based
on net asset value(d) 4.38% 5.16% 5.65% 2.66% 7.87%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $64,920 $54,635 $45,362 $53,022 $55,396
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements .98%(e) .99% 1.01% 1.01% 1.01%
Expenses, before waivers/
reimbursements 1.04%(e) 1.05% 1.20% 1.20% 1.21%
Net investment income,
net of waivers/
reimbursements 3.92%(e) 4.19% 4.51% 4.38% 4.57%
Portfolio turnover rate 17% 18% 18% 46% 18%
See footnote summary on page 163.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 145
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Michigan Portfolio
---------------------------------------------------------------
Class B
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.86 $10.77 $10.67 $10.89 $10.62
Income From Investment
Operations
Net investment income(b)(c) .35 .38 .41 .40 .41
Net realized and unrealized
gain (loss) on investment
transactions .04 .10 .10 (.18) .32
Net increase in net asset value
from operations .39 .48 .51 .22 .73
Less: Dividends and
Distributions
Dividends from net investment
income (.35) (.39) (.41) (.44) (.41)
Distributions in excess of net
investment income (.01) -0- -0- -0- (.05)
Total dividends and
distributions (.36) (.39) (.41) (.44) (.46)
Net asset value, end of period $10.89 $10.86 $10.77 $10.67 $10.89
Total Return
Total investment return based
on net asset value(d) 3.66% 4.47% 4.91% 1.95% 7.06%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $30,813 $41,516 $47,605 $58,034 $53,097
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.69%(e) 1.70% 1.71% 1.71% 1.71%
Expenses, before waivers/
reimbursements 1.75%(e) 1.76% 1.91% 1.92% 1.92%
Net investment income,
net of waivers/
reimbursements 3.23%(e) 3.50% 3.81% 3.69% 3.88%
Portfolio turnover rate 17% 18% 18% 46% 18%
See footnote summary on page 163.
146 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Michigan Portfolio
---------------------------------------------------------------
Class C
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.87 $10.77 $10.67 $10.89 $10.62
Income From Investment
Operations
Net investment income(b)(c) .35 .38 .41 .40 .41
Net realized and unrealized
gain (loss) on investment
transactions .03 .10 .10 (.18) .32
Net increase in net asset value
from operations .38 .48 .51 .22 .73
Less: Dividends and
Distributions
Dividends from net investment
income (.35) (.38) (.41) (.44) (.41)
Distributions in excess of net
investment income (.01) -0- -0- -0- (.05)
Total dividends and
distributions (.36) (.38) (.41) (.44) (.46)
Net asset value, end of period $10.89 $10.87 $10.77 $10.67 $10.89
Total Return
Total investment return based
on net asset value(d) 3.56% 4.54% 4.91% 1.95% 7.06%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $41,274 $43,225 $43,382 $54,996 $57,818
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.68%(e) 1.70% 1.71% 1.71% 1.71%
Expenses, before waivers/
reimbursements 1.74%(e) 1.75% 1.90% 1.90% 1.93%
Net investment income,
net of waivers/
reimbursements 3.23%(e) 3.50% 3.82% 3.69% 3.86%
Portfolio turnover rate 17% 18% 18% 46% 18%
See footnote summary on page 163.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 147
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Minnesota Portfolio
---------------------------------------------------------------
Class A
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.19 $10.14 $10.15 $10.31 $10.09
Income From Investment
Operations
Net investment income(b)(c) .42 .42 .44 .45 .48
Net realized and unrealized
gain (loss) on investment
transactions .01 .05 (.01) (.15) .25
Net increase in net asset value
from operations .43 .47 .43 .30 .73
Less: Dividends and
Distributions
Dividends from net investment
income (.42) (.42) (.44) (.46) (.48)
Distributions in excess of net
investment income -0- -0- -0- -0- (.03)
Total dividends and
distributions (.42) (.42) (.44) (.46) (.51)
Net asset value, end of period $10.20 $10.19 $10.14 $10.15 $10.31
Total Return
Total investment return based
on net asset value(d) 4.29% 4.72% 4.41% 3.05% 7.46%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $71,172 $69,174 $64,847 $67,521 $65,850
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements and interest
expense .90%(e) .90% .90% .90% .90%
Expenses, before waivers/
reimbursements 1.17%(e)+ 1.26%+ 1.32%+ 1.22%+ 1.29%
Net investment income,
net of waivers/
reimbursements 4.10%(e) 4.12% 4.36% 4.42% 4.75%
Portfolio turnover rate 13% 14% 19% 32% 29%
+ As restated, see Note K.
See footnote summary on page 163.
148 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Minnesota Portfolio
---------------------------------------------------------------
Class B
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.19 $10.14 $10.15 $10.31 $10.08
Income From Investment
Operations
Net investment income(b)(c) .34 .35 .37 .38 .40
Net realized and unrealized
gain (loss) on investment
transactions .01 .05 (.01) (.15) .27
Net increase in net asset value
from operations .35 .40 .36 .23 .67
Less: Dividends and
Distributions
Dividends from net investment
income (.34) (.35) (.37) (.39) (.40)
Distributions in excess of net
investment income -0- -0- -0- -0- (.04)
Total dividends and
distributions (.34) (.35) (.37) (.39) (.44)
Net asset value, end of period $10.20 $10.19 $10.14 $10.15 $10.31
Total Return
Total investment return based
on net asset value(d) 3.56% 3.99% 3.68% 2.34% 6.84%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $10,577 $14,424 $16,976 $24,366 $24,340
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements and interest
expense 1.60%(e) 1.60% 1.60% 1.60% 1.60%
Expenses, before waivers/
reimbursements 1.88%(e)+ 1.97%+ 2.04%+ 1.93%+ 1.99%
Net investment income,
net of waivers/
reimbursements 3.41%(e) 3.43% 3.65% 3.72% 4.04%
Portfolio turnover rate 13% 14% 19% 32% 29%
+ As restated, see Note K.
See footnote summary on page 163.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 149
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Minnesota Portfolio
-----------------------------------------------------------------
Class C
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.20 $10.15 $10.16 $10.32 $10.10
Income From Investment
Operations
Net investment income(b)(c) .34 .35 .37 .38 .40
Net realized and unrealized
gain (loss) on investment
transactions .01 .05 (.01) (.15) .26
Net increase in net asset value
from operations .35 .40 .36 .23 .66
Less: Dividends and
Distributions
Dividends from net investment
income (.34) (.35) (.37) (.39) (.40)
Distributions in excess of net
investment income -0- -0- -0- -0- (.04)
Total dividends and
distributions (.34) (.35) (.37) (.39) (.44)
Net asset value, end of period $10.21 $10.20 $10.15 $10.16 $10.32
Total Return
Total investment return based
on net asset value(d) 3.55% 3.98% 3.68% 2.34% 6.72%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $15,635 $17,153 $16,402 $19,248 $20,401
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements and interest
expense 1.60%(e) 1.60% 1.60% 1.60% 1.60%
Expenses, before waivers/
reimbursements 1.87%(e)+ 1.96%+ 2.03%+ 1.92%+ 1.99%
Net investment income,
net of waivers/
reimbursements 3.40%(e) 3.42% 3.65% 3.70% 4.01%
Portfolio turnover rate 13% 14% 19% 32% 29%
+ As restated, see Note K.
See footnote summary on page 163.
150 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
New Jersey Portfolio
---------------------------------------------------------------
Class A
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $9.90 $9.84 $9.80 $10.03 $10.11
Income From Investment
Operations
Net investment income(b)(c) .42 .42 .45 .45 .48
Net realized and unrealized
gain (loss) on investment
transactions .03 .07 .04 (.22) (.05)
Net increase in net asset value
from operations .45 .49 .49 .23 .43
Less: Dividends and
Distributions
Dividends from net investment
income (.42) (.43) (.45) (.46) (.48)
Distributions in excess of net
investment income -0- -0- -0- -0- (.03)
Total dividends and
distributions (.42) (.43) (.45) (.46) (.51)
Net asset value, end of period $9.93 $9.90 $9.84 $9.80 $10.03
Total Return
Total investment return based
on net asset value(d) 4.65% 5.03% 5.05% 2.39% 4.42%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $83,088 $77,570 $76,164 $81,632 $94,865
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements and interest
expense .87%(e) .87% .87% .87% .87%
Expenses, before waivers/
reimbursements 1.15%(e)+ 1.16%+ 1.23%+ 1.16%+ 1.11%
Net investment income,
net of waivers/
reimbursements 4.25%(e) 4.26% 4.60% 4.53% 4.80%
Portfolio turnover rate 6% 38% 15% 45% 49%
+ As restated, see Note K.
See footnote summary on page 163.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 151
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
New Jersey Portfolio
---------------------------------------------------------------
Class B
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $9.90 $9.84 $9.80 $10.04 $10.11
Income From Investment
Operations
Net investment income(b)(c) .35 .35 .38 .38 .41
Net realized and unrealized
gain (loss) on investment
transactions .03 .07 .04 (.23) (.04)
Net increase in net asset value
from operations .38 .42 .42 .15 .37
Less: Dividends and
Distributions
Dividends from net investment
income (.35) (.36) (.38) (.39) (.41)
Distributions in excess of net
investment income -0- -0- -0- -0- (.03)
Total dividends and
distributions (.35) (.36) (.38) (.39) (.44)
Net asset value, end of period $9.93 $9.90 $9.84 $9.80 $10.04
Total Return
Total investment return based
on net asset value(d) 3.91% 4.30% 4.41% 1.56% 3.79%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $42,766 $58,706 $83,835 $110,294 $127,025
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements and interest
expense 1.57%(e) 1.57% 1.57% 1.57% 1.57%
Expenses, before waivers/
reimbursements 1.86%(e)+ 1.87%+ 1.94%+ 1.87%+ 1.82%
Net investment income,
net of waivers/
reimbursements 3.55%(e) 3.56% 3.89% 3.83% 4.10%
Portfolio turnover rate 6% 38% 15% 45% 49%
+ As restated, see Note K.
See footnote summary on page 163.
152 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
New Jersey Portfolio
---------------------------------------------------------------
Class C
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $9.90 $9.84 $9.81 $10.04 $10.11
Income From Investment
Operations
Net investment income(b)(c) .35 .35 .38 .38 .41
Net realized and unrealized
gain (loss) on investment
transactions .03 .07 .03 (.22) (.04)
Net increase in net asset value
from operations .38 .42 .41 .16 .37
Less: Dividends and
Distributions
Dividends from net investment
income (.35) (.36) (.38) (.39) (.41)
Distributions in excess of net
investment income -0- -0- -0- -0- (.03)
Total dividends and
distributions (.35) (.36) (.38) (.39) (.44)
Net asset value, end of period $9.93 $9.90 $9.84 $9.81 $10.04
Total Return
Total investment return based
on net asset value(d) 3.92% 4.31% 4.30% 1.66% 3.78%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $34,042 $35,279 $37,926 $45,633 $56,295
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements and interest
expense 1.57%(e) 1.57% 1.57% 1.57% 1.57%
Expenses, before waivers/
reimbursements 1.85%(e)+ 1.86%+ 1.93%+ 1.86%+ 1.81%
Net investment income,
net of waivers/
reimbursementss 3.55%(e) 3.56% 3.89% 3.83% 4.10%
Portfolio turnover rate 6% 38% 15% 45% 49%
+ As restated, see Note K.
See footnote summary on page 163.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 153
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Ohio Portfolio
---------------------------------------------------------------
Class A
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.14 $10.10 $10.05 $10.02 $10.01
Income From Investment
Operations
Net investment income(b)(c) .41 .43 .44 .46 .50
Net realized and unrealized
gain on investment
transactions .02 .03 .05 .05 .04
Net increase in net asset value
from operations .43 .46 .49 .51 .54
Less: Dividends and
Distributions
Dividends from net investment
income (.41) (.42) (.44) (.48) (.51)
Distributions in excess of net
investment income -0- -0- -0- -0- (.02)
Total dividends and
distributions (.41) (.42) (.44) (.48) (.53)
Net asset value, end of period $10.16 $10.14 $10.10 $10.05 $10.02
Total Return
Total investment return based
on net asset value(d) 4.40% 4.67% 5.02% 5.20% 5.57%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $87,902 $85,749 $78,184 $75,102 $70,223
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements .85%(e) .85% .85% .85% .85%
Expenses, before waivers/
reimbursements .98%(e) .99% 1.14% 1.15% 1.15%
Net investment income,
net of waivers/
reimbursements 4.12%(e) 4.19% 4.38% 4.59% 4.99%
Portfolio turnover rate 11% 23% 33% 23% 34%
See footnote summary on page 163.
154 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Ohio Portfolio
---------------------------------------------------------------
Class B
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.13 $10.09 $10.04 $10.02 $10.01
Income From Investment
Operations
Net investment income(b)(c) .34 .36 .37 .39 .43
Net realized and unrealized
gain on investment
transactions .02 .03 .05 .04 .05
Net increase in net asset value
from operations .36 .39 .42 .43 .48
Less: Dividends and
Distributions
Dividends from net investment
income (.34) (.35) (.37) (.41) (.44)
Distributions in excess of net
investment income -0- -0- -0- -0- (.03)
Total dividends and
distributions (.34) (.35) (.37) (.41) (.47)
Net asset value, end of period $10.15 $10.13 $10.09 $10.04 $10.02
Total Return
Total investment return based
on net asset value(d) 3.67% 3.95% 4.30% 4.37% 4.87%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $41,802 $55,111 $70,121 $83,422 $73,159
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.55%(e) 1.55% 1.55% 1.55% 1.55%
Expenses, before waivers/
reimbursements 1.69%(e) 1.69% 1.85% 1.86% 1.85%
Net investment income,
net of waivers/
reimbursements 3.42%(e) 3.50% 3.69% 3.88% 4.29%
Portfolio turnover rate 11% 23% 33% 23% 34%
See footnote summary on page 163.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 155
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Ohio Portfolio
---------------------------------------------------------------
Class C
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.13 $10.09 $10.05 $10.02 $10.02
Income From Investment
Operations
Net investment income(b)(c) .34 .36 .37 .39 .43
Net realized and unrealized
gain on investment
transactions .03 .03 .04 .05 .04
Net increase in net asset value
from operations .37 .39 .41 .44 .47
Less: Dividends and
Distributions
Dividends from net investment
income (.34) (.35) (.37) (.41) (.44)
Distributions in excess of net
investment income -0- -0- -0- -0- (.03)
Total dividends and
distributions (.34) (.35) (.37) (.41) (.47)
Net asset value, end of period $10.16 $10.13 $10.09 $10.05 $10.02
Total Return
Total investment return based
on net asset value(d) 3.78% 3.94% 4.19% 4.47% 4.77%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $44,023 $47,610 $48,233 $54,062 $53,883
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.55%(e) 1.55% 1.55% 1.55% 1.55%
Expenses, before waivers/
reimbursements 1.68%(e) 1.69% 1.85% 1.85% 1.85%
Net investment income,
net of waivers/
reimbursements 3.42%(e) 3.49% 3.69% 3.89% 4.29%
Portfolio turnover rate 11% 23% 33% 23% 34%
See footnote summary on page 163.
156 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Pennsylvania Portfolio
---------------------------------------------------------------
Class A
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.53 $10.48 $10.44 $10.58 $10.42
Income From Investment
Operations
Net investment income(b)(c) .42 .44 .48 .50 .51
Net realized and unrealized
gain (loss) on investment
transactions .05 .05 .04 (.14) .18
Net increase in net asset value
from operations .47 .49 .52 .36 .69
Less: Dividends and
Distributions
Dividends from net investment
income (.42) (.44) (.48) (.50) (.51)
Distributions in excess of net
investment income -0- -0- -0- -0- (.02)
Total dividends and
distributions (.42) (.44) (.48) (.50) (.53)
Net asset value, end of period $10.58 $10.53 $10.48 $10.44 $10.58
Total Return
Total investment return based
on net asset value(d) 4.57% 4.75% 5.06% 3.57% 6.88%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $81,151 $78,472 $74,132 $84,053 $99,426
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements and interest
expense .95%(e) .95% .95% .95% .95%
Expenses, before waivers/
reimbursements 1.11%(e)+ 1.20%+ 1.24%+ 1.16% 1.13%
Net investment income,
net of waivers/
reimbursements 4.00%(e) 4.19% 4.55% 4.91% 4.98%
Portfolio turnover rate 23% 36% 19% 17% 38%
+ As restated, see Note K.
See footnote summary on page 163.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 157
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Pennsylvania Portfolio
---------------------------------------------------------------
Class B
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.53 $10.48 $10.44 $10.58 $10.41
Income From Investment
Operations
Net investment income(b)(c) .35 .37 .40 .44 .45
Net realized and unrealized
gain (loss) on investment
transactions .05 .05 .04 (.15) .18
Net increase in net asset value
from operations .40 .42 .44 .29 .63
Less: Dividends and
Distributions
Dividends from net investment
income (.35) (.37) (.40) (.43) (.45)
Distributions in excess of net
investment income -0- -0- -0- -0- (.01)
Total dividends and
distributions (.35) (.37) (.40) (.43) (.46)
Net asset value, end of period $10.58 $10.53 $10.48 $10.44 $10.58
Total Return
Total investment return based
on net asset value(d) 3.84% 4.01% 4.32% 2.84% 6.26%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $33,448 $41,760 $55,552 $68,409 $74,390
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements and interest
expense 1.65%(e) 1.65% 1.65% 1.65% 1.65%
Expenses, before waivers/
reimbursements 1.82%(e)+ 1.90%+ 1.95%+ 1.87% 1.84%
Net investment income,
net of waivers/
reimbursements 3.31%(e) 3.49% 3.85% 4.21% 4.35%
Portfolio turnover rate 23% 36% 19% 17% 38%
+ As restated, see Note K.
See footnote summary on page 163.
158 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Pennsylvania Portfolio
---------------------------------------------------------------
Class C
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.53 $10.48 $10.44 $10.58 $10.41
Income From Investment
Operations
Net investment income(b)(c) .35 .37 .40 .44 .45
Net realized and unrealized
gain (loss) on investment
transactions .05 .05 .04 (.15) .18
Net increase in net asset value
from operations .40 .42 .44 .29 .63
Less: Dividends and
Distributions
Dividends from net investment
income (.35) (.37) (.40) (.43) (.45)
Distributions in excess of net
investment income -0- -0- -0- -0- (.01)
Total dividends and
distributions (.35) (.37) (.40) (.43) (.46)
Net asset value, end of period $10.58 $10.53 $10.48 $10.44 $10.58
Total Return
Total investment return based
on net asset value(d) 3.84% 4.02% 4.32% 2.84% 6.26%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $34,332 $34,705 $36,168 $42,917 $46,296
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements and interest
expense 1.65%(e) 1.65% 1.65% 1.65% 1.65%
Expenses, before waivers/
reimbursements 1.82%(e)+ 1.90%+ 1.94%+ 1.87% 1.83%
Net investment income,
net of waivers/
reimbursements 3.30%(e) 3.49% 3.85% 4.20% 4.30%
Portfolio turnover rate 23% 36% 19% 17% 38%
+ As restated, see Note K.
See footnote summary on page 163.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 159
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Virginia Portfolio
---------------------------------------------------------------
Class A
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.82 $10.77 $10.75 $10.77 $10.54
Income From Investment
Operations
Net investment income(b)(c) .47 .49 .52 .52 .52
Net realized and unrealized
gain (loss) on investment
transactions .02 .05 .01 (.03) .25
Net increase in net asset value
from operations .49 .54 .53 .49 .77
Less: Dividends and
Distributions
Dividends from net investment
income (.47) (.49) (.51) (.51) (.52)
Distributions in excess of net
investment income -0- -0- -0- -0- (.02)
Total dividends and
distributions (.47) (.49) (.51) (.51) (.54)
Net asset value, end of period $10.84 $10.82 $10.77 $10.75 $10.77
Total Return
Total investment return based
on net asset value(d) 4.61% 5.11% 5.04% 4.66% 7.58%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $109,343 $88,605 $64,089 $71,572 $76,797
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements and interest
expense .72%(e) .72% .72% .72% .72%
Expenses, before waivers/
reimbursements 1.01%(e)+ 1.09%+ 1.18%+ 1.15% 1.15%
Net investment income,
net of waivers/
reimbursements 4.33%(e) 4.48% 4.82% 4.87% 4.95%
Portfolio turnover rate 31% 23% 10% 25% 16%
+ As restated, see Note K.
See footnote summary on page 163.
160 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Virginia Portfolio
---------------------------------------------------------------
Class B
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.80 $10.75 $10.73 $10.75 $10.53
Income From Investment
Operations
Net investment income(b)(c) .39 .41 .44 .45 .45
Net realized and unrealized
gain (loss) on investment
transactions .02 .05 .01 (.04) .24
Net increase in net asset value
from operations .41 .46 .45 .41 .69
Less: Dividends and
Distributions
Dividends from net investment
income (.39) (.41) (.43) (.43) (.45)
Distributions in excess of net
investment income -0- -0- -0- -0- (.02)
Total dividends and
distributions (.39) (.41) (.43) (.43) (.47)
Net asset value, end of period $10.82 $10.80 $10.75 $10.73 $10.75
Total Return
Total investment return based
on net asset value(d) 3.89% 4.36% 4.32% 3.94% 6.78%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $37,006 $46,489 $65,978 $82,541 $85,842
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements and interest
expense 1.42%(e) 1.42% 1.42% 1.42% 1.42%
Expenses, before waivers/
reimbursements 1.72%(e)+ 1.80%+ 1.89%+ 1.85% 1.86%
Net investment income,
net of waivers/
reimbursements 3.64%(e) 3.81% 4.13% 4.18% 4.27%
Portfolio turnover rate 31% 23% 10% 25% 16%
+ As restated, see Note K.
See footnote summary on page 163.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 161
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Virginia Portfolio
---------------------------------------------------------------
Class C
---------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2006 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.79 $10.74 $10.73 $10.75 $10.52
Income From Investment
Operations
Net investment income(b)(c) .39 .41 .44 .45 .45
Net realized and unrealized
gain (loss) on investment
transactions .02 .06 -0- (.04) .25
Net increase in net asset value
from operations .41 .47 .44 .41 .70
Less: Dividends and
Distributions
Dividends from net investment
income (.39) (.42) (.43) (.43) (.45)
Distributions in excess of net
investment income -0- -0- -0- -0- (.02)
Total dividends and
distributions (.39) (.42) (.43) (.43) (.47)
Net asset value, end of period $10.81 $10.79 $10.74 $10.73 $10.75
Total Return
Total investment return based
on net asset value(d) 3.90% 4.41% 4.23% 3.94% 6.88%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $34,544 $29,412 $28,654 $33,486 $34,396
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements and interest
expense 1.42%(e) 1.42% 1.42% 1.42% 1.42%
Expenses, before waivers/
reimbursements 1.71%(e)+ 1.79%+ 1.88%+ 1.85% 1.86%
Net investment income,
net of waivers/
reimbursements 3.64%(e) 3.80% 4.13% 4.17% 4.26%
Portfolio turnover rate 31% 23% 10% 25% 16%
+ As restated, see Note K.
See footnote summary on page 163.
162 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
(a) As of October 1, 2003, the Portfolios have adopted the method of
accounting for interim payments on swap contracts in accordance with Financial
Accounting Standards Board Statement No. 133. These interim payments are
reflected within net realized and unrealized gain (loss) on swap contracts,
however prior to October 1, 2003, these interim payments were reflected within
interest income/expense on the statement of operations. For the year ended
September 30, 2004, the effect of this change to the net investment income and
the net realized and unrealized gain (loss) on investment transactions was less
than $0.01 per share. The effect on the ratio of net investment income to
average net assets was as follows:
Class A Class B Class C
---------- ---------- ----------
Arizona .01% .00% .00%
Florida (.02)% (.02)% (.02)%
Massachusetts (.01)% .00% (.01)%
Michigan .01% .01% .02%
Minnesota .00% .00% .00%
New Jersey .01% .01% .01%
Ohio (.04)% (.03)% (.04)%
Pennsylvania .00% .01% .00%
Virginia (.02)% (.01)% (.02)%
(b) Net of fees waived and expenses reimbursed 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 charge or contingent
deferred sales charge is not reflected in the calculation of total investment
return. Total return does not reflect the deduction of taxes that a shareholder
would pay on Portfolio distributions or the redemption of Portfolio shares.
Total investment return calculated for a period of less than one year is not
annualized.
(e) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 163
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees
Alliance Municipal Income Fund II
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of Alliance Municipal Income Fund II
(the "Fund") (comprising, respectively, the Arizona, Florida, Massachusetts,
Michigan, Minnesota, New Jersey, Ohio, Pennsylvania, and Virginia Portfolios)
as of September 30, 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 in the period 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 September 30, 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 respective portfolios constituting the Alliance Municipal Income Fund II
at September 30, 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 the financial highlights for each of the five years in the period
then ended, in conformity with U.S. generally accepted accounting principles.
As discussed in Note K in Notes to Financial Statements, the New Jersey
Portfolio referred to above has restated the statement of assets and
liabilities, and the portfolio of investments as of September 30, 2006, the
statements of operations and changes in net assets for the year then ended and
the financial highlights for each of the four years then ended. The Florida,
Massachusetts, Minnesota, Pennsylvania and Virginia Portfolios referred to
above have restated their statement of operations for the year ended September
30, 2006, and expense ratios to net assets for the periods indicated in Note K.
/s/ Ernst & Young LLP
New York, New York
November 17, 2006
Except for Note K as to which the date is January 22, 2007.
164 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
TAX INFORMATION
(unaudited)
Tax Information
In order to meet certain requirements of the Internal Revenue Code, we are
advising you that the Michigan Portfolio paid $152,691 of long-term capital
gains distributed during the fiscal year ended September 30, 2006, which is
subject to a maximum tax rate of 15%.
The Portfolios designated the following for the fiscal year ended September 30,
2006:
Exempt-Interest Qualified (a)
Portfolio Dividends Interest Income
- ------------------------------------------------------------------
Arizona $ 7,890,473 63.8%
Florida $ 9,306,646 13.6%
Massachusetts $ 5,201,319 46.8%
Michigan $ 4,978,179 13.9%
Minnesota $ 3,831,101 18.7%
New Jersey $ 6,402,977 17.3%
Ohio $ 6,727,534 3.8%
Pennsylvania $ 5,491,025 4.1%
Virginia $ 6,880,113 9.2%
(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.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 165
BOARD OF TRUSTEES
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
(Guy) Robert B. 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
The Bank of New York
One Wall Street
New York, NY 10286
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, Texas 78278-6003
Toll-free (800) 227-5672
(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. Michael G. Brooks,
Fred S. Cohen, (Guy) Robert B. Davidson III and Terrance T. Hults are the
investment professionals with the most significant responsibility for the
day-to-day management of the Portfolios' portfolios.
166 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
MANAGEMENT OF THE FUND
Board of Trustees Information
The business and affairs of the Fund are managed under the direction of the
Board of Trustees. Certain information concerning the Fund's Trustees 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 TRUSTEE TRUSTEE
- ---------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
Marc O. Mayer,++ Executive Vice President of 111 SCB Partners,
1345 Avenue of the the Adviser since 2001 and Inc. and
Americas, Executive Managing Director of SCB Inc.
New York, NY 10105 AllianceBernstein Investments, Inc.
49 ("ABI") since 2003; prior thereto he
(2003) was head of 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.
DISINTERESTED TRUSTEES
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
Chairman of the Board Associates, Inc., a registered
74 investment adviser, with which
(1998) he 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 100 None
500 SE Mizner Blvd. President and Chief Insurance
Boca Raton, FL 33432 Officer of The Equitable Life
76 Assurance Society of the United
(1993) States; Chairman and 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; and Governor
at Large, National Association
of Securities Dealers, Inc.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 167
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS PRINCIPAL COMPLEX DIRECTORSHIPS
AGE OCCUPATION(S) OVERSEEN BY HELD BY
(FIRST YEAR ELECTED*) DURING PAST 5 YEARS TRUSTEE TRUSTEE
- ---------------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES
(continued)
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
(1993) 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.
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 Fund,
c/o AllianceBernstein L.P. Formerly managing partner of Inc. and
Attn: Philip L. Kirstein Lexington Capital, LLC (investment The Merger Fund
1345 Avenue of the advisory firm) from December 1997
Americas until December 2003. Prior thereto,
New York, NY 10105 Chairman and CEO of Prudential
62 Mutual Fund Management from
(2005) 1987 until 1993.
168 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS PRINCIPAL COMPLEX DIRECTORSHIPS
AGE OCCUPATION(S) OVERSEEN BY HELD BY
(FIRST YEAR ELECTED*) DURING PAST 5 YEARS TRUSTEE TRUSTEE
- ---------------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES
(continued)
D. James Guzy, # Chairman of the Board of PLX 111 Intel Corporation
P.O. Box 128 Technology (semi-conductors) and (semi-conductors);
Glenbrook, NV 89413 of SRC Computers Inc., with which Cirrus Logic
70 he has been associated since prior Corporation
(2005) to 2001. He is also President of the (semi-conductors);
Arbor Company (private family and the
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); Partner,
58 Clifford Chance (1992-2002); Senior
(2006) 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.
Marshall C. Turner, Jr., # Principal of Turner Venture 111 The George
220 Montgomery Street Associates (venture capital and Lucas Educational
Penthouse 10 consulting) since prior to 2001. Foundation; and
San Francisco, CA From 2003 until May 31, 2006, National
94104-3402 he was CEO of Toppan Photomasks, Datacast, Inc.
65 Inc. (semi-conductor manufacturing
(2005) services), Austin, Texas.
* There is no stated term of office for the Fund's Trustees.
** Ms. Block was an "interested person", as defined in the 1940 Act, until
October 21, 2004 by reason of her ownership of equity securities of a
controlling person of the Adviser. Such securities were sold for approximately
$2,400 on October 21, 2004. Ms. Block received shares of The Equitable
Companies Incorporated ("Equitable") as part of the demutualization of The
Equitable Life Assurance Society of the United States. Her Equitable shares
were subsequently converted through a corporate action into 116 American
Depositary Shares of AXA.
# Member of the Audit Committee,the Governance and Nominating Committee and
Independent Directors Committee.
+ Member of the Fair Value Pricing Committee.
++ Mr. Mayer is an "interested trustee", as defined in the 1940 Act, due to
his position as an Executive Vice President of the Adviser.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 169
Officer Information
Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) PRINCIPAL OCCUPATION
AND AGE HELD WITH FUND DURING PAST 5 YEARS**
- --------------------------------------------------------------------------------------------------------------
Marc O. Mayer President and See biography above.
49 Chief 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.
(Guy) Robert B. Senior Vice President Senior Vice President of the Adviser,**
Davidson III with which he has been associated
45 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.
170 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
NAME, ADDRESS* POSITION(S) PRINCIPAL OCCUPATION
AND AGE HELD WITH FUND DURING PAST 5 YEARS**
- --------------------------------------------------------------------------------------------------------------
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.
Joseph J. Mantineo Treasurer and Chief Senior Vice President of ABIS,**
47 Financial Officer 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 Trustees and Officers and is available without
charge upon request. Contact your financial representative or AllianceBernstein
at 1-800-227-4618 for a free prospectus or SAI.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 171
Information Regarding the Review and Approval of the Fund's Advisory Agreement
In this disclosure, the term "Fund" refers to AllianceBernstein Municipal
Income Fund II and the term "Portfolio" refers to the Arizona Portfolio,
Florida Portfolio, Massachusetts Portfolio, Michigan Portfolio, Minnesota
Portfolio, New Jersey Portfolio, Ohio Portfolio, Pennsylvania Portfolio and
Virginia 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 nine Portfolios.
The Fund's disinterested trustees (the "trustees") 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 trustees had requested from the Adviser and
received and evaluated extensive materials, including performance and expense
information for other investment companies with similar investment objectives
derived from data compiled by Lipper Inc. ("Lipper"), which is not affiliated
with the Adviser. The trustees 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
trustees received a presentation from the Adviser and had an opportunity to ask
representatives of the Adviser various questions relevant to the proposed
approvals. The trustees 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 trustees 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 trustees
also discussed the proposed continuances in a private session at which only the
trustees, 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 trustees considered
all factors they believed relevant, including the following:
172 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
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 which 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 the Adviser 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.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 173
The trustees also considered their knowledge of the nature and quality of the
services provided by the Adviser to the Portfolios gained from their experience
as trustees 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 trustees did not identify any particular
information that was all-important or controlling, and different trustees may
have attributed different weights to the various factors. The trustees
evaluated all information available to them on a fund-by-fund basis, and their
determinations were made separately in respect of each Portfolio.
The trustees 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 trustees considered relevant in
the exercise of their business judgment.
The material factors and conclusions that formed the basis for the trustees
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 trustees.
Nature, Extent and Quality of Services provided by the Adviser
The trustees noted that, under the Advisory Agreement, the Adviser, subject to
the oversight of the trustees, 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 Portfolios' 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 trustees of the Fund who are affiliated persons
of the Adviser and of the officers of the Portfolio.
The trustees 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
174 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
"at no more than cost" reimbursements are approved by the trustees 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 trustees 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 trustees noted, for example, that the Adviser is
responsible for maintaining and monitoring its own and, to varying degrees, the
Portfolio's compliance programs, and that these compliance programs have
recently been refined and enhanced in light of new regulatory requirements. The
trustees 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 trustees also
considered the Adviser's response to recent regulatory compliance issues
affecting a number of the investment companies in the AllianceBernstein Funds
complex. The trustees 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 trustees 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 trustees
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 trustees that there is no
generally accepted allocation methodology for information of this type.
The trustees 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 trustees 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 trustees focused on the profitability of the Adviser's
relationships with the Portfolios before taxes and distribution expenses.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 175
The trustees recognized that the Adviser should generally be entitled to earn a
reasonable level of profits for the services it provides to each Portfolio and,
based on their review, concluded that they were satisfied that the Adviser's
level of profitability from its relationship with each Portfolio was not
excessive.
Fall-Out Benefits
The trustees 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 trustees 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 trustees 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
trustees 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 trustees recognized that the Adviser's profitability would be somewhat
lower if the Adviser's affiliates did not receive the benefits described above.
The trustees 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 trustees in connection with the
meeting, the trustees receive detailed comparative performance information for
each Portfolio at each regular Board meeting during the year. At the meeting,
the trustees 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 trustees 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").
Arizona Portfolio
The trustees reviewed information showing performance for Class A shares of the
Arizona Portfolio as compared to a Performance Group of 5 funds in its Lipper
category selected by Lipper and as compared to a Performance Universe of 11 to
10 funds (depending on the year) in its Lipper category selected by Lipper for
176 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
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 (June 1994
inception). The trustees noted that in the Performance Group and Performance
Universe comparisons the Arizona Portfolio was in the 1st quintile in all
periods reviewed except in the 1-year period when the Arizona Portfolio was in
the 2nd quintile in the Performance Universe comparison. The comparative
information showed that the Arizona Portfolio underperformed the Index in the
YTD period and outperformed the Index in all other periods reviewed. Based on
their review, the trustees concluded that the Arizona Portfolio's relative
performance over time was satisfactory.
Florida Portfolio
The trustees reviewed information showing performance for Class A shares of the
Florida Portfolio as compared to a Performance Group of 8 funds in its Lipper
category selected by Lipper and as compared to a Performance Universe of 16
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, 1-, 3-, 5- and 10-year and
since inception periods (June 1993 inception). The trustees noted that in the
Performance Group comparison the Florida Portfolio was in the 3rd quintile in
the 1- and 3-year periods, 2nd quintile in the 5-year period and 1st quintile
in the 10-year period, and in the Performance Universe comparison the Florida
Portfolio was in the 2nd quintile in the 1- and 3-year periods and 1st quintile
in the 5- and 10-year periods. The comparative information showed that the
Florida Portfolio underperformed the Index in the since inception period and
outperformed the Index in all other periods reviewed. Based on their review,
the trustees concluded that the Florida Portfolio's relative performance over
time was satisfactory.
Massachusetts Portfolio
The trustees reviewed information showing performance for Class A shares of the
Massachusetts Portfolio as compared to a Performance Group of 10 funds in its
Lipper category selected by Lipper and as compared to a Performance Universe of
17 to 16 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 (March 1994
inception). The trustees noted that in the Performance Group comparison the
Massachusetts Portfolio was in the 2nd quintile in the 1- and 10-year periods,
1st quintile in the 3-year period and 5th quintile in the 5-year period, and in
the Performance Universe comparison the Massachusetts Portfolio was in the 1st
quintile in the 1-, 3- and 10-year periods and 4th quintile in the 5-year
period. The comparative information showed that the Massachusetts Portfolio
outperformed the Index in the 1- and 3-year and since inception periods and
underper-
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 177
formed the Index in the YTD, 5- and 10-year periods. Based on their review, the
trustees concluded that the Massachusetts Portfolio's relative performance over
time was satisfactory.
Michigan Portfolio
The trustees reviewed information showing performance for Class A shares of the
Michigan Portfolio as compared to a Performance Group of 6 funds in its Lipper
category selected by Lipper and as compared to a Performance Universe of 11
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, 1-, 3-, 5- and 10-year and
since inception periods (February 1994 inception). The trustees noted that in
the Performance Group and Performance Universe comparisons the Michigan
Portfolio was in the 1st quintile in all periods reviewed. The comparative
information showed that the Michigan Portfolio outperformed the Index in all
periods reviewed. Based on their review, the trustees concluded that the
Michigan Portfolio's relative performance over time was highly satisfactory.
Minnesota Portfolio
The trustees reviewed information showing performance for Class A shares of the
Minnesota Portfolio as compared to a Performance Group of 7 funds in its Lipper
category selected by Lipper and as compared to a Performance Universe of 18 to
17 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 (June 1993 inception). The
trustees noted that in the Performance Group comparison the Minnesota Portfolio
was in the 3rd quintile in the 1- and 5-year periods, 2nd quintile in the
3-year period and 1st quintile in the 10-year period, and in the Performance
Universe comparison the Minnesota Portfolio was in the 2nd quintile in the 1-,
3- and 5-year periods and 1st quintile in the 10-year period. The comparative
information showed that the Minnesota Portfolio outperformed the Index in the
1- and 3-year periods and underperformed the Index in all other periods
reviewed. Based on their review, the trustees concluded that the Minnesota
Portfolio's relative performance over time was satisfactory.
New Jersey Portfolio
The trustees reviewed information showing performance for Class A shares of the
New Jersey Portfolio as compared to a Performance Group of 10 funds in its
Lipper category selected by Lipper and as compared to a Performance Universe of
16 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 (June 1993 inception). The trustees noted
that in the Performance Group and Performance Universe comparisons the New
178 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Jersey Portfolio was in the 2nd quintile in the 1-, 3- and 10-year periods and
5th quintile in the 5-year period. The comparative information showed that the
New Jersey 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 trustees concluded that the New Jersey Portfolio's
relative performance over time was satisfactory.
Ohio Portfolio
The trustees reviewed information showing performance for Class A shares of the
Ohio 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 14 to
13 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 (June 1993 inception). The
trustees noted that in the Performance Group comparison the Ohio Portfolio was
in the 2nd quintile in the 1-, 3- and 5-year periods and 1st quintile in the
10-year period, and in the Performance Universe comparison the Ohio Portfolio
was in the 1st quintile in the 1-, 3- and 10-year periods and 2nd quintile in
the 5-year period. The comparative information showed that the Ohio Portfolio
outperformed the Index in the 3-year period and underperformed the Index in all
other periods reviewed. Based on their review, the trustees concluded that the
Ohio Portfolio's relative performance over time was satisfactory.
Pennsylvania Portfolio
The trustees reviewed information showing performance for Class A shares of the
Pennsylvania 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
21 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 (June 1993 inception). The trustees noted
that in the Performance Group comparison the Pennsylvania Portfolio was in the
3rd quintile in the 1-year period, 2nd quintile in the 3- and 5-year periods
and 1st quintile in the 10-year period, and in the Performance Universe
comparison the Pennsylvania Portfolio was in the 3rd quintile in the 1-year
period, 1st quintile in the 3- and 10-year periods and 2nd quintile in the
5-year period. The comparative information showed that the Pennsylvania
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 trustees concluded that the Pennsylvania Portfolio's
relative performance over time was satisfactory.
Virginia Portfolio
The trustees reviewed information showing performance for Class A shares of the
Virginia Portfolio as compared to a Performance Group of 6 funds in its Lipper
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 179
category selected by Lipper and as compared to a Performance Universe of 10 to
9 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 (April 1994 inception). The
trustees noted that in the Performance Group and Performance Universe
comparisons the Virginia Portfolio was in the 1st quintile in all periods
reviewed except in the 1-year period when the Virginia Portfolio was in the 2nd
quintile in the Performance Group comparison. The comparative information
showed that the Virginia Portfolio outperformed the Index in all periods
reviewed. Based on their review, the trustees concluded that the Virginia
Portfolio's relative performance over time was highly satisfactory.
Advisory Fees and Other Expenses
The trustees 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
trustees 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 trustees that there are no institutional products
managed by it which have a substantially similar investment style as the
Portfolios. The trustees 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). They had previously
received an oral presentation from the Adviser that supplemented such
information.
The Adviser reviewed with the trustees 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 trustees did not place significant weight on these
fee comparisons.
180 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
The trustees 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
trustees noted that because of the small number of funds in each Portfolio's
Lipper category (except the New Jersey Portfolio), at the request of the
Adviser and the Fund's Senior Officer, Lipper had expanded the Expense Group to
include peers that had a similar (but not the same) Lipper investment
objective/ classification. The Expense Universe for each such Portfolio 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 trustees 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 trustees 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.
Arizona Portfolio
The information reviewed by the trustees showed that the Arizona Portfolio's at
approximate current size contractual effective fee rate of 45 basis points was
materially lower than the Expense Group median. The trustees noted that the
latest fiscal year administrative expense reimbursement by the Arizona
Portfolio pursuant to the Advisory Agreement was 4 basis points, and that as a
result the total compensation of 49 basis points received by the Adviser from
the Arizona Portfolio pursuant to the Advisory Agreement was somewhat lower
than the Expense Group median. The trustees also noted that the Arizona
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 trustees concluded that the Arizona Portfolio's
expense ratio was satisfactory.
Florida Portfolio
The information reviewed by the trustees showed that the Florida Portfolio's at
approximate current size contractual effective fee rate of 45 basis points was
materially lower than the Expense Group median. The trustees noted that the
latest fiscal year administrative expense reimbursement by the Florida
Portfolio pursuant to the Advisory Agreement was 3 basis points. The trustees
also noted that the Florida Portfolio's total expense ratio, which had been
capped by the Adviser, was somewhat lower than the Expense Group median and
materially lower than the Expense Universe median. The trustees concluded that
the Florida Portfolio's expense ratio was satisfactory.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 181
Massachusetts Portfolio
The information reviewed by the trustees showed that the Massachusetts
Portfolio's at approximate current size contractual effective fee rate of 45
basis points was materially lower than the Expense Group median. The trustees
noted that the latest fiscal year administrative expense reimbursement by the
Massachusetts 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 Massachusetts Portfolio pursuant to the Advisory Agreement was
the same as the Expense Group median. The trustees also noted that the
Massachusetts Portfolio's total expense ratio, which had been capped by the
Adviser, was somewhat lower than the Expense Group and Expense Universe
medians. The trustees concluded that the Massachusetts Portfolio's expense
ratio was satisfactory.
Michigan Portfolio
The information reviewed by the trustees showed that the Michigan Portfolio's
at approximate current size contractual effective fee rate of 45 basis points
was materially lower than the Expense Group median. The trustees noted that in
the Michigan Portfolio's latest fiscal year, the administrative expense
reimbursement of 5 basis points had been waived by the Adviser. The trustees
also noted that the Michigan Portfolio's total expense ratio, which had been
capped by the Adviser (although the expense ratio was currently slightly lower
than the cap), was materially higher than the Expense Group and Expense
Universe medians. The trustees further noted that the Adviser had recently
reviewed with them steps being taken that are intended to reduce expenses of
the AllianceBernstein Funds. They concluded that the Michigan Portfolio's
expense ratio was acceptable.
Minnesota Portfolio
The information reviewed by the trustees showed that the Minnesota Portfolio's
at approximate current size contractual effective fee rate of 45 basis points
was materially lower than the Expense Group median. The trustees noted that in
the Minnesota Portfolio's latest fiscal year, the administrative expense
reimbursement of 7 basis points had been waived by the Adviser. The trustees
also noted that the Minnesota Portfolio's total expense ratio, which had been
capped by the Adviser, was the same as the Expense Group median and slightly
higher than the Expense Universe median. The trustees concluded that the
Minnesota Portfolio's expense ratio was satisfactory.
New Jersey Portfolio
The information reviewed by the trustees showed that the New Jersey Portfolio's
at approximate current size contractual effective fee rate of 45 basis points
was materially lower than the Expense Group median. The trustees noted that the
latest fiscal year administrative expense reimbursement by the New Jersey
Portfolio pursuant to the Advisory Agreement was 4 basis points, and that as a
result the total compensation of 49 basis points received by the Adviser from
the
182 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
New Jersey Portfolio pursuant to the Advisory Agreement was slightly lower than
the Expense Group median. The trustees also noted that the New Jersey
Portfolio's total expense ratio, which had been capped by the Adviser, was the
same as the Expense Group and Expense Universe medians. The trustees concluded
that the New Jersey Portfolio's expense ratio was satisfactory.
Ohio Portfolio
The information reviewed by the trustees showed that the Ohio Portfolio's at
approximate current size contractual effective fee rate of 45 basis points was
materially lower than the Expense Group median. The trustees noted that the
latest fiscal year administrative expense reimbursement by the Ohio Portfolio
pursuant to the Advisory Agreement was 4 basis points. The trustees also noted
that the Ohio Portfolio's total expense ratio, which had been capped by the
Adviser, was slightly lower than the Expense Group and Expense Universe
medians. The trustees concluded that the Ohio Portfolio's expense ratio was
satisfactory.
Pennsylvania Portfolio
The information reviewed by the trustees showed that the Pennsylvania
Portfolio's at approximate current size contractual effective fee rate of 45
basis points was materially lower than the Expense Group median. The trustees
noted that the latest fiscal year administrative expense reimbursement by the
Pennsylvania 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 Pennsylvania Portfolio pursuant to the Advisory Agreement was
somewhat lower than the Expense Group median. The trustees also noted that the
Pennsylvania Portfolio's total expense ratio, which had been capped by the
Adviser, was somewhat lower than the Expense Group and Expense Universe
medians. The trustees concluded that the Pennsylvania Portfolio's expense ratio
was satisfactory.
Virginia Portfolio
The information reviewed by the trustees showed that the Virginia Portfolio's
at approximate current size contractual effective fee rate of 45 basis points
was materially lower than the Expense Group median. The trustees noted that in
the Virginia Portfolio's latest fiscal year, the administrative expense
reimbursement of 4 basis points had been waived by the Adviser. The trustees
also noted that the Virginia Portfolio's total expense ratio, which had been
capped by the Adviser, was materially lower than the Expense Group and Expense
Universe medians. The trustees concluded that the Virginia Portfolio's expense
ratio was satisfactory.
Economies of Scale
The trustees 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 trustees also
considered a
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 183
presentation by an independent consultant discussing economies of scale issues
in the mutual fund industry. The trustees 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 trustees noted that there is no
uniform methodology for establishing breakpoints that give effect to
fund-specific services provided by the Adviser and to the economies of scale
that the Adviser may realize in its overall mutual fund business or those
components of it which directly or indirectly affect a Portfolio's operations.
The trustees 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 trustees also noted that the advisory agreements for many
funds do not have breakpoints at all. Having taken these factors into account,
the trustees 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.
184 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
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 II (the "Trust") in respect of the following
Portfolios:(2)
- Arizona Portfolio
- Florida Portfolio
- Massachusetts Portfolio
- Michigan Portfolio
- Minnesota Portfolio
- New Jersey Portfolio
- Ohio Portfolio
- Pennsylvania Portfolio
- Virginia Portfolio
This is a summary prepared by Philip L. Kirstein, the Senior Officer of the
Trust, for the Trustees of the Trust, 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 Trustees of the Trust 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 Trustees 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;
(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.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 185
4. Profit margins of the Adviser and its affiliates from supplying such
services;
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 REIMBURSEMENTS, CAPS & 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(4) Trust
- -------------------------------------------------------------------------------
Low Risk Income 45 bp on 1st $2.5 billion Municipal Income Fund II
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)
- ------------------------------------------------------
Arizona Portfolio $ 216.3
Florida Portfolio $ 215.8
Massachusetts Portfolio $ 142.4
Michigan Portfolio $ 137.1
Minnesota Portfolio $ 97.3
New Jersey Portfolio $ 160.3
Ohio Portfolio $ 173.7
Pennsylvania Portfolio $ 148.9
Virginia Portfolio $ 180.9
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative, and other services.
Indicated below are the reimbursement amounts, which the Adviser received from
the
(3) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the NYAG.
(4) The management fees for each Portfolio are based on the percentage of each
Portfolio's average daily net assets, not a combination of any of the
Portfolios.
186 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
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
- -------------------------------------------------------------------------------
Arizona Portfolio $ 72,500 0.04%
Florida Portfolio $ 72,500 0.03%
Massachusetts Portfolio $ 72,500 0.05%
Michigan Portfolio(5) $ 72,500 0.05%
Minnesota Portfolio(5) $ 72,500 0.07%
New Jersey Portfolio $ 72,500 0.04%
Ohio Portfolio $ 72,500 0.04%
Pennsylvania Portfolio $ 72,500 0.05%
Virginia Portfolio(6) $ 72,500 0.04%
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 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 Gross
Pursuant to Expense Expense
Fund Limitation Undertaking Ratio(7) Fiscal Year End
- -------------------------------------------------------------------------------
Arizona Portfolio Class A 0.78% 0.95% September 30
Class B 1.48% 1.66%
Class C 1.48% 1.66%
Florida Portfolio Class A 0.78% 0.92% September 30
Class B 1.48% 1.63%
Class C 1.48% 1.62%
Massachusetts Portfolio Class A 0.82% 1.03% September 30
Class B 1.52% 1.74%
Class C 1.52% 1.73%
Michigan Portfolio Class A 1.01% 1.03% September 30
Class B 1.71% 1.74%
Class C 1.71% 1.73%
Minnesota Portfolio Class A 0.90% 1.09% September 30
Class B 1.60% 1.80%
Class C 1.60% 1.80%
New Jersey Portfolio Class A 0.87% 1.03% September 30
Class B 1.57% 1.74%
Class C 1.57% 1.73%
Ohio Portfolio Class A 0.85% 0.99% September 30
Class B 1.55% 1.70%
Class C 1.55% 1.69%
(5) The Adviser waived the amount in its entirety.
(6) See footnote 5.
(7) Annualized.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 187
Pennsylvania Portfolio Class A 0.95% 1.01% September 30
Class B 1.65% 1.71%
Class C 1.65% 1.71%
Virginia Portfolio Class A 0.72% 0.98% September 30
Class B 1.42% 1.69%
Class C 1.42% 1.68%
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 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 the Portfolios. It should
be noted that the Adviser has represented that it does not manage any
separately managed accounts
188 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
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 a substantially lower risk profile (credit
and interest rate risk) than the Portfolios.
The Adviser represented that it does not sub-advise any registered investment
companies of other fund families with a substantially similar investment style
as any of the Portfolios.(8)
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")(9) at the approximate current asset level of the subject
Portfolio.(10)
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 the
Portfolios' EGs to include peers that had a similar (but not the same) Lipper
investment classification/ objective. However, because Lipper had expanded the
EGs of those Portfolios, under Lipper's standard guidelines, each of the
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.(11) A
(8) The Adviser manages certain portfolios of Sanford C. Bernstein Fund, Inc.
which invests principally in municipal securities but they are of different
states.
(9) It should be noted that Lipper does not consider average account size when
constructing EGs. Portfolios 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.
(10) 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.
(11) The expansion of the Portfolios' EUs was not requested by the Adviser or
the Senior Officer. They requested that only the EGs be expanded.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 189
"normal" EU will include funds that have the same investment
classification/objective and load type as the subject Portfolio.(12)
Contractual Lipper
Management Expense Group
Portfolio Fee(13) Median Rank
- -------------------------------------------------------------------------------
Arizona Portfolio(14) 0.450 0.520 3/11
Florida Portfolio(15) 0.450 0.547 3/12
Massachusetts Portfolio(16) 0.450 0.500 3/15
Michigan Portfolio(17) 0.450 0.550 2/13
Minnesota Portfolio(18) 0.450 0.525 2/14
New Jersey Portfolio 0.450 0.510 2/10
Ohio Portfolio(19) 0.450 0.550 2/13
Pennsylvania Portfolio(20) 0.450 0.549 2/12
Virginia Portfolio(21) 0.450 0.510 4/12
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.
(12) Except for asset (size) comparability, Lipper uses the same criteria for
selecting a Lipper Expense Group when selecting a Lipper Expense Universe.
Unlike the Lipper Expense Group, the Lipper Expense Universe allows for the
same adviser to be represented by more than just one fund.
(13) The contractual management fees for the Portfolios do not reflect any
expense reimbursements made by the Portfolios to the Adviser for certain
clerical, legal, accounting, administrative, and other services. In addition,
the contractual management fees do not reflect any management waivers for
expense caps that effectively reduce the contractual management fee.
(14) The Portfolio's EG includes the Portfolio, four other Arizona Municipal
Debt funds, one Virginia Municipal Debt fund, one Georgia Municipal Debt fund,
one Louisiana Municipal Debt Fund, one Minnesota Municipal Debt fund, one
Hawaii Municipal Debt fund and one Connecticut Municipal Debt fund.
(15) The Portfolio's EG includes the Portfolio, seven other Florida Municipal
Debt funds, two Minnesota Municipal Debt funds, one Massachusetts Municipal
Debt fund and one Ohio Municipal Debt fund.
(16) The Portfolio's EG includes the Portfolio, nine other Massachusetts
Municipal Debt funds, two Florida Municipal Debt funds, one Minnesota Debt
fund, one Ohio Municipal Debt fund and one Pennsylvania Municipal Debt fund.
(17) The Portfolio's EG includes the Portfolio, five other Michigan Municipal
Debt funds, two Ohio Municipal Debt funds, two Florida Municipal Debt funds,
one Minnesota Municipal Debt fund, one Massachusetts Municipal Debt fund and
one Pennsylvania Municipal Debt fund.
(18) The Portfolio's EG includes the Portfolio, six other Minnesota Municipal
Debt funds, three Massachusetts Municipal Debt funds, two Pennsylvania
Municipal Debt funds and two Ohio Municipal Debt funds.
(19) The Portfolio's EG includes the Portfolio, eight other Ohio Municipal
Debt funds, one Florida Municipal Debt fund, one Pennsylvania Municipal Debt
fund, one Minnesota Municipal Debt fund and one Massachusetts Municipal Debt
fund.
(20) The Portfolio's EG includes the Portfolio, eight other Pennsylvania
Municipal Debt funds, two Florida Municipal Debt funds and one Ohio Municipal
Debt fund.
(21) The Portfolio's EG includes the Portfolio, five other Virginia Municipal
Debt funds, two Minnesota Municipal Debt funds, one Connecticut Municipal Debt
fund, one Wisconsin Municipal Debt fund, one Missouri Municipal Debt fund and
one Hawaii Municipal Debt fund.
190 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Expense Lipper Exp. Lipper Lipper Exp. Lipper
Ratio Group Group Universe Universe
Portfolio (%)(22) Median(%) Rank Median(%) Rank
- -------------------------------------------------------------------------------
Arizona Portfolio(23) 0.780 0.800 5/11 0.837 24/64
Florida Portfolio(24) 0.780 0.852 2/12 0.869 14/61
Massachusetts Portfolio(25) 0.820 0.888 3/15 0.876 26/81
Michigan Portfolio(26) 0.999 0.897 11/13 0.871 115/127
Minnesota Portfolio(27) 0.900 0.897 8/14 0.878 42/66
New Jersey Portfolio 0.870 0.871 5/10 0.870 8/15
Ohio Portfolio(28) 0.850 0.871 5/13 0.876 32/81
Pennsylvania Portfolio(29) 0.950 0.885 9/12 0.869 36/48
Virginia Portfolio(30) 0.720 0.841 3/12 0.850 15/72
Based on this analysis, except for Florida Portfolio and Virginia Portfolio,
which have a more favorable ranking on a total expense ratio basis than on a
management fee basis and Massachusetts Portfolio, which has equally favorable
rankings, the Portfolios have a more favorable ranking on a management fee
basis than they do on a total expense ratio basis.
(22) Most recently completed fiscal year Class A share total expense ratio.
(23) The Portfolio's EU includes all other retail front-end load Arizona
Municipal Debt funds, Virginia Municipal Debt funds, Georgia Municipal Debt
funds, Louisiana Municipal Debt funds, Minnesota Municipal Debt funds, Hawaii
Municipal Debt funds and Connecticut Municipal Debt funds, excluding outliers.
(24) The Portfolio's EU includes all other retail front-end load Florida
Municipal Debt funds, Minnesota Municipal Debt funds, Massachusetts Municipal
Debt funds and Ohio Municipal Debt funds, excluding outliers.
(25) The Portfolio's EU includes all other retail front-end load Massachusetts
Municipal Debt funds, Florida Municipal Debt funds, Minnesota Municipal Debt
funds, Ohio Municipal Debt funds and Pennsylvania Municipal Debt funds,
excluding outliers.
(26) The Portfolio's EU includes all other retail front-end load Michigan
Municipal Debt funds, Ohio Municipal Debt funds, Florida Municipal Debt funds,
Minnesota Municipal Debt funds, Massachusetts Municipal Debt funds and
Pennsylvania Municipal Debt funds, excluding outliers.
(27) The Portfolio's EU includes all other retail front-end load Minnesota
Municipal Debt funds, Massachusetts Municipal Debt funds, Pennsylvania
Municipal Debt funds and Ohio Municipal Debt funds, excluding outliers.
(28) The Portfolio's EU includes all other retail front-end load Ohio
Municipal Debt funds, Florida Municipal Debt funds, Pennsylvania Municipal Debt
funds, Minnesota Municipal Debt funds and Massachusetts Municipal Debt funds,
excluding outliers.
(29) The Portfolio's EU includes all other retail front-end load Pennsylvania
Municipal Debt funds, Florida Municipal Debt funds, and Ohio Municipal Debt
funds, excluding outliers.
(30) The Portfolio's EU includes all other retail front-end load Virginia
Municipal Debt funds, Minnesota Municipal Debt funds, Connecticut Municipal
Debt funds, Wisconsin Municipal Debt funds, Missouri Municipal Debt funds and
Hawaii Municipal Debt funds, excluding outliers.
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 191
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 Trustees 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 Trustees of the Trust was reviewed by the Senior Officer and
the consultant. 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 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.(31)
(31) 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.
192 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
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
- ----------------------------------------------------------------
Arizona Portfolio $ 38,075
Florida Portfolio $ 33,138
Massachusetts Portfolio $ 9,833
Michigan Portfolio $ 15,465
Minnesota Portfolio $ 9,447
New Jersey Portfolio $ 5,870
Ohio Portfolio $ 18,079
Pennsylvania Portfolio $ 8,837
Virginia Portfolio $ 21,636
ABI received the following Rule 12b-1 fees and CDSC for the Portfolios during
the Portfolios' most recently completed fiscal year:
Portfolio 12b-1 Fee Received CDSC Received
- -------------------------------------------------------------------------------
Arizona Portfolio $ 1,227,750 $ 47,987
Florida Portfolio $ 1,402,560 $ 58,320
Massachusetts Portfolio $ 1,061,013 $ 31,534
Michigan Portfolio $ 1,038,592 $ 57,631
Minnesota Portfolio $ 525,174 $ 8,148
New Jersey Portfolio $ 1,296,061 $ 54,382
Ohio Portfolio $ 1,366,284 $ 74,003
Pennsylvania Portfolio $ 1,071,744 $ 21,119
Virginia Portfolio $ 1,079,158 $ 27,314
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 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: (32)
Portfolio ABIS Fee Expense Offset
- -------------------------------------------------------------------------------
Arizona Portfolio $ 35,339 $ 470
Florida Portfolio $ 35,969 $ 451
Massachusetts Portfolio $ 37,112 $ 543
Michigan Portfolio $ 47,767 $ 544
Minnesota Portfolio $ 31,415 $ 325
New Jersey Portfolio $ 61,832 $ 620
Ohio Portfolio $ 51,028 $ 652
Pennsylvania Portfolio $ 54,671 $ 524
Virginia Portfolio $ 37,609 $ 414
(32) 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 II o 193
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant, retained by the Senior Officer, made a presentation
to the Board of Trustees regarding possible economies of scale or scope in the
mutual fund industry. Based on the presentation, it was evident that fund
management companies benefit from economies of scale. However, due to lack of
cost data, researchers had to infer facts about the costs from the behavior of
fund expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. In the meantime,
it is clear that to the extent a fund's assets exceed the initial breakpoint
its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE 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(33) relative to their Lipper Performance
Group ("PG") and Lipper Performance Universe ("PU")(34) for the periods ended
June 30, 2006.(35)
(33) The performance returns and rankings are for the Class A shares of the
Portfolios. It should be noted that the performance returns of the Portfolios
that is shown was provided by the Adviser. Lipper maintains its own database
that includes the Portfolios' 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 Portfolios to be one or two
basis points different from Lipper. To maintain consistency in this evaluation,
the performance returns of the Portfolios, as reported by the Adviser, are
provided instead of Lipper.
(34) A Portfolio's PG and PU may not necessarily be identical to its
respective EG and EU. 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.
(35) Note that the current Lipper investment classification/objective dictates
the PG and PU throughout the life of each Portfolio even if a Portfolio may
have had a different investment classification/objective at different points in
time.
194 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Portfolio PG PU PG PU
Arizona Portfolio Return Median Median Rank Rank
- -------------------------------------------------------------------------------
1 year 0.96 0.53 0.53 1/5 3/11
3 year 4.46 2.80 2.80 1/5 1/11
5 year 5.10 4.54 4.54 1/5 2/11
10 year 6.03 4.92 4.99 1/5 1/10
Portfolio PG PU PG PU
Florida Portfolio Return Median Median Rank Rank
- -------------------------------------------------------------------------------
1 year 1.68 1.43 1.10 4/8 4/16
3 year 4.00 3.98 3.05 4/8 4/16
5 year 5.20 4.75 4.43 3/8 3/16
10 year 5.80 5.25 5.12 1/8 1/16
Massachusetts Portfolio PG PU PG PU
Portfolio Return Median Median Rank Rank
- -------------------------------------------------------------------------------
1 year 1.00 0.59 0.54 3/10 3/17
3 year 3.66 3.16 2.89 2/10 2/17
5 year 4.36 4.81 4.64 9/10 13/17
10 year 5.60 5.33 5.19 3/10 3/16
Portfolio PG PU PG PU
Michigan Portfolio Return Median Median Rank Rank
- -------------------------------------------------------------------------------
1 year 1.14 0.59 0.47 1/6 2/11
3 year 3.77 2.61 2.57 1/6 1/11
5 year 5.20 4.25 4.34 1/6 1/11
10 year 6.25 5.03 5.09 1/6 1/11
Portfolio PG PU PG PU
Minnesota Portfolio Return Median Median Rank Rank
- -------------------------------------------------------------------------------
1 year 0.97 0.88 0.75 3/7 6/18
3 year 3.29 2.93 2.88 2/7 5/18
5 year 4.74 4.64 4.58 3/7 6/17
10 year 5.60 5.12 5.11 1/7 2/17
Portfolio PG PU PG PU
New Jersey Portfolio Return Median Median Rank Rank
- -------------------------------------------------------------------------------
1 year 1.23 0.75 0.75 4/10 5/16
3 year 3.48 3.08 2.79 4/10 6/16
5 year 3.68 4.17 4.17 10/10 16/16
10 year 5.18 5.04 5.04 3/10 5/16
Portfolio PG PU PG PU
Ohio Portfolio Return Median Median Rank Rank
- -------------------------------------------------------------------------------
1 year 0.77 0.34 0.22 2/9 2/14
3 year 3.50 2.55 2.42 2/9 2/14
5 year 4.51 4.27 4.27 3/9 4/13
10 year 5.52 4.91 4.91 1/9 1/13
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 195
Pennsylvania Portfolio PG PU PG PU
Portfolio Return Median Median Rank Rank
- -------------------------------------------------------------------------------
1 year 0.92 0.48 0.44 4/9 9/21
3 year 3.62 3.25 3.06 2/9 3/21
5 year 4.97 4.66 4.66 3/9 7/21
10 year 5.71 5.19 5.12 1/9 3/21
Portfolio PG PU PG PU
Virginia Portfolio Return Median Median Rank Rank
- -------------------------------------------------------------------------------
1 year 1.80 0.65 0.51 2/6 2/10
3 year 4.09 3.39 3.02 1/6 1/9
5 year 5.15 4.72 4.64 1/6 1/9
10 year 5.95 5.15 5.15 1/6 1/9
Set forth below are the 1, 3, 5, 10 year and since inception performance
returns of the Portfolios (in bold) versus their benchmarks.(36) Note that each
Portfolio's benchmark is the Lehman Brothers Municipal Bond Index.(37)
Periods Ending June 30, 2006
Annualized Performance
- -------------------------------------------------------------------------------
1 3 5 10 Since
Portfolio Year Year Year Year Inception
- -------------------------------------------------------------------------------
Arizona Portfolio 0.96 4.46 5.10 6.03 6.16
Lehman Brothers Municipal
Bond Index 0.89 3.23 5.05 5.79 6.11
Florida Portfolio 1.68 4.00 5.20 5.80 5.53
Lehman Brothers Municipal
Bond Index 0.89 3.23 5.05 5.79 5.64
Massachusetts Portfolio 1.00 3.66 4.36 5.60 6.32
Lehman Brothers Municipal
Bond Index 0.89 3.23 5.05 5.79 6.08
Michigan Portfolio 1.14 3.77 5.20 6.25 6.21
Lehman Brothers Municipal
Bond Index 0.89 3.23 5.05 5.79 5.68
Minnesota Portfolio 0.97 3.29 4.74 5.60 5.25
Lehman Brothers Municipal
Bond Index 0.89 3.23 5.05 5.79 5.64
New Jersey Portfolio 1.23 3.48 3.68 5.18 4.99
Lehman Brothers Municipal
Bond Index 0.89 3.23 5.05 5.79 5.64
(36) The Adviser provided Portfolio and benchmark performance return
information for periods through June 30, 2006.
(37) The Lehman Brothers 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.
196 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
Ohio Portfolio 0.77 3.50 4.51 5.52 5.23
Lehman Brothers Municipal
Bond Index 0.89 3.23 5.05 5.79 5.64
Pennsylvania Portfolio 0.92 3.62 4.97 5.71 5.56
Lehman Brothers Municipal
Bond Index 0.89 3.23 5.05 5.79 5.64
Virginia Portfolio 1.80 4.09 5.15 5.95 6.37
Lehman Brothers Municipal
Bond Index 0.89 3.23 5.05 5.79 6.05
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed 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: November 15, 2006
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 197
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.
198 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
NOTES
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II o 199
NOTES
200 o ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
ALLIANCEBERNSTEIN MUNICIPAL INCOME FUND II
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
MIFII-0151-0906
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 Audit-Related Tax
Fees Fees Fees
-------- -------------- --------
Arizona Portfolio 2005 $ 22,500 3,084 14,758
2006 23,722 4,486 14,171
Florida Portfolio 2005 22,500 3,084 15,689
2006 23,722 4,486 14,268
Massachusetts Portfolio 2005 22,500 3,084 12,031
2006 23,722 4,486 14,171
Michigan Portfolio 2005 22,500 3,084 12,116
2006 23,722 4,486 13,915
Minnesota Portfolio 2005 22,500 3,084 10,264
2006 23,722 4,486 13,703
New Jersey Portfolio 2005 22,500 3,084 14,054
2006 23,722 4,486 14,012
Ohio Portfolio 2005 22,500 3,084 14,620
2006 23,722 4,486 14,086
Pennsylvania Portfolio 2005 22,500 3,084 13,022
2006 23,722 4,486 13,944
Virginia Portfolio 2005 22,500 3,084 13,315
2006 23,722 4,486 14,035
(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)
- --------------------------------------------------------------------------------------------------------
Arizona Portfolio 2005 892,738 [ 185,545 ]
( 170,787 )
( 14,758 )
2006 680,145 [ 150,172 ]
( 136,001 )
( 14,171 )
Florida Portfolio 2005 893,669 [ 186,476 ]
( 170,787 )
( 15,689 )
2006 680,242 [ 150,269 ]
( 136,001 )
( 14,268 )
Massachusetts Portfolio 2005 890,011 [ 182,818 ]
( 170,787 )
( 12,031 )
2006 680,145 [ 150,172 ]
( 136,001 )
( 14,171 )
Michigan Portfolio 2005 890,096 [ 182,903 ]
( 170,787 )
( 12,116 )
2006 679,889 [ 149,916 ]
( 136,001 )
( 13,915 )
Minnesota Portfolio 2005 888,244 [ 181,051 ]
( 170,787 )
( 10,264 )
2006 679,677 [ 149,704 ]
( 136,001 )
( 13,703 )
New Jersey Portfolio 2005 892,034 ( 184,841 )
( 170,787 )
( 14,054 )
2006 679,986 ( 150,013 )
( 136,001 )
( 14,012 )
Ohio Portfolio 2005 892,600 [ 185,407 ]
( 170,787 )
( 14,620 )
2006 680,060 [ 150,087 ]
( 136,001 )
( 14,086 )
Pennsylvania Portfolio 2005 891,002 [ 183,809 ]
( 170,787 )
( 13,022 )
2006 679,918 [ 149,945 ]
( 136,001 )
( 13,944 )
Virginia Portfolio 2005 891,295 [ 184,102 ]
( 170,787 )
( 13,315 )
2006 680,009 [ 150,036 ]
( 136,001 )
( 14,035 )
(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-2(c) under the Investment Company Act of 1940, as
amended) are effective at the reasonable assurance level based on their
evaluation of these controls and procedures as of a date within 90 days of the
filing date of this document.
(b) 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.
With respect to each of the Florida Portfolio, Massachusetts Portfolio,
Minnesota Portfolio, New Jersey Portfolio, Pennsylvania Portfolio and Virginia
Portfolio, subsequent to the filing of the Fund's Form N-SAR for its fiscal
year ended September 30, 2006, there was the following control deficiency that
was determined to be a material weakness, as defined above, in the Portfolio's
internal control over financial reporting. The Portfolios' 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 statement of operations for each of
Florida Portfolio's, Massachusetts Portfolio's, Minnesota Portfolio's,
Pennsylvania Portfolio's and Virginia Portfolio's year ended September 30, 2006
and expense ratios to average net assets in the financial highlights for the
years ended September 30, 2006, September 30, 2005 and September 30, 2004 (and
with respect to the Minnesota portfolio for the year ended September 30, 2003)
were restated in order to appropriately account for such transfers of
securities as secured borrowings and report the related interest income and
expense. With respect to the New Jersey Portfolio, the statement of assets and
liabilities and the portfolio of investments as of September 30, 2006, the
statements of operations and changes in net assets for the year then ended and
the financial highlights for each of the four years then ended were restated in
order to appropriately account for such transfers of securities as secured
borrowings and 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 Portfolios prior to the Portfolios'
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 II
By: /s/ Marc O. Mayer
----------------------
Marc O. Mayer
President
Date: January 29, 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 29, 2007
By: /s/ Joseph J. Mantineo
----------------------
Joseph J. Mantineo
Treasurer and Chief Financial Officer
Date: January 29, 2007