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)
Mark R. Manley
Alliance Capital Management, L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: October 31, 2004
Date of reporting period: April 30, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
AllianceBernstein [LOGO](SM)
Investment Research and Management
Closed End
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Alliance National Municipal Income Fund
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Semi-Annual Report--April 30, 2004
Investment Products Offered
-------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
-------------------------
You may obtain a description of the Fund's proxy voting policies and
procedures, without charge, upon request by visiting Alliance Capital's web
site at www.alliancebernstein.com (click on Investors, then the "proxy voting
policies and procedures" link on the left side of the page), or by going to the
Securities and Exchange Commission's web site at www.sec.gov, or by calling
Alliance Capital at (800) 227-4618.
AllianceBernstein Investment Research and Management, Inc., is an affiliate of
Alliance Capital Management L.P., the manager of the funds, and is a member of
the NASD.
June 25, 2004
Semi-Annual Report
This report provides management's discussion of fund performance for Alliance
National Municipal Income Fund (the "Fund") for the semi-annual reporting
period ended April 30, 2004.
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. Under
normal conditions, the Fund will invest at least 80%, and normally
substantially all, of its assets in municipal securities paying interest that
is exempt from regular federal income tax. In addition, 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 (LB) Municipal Index, for the six- and 12-month periods
ended April 30, 2004. For comparison, returns for the Lipper General Municipal
Debt Funds (Leveraged) Average (the "Lipper Average") are also included. The
funds that comprise the Lipper Average have generally similar investment
objectives to the Fund, although some may have different investment policies
and sales and management fees.
INVESTMENT RESULTS*
Periods Ended April 30, 2004
---------------------------------
Returns
---------------------------------
6 Months 12 Months
-------------- --------------
Alliance National
Municipal Income Fund
(NAV) 3.02% 5.32%
------------------------------------------------------------
Lehman Brothers
Municipal Index 1.19% 2.68%
------------------------------------------------------------
Lipper General
Municipal Debt Funds
(Leveraged) Average 2.21% 4.97%
------------------------------------------------------------
The Fund's market price per share on April 30, 2004 was $13.34. For
additional Financial Highlights, please see pages 24-25.
* The Fund's investment results are for the periods shown and are based on the
net asset value (NAV) as of April 30, 2004. All fees and expenses related to
the operation of the Fund have been deducted. Performance assumes reinvestment
of distributions and does not account for taxes. Past performance is no
guarantee of future results.
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
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ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 1
a total return performance benchmark for the long-term, investment grade,
tax-exempt bond market. For the six- and 12-month periods ended April 30, 2004,
the Lipper General Municipal Debt Funds (Leveraged) Average consisted of 65 and
64 funds, respectively. These funds have generally similar investment
objectives to Alliance National Municipal Income Fund, although some may have
different investment policies and sales and management fees. An investor cannot
invest directly in an index or average, and their results are not indicative of
the performance for any specific investment, including Alliance National
Municipal Income Fund.
For the six-month period ended April 30, 2004, the municipal bond market posted
positive returns even though long municipal rates rose by 0.13%. During this
period, the Fund outperformed its benchmark, the LB Municipal Index. The Fund's
stronger relative performance was largely the result of certain holdings being
advance refunded as well as security selection in the insured and tobacco
settlement sectors. In addition, the Fund's leveraged structure benefited its
performance, primarily because of historically low borrowing costs. During the
six-month reporting period, the Fund also outperformed its peer group, as
represented by the Lipper Average.
Market Review and Investment Strategy
From October 31, 2003 to April 30, 2004, long-term municipal bond yields
increased by approximately 13 basis points. Over that time period, the long
municipal bond market slightly underperformed the taxable bond market on a
pre-tax basis, but outperformed on an after-tax basis. For example, the LB
Municipal Index gained 1.19% during the six-month period ended April 30, 2004
while the LB U.S. Aggregate Index, representing taxable bonds, generated a
pre-tax return of 1.25% over the same period. The Treasury bond component of
the aggregate index posted a lower pre-tax return of 0.75%. As of April 30,
2004, 30-year municipal bonds were yielding approximately 95% of comparable
maturity Treasury bonds.
Continued weak economic conditions, as well as minimal concern for inflation,
contributed to declining municipal bond yields through early March 2004. As
signs of economic recovery emerged in the latter part of March and into early
April, municipal bond yields started to rise in concert with taxable yields. In
anticipation of a more imminent reaction by the U.S. Federal Reserve to the
stronger economic indicators, the market began to push shorter maturity bond
yields higher at a faster pace than longer maturity bonds. As a result, the
difference between 30-year and five-year short-term municipal bond yields
declined by 0.43%. The yield curve, a plot of bond yields sorted by ascending
maturity, normally slopes upward for longer maturity bonds. When the difference
in yield between short- and long-term bonds declines, the change in the shape
of the curve is referred to as a "flattening." When the curve flattens, the
cost, as measured by the decline in yield, of reducing interest rate
sensitivity by moving from longer maturity bonds to shorter maturity bonds,
declines.
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2 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
The prolonged low rate environment has resulted in an increased demand for
lower-rated bonds that carry higher yields. As demand for those higher yielding
bonds increased, the incremental difference in yield compared to better quality
bonds declined. As a result, higher yielding bonds, in general, generated
strong relative performance over the period.
Given their lower credit profiles, the health care and industrial development
sectors led the market in performance over the past six months. Two of the
weakest performing sectors, pre-refunded bonds and housing bonds, were high
credit quality sectors. Pre-refunded bonds typically have very short effective
maturities so rising short-term rates hurt the performance of those securities.
Continued concerns regarding increased refinancing activity limited price
improvement in municipal housing bonds. Municipal housing bonds are secured by
homeowners' mortgages. As homeowners prepay their mortgages, municipal housing
bonds are redeemed at par (100% of face value). Typically, lower yields cause
bond prices to increase, but if the market anticipates that a bond may be
redeemed in the near term, it is unlikely to value the bonds at a price much
above par.
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ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 3
PORTFOLIO OF INVESTMENTS
April 30, 2004 (unaudited)
Standard Principal
& Poor's Amount
Ratings (000) Value
-------------------------------------------------------------------------------
MUNICIPAL BONDS-160.9%
Long-Term Municipal Bonds-159.3%
Alabama-9.0%
Huntsville Hlth Care Auth
(Huntsville Hosp Sys) Ser 02B
5.75%, 6/01/32(a) A2 $ 8,000 $ 8,267,920
Jefferson Cnty Swr Rev
FGIC Ser 99A
5.375%, 2/01/36 AAA 12,405 13,816,193
Marshall Cnty Hlth Care Auth
(Marshall Cnty Med Ctr) Ser 02A
5.75%, 1/01/32 A- 2,500 2,523,525
Marshall Cnty Hlth Care Auth
(Marshall Cnty Med Ctr) Ser 02D
5.75%, 1/01/32 A- 3,000 3,030,270
------------
27,637,908
------------
Alaska-0.8%
Alaska Intl Arpt Rev
MBIA Ser 03B
5.00%, 10/01/26 AAA 1,000 995,950
Alaska Mun Bd Bk Auth
MBIA Ser 04G
5.00%, 2/15/24 AAA 1,345 1,352,129
------------
2,348,079
------------
Arkansas-2.3%
Arkansas Dev Fin Auth SFMR
(Mtg Rev) GNMA Ser 02A
5.30%, 7/01/34 AAA 6,985 7,037,387
------------
California-9.1%
California GO
Ser 02
5.25%, 4/01/30 BBB 1,000 984,640
Ser 03
5.00%, 2/01/32 BBB 3,250 3,077,295
5.25%, 2/01/24 BBB 2,500 2,499,800
Ser 04
5.00%, 2/01/33 BBB 3,200 3,027,328
5.25%, 4/01/29 2,000 1,971,200
Coachella Valley Uni Sch Dist
MBIA Ser 03
5.00%, 9/01/31 AAA 1,000 991,100
Hartnell Comm College
MBIA Ser 03A
5.00%, 8/01/27 AAA 1,155 1,157,449
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4 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
Standard Principal
& Poor's Amount
Ratings (000) Value
-------------------------------------------------------------------------------
Los Angeles Cmnty Redev Agy
Ser 04L
5.00%, 3/01/18 BBB- $ 1,715 $ 1,673,102
Los Angeles Regl Arpts
(Laxfuel Corp) AMBAC Ser 01AMT
5.50%, 1/01/32 AAA 9,500 9,575,905
San Rafael Elem Sch Dist
FSA Ser 03A
5.00%, 8/01/28 AAA 2,820 2,808,015
------------
27,765,834
------------
Colorado-2.4%
Avon Hsg Auth MFHR
(Buffalo Ridge II Proj) GNMA
Ser 02A AMT
5.70%, 10/20/43 AAA 4,950 5,063,108
Denver City & Cnty MFHR
(Clyburn Stapleton Proj) GNMA
Ser 02 AMT
5.50%, 12/20/43(a) Aaa 2,155 2,168,878
------------
7,231,986
------------
Connecticut-0.3%
Mohegan Tribe Indians Gaming Auth
Ser 03
5.125%, 1/01/23 BBB- 1,000 966,710
------------
District of Columbia-1.6%
District of Columbia
Tobacco Settlement Bonds Ser 01
6.75%, 5/15/40 BBB 1,500 1,377,810
District of Columbia Special Tax Rev
(Gallery Place Proj) Ser 02
5.40%, 7/01/31 AAA 3,500 3,604,405
------------
4,982,215
------------
Florida-27.2%
Beacon Tradeport Cmnty Dev Dist
Ser 02B
7.25%, 5/01/33 NR 7,350 7,651,718
Brevard Cnty HFA SFMR
(Mtg Rev) GNMA Ser 02C AMT
5.40%, 3/01/33(a) Aaa 2,250 2,255,535
Collier Cnty CFD
(Fiddler's Creek) Ser 02A
6.875%, 5/01/33 NR 10,015 10,412,495
Collier Cnty CFD
(Fiddler's Creek) Ser 02B
6.625%, 5/01/33 NR 5,270 5,389,787
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ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 5
Standard Principal
& Poor's Amount
Ratings (000) Value
-------------------------------------------------------------------------------
Dade Cnty Arpt Rev
(Miami Int'l Arpt) FGIC Ser 02 AMT
5.375%, 10/01/32 AAA $ 6,040 $ 6,143,828
Florida Educ & Athletic Fac
(FSU Finl Assist) AMBAC Ser 02
5.00%, 10/01/31 AAA 5,000 5,020,200
Florida Hsg Fin Corp MFHR
(Westminster Apts) FSA
Ser 02E-1 AMT
5.40%, 4/01/42 AAA 3,000 3,027,120
Hamal Cmnty Dev Dist
(Hamal) Ser 01
6.75%, 5/01/31 NR 2,460 2,531,734
Jacksonville Wtr & Swr Sys Rev
(Jacksonville Elec) MBIA Ser 02A
5.50%, 10/01/41 AAA 20,000 20,713,600
Lee Cnty Arpt Rev
(Southwest FL Intl) FSA
Ser 00A AMT
5.75%, 10/01/22 AAA 5,000 5,378,950
5.75%, 10/01/25 4,500 4,843,665
Lee Cnty Cmnty Dev Dist
(Miromar Lakes) Ser 00A
7.25%, 5/01/12 NR 1,770 1,849,455
Lee Cnty IDA Hlth Fac
(Shell Point Village) Ser 99A
5.50%, 11/15/29 BBB- 2,500 2,350,075
Miami Beach Hlth Facs Hosp Rev
(Mount Sinai Med Ctr) Ser 04
6.75%, 11/15/24 BB 2,000 1,963,040
Orange Cnty Hlth Facs Hosp Rev
(Orlando Regional) Ser 02
5.75%, 12/01/32 A- 1,400 1,431,276
Pinellas Cnty HFA SFMR
(Mtg Rev) GNMA/FNMA
Ser 02A AMT
5.40%, 3/01/32(a) Aaa 1,240 1,243,819
Village Cmnty Dev Dist
Ser 03A
6.00%, 5/01/22 NR 1,000 1,012,730
------------
83,219,027
------------
Georgia-2.5%
Cartersville Dev Auth
(Anheuser Busch Proj) Ser 02 AMT
5.95%, 2/01/32 A+ 2,510 2,621,946
Georgia HFA SFMR
(Mtg Rev) Ser 02A-2 AMT
5.60%, 12/01/32 AAA 4,975 5,011,367
------------
7,633,313
------------
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6 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
Standard Principal
& Poor's Amount
Ratings (000) Value
-------------------------------------------------------------------------------
Hawaii-0.8%
Hawaii St Elec Rev
XLCA Ser 03B AMT
5.00%, 12/01/22 AAA $ 2,500 $ 2,490,925
------------
Illinois-18.4%
Bolingbrook GO
FGIC Ser 02A
5.375%, 1/01/38 AAA 5,000 5,152,950
Chicago Arpt Rev
(O'Hare Int'l Arpt) MBIA
Ser 02A AMT
5.375%, 1/01/32 AAA 15,000 15,144,150
Chicago Arpt Rev
(O'Hare Int'l Arpt) XLCA Ser 03B-1
5.25%, 1/01/34 AAA 1,760 1,785,168
Chicago GO
FGIC Ser 00
5.50%, 1/01/40 AAA 14,585 14,982,879
Chicago Parking Rev
(Lakefront Millennium) MBIA Ser 98
5.125%, 1/01/28 AAA 9,000 8,968,770
Chicago Sales Tax Rev
FGIC Ser 98
5.25%, 1/01/28 AAA 5,710 5,784,458
Cook Cnty Sch Dist
FSA Ser 04
zero coupon, 12/01/20(b) AAA 1,000 837,180
Met Pier & Expo Auth
(McCormick Place) MBIA Ser 02A
5.25%, 6/15/42 AAA 3,750 3,793,088
------------
56,448,643
------------
Indiana-4.6%
Indiana HFA SFMR
(Mtg Rev) GNMA/FNMA
Ser 02 AMT
5.55%, 7/01/32(a) Aaa 3,820 3,864,770
Indianapolis Pub Improv Bond
MBIA Ser 02A
5.25%, 7/01/33 AAA 10,000 10,158,400
------------
14,023,170
------------
Iowa-1.9%
Iowa
Tobacco Settlement Bonds Ser 01B
5.30%, 6/01/25 BBB 5,400 4,447,332
Iowa Fin Auth SFMR
(Mtg Rev) GNMA/FNMA
Ser 02A AMT
5.40%, 7/01/32 AAA 1,440 1,443,269
------------
5,890,601
------------
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ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 7
Standard Principal
& Poor's Amount
Ratings (000) Value
-------------------------------------------------------------------------------
Louisiana-1.1%
Calcasieu Parish SFMR
(Mtg Rev) GNMA/FNMA Ser 02A
6.05%, 4/01/33(a) Aaa $ 410 $ 422,201
Louisiana HFA SFMR
(Mtg Rev) GNMA Ser 02C AMT
5.60%, 6/01/33(a) Aaa 2,965 2,989,758
------------
3,411,959
------------
Massachusetts-3.2%
Massachusetts GO
Ser 02C
5.25%, 11/01/30 AA- 1,780 1,946,857
Massachusetts GO
Ser 02C Prerefunded
5.25%, 11/01/30 AA- 3,220 3,558,519
Massachusetts Hlth & Ed Fac Hosp Rev
(Berkshire Hlth Sys) Asset Gty
Ser 01E
5.70%, 10/01/25 AA 2,000 2,103,340
Massachusetts Hlth & Ed Fac Hosp Rev
(Cape Cod Healthcare) Asset Gty
Ser 01C
5.25%, 11/15/31 AA 2,100 2,093,889
------------
9,702,605
------------
Michigan-3.7%
Detroit Dev Fin Auth
(Daimler/Chrysler Plant) Ser 98A
5.50%, 5/01/21 BB- 1,665 1,338,543
Michigan Strategic
(Detroit Edison Co Proj) XLCA
Ser 02 AMT
5.45%, 12/15/32 AAA 5,000 5,116,950
Saginaw Hosp Fin Auth Hosp Rev
(Covenant Med Ctr) Ser 00F
6.50%, 7/01/30 A 4,410 4,730,828
------------
11,186,321
------------
Missouri-0.9%
Missouri SFMR
(Mtg Rev) GNMA/FNMA
Ser 02A-1 AMT
5.58%, 9/01/32 AAA 2,870 2,907,855
------------
Nevada-15.8%
Carson City Hosp Rev
(Carson-Tahoe Hosp Proj) Radian
Ser 03A
5.00%, 9/01/23 AA 2,600 2,539,992
Clark Cnty Arpt Rev
FGIC Ser 01B
5.25%, 7/01/34 AAA 11,920 12,089,383
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8 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
Standard Principal
& Poor's Amount
Ratings (000) Value
-------------------------------------------------------------------------------
Nevada Dept Bus & Ind
(Las Vegas Monorail Proj) AMBAC
Ser 00
5.625%, 1/01/32 AAA $11,720 $ 12,547,315
Reno Special Tax
(Retrac Transp Proj) AMBAC Ser 02
5.25%, 6/01/41 AAA 1,000 1,012,420
Reno Special Tax
FGIC Ser 02
5.375%, 6/01/32 AAA 7,500 7,729,800
Truckee Meadows Wtr Auth
FSA Ser 01A
5.25%, 7/01/34 AAA 12,000 12,315,720
------------
48,234,630
------------
New Hampshire-1.4%
New Hampshire Hlth & Ed Fac Hosp Rev
(Covenant Med Ctr) Ser 02
6.125%, 7/01/31 A- 4,200 4,311,930
------------
New York-2.9%
New York City GO
Ser 04I
5.00%, 8/01/21 A 8,850 8,884,515
------------
North Dakota-0.9%
North Dakota HFA SFMR
(Mtg Rev) Ser 02A AMT
5.65%, 1/01/34(a) Aa2 2,795 2,829,379
------------
Ohio-3.8%
Cleveland-Cuyahoga Cnty
Port Auth Rev Ser 01
7.35%, 12/01/31 NR 5,000 5,162,400
Fairfield Cnty Hosp Rev
(Fairfield Med Ctr Proj) Radian Ser 03
5.00%, 6/15/22 AA 1,585 1,588,059
5.00%, 6/15/23 1,000 995,080
5.00%, 6/15/24 1,370 1,351,121
Ohio HFA SFMR
(Mtg Rev) GNMA Ser 00D AMT
6.05%, 3/01/31(a) Aaa 2,535 2,623,624
------------
11,720,284
------------
Pennsylvania-3.2%
Pennsylvania Parking Fac
(30th St Station Garage Proj) ACA
Ser 02A AMT
5.875%, 6/01/33 A 2,050 2,107,154
Pennsylvania Trpk Transp Rev
AMBAC Ser 01
5.00%, 7/15/41 AAA 2,000 1,969,940
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ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 9
Standard Principal
& Poor's Amount
Ratings (000) Value
-------------------------------------------------------------------------------
Philadelphia Hosp Rev
(Temple Univ Hosp) Ser 93A
6.625%, 11/15/23 BBB $ 3,000 $ 3,053,310
Washington Cnty
AMBAC Ser 99
6.15%, 12/01/29 AAA 2,300 2,631,982
------------
9,762,386
------------
South Carolina-0.5%
Richland Lexington Arpt Rev
(Columbia Met Arpt) FSA Ser04 AMT
5.125%, 1/01/25 AAA 500 484,950
South Carolina
Tobacco Settlement Bonds Ser 01B
6.375%, 5/15/30 BBB 1,000 901,410
------------
1,386,360
------------
Texas-20.7%
Bexar Cnty Hsg Fin Corp MFHR
(Doral Club & Sutton House Apts)
MBIA Ser 01A
5.55%, 10/01/36(a) Aaa 15,000 14,420,100
Dallas-Fort Worth Arpt Rev
(Int'l Arpt) FGIC Ser 01 AMT
5.50%, 11/01/35 AAA 10,000 10,171,700
Gulf Coast Waste Disp Auth
(Anheuser-Busch Proj) Ser 02 AMT
5.90%, 4/01/36 A+ 9,000 9,379,980
Harris Cnty
(Flood Ctl) Ser 03B
5.00%, 10/01/23 AA+ 2,600 2,662,608
Harris Cnty Toll Road Rev
FSA Ser 02
5.125%, 8/15/32 AAA 2,500 2,510,675
Houston
(Northeast Wtr Purification Proj)
FGIC Ser 02
5.125%, 3/01/32 AAA 7,000 7,028,560
Matagorda Cnty Util Rev
(Centerpoint Energy Proj) Ser 04
5.60%, 3/01/27 BBB 1,000 999,910
San Antonio Arpt Rev
FGIC Ser 02A AMT
5.25%, 7/01/27 AAA 5,250 5,287,695
Seguin High Ed Fac Rev
(Texas Lutheran University Proj)
Ser 04
5.25%, 9/01/33 BBB- 1,250 1,153,525
Texas GO
Ser 02A AMT
5.50%, 8/01/41 AA 9,470 9,687,526
------------
63,302,279
------------
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10 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
Standard Principal
& Poor's Amount
Ratings (000) Value
-------------------------------------------------------------------------------
Utah-0.8%
Davis Cnty Sales Tax Rev
AMBAC Ser 03B
5.25%, 10/01/23 AAA $ 1,000 $ 1,031,910
Utah Hsg Corp MFHR
(Bluffs Apts Proj) GNMA
Ser 02A AMT
5.60%, 7/20/30(a) Aaa 1,480 1,525,125
------------
2,557,035
------------
Virginia-2.8%
Fauquier Cnty IDA Hosp Rev
(Fauquier Hospital) Asset Gty Ser 02
5.25%, 10/01/31 AA 8,500 8,547,005
------------
Washington-8.8%
King Cnty Swr Rev
FSA Ser 02A
5.25%, 1/01/32 AAA 3,000 3,045,120
Twenty-Fifth Ave Pptys
(University of WA) MBIA Ser 02
5.25%, 6/01/33 AAA 9,750 9,903,367
Washington
Tobacco Settlement Bonds Ser 02
6.625%, 6/01/32 BBB 5,000 4,615,800
Washington HFA SFMR
(Mtg Rev) GNMA/FNMA
Ser 02A AMT
5.83%, 6/01/29(a) Aaa 9,090 9,259,256
------------
26,823,543
------------
Wisconsin-7.9%
Wisconsin Hlth & Ed Fac Hosp Rev
(Ministry Hlth Care) MBIA Ser 02A
5.25%, 2/15/32 AAA 13,615 13,747,338
Wisconsin Hsg Auth SFMR
(Mtg Rev) MBIA Ser 02A AMT
5.60%, 5/01/33 AAA 5,000 5,159,000
Wisconsin Hsg Auth SFMR
(Mtg Rev) Ser 02A AMT
5.50%, 9/01/32 AA 5,125 5,142,937
------------
24,049,275
------------
Total Long-Term Municipal Bonds
(cost $473,946,284) 487,293,159
------------
Short Term Municipal Notes(c)-1.6%
Alaska-0.6%
Valdez Marine Term Rev
(Exxon Pipeline Co Proj) Ser 93B
1.02%, 12/01/33 A-1+ 1,800 1,800,000
------------
-------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 11
Standard Principal
& Poor's Amount
Ratings (000) Value
-------------------------------------------------------------------------------
Arizona-0.1%
Coconino Cnty PCR
(Ariz Pub Svc Co Proj) Ser 98
1.12%, 11/01/33 A-1 $ 500 $ 500,000
------------
California-0.3%
Irvine Ranch Wtr Dist
Ser 85B
1.10%, 10/01/04 A-1+ 1,000 1,000,000
------------
Illinois-0.1%
Illinois Hlth Facs Rev
(Resurrection Hlth Proj) Ser 99A
1.04%, 5/15/29 A-1 200 200,000
------------
Michigan-0.1%
Michigan Strategic Fund
(Henry Ford Museum Proj) Ser 02
1.10%, 12/01/33(a) VMIG-1 500 500,000
------------
Minnesota-0.2%
St Paul Port Auth Dist
Cooling Rev Ser 02R
1.20%, 3/01/22 A-1+ 500 500,000
------------
Wyoming-0.2%
Lincoln Cnty PCR
(Exxon Proj) Ser 87B AMT
1.08%, 7/01/17 A-1+ 500 500,000
------------
Total Short Term Municipal Notes
(cost $5,000,000) 5,000,000
------------
Total Investments-160.9%
(cost $478,946,284) 492,293,159
Other assets less liabilities-2.8% 8,667,402
Preferred stock, at redemption
value-(63.7%) (195,000,000)
------------
Net Assets Applicable to Common
Shareholders-100%(d) $305,960,561
============
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12 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
INTEREST RATE SWAP (see Note C)
Rate Type
------------------------
Payments
made by Payments
Swap Notional Termination the received by Unrealized
Counterparty Amount Date Portfolio the Portfolio Appreciation
-------------------------------------------------------------------------------
Merrill Lynch $26,700,000 02/03/06 BMA* 85.10% of $12,017
1 Month LIBOR1+
* BMA (Bond Market Association)
+ LIBOR (London Interbank Offered Rate)
(a) Moody's or Fitch Rating.
(b) Indicates a security that has a zero coupon that remains in effect until a
predetermined date at which time the stated coupon rate becomes effective until
final maturity.
(c) 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.
(d) Portfolio percentages are calculated based on net assets applicable to
common shareholders.
Glossary of Terms:
ACA - American Capital Access Financial Guaranty Corporation
AMBAC - American Municipal Bond Assurance Corporation
AMT - Alternative Minimum Tax- (subject to)
CFD - Communities Facilities District
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
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
XLCA - XL Capital Assurance
See notes to financial statements.
-------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 13
STATEMENT OF ASSETS & LIABILITIES
April 30, 2004 (unaudited)
Assets
Investments in securities, at value (cost $478,946,284) $492,293,159
Unrealized appreciation of swap agreements 12,017
Interest receivable 8,079,462
Receivable for investment securities sold 4,940,211
Prepaid expenses 260,016
------------
Total assets 505,584,865
------------
Liabilities
Due to custodian 12,198
Payable for investment securities purchased 4,194,245
Advisory fee payable 176,840
Dividends payable-preferred shares 94,929
Accrued expenses and other liabilities 146,092
------------
Total liabilities 4,624,304
------------
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 $305,960,561
============
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 290,278,214
Undistributed net investment income 4,633,333
Accumulated net realized loss on investment transactions (2,330,350)
Net unrealized appreciation of investments 13,358,892
------------
Net Assets Applicable to Common Shareholders $305,960,561
============
Net Asset Value Applicable to Common Shareholders
(based on 20,471,667 common shares outstanding) $14.95
======
See notes to financial statements.
-------------------------------------------------------------------------------
14 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
STATEMENT OF OPERATIONS
Six Months Ended April 30, 2004 (unaudited)
Investment Income
Interest $13,535,092
Expenses
Advisory fee $1,672,629
Auction Preferred Stock--auction
agent's fees 248,709
Custodian 79,903
Audit and legal 69,218
Printing 32,986
Registration fees 22,648
Directors' fees and expenses 17,500
Transfer agency 12,340
Miscellaneous 34,608
------------
Total expenses 2,190,541
Less: expenses waived by the Adviser
(see Note B) (643,319)
------------
Net expenses 1,547,222
------------
Net investment income 11,987,870
------------
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized gain on:
Investment transactions 1,498,739
Swaps 354
Net change in unrealized
appreciation/depreciation of:
Investments (3,838,723)
Swaps 12,017
------------
Net loss on investment transactions (2,327,613)
------------
Dividends to Auction Preferred
Shareholders from
Net investment income (1,136,715)
------------
Net Increase in Net Assets Applicable
to Common Shareholders Resulting
from Operations $ 8,523,542
============
See notes to financial statements.
-------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 15
STATEMENT OF CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS
Six Months
Ended Year Ended
April 30, 2004 October 31,
(unaudited) 2003
--------------- ---------------
Increase (Decrease) in Net Assets
Applicable to Common Shareholders
Resulting from Operations
Net investment income $ 11,987,870 $ 24,270,547
Net realized gain (loss) on investment
transactions 1,499,093 (2,630,045)
Net change in unrealized
appreciation/depreciation
of investments (3,826,706) 3,420,258
Dividends to Auction Preferred
Shareholders from
Net investment income (1,136,715) (2,745,557)
------------ ------------
Net increase in net assets applicable
to Common Shareholders resulting
from operations 8,523,542 22,315,203
Dividends to Common
Shareholders from
Net investment income (10,123,397) (17,902,449)
Preferred offering costs and sales load -0- (110,084)
------------ ------------
Total increase (decrease) (1,599,855) 4,302,670
Net Assets Applicable to
Common Shareholders
Beginning of period 307,560,416 303,257,746
------------ ------------
End of period (including undistributed
net investment income of $4,633,333
and $3,905,575, respectively) $305,960,561 $307,560,416
============ ============
See notes to financial statements.
-------------------------------------------------------------------------------
16 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 2004 (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. The preparation of financial statements in accordance with
accounting principles generally accepted in the Untied States requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. 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 Alliance Capital Management, L.P. (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
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
-------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 17
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. The Fund fair values a
security that it holds when a significant event (e.g., an earthquake or a major
terrorist attack) occurs after the time that the latest market quotation was
established, and, as a result, such market quotation cannot be said to
represent the current market value of the security as of the time the Fund
prices its shares. Fair valuing securities is imprecise, and there is no
assurance that the Fund could dispose of the security at the price used for
determining the Fund's net asset value.
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 trade 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, if any, are recorded on the
ex-dividend date. Income dividends and capital gains distributions are
determined in accordance with federal tax regulations and may differ from those
determined in accordance with 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 applicable to common and preferred shareholders. Such fee is accrued
daily and paid monthly. The Adviser has voluntarily agreed to waive a portion
of its
-------------------------------------------------------------------------------
18 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
fees or reimburse the Fund for expenses in the amount of 0.25% of the Fund's
average daily net assets applicable to common and preferred shareholders for
the first 5 full years of the Fund's operations, 0.20% of the Fund's average
daily net assets applicable to common and preferred shareholders in year 6,
0.15% in year 7, 0.10% in year 8, and 0.05% in year 9. For the six months ended
April 30, 2004, the amount of such fees waived was $643,319.
Under the terms 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 six months ended April 30, 2004, 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, 2004, were as follows:
Purchases Sales
--------------- ---------------
Investment securities (excluding
U.S. government securities) $ 69,574,467 $ 68,537,101
U.S. government securities -0- -0-
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 (excluding swap
transactions) are as follows:
Gross unrealized appreciation $ 15,541,678
Gross unrealized depreciation (2,194,803)
---------------
Net unrealized appreciation $ 13,346,875
===============
1. Swap Agreements
The Fund may enter into swaps to protect itself from interest rate fluctuations
on the underlying debt instruments and for investment purposes. A swap is an
agreement that obligates two parties to exchange a series of cash flows at
specified intervals based upon or calculated by reference to changes in
specified prices or rates for a specified amount of an underlying asset. The
payment flows are usually netted against each other, with the difference being
paid by one party to the other.
Risks may arise as a result of the failure of the counterparty to the swap
contract to comply with the terms of the swap contract. The loss incurred by
the failure of a counterparty is generally limited to the net interim payment
to be received by the Fund, and/or the termination value at the end of the
contract. Therefore, the Fund considers the creditworthiness of each
counterparty to a swap contract in evaluating potential credit risk.
Additionally, risks may arise from unanticipated movements in interest rates or
in the value of the underlying securities.
-------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 19
The Fund accrues for the interim payments on swap contracts on a daily basis,
with the net amount recorded within unrealized appreciation/depreciation of
swap contracts on the statement of assets and liabilities. Once the interim
payments are settled in cash, the net amount is recorded as realized gain/loss
on swaps, in addition to realized gain/loss recorded upon the termination of
swaps contracts on the statement of operations. Fluctuations in the value of
swap contracts are recorded as a component of net change in unrealized
appreciation/depreciation of investments.
NOTE D
Common Stock
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, 2004.
NOTE E
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 T and W. The dividend rate on the Series M is 1.06% effective
through May 3, 2004. The dividend rate on the Series T is 1.45% effective
through March 8, 2004. The dividend rate on the Series W is 1.079% effective
through May 5, 2004. The dividend rate on the Series TH is 1.70% effective
through August 4, 2005.
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.
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.
-------------------------------------------------------------------------------
20 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
NOTE F
Distributions To Common Shareholders
The tax character of distributions to be paid to common shareholders for the
year ending October 31, 2004 will be determined at the end of the current
fiscal year. The tax character of distributions paid to common shareholders
during the fiscal periods ended October 31, 2003 and October 31, 2002 were as
follows:
2003 2002
--------------- ---------------
Distributions paid from:
Ordinary income $ 56,946 $ 26,652
Tax exempt income 17,845,503 11,365,824
--------------- ---------------
Total distributions paid $ 17,902,449 $ 11,392,476(a)
=============== ===============
As of October 31, 2003, the components of accumulated earnings/(deficit)
applicable to common shareholders on a tax basis were as follows:
Undistributed tax exempt income $ 4,039,444
Accumulated capital and other losses (3,829,443)(b)
Unrealized appreciation/(depreciation) 17,185,598
---------------
Total accumulated earnings/(deficit) $ 17,395,599
---------------
(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, 2003, the Fund had a net capital loss carryforward of $
3,829,443, of which $1,199,398 expires in the year 2010 and $2,630,045 expires
in the year 2011. To the extent future capital gains are offset by capital loss
carryforward, such gains will not be distributed.
NOTE G
Risks Involved in Investing in the Fund
Interest Rate Risk and Credit Risk--Interest rate risk is the risk that changes
in interest rates will affect the value of the Fund's investments in
fixed-income debt securities such as bonds or notes. Increases in interest
rates may cause the value of the Fund's investments to decline. Credit risk is
the risk that the issuer or guarantor of a debt security, or the counterparty
to a derivative contract, will be unable or unwilling to make timely principal
and/or interest payments, or to otherwise honor its obligations. The degree of
risk for a particular security may be reflected in its credit risk rating.
Credit risk is greater for medium quality and lower-rated securities.
Lower-rated debt securities and similar unrated securities (commonly known as
"junk bonds") have speculative elements or are predominantly speculative risks.
In the ordinary course of business, the Fund enters into contracts that contain
a variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown. However, the Fund has not had prior claims or losses
pursuant to these contracts and expects the risk of loss thereunder to be
remote.
-------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 21
NOTE H
Legal Proceedings
As has been previously reported in the press, the Staff of the U.S. Securities
and Exchange Commission ("SEC") and the Office of the 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 Alliance Capital
Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information
to them. Alliance Capital has been cooperating and will continue to cooperate
with all of these authorities. The shares of the Fund are not redeemable by the
Fund, but are traded on an exchange at prices established by the market.
Accordingly, the Fund and its shareholders are not subject to the market timing
and late trading practices that are the subject of the investigations mentioned
above or the lawsuits described below. Please see below for a description of
the agreements reached by Alliance Capital and the SEC and NYAG in connection
with the investigations mentioned above.
In addition, numerous lawsuits have been filed against Alliance Capital and
certain other defendants in which plaintiffs make claims purportedly based on
or related to the same practices that are the subject of the SEC and NYAG
investigations referred to above. Some of these lawsuits name the Fund as a
party. Management of the Fund's Adviser believes that these private lawsuits
are not likely to have a material adverse effect on the results of operations
or financial condition of the Fund.
On December 18, 2003, Alliance Capital 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 subject to final,
definitive documentation. Among the key provisions of these agreements are the
following:
(i) Alliance Capital 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;
-------------------------------------------------------------------------------
22 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
(ii) Alliance Capital agreed to reduce the advisory fees it receives from some
of the AllianceBernstein long-term, open-end retail funds, commencing January
1, 2004, for a period of at least five years; and
(iii) Alliance Capital agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order contemplates that Alliance
Capital's registered investment company clients, including the Fund, will
introduce governance and compliance changes.
The shares of the Fund are not redeemable by the Fund, but are traded on an
exchange at prices established by the market. Accordingly, the Fund and its
shareholders are not subject to the market timing practices described in the
SEC Order and are not expected to participate in the Reimbursement Fund. Since
the Fund is a closed-end fund, it will not have its advisory fee reduced
pursuant to the terms of the agreements mentioned above.
-------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 23
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
Six Months January 28,
Ended Year Ended 2002(a) to
April 30, 2004 October 31, October 31,
(unaudited) 2003 2002
--------------------------------------------------------
Net asset value, beginning of period $15.02 $14.81 $14.33
--------------------------------------------------------
Income from Investment Operations
Net investment income(b)(c) .59 1.19 .74
Net realized and unrealized (loss) on
investment transactions (.10) .03 .60
Dividends to preferred shareholders from
Net investment income (common stock
equivalent basis) (.06) (.13) (.08)
--------------------------------------------------------
Net increase in net asset value from operations .43 1.09 1.26
--------------------------------------------------------
Less: Dividends to common
shareholders from
Net investment income (.50) (.87) (.64)
Common stock offering costs -0- -0- (.03)
Preferred stock offering costs and sales load -0- (.01) (.11)
--------------------------------------------------------
Net asset value, end of period $14.95 $15.02 $14.81
========================================================
Market value, end of period $13.34 $13.71 $13.48
========================================================
Discount (10.77)% (8.72)% (8.98)%
Total Return
Total investment return based on:(d)
Market value 0.71% 8.36% (5.92)%
Net asset value 3.02% 8.05% 8.14%
Ratios/Supplemental Data:
Net assets applicable to common shareholders,
end of period (000's omitted) $305,961 $307,560 $303,258
Preferred Stock, at redemption value
($25,000 per share liquidation preference)
(000's omitted) $195,000 $195,000 $195,000
Ratios to average net assets applicable
to common shareholders of:
Expenses, net of fee waivers(e) .97%(f) .95% .95%(f)
Expenses, before fee waivers(e) 1.37%(f) 1.36% 1.33%(f)
Net investment income, before preferred
stock dividends(c)(e) 7.53%(f) 7.88% 6.73%(f)
Preferred stock dividends .71%(f) .89% .76%(f)
Net investment income, net of preferred
stock dividends(c) 6.82%(f) 6.99% 5.97%(f)
Portfolio turnover rate 14% 11% 13%
Asset coverage ratio 257% 258% 255%
See footnote summary on page 25.
-------------------------------------------------------------------------------
24 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) These expense and net investment income ratios do not reflect the effect of
dividend payments to preferred shareholders.
(f) Annualized.
-------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 25
SUPPLEMENTAL PROXY INFORMATION
(unaudited)
A Special Meeting of Shareholders of Alliance National Municipal Income Fund
was held on March 25, 2004. 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 Nominees
(terms expire in 2007)
John H. Dobkin 17,347,324 282,772
Clifford L. Michel 17,348,281 281,815
Donald J. Robinson 17,340,087 290,009
-------------------------------------------------------------------------------
26 o ALLIANCE NATIONAL MUNICIPAL INCOME FUND
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Marc O. Mayer, President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
Dr. James M. Hester(1)
Clifford L. Michel(1)
Donald J. Robinson(1)
OFFICERS
Robert B. Davidson, III, Senior Vice President
David M. Dowden(2), Vice President
Terrance T. Hults(2), Vice President
Mark R. Manley, 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
Preferred Stock:
Dividend Paying Agent, Transfer
Agent and Registrar
The Bank of New York
100 Church Street
New York, NY 10286
Independent Auditors
Ernst & Young LLP
5 Times Square
New York, NY 10036
Common Stock:
Dividend Paying Agent,
Transfer Agent and Registrar
Equiserve Trust Company, N.A.
P.O. Box 43011
Providence, RI 02940-3011
Notice is hereby given in accordance with Section 23(c) of the Investment
CompanyAct of 1940 that the Fund may purchase at market prices from time to
time shares of its Common Stock in the open market.
This report, including the financial statements therein, is transmitted to the
shareholders of Alliance National Municipal Income Fund for their
information.This is not a prospectus, circular or representation intended for
use in the purchase of shares of the Fund or any securities mentioned in the
report.
(1) Member of the Audit Committee.
(2) Messrs. Dowden and Hults are the persons primarily responsible for the
day-to-day management of the Fund's investment portfolio.
-------------------------------------------------------------------------------
ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 27
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
Health Care Fund
Mid-Cap Growth Fund
Premier Growth Fund
Small Cap Growth Fund
Technology Fund
Global & International
All-Asia Investment Fund
Global Research Growth Fund
Global Small Cap Fund
Greater China '97 Fund
International Premier Growth Fund
New Europe Fund
Worldwide Privatization Fund
Select Investor Series
Biotechnology Portfolio
Premier Portfolio
Technology Portfolio
Value Funds
----------------------------------
Domestic
Balanced Shares
Disciplined Value Fund
Growth & Income Fund
Real Estate Investment Fund
Small CapValue Fund
Utility Income Fund
Value Fund
Global & International
Global Value Fund
International Value Fund
Taxable Bond Funds
----------------------------------
Americas Government Income Trust
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Multi-Market Strategy Trust
Quality Bond Portfolio
Short Duration Portfolio
U.S. Government Portfolio
Municipal Bond Funds
----------------------------------
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
Intermediate Municipal Bond Funds
----------------------------------
Intermediate California
Intermediate Diversified
Intermediate New York
Closed-End Funds
----------------------------------
All-Market Advantage Fund
ACM Income Fund
ACM Government Opportunity Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
California Municipal Income Fund
National Municipal Income Fund
New York Municipal Income Fund
The Spain Fund
World Dollar Government Fund
World Dollar Government Fund II
We also offer Exchange Reserves,+ which serves as the money market fund
exchange vehicle for the AllianceBernstein mutual funds.
For more complete information on any AllianceBernstein mutual fund, including
investment objectives and policies, sales charges, expenses, risks and other
matters of importance to prospective investors, visit our web site at
www.alliancebernstein.com or call us at (800) 227-4618 for a current
prospectus. Please read the prospectus carefully before you invest or send
money.
* Formerly Growth Investors Fund.
** Formerly Conservative Investors Fund.
+ An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
-------------------------------------------------------------------------------
28 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 NYSEtrading 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.
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ALLIANCE NATIONAL MUNICIPAL INCOME FUND o 29
ALLIANCE NATIONAL MUNICIPAL INCOME FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO] ALLIANCEBERNSTEIN (SM)
Investment Research and Management
(SM) This service mark used under license from
the owner, Alliance Capital Management L.P.
NMISR0404
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. SCHEDULE OF INVESTMENTS.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
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. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant
ITEM 9. 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 the requirements of Item 7(d)(2)(ii)(G) of
Schedule 14A in its proxy statement filed with the Commission on February 23,
2004.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and procedures
(as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as
amended) are effective at the reasonable assurance level based on their
evaluation of these controls and procedures as of a date within 90 days of the
filing date of this document.
(b) There were no significant changes in the registrant's internal controls
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 11. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
11 (b) (1) Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
11 (b) (2) Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
11 (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/Marc O. Mayer
--------------------------------
Marc O. Mayer
President
Date: June 30, 2004
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: June 30, 2004
By: /s/Mark D. Gersten
--------------------------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: June 30, 2004