United States
Securities and Exchange Commission
Washington, D.C. 20549
Form N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-10573
Alliance National Municipal Income Fund, Inc.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Edmund P. Bergan, Jr.
Alliance Capital Management, L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: October 31, 2003
Date of reporting period: April 30, 2003
ITEM 1. REPORTS TO STOCKHOLDERS.
Alliance
National Municipal
Income Fund
Semi-Annual Report
April 30, 2003
[LOGO] ALLIANCEBERNSTEIN
Investment Research and Management
Investment Products Offered
============================
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
============================
AllianceBernstein Investment Research and Management, Inc., the principal
underwriter of the AllianceBernstein mutual funds and an affiliate of Alliance
Capital Management L.P., the manager of the funds, is a member of the NASD.
June 9, 2003
Semi-Annual Report
This report provides management's discussion of fund performance for Alliance
National Municipal Income Fund's (the "Fund") semi-annual reporting period ended
April 30, 2003.
Investment Objective and Policies
The Fund is a closed-end management investment company designed for investors
who seek high current income exempt from regular federal income tax. The Fund
normally invests at least 75% of its assets in investment grade municipal
securities.
Investment Results
The following table provides performance data for the Fund and its benchmark,
the Lehman Brothers Municipal Bond Index, for the six- and 12-month periods
ended April 30, 2003. For comparison, returns for the Lipper General & Leveraged
Municipal Debt Funds Average are also included.
INVESTMENT RESULTS*
Periods Ended April 30, 2003
===========================
Returns
===========================
6 Months 12 Months
--------------------------------------------------------------------------------
Alliance National Municipal Income Fund (NAV) 5.67% 14.22%
--------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index 3.59% 8.49%
--------------------------------------------------------------------------------
Lipper General & Leveraged Municipal Debt
Funds Average 5.24% 10.27%
--------------------------------------------------------------------------------
*The Fund's investment results are for the periods shown and are based on the
Fund's net asset value (NAV) as of April 30, 2003. All fees and expenses
related to the operation of the Fund have been deducted. Returns for the Fund
include the reinvestment of any distributions paid during the period. Past
performance is no guarantee of future results.
The Lehman Brothers Municipal Bond Index is a total return performance
benchmark for the long-term, investment grade tax-exempt bond market. The
Lipper General & Leveraged Municipal Debt Funds Average is comprised of
leveraged closed-end funds with generally similar investment objectives to
Alliance National Municipal Income Fund. An investor cannot invest directly
in an index, and its results are not indicative of any specific investment,
including Alliance National Municipal Income Fund.
Investment Results
For the past six months ended April 30, 2003, the municipal bond market posted
positive returns. The Fund generated a positive return as well, outperforming
its benchmark, the Lehman Brothers Municipal Bond Index, as well as the Lipper
General & Leverage Municipal Debt Funds Average. The Fund's outperformance in
comparison to its Lipper peer group can be attributed to its relatively high
average credit quality.
Over the past 12 months, municipal bond yields declined substantially. This
resulted in strong positive price performance for the municipal bond market. The
Fund also generated a positive rate of return over this period. For the 12
months, the Fund outperformed both
--------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 1
the Lehman Brothers Municipal Bond Index and the Lipper General & Leveraged
Municipal Debt Funds Average. Once again, the Fund's relatively strong
performance is attributable to the Fund's higher average credit quality. In
addition, the Fund's performance was aided by the advance refunding of a 2.5%
position, Alabama's Jefferson County Sewer Revenue. An advance refunding results
in the bond becoming secured by U.S. government securities, and its effective
maturity date becomes the same as the first call date. These two modifications
result in a substantial increase in bond price.
Market Review and Investment Strategy
The pace of municipal issuance continues to be quite strong. Year-to-date
issuance has totaled $145.6 billion--an increase of almost 14% from the same
period in 2002. This high level of issuance has impaired municipal price
performance relative to the taxable bond market. State and local governments are
currently mired in their worst financial crises in decades. Policy makers are
debating how much to cut expenses and raise taxes to close their projected
budget shortfalls. The Center on Budget and Policy Priorities estimates that
states' collective projected budget deficits could reach $85 billion in fiscal
year 2004. Two states, California and Oregon, were recently downgraded by
Moody's Investors Service, and 16 more continue to have "negative" outlooks,
meaning they are at risk for being downgraded, as well. The Fund has minimal
general obligation exposure and, therefore, has generally been sheltered from
the recent credit spread widening affecting these bonds.
Investment activity over the past six months focused on improving the credit
quality of the Fund. The Fund's exposure to the health care and tobacco
settlement sectors was reduced over the period and replaced by higher credit
quality bonds. In an effort to maintain a low cost of leverage, one series of
its variable rate preferred stock was reset into an extended rate mode expiring
in December, 2003. Two other series had been previously reset into extended rate
mode, expiring in August, 2003. The final series continues to reset on a weekly
basis.
--------------------------------------------------------------------------------
2 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS
April 30, 2003 (unaudited)
Standard Principal
& Poor's Amount
Rating (000) Value
--------------------------------------------------------------------------------
MUNICIPAL BONDS-162.2%
Long-Term Municipal Bonds-160.8%
Alabama-9.1%
Huntsville Hlth Care Auth
(Huntsville Hosp Sys) Ser 02B
5.75%, 6/01/32(a).................. A2 $ 8,000 $ 8,177,520
Jefferson Cnty Swr Rev
FGIC Ser 99A
5.375%, 2/01/36.................... AAA 12,405 14,256,942
Marshall Cnty Hlth Care Auth
(Marshall Cnty Med Ctr) Ser 02A
5.75%, 1/01/32..................... A- 2,500 2,551,750
Marshall Cnty Hlth Care Auth
(Marshall Cnty Med Ctr) Ser 02D
5.75%, 1/01/32..................... A- 3,000 3,064,380
--------------
28,050,592
--------------
Arizona-0.6%
Mohave Cnty IDA
(Citizens Utilities) Ser 93B AMT
5.80%, 11/15/28.................... BBB 2,000 1,790,120
--------------
Arkansas-2.6%
Arkansas Dev Fin Auth SFMR
Mtg Rev GNMA Ser 02A
5.30%, 7/01/34..................... AAA 7,750 7,988,623
--------------
California-4.2%
California St
5.00%, 2/01/32..................... A 3,250 3,210,675
Los Angeles Regl Arpts Lease Rev
(Laxfuel Corp) AMBAC Ser 01AMT
5.50%, 1/01/32..................... AAA 9,500 9,796,115
--------------
13,006,790
--------------
Colorado-2.4%
Avon HSG Auth MFHR
(Buffalo Ridge II Proj)GNMA
Ser 02A AMT
5.70%, 10/20/43.................... AAA 4,950 5,140,427
Denver City & Cnty MFHR
(Clyburn Stapleton Proj)
GNMA Ser 02 AMT
5.50%, 12/20/43(a)................. Aaa 2,155 2,196,656
--------------
7,337,083
--------------
--------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 3
Standard Principal
& Poor's Amount
Rating (000) Value
--------------------------------------------------------------------------------
District of Columbia-2.6%
District of Columbia
Tobacco Settlement Bonds Ser 01
6.75%, 5/15/40..................... A- $ 4,920 $ 4,244,287
District of Columbia Special Tax Rev
(Gallary Place Proj) Ser 02
5.40%, 7/01/31..................... AAA 3,500 3,704,400
--------------
7,948,687
--------------
Florida-26.9%
Beacon Tradeport Comm Dev Dist
Ser 02B
7.25%, 5/01/33..................... NR 10,000 10,298,200
Brevard Cnty HFA SFMR
Mtg Rev GNMA Ser 02C AMT
5.40%, 3/01/33(a).................. Aaa 4,000 4,082,760
Collier Cnty Comm Fac Dist
(Fiddler's Creek) Ser 02A
6.875%, 5/01/33.................... NR 10,120 10,317,441
Collier Cnty Comm Fac Dist
(Fiddler's Creek) Ser 02B
6.625%, 5/01/33.................... NR 5,330 5,435,161
Dade Cnty Aviation Rev
(Miami Int'l Airport) FGIC
Ser 02 AMT
5.375%, 10/01/32................... AAA 6,040 6,263,057
Florida Educ & Athletic Fac Impt Rev
(FSU Finl Assist) AMBAC Ser 02
5.00%, 10/01/31.................... AAA 5,000 5,128,050
Florida Hsg Fin Corp Rev MFHR
(Westminster Apts)FSA
Ser 02E-1 AMT
5.40%, 4/01/42..................... AAA 3,000 3,066,210
Jacksonville Wtr & Swr Sys Rev
(Jacksonville Elec) MBIA Ser 02A
5.50%, 10/01/41.................... AAA 20,000 20,897,400
Lee Cnty Arpt Rev
(Southwest FL Intl) FSA
Ser 00A AMT
5.75%, 10/01/22.................. AAA 5,000 5,409,250
5.75%, 10/01/25.................. AAA 4,500 4,856,535
Lee Cnty Comm Dev
(Miromar Lakes) Ser 00A
7.25%, 5/01/12..................... NR 1,905 2,041,246
Orange Cnty Hlth Facs Auth Rev
(Orlando Regional) Ser 02
5.75%, 12/01/32.................... A- 1,400 1,431,990
--------------------------------------------------------------------------------
4 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
Standard Principal
& Poor's Amount
Rating (000) Value
--------------------------------------------------------------------------------
Pinellas Cnty HFA SFMR
Mtg Rev GNMA/FNMA
Ser 02A AMT
5.40%, 3/01/32(a).................. Aaa $ 1,490 $ 1,524,508
West Palm Beach Comm Dev
(Hamal Dist) Ser 01
6.75%, 5/01/31..................... NR 2,460 2,511,414
--------------
83,263,222
--------------
Georgia-2.5%
Cartersville Dev Auth
(Anheuser Busch Proj) Ser 02 AMT
5.95%, 2/01/32..................... A+ 2,510 2,646,042
Georgia HFA SFMR
Mtg Rev Ser 02A-2 AMT
5.60%, 12/01/32.................... AAA 4,980 5,130,047
--------------
7,776,089
--------------
Hawaii-0.8%
Hawaii St Dept Budget & Fin
XLCA Ser 03B AMT
5.00%, 12/01/22.................... AAA 2,500 2,517,375
--------------
Illinois-17.8%
Bolingbrook GO
FGIC Ser 02A
5.375%, 1/01/38.................... AAA 5,000 5,241,050
Chicago GO
FGIC Ser 00
5.50%, 1/01/40..................... AAA 14,585 15,468,268
Chicago O'Hare Int'l Arpt Arpt Rev
(O'Hare Intl Arpt) MBIA Ser 02A AMT
5.375%, 1/01/32.................... AAA 15,000 15,390,300
Chicago Parking Rev
(Lakefront Millennium) MBIA Ser 98
5.125%, 1/01/28.................... AAA 9,000 9,225,540
Chicago Sales Tax Rev
FGIC Ser 98
5.25%, 1/01/28..................... AAA 5,710 5,912,648
Met Pier & Expo Auth Special
Tax Rev
(McCormick Place) Ser 02A
5.25%, 6/15/42..................... AAA 3,750 3,902,025
--------------
55,139,831
--------------
Indiana-4.8%
Indiana Hsg Fin Auth SFMR
Mtg Rev GNMA/FNMA AMT
5.55%, 7/01/32(a).................. Aaa 4,310 4,462,359
Indianapolis Pub Improv Bond
(Wtrwks Proj) MBIA Ser 02A
5.25%, 7/01/33..................... AAA 10,000 10,450,200
--------------
14,912,559
--------------
--------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 5
Standard Principal
& Poor's Amount
Rating (000) Value
--------------------------------------------------------------------------------
Iowa-2.1%
Iowa Dev Fin Auth
Tobacco Settlement Bonds
Ser 01B
5.30%, 6/01/25..................... A- $ 5,900 $ 4,432,847
Iowa Fin Auth SFMR
Mtg Rev GNMA/FNMA
Ser 02A AMT
5.40%, 7/01/32..................... AAA 2,190 2,236,165
--------------
6,669,012
--------------
Louisiana-2.4%
Calcasieu Parish SFMR
Mtg Rev GNMA/FNMA Ser 02A
4.50%, 4/01/33(a).................. Aaa 1,500 1,597,425
Louisiana Dev Fin Auth
Tobacco Settlement Bonds
Ser 01B
5.50%, 5/15/30..................... A 3,000 2,426,430
Louisiana Hsg Fin Agy SFMR
Mtg Rev GNMA Ser 02C AMT
5.60%, 6/01/33(a).................. Aaa 3,365 3,473,521
--------------
7,497,376
--------------
Massachusetts-3.0%
Mass Hlth & Ed Fac Hosp Rev
(Berkshire Hlth Sys)
Asset Gty Ser 01E
5.70%, 10/01/25.................... AA 2,000 2,146,680
Massachusetts Hlth & Ed Fac
Hosp Rev
(Cape Cod Healthcare)
Asset Gty Ser 01E
5.25%, 11/15/31.................... AA 2,100 2,165,079
Massachusetts Trpk Auth
(Metro System Hwy)
AMBAC Ser 99A
5.00%, 1/01/39..................... AAA 5,000 5,056,100
--------------
9,367,859
--------------
Michigan-3.7%
Detroit Loc Dev Fin Auth Tax Incr
(Daimler/Chrysler Plant) Ser 98A
5.50%, 5/01/21..................... BB- 1,705 1,395,900
Michigan Strategic
(Detroit Edison Co Pj) XLCA
Ser 02C AMT
5.45%, 12/15/32.................... AAA 5,000 5,208,500
Saginaw Hosp Fin Auth
(Covenant Med Ctr) Ser 00F
6.50%, 7/01/30..................... A 4,410 4,748,953
--------------
11,353,353
--------------
--------------------------------------------------------------------------------
6 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
Standard Principal
& Poor's Amount
Rating (000) Value
--------------------------------------------------------------------------------
Minnesota-0.4%
Dakota Cnty Comm Dev Agy MFHR
(Buffalo Ridge Apts) GNMA Ser 02
5.40%, 7/20/28(a).................. Aaa $ 1,265 $ 1,311,324
--------------
Missouri-1.4%
Missouri Hsg Dev Comm SFMR
Mtg Rev GNMA/FNMA
Ser 02A-1 AMT
5.58%, 9/01/32..................... AAA 4,050 4,206,816
--------------
Nevada-14.9%
Clark Cnty Arpt Rev
FGIC Ser 01B
5.25%, 7/01/34..................... AAA 11,920 12,237,191
Nevada Dept Bus & Ind Transp Rev
(Las Vegas Monorail Proj)
AMBAC Ser 00
5.625%, 1/01/32.................... AAA 11,720 12,577,670
Reno Special Tax
FGIC Ser 02
5.375%, 6/01/32.................... AAA 7,500 7,915,500
Reno Special Tax Rev
(Retrac Transp Proj) AMBAC
Ser 02
5.25%, 6/01/41..................... AAA 1,000 1,044,720
Truckee Meadows Wtr Auth
Wtr Rev FSA Ser 01A
5.25%, 7/01/34..................... AAA 12,000 12,450,360
--------------
46,225,441
--------------
New Hampshire-1.7%
New Hampshire Hlth & Ed Fac
Hosp Rev
(Covenant Med Ctr) Ser 02
6.125%, 7/01/31.................... A- 5,000 5,199,950
--------------
North Dakota-1.2%
North Dakota HFA SFMR
Mtg Rev Ser 02A AMT
5.65%, 1/01/34(a).................. Aa2 3,495 3,625,433
--------------
Ohio-6.0%
Cleveland-Cuyahoga Cnty Port Auth Rev
Ser 01
7.35%, 12/01/31.................... NR 7,800 8,089,380
Ohio HFA SFMR
Mtg Rev GNMA Ser 00D AMT
6.05%, 3/01/31(a).................. Aaa 9,925 10,494,397
--------------
18,583,777
--------------
--------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 7
Standard Principal
& Poor's Amount
Rating (000) Value
--------------------------------------------------------------------------------
Pennsylvania-5.5%
Pennsylvania Econ Dev Parking FAC
(30Th St Station Garage Proj)
ACA Ser 02A AMT
5.875%, 6/01/33.................... A $ 2,050 $ 2,104,469
Pennsylvania Trpk Comm
Transp Rev
AMBAC Ser 01
5.00%, 7/15/41..................... AAA 5,000 5,095,700
Philadelphia Hosp Rev
(Temple Univ Hosp) Ser 93A
6.625%, 11/15/23................... BBB 3,000 3,034,920
Southeastern Trans Auth
FGIC Ser 99A
4.75%, 3/01/29..................... AAA 4,000 4,025,720
Washington Cnty Auth Rev
Capital Funding AMBAC Ser 99
6.15%, 12/01/29.................... AAA 2,300 2,779,113
--------------
17,039,922
--------------
Rhode Island-1.6%
Rhode Island
Tobacco Securitization Bonds
Ser 02A
6.125%, 6/01/32.................... A- 5,700 4,836,279
--------------
South Carolina-0.3%
South Carolina
Tobacco Settlement Bonds
Ser 01B
6.375%, 5/15/30.................... A- 1,000 850,220
--------------
South Dakota-0.1%
South Dakota
Tobacco Settlement Bonds
Ser 02B
6.50%, 6/01/32..................... A 500 433,275
--------------
Texas-19.7%
Bexar Cnty Hsg Fin Corp MFHR
(Doral Club & Sutton House Apts)
MBIA Ser 01A
5.55%, 10/01/36(a)................. Aaa 15,000 15,157,500
Dallas-Fort Worth Int'l Arpt Rev
FGIC Ser 01 AMT
5.50%, 11/01/35.................... AAA 10,000 10,342,400
Gulf Coast Waste Disp Auth
(Anheuser-Busch Proj) Ser 02 AMT
5.90%, 4/01/36..................... A+ 9,000 9,463,680
--------------------------------------------------------------------------------
8 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
Standard Principal
& Poor's Amount
Rating (000) Value
--------------------------------------------------------------------------------
Harris Cnty
Toll Road Rev FSA Ser 02
5.125%, 8/15/32.................... AAA $ 2,500 $ 2,567,625
Houston
(Northeast Wtr Purification Proj)
FGIC Ser 02
5.125%, 3/01/32.................... AAA 7,000 7,186,900
San Antonio Arpt Sys Rev
FGIC Ser 02A AMT
5.25%, 7/01/27..................... AAA 6,250 6,322,000
Texas GO
Ser 02A AMT
5.50%, 8/01/41..................... AA 9,470 9,944,826
--------------
60,984,931
--------------
Utah-0.5%
Utah Hsg Corp MFHR
Mtg Rev (Bluffs Apts Proj)
GNMA Ser 02A AMT
5.60%, 7/20/30(a).................. Aaa 1,480 1,551,484
--------------
Virginia-2.8%
Fauquier Cnty IDA Hosp Rev
(Fauquier Hospital)
Asset Gty Ser 02
5.25%, 10/01/31.................... AA 8,500 8,824,955
--------------
Washington-9.0%
King Cnty
Swr Rev FSA Ser 02A
5.25%, 1/01/32..................... AAA 3,000 3,113,880
Twenty-Fifth Ave Pptys Dorm Rev.
(University of WA)
MBIA Ser 02
5.25%, 6/01/33..................... AAA 9,750 10,142,047
Washington HFA SFMR
Mtg Rev GNMA/FNMA
Ser 02A AMT
5.83%, 6/01/29(a).................. Aaa 9,090 9,484,870
Western Washington University
Student Rec Fee MBIA Ser 02
5.00%, 5/01/33..................... AAA 5,110 5,202,542
--------------
27,943,339
--------------
Wisconsin-10.2%
Badger Tobacco Asset Sec Corp
Tobacco Settlement Bonds Ser 02
6.375%, 6/01/32.................... A- 5,000 4,209,800
--------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 9
Standard Principal
& Poor's Amount
Rating (000) Value
--------------------------------------------------------------------------------
Wisconsin Hlth & Ed Fac Auth
Hosp Rev (Ministry Hlth Care)
MBIA Ser 02A
5.25%, 2/15/32..................... AAA $13,615 $ 14,023,314
Wisconsin Hsg & Economic Dev Auth
SFMR Mtg Rev Ser 02A AMT
5.50%, 9/01/32..................... AA 7,800 7,976,982
Wisconsin Hsg Auth SFMR
Mtg Rev MBIA Ser 02A AMT
5.60%, 5/01/33..................... AAA 5,000 5,252,000
--------------
31,462,096
--------------
Total Long-Term Municipal Bonds
(cost $476,019,264)................ 497,697,813
--------------
Short-Term Municipal Notes(b)-1.4%
California-0.7%
Los Angeles Dept of Wtr & Pwr FRN DD
Electric Plant Rev. Bonds
Ser 2001 B-3
1.32%, 7/01/34..................... A-1+ 2,000 2,000,000
--------------
Louisiana-0.4%
East Baton Rouge La PCR
(Exxon Project) Ser 89
1.25%, 11/01/19.................... A-1+ 1,300 1,300,000
--------------
New Jersey-0.3%
Port Auth of NY & NJ Port Rev
(Versatile Structure) Ser 95-3
1.35%, 6/01/20..................... A-1+ 1,000 1,000,000
--------------
Total Short-Term Municipal Notes
(cost $4,300,000).................. 4,300,000
--------------
Total Investments-162.2%
(cost $480,319,264)............. 501,997,813
Other assets less liabilities-0.8%. 2,531,481
Preferred Stock, at redemption
value-(63.0%) ..................... (195,000,000)
--------------
Net Assets Applicable to Common
Shareholders-100%(c)............... $ 309,529,294
--------------
See footnote summary on page 11.
--------------------------------------------------------------------------------
10 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
(a) Moody's or Fitch Rating.
(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) Portfolio percentages are calculated based on net assets applicable to
common shareholders.
Glossary of Terms:
AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax - (subject to)
FGIC Financial Guaranty Insurance Company
FNMA Federal National Mortgage Association
FSA Financial Security Assurance, Inc.
GNMA Government National Mortgage Association
GO General Obligation
HFA Housing Finance Authority
IDA Industrial Development Authority
MBIA Municipal Bond Investors Assurance
MFHR Multi-Family Housing Revenue
NR Rating not applied for
SFMR Single Family Mortgage Revenue
See notes to financial statements.
--------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 11
STATEMENT OF ASSETS & LIABILITIES
April 30, 2003 (unaudited)
Assets
Investments in securities, at value
(cost $480,319,264) ................................. $ 501,997,813
Cash .................................................. 1,618,170
Interest receivable.................................... 8,279,700
Receivable due from Adviser............................ 205,994
Receivable for investment securities sold.............. 55,000
Prepaid expenses....................................... 138,131
--------------
Total assets........................................... 512,294,808
--------------
Liabilities
Payable for investment securities purchased............ 5,687,422
Dividends payable--common shares....................... 1,627,504
Dividends payable--preferred shares.................... 196,421
Advisory fee payable....... ........................... 165,085
Accrued expenses and other liabilities................. 89,082
--------------
Total liabilities...................................... 7,765,514
--------------
Preferred Stock, at redemption value
$.001 par value per share; 7,800 shares
Auction Preferred Stock authorized, issued and
outstanding at $25,000 per share liquidation
preference........................................... 195,000,000
--------------
Net Assets Applicable to Common Shareholders........... $ 309,529,294
--------------
Composition of Net Assets Applicable to
Common Shareholders
Common stock, $.001 par value per share;
1,999,992,200 shares authorized,
20,471,667 shares issued and outstanding............. $ 20,472
Additional paid-in capital............................. 290,388,298
Undistributed net investment income.................... 1,141,622
Accumulated net realized loss on investment
transactions ........................................ (3,699,647)
Net unrealized appreciation of investments............. 21,678,549
--------------
Net Assets Applicable to Common Shareholders........... $ 309,529,294
--------------
Net Asset Value Applicable to Common Shareholders
(based on 20,471,667 common shares outstanding)....... $15.12
------
See notes to financial statements.
--------------------------------------------------------------------------------
12 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
STATEMENT OF OPERATIONS
Six Months Ended April 30, 2003 (unaudited)
Investment Income
Interest................................ $ 13,539,107
Expenses
Advisory fee $ 1,617,107
Auction Preferred Stock-auction
agent's fees.......................... 263,107
Custodian............................... 77,399
Audit and legal......................... 37,613
Printing................................ 15,549
Directors' fees and expenses............ 15,000
Registration fees....................... 14,480
Transfer agency......................... 6,899
Miscellaneous........................... 49,672
---------------
Total expenses.......................... 2,096,826
Less: expenses waived by the Adviser
(see Note B).......................... (621,969)
---------------
Net expenses............................ 1,474,857
---------------
Net investment income................... 12,064,250
---------------
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized loss on investment
transactions.......................... (2,500,249)
Net change in unrealized
appreciation/depreciation
of investments........................ 7,913,209
---------------
Net gain on investment transactions..... 5,412,960
---------------
Dividends to Auction Preferred
Shareholders from
Net investment income................... (1,440,682)
---------------
Net Increase in Net Assets Applicable
to Common Shareholders Resulting
from Operations......................... $ 16,036,528
---------------
See notes to financial statements.
--------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 13
STATEMENT OF CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS
Six Months January 28,
Ended 2002(a) to
April 30, 2003 October 31,
(unaudited) 2002
--------------- ---------------
Increase (Decrease) in Net Assets
Applicable to Common Shareholders
Resulting from Operations
Net investment income................... $ 12,064,250 $ 14,989,072
Net realized loss on investment
transactions.......................... (2,500,249) (1,199,398)
Net change in unrealized
appreciation/depreciation
of investments....................... 7,913,209 13,765,340
Dividends to Auction Preferred
Shareholders from
Net investment income.................. (1,440,682) (1,686,064)
--------------- ---------------
Net increase in net assets applicable
to Common Shareholders resulting
from operations...................... 16,036,528 25,868,950
--------------- ---------------
Dividends to Common Shareholders from
Net investment income.................. (9,764,980) (13,019,974)
Common Stock Transactions
Net increase........................... -0- 290,308,765
--------------- ---------------
Total increase......................... 6,271,548 303,157,741
Net Assets Applicable to Common
Shareholders
Beginning of period 303,257,746 100,005
--------------- ---------------
End of period (including undistributed
net investment income of $283,034
at October 31, 2002)................. $ 309,529,294 $ 303,257,746
--------------- ---------------
(a) Commencement of operations
See notes to financial statements.
--------------------------------------------------------------------------------
14 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 2003 (unaudited)
NOTE A
Significant Accounting Policies
Alliance National Municipal Income Fund, Inc. (the "Fund"), was incorporated in
the state of Maryland on November 9, 2001 and is registered under the Investment
Company Act of 1940 as a non-diversified, closed-end management investment
company. Prior to the commencement of operations on January 28, 2002, the Fund
had no operations other than the sale to Alliance Capital Management L.P. (the
"Adviser") of 6,667 shares in the amount of $100,005 on January 23, 2002. The
financial statements have been prepared in conformity with accounting principles
generally accepted in the United States, which require management to make
certain estimates and assumptions that affect the reporting amounts of assets
and liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund.
1. Security Valuation
In accordance with Pricing Policies adopted by the Board of Directors of the
Fund (the "Pricing Policies") and applicable law, portfolio securities are
valued at current market value or at fair value. The Board of Directors has
delegated to the Adviser, subject to the Board's continuing oversight, certain
responsibilities with respect to the implementation of the Pricing Policies.
Pursuant to the Pricing Policies, securities for which market quotations are
readily available are valued at their current market value. In general, the
market value of these securities is determined as follows:
Securities listed on a national securities exchange or on a foreign securities
exchange are valued at the last sale price at the close of the exchange or
foreign securities exchange. If there has been no sale on such day, the
securities are valued at the mean of the closing bid and asked prices on such
day. If no bid or asked prices are quoted on such day, then the security is
valued in good faith at fair value in accordance with the Pricing Policies.
Securities listed on more than one exchange are valued by reference to the
principal exchange on which the securities are traded; securities not listed on
an exchange but traded on The Nasdaq Stock Market, Inc. ("NASDAQ") are valued in
accordance with the NASDAQ Official Closing Price; listed put or call options
are valued at the last sale price. If there has been no sale on that day, such
securities will be valued at the closing bid prices on that day; open futures
contracts and options thereon are valued using the closing settlement price or,
in the absence of such a price, the most recent quoted bid price. If there are
no quotations available for the day of valuations, the last available closing
settlement price is used; securities traded in the over-the-counter market, (but
excluding securities traded on NASDAQ) are valued at the mean of the current bid
and asked prices as reported by the National Quotation Bureau or other
comparable sources; U.S. Government securities and other debt instruments having
60 days or less remaining until maturity are valued at amor-
--------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 15
tized cost if their original maturity was 60 days or less, or by amortizing
their fair value as of the 61st day prior to maturity if their original term to
maturity exceeded 60 days; fixed-income securities, including mortgage backed
and asset backed securities, may be valued on the basis of prices provided by a
pricing service or at a price obtained from one or more of the major
broker/dealers. In cases where broker/dealer quotes are obtained, the Pricing
Policies provide that 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 are
valued at fair value in accordance with the Pricing Policies.
2. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. Investment Income and Investment Transactions
Interest income is accrued daily. Investment transactions are accounted for on
the date the securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. The Fund amortizes premiums and
accretes original issue discounts and market discounts as adjustments to
interest income.
4. 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
accounting principles generally accepted in the United States. 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 an investment advisory agreement, the Fund pays the Adviser
an advisory fee at an annual rate of .65 of 1% of the Fund's average daily net
assets. Such fee is accrued daily and paid monthly. The Adviser has agreed to
waive a portion of its fees or reimburse the Fund for expenses in the amount of
0.25% of the Fund's average daily net assets for the first 5 full years of the
Fund's operations, 0.20% of the Fund's average daily net assets in year 6, 0.15%
in year 7, 0.10% in year 8, and 0.05% in year 9. For the period ended April 30,
2003, the amount of such fees waived was $621,969.
--------------------------------------------------------------------------------
16 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
Under the term of a Shareholder, Inquiry Agency Agreement with Alliance Global
Investor Services, Inc. (AGIS), an affiliate of the Adviser, the Fund reimburses
AGIS for costs relating to servicing phone inquiries for the Fund.During the
period ended April 30, 2003, there was no reimbursement paid to AGIS.
NOTE C
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the period ended April 30, 2003, were as follows:
Purchases Sales
--------------- ---------------
Investment securities................... $ 31,253,599 $ 27,837,910
U.S. government securities.............. -0- -0-
At April 30, 2003, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes.
Accordingly, gross unrealized appreciation and unrealized depreciation are as
follows:
Gross unrealized appreciation.......................... $ 23,521,128
Gross unrealized depreciation.......................... (1,842,579)
-------------
Net unrealized appreciation............................ $ 21,678,549
-------------
NOTE D
Distributions To Common Shareholders
The tax character of distributions to be paid for the year ending October 30,
2003 will be determined at the end of the current fiscal year. The tax character
of distributions paid to common shareholders during the fiscal period ended
October 31, 2002 were as follows:
2002
-------------
Distributions paid from:
Ordinary income..................................... $ 26,652
Tax exempt income................................... 11,365,824
-------------
Total distributions paid............................... $ 11,392,476(a)
-------------
--------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 17
As of October 31, 2002, the components of accumulated earnings/(deficit)
applicable to common shareholders on a tax basis were as follows:
Undistributed tax exempt income........................ $ 2,065,905
Accumulated capital and other losses................... (1,199,398)(b)
Unrealized appreciation/(depreciation)................. 13,765,340
-------------
Total accumulated earnings/(deficit)................... $ 14,631,847
-------------
(a) Total distributions paid differ from the statement of changes in net assets
applicable to common shareholders because for tax purposes dividends are
recognized when actually paid.
(b) On October 31, 2002, the Fund had a net capital loss carryforward of $
1,199,398, all of which expires in the year 2010. To the extent future
capital gains are offset by capital loss carryforward, such gains will not
be distributed.
NOTE E
CommonStock
The Fund has 1,999,992,200 shares of $.001 par value common stock authorized.
There are 20,471,667 shares of common stock outstanding at April 30, 2003, of
which the Adviser owns 6,667 shares. In addition to the shares issued to the
Adviser, an initial public offering of the Fund's shares resulted in the
issuance of 18,900,000 shares. Also, the Fund issued an additional 1,565,000
shares in connection with the exercise by the underwriters of the over-allotment
option.
NOTE F
Preferred Stock
The Fund has authorized, issued and outstanding 7,800 shares of Auction
Preferred Stock, consisting of 1,950 shares each of Series M, Series T, Series W
and Series TH. The preferred shares have a liquidation value of $25,000 per
share plus accumulated, unpaid dividends. The dividend rate on the Auction
Preferred Stock may change generally every 7 days as set by the auction agent
for Series M and T. The dividend rate on the Series M is 1.35% effective through
December 15, 2003. The dividend rate on the Series T is 1.15% effective through
May 6, 2003. The dividend rate on the Series W is 1.749% effective through
August 6, 2003. The dividend rate on the Series TH is 1.698% effective through
August 7, 2003.
At certain times, the Preferred Shares are redeemable by the Fund, in whole or
in part, at $25,000 per share plus accumulated, unpaid dividends.
Although the Fund will not ordinarily redeem the Preferred Shares, it may be
required to redeem shares if, for example, the Fund does not meet an asset
coverage ratio required by law or to correct a failure to meet a rating agency
guideline in a timely manner. The Fund voluntarily may redeem the Preferred
Shares in certain circumstances.
--------------------------------------------------------------------------------
18 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
The Preferred Shareholders, voting as a separate class, have the right to elect
at least two Directors at all times and to elect a majority of the Directors in
the event two years' dividends on the Preferred Shares are unpaid. In each case,
the remaining Directors will be elected by the Common Shareholders and Preferred
Shareholders voting together as a single class. The Preferred Shareholders will
vote as a separate class on certain other matters as required under the Fund's
Charter, the Investment Company Act of 1940 and Maryland law.
--------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 19
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout The Period
Six Months January 28,
Ended 2002(a) to
April 30, 2003 October 31,
(unaudited) 2002
---------------------------
Net asset value, beginning of period................. $14.81 $14.33
---------------------------
Income From Investment Operations
Net investment income(b)(c).......................... .59 .74
Net realized and unrealized gain on investments...... .27 .60
Dividends to preferred shareholders from
Net investment income
(common stock equivalent basis).................. (.07) (.08)
---------------------------
Net increase in net asset value from operations...... .79 1.26
---------------------------
Less: Dividends to common shareholders from
Net investment income ............................. (.48) (.64)
Common stock offering costs........................ -0- (.03)
Preferred stock offering costs and sales load...... -0- (.11)
---------------------------
Net asset value, end of period..................... $15.12 $14.81
---------------------------
Market value, end of period.......................... $13.91 $13.48
---------------------------
Total Return
Total investment return based on:(d)
Market value....................................... 6.85% (5.92)%
Net asset value.................................... 5.67% 8.14%
Ratios/Supplemental Data:
Net assets applicable to common shareholders,
end of period
(000's omitted).................................... $309,529 $303,258
Preferred Stock, at redemption value
($25,000 per share
liquidation preference) (000's omitted)............ $195,000 $195,000
Ratios to average net assets applicable to
common shareholders of:(e)
Expenses, net of fee waivers(f).................... 0.75% 0.95%
Expenses, before fee waivers(f).................... 1.07% 1.33%
Net investment income, before preferred stock
dividends(c)(f) ................................. 6.18% 6.73%
Preferred stock dividends........................ 0.74% 0.76%
Net investment income, net of preferred stock
dividends(c) .................................. 5.44% 5.97%
Portfolio turnover rate.............................. 6% 13%
Asset coverage ratio................................. 259% 255%
See footnote summary on page 21.
--------------------------------------------------------------------------------
20 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
(a) Commencement of operations. Net asset value immediately after the closing of
the first public offering was $14.30.
(b) Based on average shares outstanding.
(c) Net of fees waived by the Adviser.
(d) Total investment return is calculated assuming a purchase of common stock on
the opening of the first day and a sale on the closing of the last day of
the period reported. Dividends and distributions, if any, are assumed for
purposes of this calculation, to be reinvested at prices obtained under the
Fund's dividend reinvestment plan. Generally, total investment return based
on net asset value will be higher than total investment return based on
market value in periods where there is an increase in the discount or a
decrease in the premium of the market value to net asset value from the
beginning to the end of such periods. Conversely, total investment return
based on net asset value will be lower than total investment return based on
market value in periods where there is a decrease in the discount or an
increase in the premium of the market value to the net asset value from the
beginning to the end of the period. Total investment return calculated for a
period of less than one year is not annualized.
(e) Annualized.
(f) These expense and net investment income ratios do not reflect the effect of
dividend payments to preferred shareholders.
--------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 21
ADDITIONALINFORMATION
(unaudited)
Supplemental Proxy Information
The Annual Meeting of Shareholders of Alliance National Municipal Income Fund,
Inc. was held on March 20, 2003. The description of each proposal and number of
shares voted at the meeting are as follows:
Authority
Voted For Withheld
================================================================================
1. To elect Directors: Class One Directors
(term expires 2004)
Clifford L. Michel 17,705,838 189,362
Donald J. Robinson 17,704,163 191,037
John H. Dobkin 17,698,382 196,818
Class Two Directors
(term expires 2005)
William H. Foulk, Jr. 17,701,246 193,594
David Dievler 17,691,397 203,803
Class Three Director
(term expires 2006)
John D.Carifa 17,691,397 203,803
2. To elect Directors
for the Preferred
stockholders: Class One Directors
(term expires 2004)
Clifford L. Michel 6,932 40
Donald J. Robinson 6,932 40
John H. Dobkin 6,932 40
Class Two Directors
(term exires 2005)
Dr. James Hester 6,932 40
William H. Foulk, Jr. 6,932 40
David Dievler 6,932 40
Class Three Directors
(term expires 2006)
Ruth Block 6,932 40
John D.Carifa 6,932 40
--------------------------------------------------------------------------------
22 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
BOARD OF DIRECTORS
John D. Carifa, Chairman and President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
William H. Foulk, Jr.(1)
Dr. James M. Hester(1)
Clifford L. Michel(1)
Donald J. Robinson(1)
OFFICERS
Kathleen A. Corbet, Senior Vice President
Robert B. Davidson III, Senior Vice President
David M. Dowden, Vice President
Terrance T. Hults, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Thomas R. Manley, Controller
Custodian
State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
Independent Auditors
Ernst & Young LLP
5 Times Square
New York, NY 10036
Transfer Agent,Dividend Paying
Agent and Registrar
Equiserve Trust Company, N.A.
P.O. Box 43011
Providence, RI 02940-3011
(1) Member of the Audit Committee.
--------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 23
ALLIANCEBERNSTEIN FAMILY OF FUNDS
U.S. Growth Funds
Growth Fund
Health Care Fund
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Premier Growth Fund
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Disciplined Value Fund
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The Spain Fund
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AllianceBernstein also offers AllianceBernstein Exchange Reserves, which serves
as the money market fund exchange vehicle for the AllianceBernstein mutual
funds.
To obtain a prospectus for any AllianceBernstein fund, call your investment
professional, or call AllianceBernstein at (800) 227-4618 or visit our web site
at www.alliancebernstein.com.
--------------------------------------------------------------------------------
24 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
SUMMARY OF GENERAL
INFORMATION
Shareholder Information
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transaction Section of newspapers each day, under the
designation "ACMMSI." The Fund's NYSE trading symbol is "AFB". Weekly
comparative net asset value (NAV) and market price information about the Fund
is published each Monday in The Wall Street Journal, each Sunday in The New
York Times and each Saturday in Barron's and other newspapers in a table called
"Closed-End Bond Funds."
Dividend Reinvestment Plan
A Dividend Reinvestment Plan provides automatic reinvestment of dividends and
capital gains in additional Fund shares.
For questions concerning shareholder account information, or if you would like a
brochure describing the Dividend Reinvestment Plan, please call Equiserve Trust
Company at (800) 219-4218.
--------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 25
Alliance National Municipal Income Fund
1345 Avenue of the Americas
New York, NY 10105
[LOGO] ALLIANCEBERNSTEIN
Investment Research and Management
SM This service mark used under license from the
owner, Alliance Capital Management L.P.
NMISR0403
ITEM 2. CODE OF ETHICS.
Not applicable when filing a Semi-Annual report to shareholders.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable when filing a Semi-Annual report to shareholders.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable when filing a Semi-Annual report to shareholders.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable when filing a Semi-Annual report to shareholders.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable when filing a Semi-Annual report to shareholders.
ITEM 8. [RESERVED]
ITEM 9. 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 based on their evaluation of these controls and procedures as of a
date within 90 days of the filing date of this document.
(b) There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
Exhibit No. DESCRIPTION OF EXHIBIT
10 (b) (1) Certification of Principal Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
10 (b) (2) Certification of Principal Financial Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
10 (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): Alliance National Municipal Income Fund, Inc.
By: /s/John D. Carifa
---------------------------------
John D. Carifa
President
Date: June 30, 2003
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/John D. Carifa
---------------------------------
John D. Carifa
President
Date: June 30, 2003
By: /s/Mark D. Gersten
-------------------------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: June 30, 2003