ITEM 1. REPORTS TO STOCKHOLDERS.
OCT 10.31.21
ANNUAL REPORT
ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
(NYSE: AFB)
As of January 1, 2021, as permitted by new regulations adopted
by the Securities and Exchange Commission, the Funds annual and semi-annual shareholder reports are no longer sent by mail, unless you specifically requested paper copies of the reports. Instead, the reports are made available on a website,
and you will be notified by mail each time a report is posted and provided with a website address to access the report.
You may elect to receive all future reports
in paper form free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund,
you can call Computershare at (800) 219 4218. Your election to receive reports in paper form will apply to all funds held in your account with your financial intermediary or, if you invest directly, to all AB Closed-end Funds you hold.
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Investment Products Offered
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Are Not FDIC Insured May Lose Value Are Not Bank Guaranteed
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You may obtain a description of the Funds proxy voting policies and procedures, and information regarding how
the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit ABs website at www.abfunds.com, or go to the Securities and
Exchange Commissions (the Commission) website at www.sec.gov, or call AB at (800) 227 4618.
The Fund files its
complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Funds Form N-PORT reports are available on the Commissions
website at www.sec.gov. The Funds Forms N-PORT may also be reviewed and copied at the Commissions Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling
(800) SEC 0330.
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of
FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
The [A/B] logo is a registered service mark of
AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
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FROM THE PRESIDENT
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Dear Shareholder,
Were pleased to provide
this report for the AllianceBernstein National Municipal Income Fund, Inc. (the Fund). Please review the discussion of Fund performance, the market conditions during the reporting period and the Funds investment strategy.
At AB, were striving to help our clients achieve better outcomes by:
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Fostering diverse perspectives that give us a distinctive approach to navigating global capital markets
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Applying differentiated investment insights through a connected global research network
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Embracing innovation to design better ways to invest and leading-edge mutual-fund solutions
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Whether youre an individual investor or a multibillion-dollar institution, were putting our knowledge and experience to work for you every day.
For more information about ABs comprehensive range of products and shareholder resources, please log on to www.abfunds.com.
Thank you for your investment in AB mutual fundsand for placing your trust in our firm.
Sincerely,
Onur Erzan
President and Chief Executive
Officer, AB Mutual Funds
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ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 1
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ANNUAL REPORT
December 8, 2021
This report provides managements discussion of fund performance for the AllianceBernstein National Municipal Income Fund, Inc. for the annual reporting period
ended October 31, 2021. The Fund is a closed-end fund, and its shares are listed and traded on the New York Stock Exchange.
The Fund seeks to provide high current income exempt from regular federal income tax by investing substantially all of its net
assets in municipal securities that pay interest that is exempt from federal income tax.
RETURNS AS OF OCTOBER 31, 2021 (unaudited)
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6 Months
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12 Months
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ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND (NAV)
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0.56%
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6.71%
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Bloomberg Municipal Bond Index
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0.01%
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2.64%
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The Funds market price per share on October 31, 2021, was $14.66. The Funds NAV price per share on October 31, 2021,
was $15.26. For additional Financial Highlights, please see pages 47-48.
INVESTMENT RESULTS
The table above shows the Funds performance compared to its benchmark, the Bloomberg Municipal Bond Index, for the six-
and 12-month periods ended October 31, 2021.
The Fund outperformed the benchmark for both periods. During the 12-month period, the Funds overweight to municipal credit contributed, relative to the benchmark. Security selection within the
not-for-profit health-care sector contributed, while selection in water and sewer detracted.
For the six-month period, the Funds overweight to municipal credit contributed. Security selection in not-for-profit health care contributed, while security selection in the special tax sector detracted.
Leverage, achieved through the usage of tender option bond (TOB) and variable rate municipal term preferred shares, contributed to the Funds total
returns over both periods. Leverage benefited the Funds income over both periods, as the spread between the Funds borrowing and investment rates remained positive.
The Fund did not utilize derivatives during the six- or 12-month periods.
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2 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
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MARKET REVIEW AND INVESTMENT STRATEGY
Yields have risen so far in 2021, particularly late in the reporting period, as investors have begun to digest the implications of the US Federal Reserve (the
Fed) tapering of its asset purchase program and the likelihood of short-term interest-rate hikes next year. Even with the expected change in policy from the Fed, municipals continued to perform well over both the six- and 12-month time periods ended October 31, 2021. Heavy investor demand was a key driver of relative outperformance versus other investment-grade fixed-income sectors. Industry-wide flows into municipal bond funds
were positive in 76 of the last 77 weeks of the period. Through October, investors added $92 billion into muni funds this year, just a few billion shy of the calendar-year record set back in 2019.
Additionally, strengthening credit fundamentals and attractive credit spreads caused excess demand for municipal credit. BBB and high-yield rated municipal indices
outperformed more highly rated bonds significantly as credit spreads compressed. Toward the end of the period, the market began to experience some modest spread widening in certain idiosyncratic issuers and sectors. The Funds Senior Investment
Management Team (the Team) views this spread widening as a reflection of spreads being too tight in certain sectors and not reflective of weakening fundamentals.
The Team continues to focus on real after-tax return by investing in municipal bonds that generate income exempt from federal
income taxes. The Team relies on an investment process that combines quantitative and fundamental research to build effective bond portfolios.
The Fund may
purchase municipal securities that are insured under policies issued by certain insurance companies. Historically, insured municipal securities typically received a higher credit rating, which meant that the issuer of the securities paid a lower
interest rate. As a result of declines in the credit quality and associated downgrades of most bond insurers, insurance has less value than it did in the past. The market now values insured municipal securities primarily based on the credit quality
of the issuer of the security with little value given to the insurance feature. In purchasing such insured securities, the Adviser evaluates the risk and return of municipal securities through its own research. If an insurance companys rating
is downgraded or the company becomes insolvent, the prices of municipal securities insured by the insurance company may decline. As of October 31, 2021, the Funds percentages of investments in municipal bonds that are insured and in
insured municipal bonds that have been pre-refunded or escrowed to maturity were 8.73% and 0.27%, respectively.
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ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 3
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INVESTMENT POLICIES
The Fund will normally invest at least 80%, and normally substantially all, of its net assets in municipal
securities paying interest that is exempt from regular federal income tax. The Fund also normally will invest at least 75% of its assets in investment-grade municipal securities or unrated municipal securities considered to be of comparable quality.
The Fund may invest up to 25% of its net assets in municipal bonds rated below investment-grade and unrated municipal bonds considered to be of comparable quality as determined by the Adviser. The Fund intends to invest primarily in municipal
securities that pay interest that is not subject to the federal alternative minimum tax (AMT), but may invest without limit in municipal securities paying interest that is subject to the federal AMT. For more information regarding the
Funds risks, please see Disclosures and Risks on pages 5-10 and Note GRisks Involved in Investing in the Fund of the Notes to Financial Statements on pages 40-45.
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4 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
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DISCLOSURES AND RISKS
AllianceBernstein National Municipal
Income Fund
Shareholder Information
Weekly comparative net
asset value (NAV) and market price information about the Fund is published each Saturday in Barrons and in other newspapers in a table called Closed-End Funds. Daily NAVs and market price
information, and additional information regarding the Fund, is available at www.abfunds.com and www.nyse.com. For additional shareholder information regarding this Fund, please see pages 52-53.
Benchmark Disclosure
The Bloomberg Municipal Bond Index is unmanaged and
does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Bloomberg Municipal Bond Index represents the performance of the long-term tax-exempt bond market
consisting of investment-grade bonds. In addition, the Index does not reflect the use of leverage, whereas the Fund utilizes leverage. An investor cannot invest directly in an index, and its results are not indicative of the performance for any
specific investment, including the Fund.
A Word About Risk
Among the
risks of investing in the Fund are changes in the general level of interest rates or changes in bond credit quality ratings. Changes in interest rates have a greater effect on bonds with longer maturities than on those with shorter maturities.
Please note, as interest rates rise, existing bond prices fall and can cause the value of your investment in the Fund to decline. While the Fund invests principally in bonds and other fixed-income securities, in order to achieve its investment
objectives, the Fund may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional
investments. At the discretion of the Funds Adviser, the Fund may invest up to 25% of its net assets in municipal bonds that are rated below investment-grade (i.e., junk bonds). These securities involve greater volatility and risk
than higher-quality fixed-income securities.
Financing and Related Transactions; Leverage and Other Risks: The Fund utilizes leverage to seek to enhance the
yield and NAV attributable to its common stock. These objectives may not be achieved in all interest-rate environments. Leverage creates certain risks for holders of common stock, including the likelihood of greater volatility of the NAV and market
price of the common stock. If income from the securities purchased from the funds made available by leverage is not sufficient to cover the cost of leverage, the Funds return will be less than if leverage had not been used.
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ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 5
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DISCLOSURES AND RISKS (continued)
As a result, the
amounts available for distribution to common stockholders as dividends and other distributions will be reduced. During periods of rising short-term interest rates, the interest paid on the preferred shares or floaters in TOB transactions would
increase, which may adversely affect the Funds income and distribution to common stockholders. A decline in distributions would adversely affect the Funds yield and possibly the market value of its shares. If rising short-term rates
coincide with a period of rising long-term rates, the value of the long-term municipal bonds purchased with the proceeds of leverage would decline, adversely affecting the NAV attributable to the Funds common stock and possibly the market
value of the shares.
The Funds outstanding Variable Rate MuniFund Term Preferred Shares result in leverage. The Fund may also use other types of financial
leverage, including TOB transactions, either in combination with, or in lieu of, the preferred shares. In a TOB transaction, the Fund may transfer a highly rated fixed-rate municipal security into a special purpose entity (typically, a trust). The
Fund receives cash and a residual interest security (sometimes referred to as an inverse floater) issued by the trust in return. The trust simultaneously issues securities, which pay an interest rate that is reset each week based on an
index of high-grade short-term [seven-day] demand notes. These securities, sometimes referred to as floaters, are bought by third parties, including
tax-exempt money market funds, and can be tendered by these holders to a liquidity provider at par, unless certain events occur. The Fund continues to earn all the interest from the transferred bond less the
amount of interest paid on the floaters and the expenses of the trust, which include payments to the trustee and the liquidity provider and organizational costs. The Fund also uses the cash received from the transaction for investment purposes or to
retire other forms of leverage. Under certain circumstances, the trust may be terminated and collapsed, either by the Fund or upon the occurrence of certain events, such as a downgrade in the credit quality of the underlying bond, or in the event
holders of the floaters tender their securities to the liquidity provider. See Note H to the financial statements for more information about TOB transactions.
The
use of derivative instruments by the Fund, such as forwards, futures, options and swaps, may also result in a form of leverage.
Because the advisory fees received
by the Adviser are based on the total net assets of the Fund (including assets supported by the proceeds of the Funds outstanding preferred shares), the Adviser has a financial incentive for the Fund to keep its preferred shares outstanding,
which may create a conflict of interest between the Adviser and the common shareholders of the Fund.
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6 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
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DISCLOSURES AND RISKS (continued)
Tax Risk:
There is no guarantee that the income on the Funds municipal securities will be exempt from regular federal income and state income taxes. Unfavorable legislation, adverse interpretations by federal or state authorities, litigation or
noncompliant conduct by the issuer of a municipal security could affect the tax-exempt status of municipal securities. If the Internal Revenue Service or a state authority determines that an issuer of a
municipal security has not complied with applicable requirements, interest from the security could become subject to regular federal income tax and/or state personal income tax, possibly retroactively to the date the security was issued, the value
of the security could decline significantly, and a portion of the distributions to Fund shareholders could be recharacterized as taxable. Recent federal legislation included reductions in tax rates for individuals, with relatively larger reductions
in tax rates for corporations. These tax rate reductions may reduce the demand for municipal bonds which could reduce the value of municipal bonds held by the Fund.
Market Risk: The market value of a security may move up or down, sometimes rapidly and unpredictably. These fluctuations may cause a security to be worth less
than the price originally paid for it, or less than it was worth at an earlier time. Market risk may affect a single issuer, industry, sector of the economy or the market as a whole. Global economies and financial markets are increasingly
interconnected, which increases the probabilities that conditions in one country or region might adversely impact issuers in a different country or region. Conditions affecting the general economy, including political, social, or economic
instability at the local, regional, or global level may also affect the market value of a security. Health crises, such as pandemic and epidemic diseases, as well as other incidents that interrupt the expected course of events, such as natural
disasters, including fires, earthquakes and flooding, war or civil disturbance, acts of terrorism, power outages and other unforeseeable and external events, and the public response to or fear of such diseases or events, have had, and may in the
future have, an adverse effect on the Funds investments and NAV and can lead to increased market volatility. For example, the diseases or events themselves or any preventative or protective actions that governments may take in respect of such
diseases or events may result in periods of business disruption, inability to obtain raw materials, supplies and component parts, and reduced or disrupted operations for issuers of securities held by the Fund. The occurrence and pendency of such
diseases or events could adversely affect the economies and financial markets either in specific countries or worldwide.
Municipal Market Risk: This is the
risk that special factors may adversely affect the value of the municipal securities and have a significant effect on the yield or value of the Funds investments in municipal securities. These factors include economic conditions, political or
legislative changes, public
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ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 7
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DISCLOSURES AND RISKS (continued)
health crises,
uncertainties related to the tax status of municipal securities, or the rights of investors in these securities. To the extent that the Fund invests more of its assets in a particular states municipal securities, the Fund may be vulnerable to
events adversely affecting that state, including economic, political and regulatory occurrences, court decisions, terrorism, public health crises (including the occurrence of a contagious disease or illness) and catastrophic natural disasters, such
as hurricanes, fires or earthquakes. For example, the novel coronavirus (COVID-19) pandemic has significantly stressed the financial resources of many issuers of municipal securities, which could impair any
such issuers ability to meet its financial obligations when due and adversely impact the value of its securities held by the Fund. As the full effects of the COVID-19 pandemic on state and local
economies and on issuers of municipal securities are still uncertain, the financial difficulties of issuers of municipal securities may continue or worsen, adversely affecting the performance of the Fund. The Funds investment in certain
municipal securities with principal and interest payments that are made from the revenues of a specific project or facility, and not general tax revenues, may have increased risks. Factors affecting the project or facility, such as local business or
economic conditions, could have a significant effect on the projects ability to make payments of principal and interest on these securities.
Credit
Risk: An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or
guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a
fixed-income security may be downgraded after purchase, which may adversely affect the value of the security. Investments in fixed-income securities with lower ratings tend to have a higher probability that an issuer will default or fail to meet its
payment obligations.
Interest-Rate Risk: Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates
rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest-rate risk is generally greater for fixed-income securities with longer
maturities or durations. The current historically low interest rate environment heightens the risks associated with rising interest rates.
Inflation Risk:
This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Funds assets can decline
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8 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
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DISCLOSURES AND RISKS (continued)
as can the value of
the Funds distributions. This risk is significantly greater for fixed-income securities with longer maturities.
Derivatives Risk: The Fund may enter
into derivative transactions such as forwards, options, futures and swaps. Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Fund. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk, which is the risk that the counterparty (the party on the other side of the transaction) on a derivative
transaction will be unable or unwilling to honor its contractual obligations to the Fund. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected on the statement of assets and
liabilities.
Illiquid Investments Risk: Illiquid investments risk exists when particular investments are or become difficult to purchase or sell, possibly
preventing the Fund from selling out of these securities at an advantageous price. Causes of illiquid investments risk may include low trading volumes, large positions and heavy redemptions of Fund shares. Illiquid investments risk may be magnified
in a rising interest-rate environment, when the value and liquidity of fixed-income securities generally decline. Derivatives and securities involving substantial market and credit risk tend to involve greater illiquid investments risk than most
other types of investments. The Fund is subject to illiquid investments risk because the market for municipal securities is generally smaller than many other markets, which may make municipal securities more difficult to trade than other types of
securities. Illiquid securities may also be difficult to value.
Duration Risk: Duration is a measure that relates the expected price volatility of a
fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to the full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease
in price as interest rates rise.
Management Risk: The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will
apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there
is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the
Funds prospectus. As with all investments, you may lose money by investing in the Fund.
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ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 9
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DISCLOSURES AND RISKS (continued)
An Important Note
About Historical Performance
The performance shown in this report represents past performance and does not guarantee future results. Current performance may
be lower or higher than the performance information shown. 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. Historical performance does
not reflect the deduction of taxes that a shareholder would pay on fund distributions or the sale of fund shares and assumes the reinvestment of dividends and capital gains distributions at prices obtained pursuant to the Funds dividend
reinvestment plan.
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10 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
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HISTORICAL PERFORMANCE
GROWTH OF A $10,000 INVESTMENT IN
THE FUND (unaudited)
10/31/2011 TO 10/31/2021
This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein National Municipal Income Fund based on
market prices (from 10/31/2011 to 10/31/2021) as compared to the performance of the Funds benchmark. The chart assumes the reinvestment of dividends and capital gains distributions at prices obtained pursuant to the Funds dividend
reinvestment plan.
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ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 11
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HISTORICAL PERFORMANCE (continued)
AVERAGE ANNUAL
RETURNS AS OF OCTOBER 31, 2021 (unaudited)
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NAV Returns
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Market Price
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1 Year
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6.71%
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12.79%
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5 Years
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4.38%
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5.69%
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10 Years
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6.08%
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5.91%
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AVERAGE ANNUAL RETURNS
AS OF THE MOST
RECENT CALENDAR QUARTER-END
SEPTEMBER 30, 2021 (unaudited)
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NAV Returns
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Market Price
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1 Year
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6.60%
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12.02%
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5 Years
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4.02%
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4.82%
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10 Years
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6.10%
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5.92%
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The chart assumes the reinvestment of dividends and capital gains distributions at prices obtained pursuant to the Funds dividend
reinvestment plan.
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12 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
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PORTFOLIO SUMMARY
October 31, 2021 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $438.7
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All data are as of October 31, 2021. The Funds quality rating breakdown is expressed as a percentage of the
Funds total investments in municipal securities and may vary over time. The quality ratings are determined by using the S&P Global Ratings (S&P), Moodys Investors Services, Inc. (Moodys) and Fitch
Ratings, Ltd. (Fitch). A measure of the quality and safety of a bond or portfolio, based on the issuers financial condition. AAA is highest (best) and D is lowest (worst). If applicable, the
pre-refunded category includes bonds which are secured by U.S. Government Securities and therefore have been deemed high-quality investment grade by the Adviser. If applicable, Not Applicable (N/A) includes non-creditworthy investments such as equities, currency contracts, futures and options. If applicable, the Not Rated category includes bonds that are not rated by a Nationally Recognized Statistical Rating
Organization. The Adviser evaluates the creditworthiness of non-rated securities based on a number of factors including, but not limited to, cash flows, enterprise value and economic environment.
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ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 13
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PORTFOLIO OF INVESTMENTS
October 31, 2021
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Principal
Amount
(000)
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U.S. $ Value
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MUNICIPAL OBLIGATIONS 157.1%
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Long-Term Municipal Bonds 157.1%
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Alabama 3.8%
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Jefferson County Board of Education/AL
Series 2018
5.00%, 02/01/2046
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$
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10,000
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$
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12,070,393
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State of Alabama Docks Department
AGM Series
2017-A
5.00%, 10/01/2034
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2,000
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2,377,306
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AGM Series 2017-C
5.00%, 10/01/2036
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2,000
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2,409,270
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16,856,969
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Arizona 2.0%
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Arizona Industrial Development Authority
(Equitable School Revolving Fund LLC Obligated
Group)
Series 2020
4.00%, 11/01/2045-11/01/2050
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3,955
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4,466,640
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Salt Verde Financial Corp.
(Citigroup, Inc.)
Series
2007
5.25%, 12/01/2022-12/01/2023
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4,150
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4,472,485
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8,939,125
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Arkansas 0.5%
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Pulaski County Public Facilities Board
(Baptist Health Obligated Group)
Series
2014
5.00%, 12/01/2042
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2,000
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2,252,214
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California 19.2%
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Anaheim Public Financing Authority
(City of Anaheim CA Lease)
Series
2014-A
5.00%, 05/01/2039
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3,500
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3,813,545
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Bay Area Toll Authority
Series 2013-S
5.00%, 04/01/2032 (Pre-refunded/ETM)
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5,720
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6,108,131
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California Health Facilities Financing Authority
(Lucile Salter Packard Childrens Hospital at
Stanford Obligated Group)
Series 2022-A
4.00%, 05/15/2051(a)
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2,000
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2,261,620
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California Housing Finance
Series
2019-2
4.00%, 03/20/2033
|
|
|
1,142
|
|
|
|
1,336,825
|
|
Series 2021-1, Class A
3.50%, 11/20/2035
|
|
|
992
|
|
|
|
1,142,874
|
|
|
|
|
|
|
14 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
PORTFOLIO OF INVESTMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount
(000)
|
|
|
U.S. $ Value
|
|
|
|
California Pollution Control Financing Authority
(Poseidon Resources Channelside LP)
Series
2012
5.00%, 07/01/2037(b)
|
|
$
|
3,075
|
|
|
$
|
3,202,511
|
|
California Statewide Communities Development Authority
(CHF-Irvine LLC)
BAM Series 2021
3.00%, 05/15/2054
|
|
|
9,895
|
|
|
|
10,109,550
|
|
California Statewide Communities Development Authority
(Loma Linda University Medical Center)
Series
2016-A
5.00%, 12/01/2036(b)
|
|
|
800
|
|
|
|
917,984
|
|
Los Angeles County Metropolitan Transportation Authority
(Los Angeles County Metropolitan
Transportation Authority Sales Tax)
Series 2013-B
5.00%, 07/01/2034
|
|
|
1,770
|
|
|
|
1,903,950
|
|
Los Angeles Department of Water & Power Power System Revenue
Series 2013-A
5.00%, 07/01/2030
|
|
|
6,165
|
|
|
|
6,498,879
|
|
5.00%, 07/01/2030 (Pre-refunded/ETM)
|
|
|
90
|
|
|
|
94,994
|
|
Series
2013-B
5.00%, 07/01/2030-07/01/2032
|
|
|
13,840
|
|
|
|
14,907,995
|
|
San Bernardino County Transportation Authority
Series 2015-2
5.00%, 03/01/2032-03/01/2034(c)
|
|
|
11,340
|
|
|
|
12,522,511
|
|
State of California
Series 2013
5.00%, 11/01/2030
|
|
|
5,800
|
|
|
|
6,323,542
|
|
University of California
Series
2012-G
5.00%, 05/15/2031
|
|
|
3,825
|
|
|
|
3,924,774
|
|
5.00%, 05/15/2031 (Pre-refunded/ETM)
|
|
|
3,175
|
|
|
|
3,256,946
|
|
Series 2013-A
5.00%, 05/15/2030
|
|
|
2,875
|
|
|
|
3,080,965
|
|
5.00%, 05/15/2030 (Pre-refunded/ETM)
|
|
|
2,480
|
|
|
|
2,658,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,066,177
|
|
|
|
|
|
|
|
|
|
|
Colorado 2.8%
|
|
City & County of Denver Co. Airport System Revenue
(Denver Intl Airport)
Series 2013-B
5.25%, 11/15/2031
|
|
|
6,680
|
|
|
|
7,313,561
|
|
|
|
|
|
|
abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 15
|
PORTFOLIO OF INVESTMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount
(000)
|
|
|
U.S. $ Value
|
|
|
|
Colorado Health Facilities Authority
(CommonSpirit Health)
Series
2019-A
5.00%, 08/01/2044
|
|
$
|
4,335
|
|
|
$
|
5,204,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,518,001
|
|
|
|
|
|
|
|
|
|
|
Connecticut 8.4%
|
|
Connecticut State Health & Educational Facilities Authority
(Sacred Heart University,
Inc.)
Series 2017-I1
5.00%, 07/01/2042
|
|
|
2,410
|
|
|
|
2,822,565
|
|
Connecticut State Health & Educational Facilities Authority
(University of Hartford
(The))
Series 2019
4.00%, 07/01/2049
|
|
|
1,500
|
|
|
|
1,629,746
|
|
State of Connecticut
Series
2013-C
5.00%, 07/15/2027
|
|
|
7,165
|
|
|
|
7,710,994
|
|
Series 2013-E
5.00%, 08/15/2029
|
|
|
4,800
|
|
|
|
5,173,180
|
|
State of Connecticut Special Tax Revenue
Series
2011-A
5.00%, 12/01/2028
|
|
|
5,000
|
|
|
|
5,019,402
|
|
Series 2012-A
5.00%, 01/01/2029
|
|
|
13,855
|
|
|
|
14,615,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,971,274
|
|
|
|
|
|
|
|
|
|
|
District of Columbia 1.5%
|
|
District of Columbia
Series
2013-A
5.00%, 06/01/2029
|
|
|
5,000
|
|
|
|
5,360,842
|
|
Metropolitan Washington Airports Authority Aviation Revenue
Series
2016-A
5.00%, 10/01/2035
|
|
|
1,000
|
|
|
|
1,181,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,542,719
|
|
|
|
|
|
|
|
|
|
|
Florida 7.6%
|
|
Alachua County Health Facilities Authority
(Shands Teaching Hospital & Clinics Obligated
Group)
Series 2014-A
5.00%, 12/01/2044
|
|
|
4,560
|
|
|
|
5,109,856
|
|
Brevard County Health Facilities Authority
(Health First, Inc. Obligated Group)
Series
2014
5.00%, 04/01/2033
|
|
|
1,000
|
|
|
|
1,101,612
|
|
|
|
|
|
|
16 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
PORTFOLIO OF INVESTMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount
(000)
|
|
|
U.S. $ Value
|
|
|
|
Halifax Hospital Medical Center
(Halifax Hospital Medical Center Obligated Group)
Series
2015
5.00%, 06/01/2035
|
|
$
|
2,655
|
|
|
$
|
2,997,050
|
|
Miami Beach Health Facilities Authority
(Mount Sinai Medical Center of Florida, Inc.)
Series
2014
5.00%, 11/15/2039
|
|
|
9,250
|
|
|
|
10,181,174
|
|
Palm Beach County Health Facilities Authority
(Baptist Health South Florida Obligated Group)
Series
2019
3.00%, 08/15/2044
|
|
|
8,000
|
|
|
|
8,442,184
|
|
Putnam County Development Authority/FL
(Seminole Electric Cooperative, Inc.)
Series 2018-A
5.00%, 03/15/2042
|
|
|
4,500
|
|
|
|
5,340,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,172,810
|
|
|
|
|
|
|
|
|
|
|
Georgia 2.5%
|
|
Augusta Development Authority
(AU Health System Obligated Group)
Series
2018
5.00%, 07/01/2036
|
|
|
4,170
|
|
|
|
4,751,719
|
|
City of Atlanta GA Department of Aviation
Series
2014-B
5.00%, 01/01/2032
|
|
|
1,275
|
|
|
|
1,398,594
|
|
Municipal Electric Authority of Georgia
Series
2019
5.00%, 01/01/2038-01/01/2059
|
|
|
1,060
|
|
|
|
1,267,142
|
|
Series 2021
4.00%, 01/01/2046-01/01/2051
|
|
|
2,705
|
|
|
|
2,998,116
|
|
5.00%, 01/01/2056
|
|
|
650
|
|
|
|
774,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,190,071
|
|
|
|
|
|
|
|
|
|
|
Guam 1.3%
|
|
Territory of Guam
(Territory of Guam Business Privilege Tax)
Series
2011-A
5.25%, 01/01/2036
|
|
|
5,720
|
|
|
|
5,766,774
|
|
|
|
|
|
|
|
|
|
|
|
Hawaii 0.6%
|
|
State of Hawaii Airports System Revenue
Series
2015-A
5.00%, 07/01/2045
|
|
|
2,500
|
|
|
|
2,848,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 17
|
PORTFOLIO OF INVESTMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount
(000)
|
|
|
U.S. $ Value
|
|
|
|
Illinois 17.4%
|
|
|
|
|
|
|
|
|
Chicago Board of Education
Series
2017-C
5.00%, 12/01/2034
|
|
$
|
1,945
|
|
|
$
|
2,298,394
|
|
Series 2019-A
5.00%, 12/01/2029
|
|
|
1,260
|
|
|
|
1,561,853
|
|
Chicago OHare International Airport
Series
2016-B
5.00%, 01/01/2041
|
|
|
8,000
|
|
|
|
9,276,783
|
|
Series 2016-C
5.00%, 01/01/2038
|
|
|
2,350
|
|
|
|
2,727,282
|
|
Series 2018-A
5.00%, 01/01/2048
|
|
|
6,300
|
|
|
|
7,482,612
|
|
Illinois Finance Authority
(Bradley University)
Series
2021-A
4.00%, 08/01/2051
|
|
|
4,750
|
|
|
|
5,292,394
|
|
Illinois Finance Authority
(OSF Healthcare System Obligated Group)
Series 2015-A
5.00%, 11/15/2045
|
|
|
4,500
|
|
|
|
5,179,778
|
|
Illinois State Toll Highway Authority
Series
2015-B
5.00%, 01/01/2040
|
|
|
3,000
|
|
|
|
3,470,234
|
|
Metropolitan Pier & Exposition Authority
Series 2020
5.00%, 06/15/2050
|
|
|
8,755
|
|
|
|
10,332,992
|
|
State of Illinois
Series
2014
5.00%, 04/01/2030-02/01/2039
|
|
|
12,070
|
|
|
|
13,220,851
|
|
Series 2017-D
5.00%, 11/01/2028
|
|
|
5,000
|
|
|
|
5,960,947
|
|
Series 2018-A
5.00%, 10/01/2027
|
|
|
1,000
|
|
|
|
1,197,351
|
|
Series
2019-B
4.00%, 11/01/2036-11/01/2037
|
|
|
7,460
|
|
|
|
8,377,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,378,908
|
|
|
|
|
|
|
|
|
|
|
Indiana 0.3%
|
|
Indiana Finance Authority
Series
2013-A
5.00%, 07/01/2044 (Pre-refunded/ETM)
|
|
|
1,250
|
|
|
|
1,343,294
|
|
|
|
|
|
|
|
|
|
|
|
Iowa 0.3%
|
|
Iowa Finance Authority
(Iowa Fertilizer Co. LLC)
Series
2018-B
5.25%, 12/01/2050
|
|
|
1,205
|
|
|
|
1,310,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
PORTFOLIO OF INVESTMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount
(000)
|
|
|
U.S. $ Value
|
|
|
|
Kansas 1.4%
|
|
City of Lawrence KS
(Lawrence Memorial Hospital/KS)
Series 2018
5.00%, 07/01/2048
|
|
$
|
5,000
|
|
|
$
|
5,973,551
|
|
|
|
|
|
|
|
|
|
|
|
Kentucky 1.3%
|
|
Kentucky Economic Development Finance Authority
(CommonSpirit Health)
Series 2019-A
5.00%, 08/01/2044
|
|
|
145
|
|
|
|
174,082
|
|
Kentucky Turnpike Authority
Series
2013-A
5.00%, 07/01/2029 (Pre-refunded/ETM)
|
|
|
5,000
|
|
|
|
5,391,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,565,537
|
|
|
|
|
|
|
|
|
|
|
Louisiana 0.3%
|
|
Parish of St. John the Baptist LA
(Marathon Oil Corp.)
Series
2019
2.10%, 06/01/2037
|
|
|
235
|
|
|
|
241,966
|
|
2.20%, 06/01/2037
|
|
|
950
|
|
|
|
988,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,230,090
|
|
|
|
|
|
|
|
|
|
|
Maryland 1.7%
|
|
Maryland Health & Higher Educational Facilities Authority
(Meritus Medical Center Obligated
Group)
Series 2015
5.00%, 07/01/2045
|
|
|
6,725
|
|
|
|
7,495,571
|
|
|
|
|
|
|
|
|
|
|
|
Massachusetts 0.8%
|
|
Massachusetts Development Finance Agency
(Lasell University)
Series
2021
4.00%, 07/01/2050
|
|
|
1,000
|
|
|
|
1,100,067
|
|
Massachusetts School Building Authority
Series
2012-B
5.00%, 08/15/2030 (Pre-refunded/ETM)
|
|
|
2,480
|
|
|
|
2,574,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,674,092
|
|
|
|
|
|
|
|
|
|
|
Michigan 6.0%
|
|
Detroit City School District
Series 2012-A
5.00%, 05/01/2026-05/01/2027
|
|
|
6,045
|
|
|
|
6,186,668
|
|
Detroit Downtown Development Authority
AGM Series 2018-A
5.00%, 07/01/2043-07/01/2048
|
|
|
13,020
|
|
|
|
14,364,404
|
|
|
|
|
|
|
abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 19
|
PORTFOLIO OF INVESTMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount
(000)
|
|
|
U.S. $ Value
|
|
|
|
Michigan Finance Authority
(Great Lakes Water Authority Water Supply System Revenue)
AGM Series 2014-D1
5.00%, 07/01/2035
|
|
$
|
1,250
|
|
|
$
|
1,392,010
|
|
Michigan Finance Authority
(Public Lighting Authority)
Series
2014-B
5.00%, 07/01/2034
|
|
|
2,250
|
|
|
|
2,402,442
|
|
Plymouth Educational Center Charter School
Series 2005
5.125%, 11/01/2023(d)
|
|
|
2,140
|
|
|
|
1,954,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,299,744
|
|
|
|
|
|
|
|
|
|
|
Minnesota 2.4%
|
|
City of Rochester MN
(Mayo Clinic)
Series 2018
4.00%, 11/15/2048
|
|
|
3,000
|
|
|
|
3,407,726
|
|
Duluth Economic Development Authority
(Essentia Health Obligated Group)
Series 2018-A
5.00%, 02/15/2058
|
|
|
6,000
|
|
|
|
7,038,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,445,780
|
|
|
|
|
|
|
|
|
|
|
Nebraska 3.3%
|
|
Central Plains Energy Project
(Goldman Sachs Group Inc/(The))
Series
2017-A
5.00%, 09/01/2042
|
|
|
10,000
|
|
|
|
14,332,016
|
|
|
|
|
|
|
|
|
|
|
|
New Hampshire 0.2%
|
|
New Hampshire Business Finance Authority
Series
2020-1
4.125%, 01/20/2034
|
|
|
786
|
|
|
|
928,144
|
|
|
|
|
|
|
|
|
|
|
|
New Jersey 13.1%
|
|
Essex County Improvement Authority
(Friends of TEAM Academy Charter School Obligated Group)
Series
2021
4.00%, 06/15/2056
|
|
|
1,000
|
|
|
|
1,108,403
|
|
New Jersey Economic Development Authority
(New Jersey Economic Development Authority State
Lease)
Series 2014-P
5.00%, 06/15/2031
|
|
|
2,500
|
|
|
|
2,768,775
|
|
Series 2016-B
5.50%, 06/15/2030
|
|
|
5,000
|
|
|
|
6,092,166
|
|
|
|
|
|
|
20 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
PORTFOLIO OF INVESTMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount
(000)
|
|
|
U.S. $ Value
|
|
|
|
New Jersey Economic Development Authority
(NYNJ Link Borrower LLC)
Series
2013
5.125%, 01/01/2034
|
|
$
|
1,000
|
|
|
$
|
1,095,083
|
|
New Jersey Health Care Facilities Financing Authority
(New Jersey Health Care Facilities Financing
Authority State Lease)
Series 2017
5.00%, 10/01/2036
|
|
|
2,500
|
|
|
|
2,973,436
|
|
New Jersey Health Care Facilities Financing Authority
(RWJ Barnabas Health Obligated Group)
Series
2014
5.00%, 07/01/2044
|
|
|
6,450
|
|
|
|
7,182,771
|
|
New Jersey Transportation Trust Fund Authority
(New Jersey Transportation Fed Hwy Grant)
Series
2016
5.00%, 06/15/2029
|
|
|
4,750
|
|
|
|
5,573,663
|
|
New Jersey Transportation Trust Fund Authority
(New Jersey Transportation Trust Fund Authority State
Lease)
Series 2018-A
5.00%, 12/15/2033
|
|
|
3,370
|
|
|
|
4,122,330
|
|
Series 2019-B
4.00%, 06/15/2037
|
|
|
800
|
|
|
|
902,106
|
|
New Jersey Turnpike Authority
Series
2012-B
5.00%, 01/01/2029 (Pre-refunded/ETM)
|
|
|
6,500
|
|
|
|
6,862,232
|
|
Series 2013-A
5.00%, 01/01/2031
(Pre-refunded/ETM)
|
|
|
5,000
|
|
|
|
5,160,774
|
|
Series 2020-D
5.00%, 01/01/2028
|
|
|
2,725
|
|
|
|
3,214,360
|
|
Tobacco Settlement Financing Corp./NJ
Series
2018-A
5.00%, 06/01/2046
|
|
|
8,990
|
|
|
|
10,452,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,508,458
|
|
|
|
|
|
|
|
|
|
|
New York 17.9%
|
|
Broome County Local Development Corp.
(United Health Services Hospitals Obligated Group)
AGM Series
2020
3.00%, 04/01/2045
|
|
|
3,000
|
|
|
|
3,120,893
|
|
4.00%, 04/01/2050
|
|
|
3,500
|
|
|
|
3,966,696
|
|
City of New York NY
Series 2012-B
5.00%, 08/01/2030 (Pre-refunded/ETM)
|
|
|
5,070
|
|
|
|
5,252,717
|
|
|
|
|
|
|
abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 21
|
PORTFOLIO OF INVESTMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount
(000)
|
|
|
U.S. $ Value
|
|
|
|
Metropolitan Transportation Authority
Series
2012-D
5.00%, 11/15/2029
|
|
$
|
4,000
|
|
|
$
|
4,178,173
|
|
Series 2012-F
5.00%, 11/15/2027
|
|
|
1,575
|
|
|
|
1,646,855
|
|
Series 2013-A
5.00%, 11/15/2029
(Pre-refunded/ETM)
|
|
|
1,830
|
|
|
|
1,962,657
|
|
Series 2014-B
5.25%, 11/15/2034
|
|
|
4,000
|
|
|
|
4,401,922
|
|
Metropolitan Transportation Authority
(Metropolitan Transportation Authority Dedicated Tax
Fund)
Series 2016-A
5.25%, 11/15/2035(c)
|
|
|
14,260
|
|
|
|
17,191,693
|
|
New York City Municipal Water Finance Authority
Series
2013-D
5.00%, 06/15/2034
|
|
|
3,600
|
|
|
|
3,868,424
|
|
New York City NY Transitional
Series
2007B
5.00%, 08/01/2034-08/01/2037(c)
|
|
|
10,000
|
|
|
|
11,559,295
|
|
New York State Dormitory Authority
(State of New York Pers Income Tax)
Series 2012-B
5.00%, 03/15/2032
|
|
|
7,600
|
|
|
|
7,733,683
|
|
Series 2012-D
5.00%, 02/15/2029
|
|
|
6,865
|
|
|
|
6,958,797
|
|
Port Authority of New York & New Jersey
Series
2013-178
5.00%, 12/01/2032
|
|
|
4,400
|
|
|
|
4,793,660
|
|
Ulster County Capital Resource Corp.
(Woodland Pond at New Paltz)
Series
2017
5.00%, 09/15/2037
|
|
|
490
|
|
|
|
487,318
|
|
5.25%, 09/15/2042-09/15/2053
|
|
|
1,320
|
|
|
|
1,298,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,421,611
|
|
|
|
|
|
|
|
|
|
|
North Carolina 2.5%
|
|
North Carolina Medical Care Commission
(Vidant Health Obligated Group)
Series
2015
5.00%, 06/01/2045
|
|
|
4,445
|
|
|
|
5,056,145
|
|
North Carolina Turnpike Authority
Series 2018
5.00%, 01/01/2040
|
|
|
5,000
|
|
|
|
5,986,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,042,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
PORTFOLIO OF INVESTMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount
(000)
|
|
|
U.S. $ Value
|
|
|
|
Ohio 1.7%
|
|
City of Chillicothe OH
(Adena Health System Obligated Group)
Series
2017
5.00%, 12/01/2047
|
|
$
|
1,800
|
|
|
$
|
2,136,280
|
|
County of Cuyahoga OH
(MetroHealth System (The))
Series
2017
5.00%, 02/15/2042-02/15/2052
|
|
|
3,740
|
|
|
|
4,343,371
|
|
Ohio Higher Educational Facility Commission
(Kenyon College)
Series
2020
4.00%, 07/01/2040
|
|
|
730
|
|
|
|
837,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,316,693
|
|
|
|
|
|
|
|
|
|
|
Oklahoma 2.8%
|
|
Norman Regional Hospital Authority
(Norman Regional Hospital Authority Obligated Group)
Series
2019
3.25%, 09/01/2038
|
|
|
2,015
|
|
|
|
2,175,571
|
|
Oklahoma City Airport Trust
Series
2018
5.00%, 07/01/2043-07/01/2047
|
|
|
7,000
|
|
|
|
8,385,678
|
|
Tulsa Airports Improvement Trust
BAM Series
2015-A
5.00%, 06/01/2045 (Pre-refunded/ETM)
|
|
|
1,700
|
|
|
|
1,894,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,456,194
|
|
|
|
|
|
|
|
|
|
|
Pennsylvania 12.2%
|
|
Allegheny County Hospital Development Authority
(Allegheny Health Network Obligated Group)
Series 2018-A
5.00%, 04/01/2047
|
|
|
5,000
|
|
|
|
5,932,473
|
|
Bucks County Industrial Development Authority
(Grand View Hospital/Sellersville PA Obligated
Group)
Series 2021
4.00%, 07/01/2051
|
|
|
2,250
|
|
|
|
2,484,808
|
|
Butler County Hospital Authority
(Butler Health System Obligated Group)
Series 2015
5.00%, 07/01/2035-07/01/2039
|
|
|
3,510
|
|
|
|
3,927,370
|
|
Montgomery County Higher Education and Health Authority
(Thomas Jefferson University Obligated
Group)
Series 2018
5.00%, 09/01/2043-09/01/2048
|
|
|
13,250
|
|
|
|
15,935,013
|
|
|
|
|
|
|
abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 23
|
PORTFOLIO OF INVESTMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount
(000)
|
|
|
U.S. $ Value
|
|
|
|
Pennsylvania Economic Development Financing Authority
(PA Bridges Finco LP)
Series 2015
5.00%, 12/31/2034-06/30/2042
|
|
$
|
9,270
|
|
|
$
|
10,771,563
|
|
Pennsylvania Turnpike Commission
Series 2014-A
5.00%, 12/01/2031-12/01/2033
|
|
|
6,355
|
|
|
|
7,205,123
|
|
School District of Philadelphia (The)
Series
2016-F
5.00%, 09/01/2035
|
|
|
5,000
|
|
|
|
5,900,788
|
|
Scranton School District/PA
BAM Series
2017-E
4.00%, 12/01/2037
|
|
|
1,025
|
|
|
|
1,170,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,327,960
|
|
|
|
|
|
|
|
|
|
|
Puerto Rico 0.8%
|
|
Puerto Rico Sales Tax Financing Corp. Sales Tax Revenue
Series
2019-A
4.329%, 07/01/2040
|
|
|
615
|
|
|
|
674,946
|
|
5.00%, 07/01/2058
|
|
|
2,625
|
|
|
|
2,963,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,638,433
|
|
|
|
|
|
|
|
|
|
|
South Carolina 4.9%
|
|
South Carolina Jobs-Economic Development Authority
(Prisma Health Obligated Group)
Series 2018-A
5.00%, 05/01/2048
|
|
|
5,900
|
|
|
|
7,021,913
|
|
South Carolina Ports Authority
Series 2015
5.00%, 07/01/2045
(Pre-refunded/ETM)
|
|
|
5,000
|
|
|
|
5,804,609
|
|
South Carolina Public Service Authority
Series
2014-A
5.00%, 12/01/2049
|
|
|
1,400
|
|
|
|
1,548,714
|
|
Series 2014-C
5.00%, 12/01/2046
|
|
|
1,000
|
|
|
|
1,124,812
|
|
Series 2016-B
5.00%, 12/01/2041
|
|
|
5,000
|
|
|
|
5,911,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,411,967
|
|
|
|
|
|
|
|
|
|
|
Tennessee 2.2%
|
|
|
|
|
|
|
|
|
Chattanooga Health Educational & Housing Facility Board
(CommonSpirit Health)
Series 2019-A
4.00%, 08/01/2037-08/01/2038
|
|
|
420
|
|
|
|
481,980
|
|
5.00%, 08/01/2049
|
|
|
705
|
|
|
|
841,523
|
|
|
|
|
|
|
24 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
PORTFOLIO OF INVESTMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount
(000)
|
|
|
U.S. $ Value
|
|
|
|
Chattanooga-Hamilton County Hospital Authority
Series
2014-A
5.00%, 10/01/2044
|
|
$
|
7,500
|
|
|
$
|
8,290,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,613,765
|
|
|
|
|
|
|
|
|
|
|
Texas 5.6%
|
|
|
|
|
|
|
|
|
Arlington Higher Education Finance Corp.
Series
2014-A
5.00%, 08/15/2039 (Pre-refunded/ETM)
|
|
|
4,805
|
|
|
|
5,418,719
|
|
Baytown Municipal Development District
(Baytown Municipal Development District Hotel Occupancy
Tax)
Series 2021
4.00%, 10/01/2050
|
|
|
2,910
|
|
|
|
3,113,703
|
|
City of Austin TX Water & Wastewater System Revenue
Series
2013-A
5.00%, 11/15/2029
|
|
|
5,000
|
|
|
|
5,352,589
|
|
New Hope Cultural Education Facilities Finance Corp.
(CHF-Collegiate Housing Denton LLC)
AGM Series 2018-A1
5.00%, 07/01/2038-07/01/2048
|
|
|
1,600
|
|
|
|
1,912,884
|
|
North Texas Tollway Authority
(North Texas Tollway System)
Series
2015-B
5.00%, 01/01/2040
|
|
|
5,000
|
|
|
|
5,263,551
|
|
Texas Private Activity Bond Surface Transportation Corp.
(NTE Mobility Partners Segments 3
LLC)
Series 2013
6.75%, 06/30/2043
|
|
|
3,000
|
|
|
|
3,326,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,387,461
|
|
|
|
|
|
|
|
|
|
|
Utah 1.9%
|
|
|
|
|
|
|
|
|
City of Salt Lake City UT Airport Revenue
Series
2017-A
5.00%, 07/01/2047
|
|
|
4,500
|
|
|
|
5,331,182
|
|
Series 2018-A
5.00%, 07/01/2048
|
|
|
2,500
|
|
|
|
2,974,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,305,884
|
|
|
|
|
|
|
|
|
|
|
Washington 0.3%
|
|
Washington State Housing Finance Commission
Series 2021-1, Class
A
3.50%, 12/20/2035
|
|
|
994
|
|
|
|
1,140,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 25
|
PORTFOLIO OF INVESTMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount
(000)
|
|
|
U.S. $ Value
|
|
|
|
West Virginia 1.0%
|
|
West Virginia Hospital Finance Authority
(West Virginia United Health System Obligated Group)
Series
2018-A
5.00%, 06/01/2052
|
|
$
|
3,875
|
|
|
$
|
4,608,948
|
|
|
|
|
|
|
|
|
|
|
|
Wisconsin 4.6%
|
|
Wisconsin Center District
AGM Series 2020-C
Zero Coupon, 12/15/2036-12/15/2040
|
|
|
9,555
|
|
|
|
5,727,022
|
|
Wisconsin Public Finance Authority
(Appalachian Regional Healthcare System Obligated Group)
Series
2021
4.00%, 07/01/2056
|
|
|
2,250
|
|
|
|
2,532,313
|
|
Wisconsin Public Finance Authority
(CHF Wilmington LLC)
AGM Series
2018
5.00%, 07/01/2058
|
|
|
10,000
|
|
|
|
11,745,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,004,862
|
|
|
|
|
|
|
|
|
|
|
Total Municipal Obligations
(cost $639,015,399)
|
|
|
|
|
|
|
689,287,053
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
SHORT-TERM INVESTMENTS 0.3%
|
|
Investment Companies 0.3%
|
|
AB Fixed Income Shares, Inc. Government
Money Market Portfolio Class AB, 0.01%(e)(f)(g)
(cost $1,069,597)
|
|
|
1,069,597
|
|
|
|
1,069,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments 157.4%
(cost $640,084,996)
|
|
|
|
|
|
|
690,356,650
|
|
Other assets less liabilities (57.4)%
|
|
|
|
|
|
|
(251,673,952
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets 100.0%
|
|
|
|
|
|
$
|
438,682,698
|
|
|
|
|
|
|
|
|
|
|
(a)
|
When-Issued or delayed delivery security.
|
(b)
|
Security is exempt from registration under Rule 144A or Regulation S of the Securities Act of 1933. These securities are
considered restricted, but liquid and may be resold in transactions exempt from registration. At October 31, 2021, the aggregate market value of these securities amounted to $4,120,495 or 0.9% of net assets.
|
(c)
|
Security represents the underlying municipal obligation of an inverse floating rate obligation held by the Fund (see Note
H).
|
|
|
|
|
|
26 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
PORTFOLIO OF INVESTMENTS (continued)
(d)
|
Restricted and illiquid security.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted & Illiquid
Securities
|
|
Acquisition
Date
|
|
|
Cost
|
|
|
Market
Value
|
|
|
Percentage of
Net Assets
|
|
Plymouth Educational Center Charter School
Series 2005
5.125%, 11/01/2023
|
|
|
11/30/2005
|
|
|
$
|
2,135,364
|
|
|
$
|
1,954,220
|
|
|
|
0.45
|
%
|
(e)
|
Affiliated investments.
|
(f)
|
The rate shown represents the 7-day yield as of period end.
|
(g)
|
To obtain a copy of the funds shareholder report, please go to the Securities and Exchange Commissions website
at www.sec.gov, or call AB at (800) 227-4618.
|
As of October 31, 2021, the Funds percentages
of investments in municipal bonds that are insured and in insured municipal bonds that have been pre-refunded or escrowed to maturity are 8.7% and 0.3%, respectively.
Glossary:
AGM Assured Guaranty Municipal
BAM Build American Mutual
ETM Escrowed to Maturity
OSF Order of St. Francis
See notes to financial statements.
|
|
|
|
|
abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 27
|
STATEMENT OF ASSETS & LIABILITIES
October 31, 2021
|
|
|
|
|
Assets
|
|
Investments in securities, at value
|
|
Unaffiliated issuers (cost $639,015,399)
|
|
$
|
689,287,053
|
|
Affiliated issuers (cost $1,069,597)
|
|
|
1,069,597
|
|
Interest receivable
|
|
|
9,561,414
|
|
Affiliated dividends receivable
|
|
|
35
|
|
|
|
|
|
|
Total assets
|
|
|
699,918,099
|
|
|
|
|
|
|
Liabilities
|
|
Variable Rate MuniFund Term Preferred Shares, at liquidation value (net of unamortized deferred offering
cost of $98,778)
|
|
|
232,026,222
|
|
Payable for floating rate notes issued*
|
|
|
26,095,000
|
|
Payable for investment securities purchased
|
|
|
2,228,260
|
|
Advisory fee payable
|
|
|
313,471
|
|
Interest expense payable
|
|
|
208,272
|
|
Directors fees payable
|
|
|
1,752
|
|
Accrued expenses and other liabilities
|
|
|
362,424
|
|
|
|
|
|
|
Total liabilities
|
|
|
261,235,401
|
|
|
|
|
|
|
Net Assets Applicable to Common Shareholders
|
|
$
|
438,682,698
|
|
|
|
|
|
|
Composition of Net Assets Applicable to Common Shareholders
|
|
|
|
|
Common stock, $.001 par value per share; 1,999,990,715 shares authorized, 28,744,936 shares issued and
outstanding
|
|
$
|
28,745
|
|
Additional paid-in capital
|
|
|
403,255,809
|
|
Distributable earnings
|
|
|
35,398,144
|
|
|
|
|
|
|
Net Assets Applicable to Common Shareholders
|
|
$
|
438,682,698
|
|
|
|
|
|
|
Net Asset Value Applicable to Common Shareholders (based on 28,744,936
common shares outstanding)
|
|
$
|
15.26
|
|
|
|
|
|
|
*
|
Represents short-term floating rate certificates issued by tender option bond trusts (see Note H).
|
See notes to financial statements.
|
|
|
|
|
28 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
STATEMENT OF OPERATIONS
Year Ended October 31, 2021
|
|
|
|
|
|
|
|
|
Investment Income
|
|
Interest
|
|
$
|
25,029,174
|
|
|
|
|
|
DividendsAffiliated issuers
|
|
|
378
|
|
|
$
|
25,029,552
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
Advisory fee (see Note B)
|
|
|
3,717,978
|
|
|
|
|
|
Custody and accounting
|
|
|
136,316
|
|
|
|
|
|
Audit and tax
|
|
|
69,356
|
|
|
|
|
|
Legal
|
|
|
53,799
|
|
|
|
|
|
Printing
|
|
|
49,801
|
|
|
|
|
|
Transfer agency
|
|
|
46,178
|
|
|
|
|
|
Registration fees
|
|
|
27,991
|
|
|
|
|
|
Directors fees and expenses
|
|
|
22,515
|
|
|
|
|
|
Miscellaneous
|
|
|
49,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses before interest expense, fees and amortization of offering costs
|
|
|
4,173,776
|
|
|
|
|
|
Interest expense, fees and amortization of offering costs
|
|
|
2,761,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
6,935,039
|
|
|
|
|
|
Less: expenses waived and reimbursed by the Adviser (see Note B)
|
|
|
(1,486
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net expenses
|
|
|
|
|
|
|
6,933,553
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
|
|
|
18,095,999
|
|
|
|
|
|
|
|
|
|
|
Realized and Unrealized Gain on Investment Transactions
|
|
|
|
|
|
|
|
|
Net realized gain on investment transactions
|
|
|
|
|
|
|
825,965
|
|
Net change in unrealized appreciation/depreciation of investments
|
|
|
|
|
|
|
8,707,790
|
|
|
|
|
|
|
|
|
|
|
Net gain on investment transactions
|
|
|
|
|
|
|
9,533,755
|
|
|
|
|
|
|
|
|
|
|
Net Increase in Net Assets Applicable to Common Shareholders Resulting from
Operations
|
|
|
|
|
|
$
|
27,629,754
|
|
|
|
|
|
|
|
See notes to financial statements.
|
|
|
|
|
abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 29
|
STATEMENT OF CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS
|
|
|
|
|
|
|
|
|
|
|
Year Ended
October 31,
2021
|
|
|
Year Ended
October 31,
2020
|
|
Increase (Decrease) in Net Assets Applicable to Common Shareholders Resulting from Operations
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
18,095,999
|
|
|
$
|
16,749,442
|
|
Net realized gain (loss) on investment transactions
|
|
|
825,965
|
|
|
|
(645,036
|
)
|
Net change in unrealized appreciation/depreciation of investments
|
|
|
8,707,790
|
|
|
|
(7,607,785
|
)
|
|
|
|
|
|
|
|
|
|
Net increase in net assets applicable to common shareholders resulting from operations
|
|
|
27,629,754
|
|
|
|
8,496,621
|
|
Distributions to Common Shareholders
|
|
|
(18,408,832
|
)
|
|
|
(16,872,415
|
)
|
|
|
|
|
|
|
|
|
|
Total increase (decrease)
|
|
|
9,220,922
|
|
|
|
(8,375,794
|
)
|
Net Assets Applicable to Common Shareholders
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
429,461,776
|
|
|
|
437,837,570
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
438,682,698
|
|
|
$
|
429,461,776
|
|
|
|
|
|
|
|
|
|
|
See notes to financial statements.
|
|
|
|
|
30 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
STATEMENT OF CASH FLOWS
For the Year Ended October 31, 2021
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net increase in net assets from operations
|
|
|
|
|
|
$
|
27,629,754
|
|
Reconciliation of net increase in net assets from operations to net increase in cash from operating activities
|
|
|
|
|
|
|
|
|
Purchases of long-term investments
|
|
$
|
(37,430,638
|
)
|
|
|
|
|
Purchases of short-term investments
|
|
|
(50,014,820
|
)
|
|
|
|
|
Proceeds from disposition of long-term investments
|
|
|
34,610,342
|
|
|
|
|
|
Proceeds from disposition of short-term investments
|
|
|
50,902,474
|
|
|
|
|
|
Net realized gain on investment transactions
|
|
|
(825,965
|
)
|
|
|
|
|
Net change in unrealized appreciation/depreciation on investment transactions
|
|
|
(8,707,790
|
)
|
|
|
|
|
Net accretion of bond discount and amortization of bond premium
|
|
|
4,876,551
|
|
|
|
|
|
Decrease in deferred offering cost
|
|
|
106,267
|
|
|
|
|
|
Decrease in interest receivable
|
|
|
108,546
|
|
|
|
|
|
Decrease in affiliated dividends receivable
|
|
|
40
|
|
|
|
|
|
Decrease in payable for investments purchased
|
|
|
(2,996,904
|
)
|
|
|
|
|
Increase in advisory fee payable
|
|
|
5,526
|
|
|
|
|
|
Decrease in interest expense payable
|
|
|
(1,574
|
)
|
|
|
|
|
Decrease in Directors fee payable
|
|
|
(258
|
)
|
|
|
|
|
Increase in accrued expenses and other liabilities
|
|
|
147,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
|
|
|
|
(9,220,922
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
|
|
|
|
18,408,832
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Cash dividends paid
|
|
|
(18,408,832
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
|
|
|
(18,408,832
|
)
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
|
|
|
|
0
|
|
Cash at beginning of year
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
|
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Interest expense paid during the year
|
|
$
|
2,597,834
|
|
|
|
|
|
In accordance with U.S. GAAP, the Fund has included a Statement of Cash Flows as a result of its substantial investments in floating rate
notes and Variable Rate MuniFund Term Preferred Shares throughout the year
See notes to financial statements.
|
|
|
|
|
abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 31
|
NOTES TO FINANCIAL STATEMENTS
October 31, 2021
NOTE A
Significant Accounting Policies
AllianceBernstein National Municipal Income Fund, Inc. (the Fund) is organized as a Maryland corporation and is registered under the Investment Company Act
of 1940 as a diversified, closed-end management investment company. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP), which
require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from
those estimates. The Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities are valued at their current
market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at fair value as determined in accordance with procedures established by and under the general
supervision of the Funds Board of Directors (the Board).
In general, the market values of securities which are readily available and deemed
reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (NASDAQ)) or on a foreign securities exchange are valued at the last sale price at the
close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the
principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (OTC) market put or call options are valued at the mid
level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the Adviser) will have discretion to determine the best valuation (e.g., last trade price in the case of
listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement
price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not
available, the securities are valued at amortized cost. This methodology is commonly used for short term
|
|
|
|
|
32 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
NOTES TO FINANCIAL STATEMENTS (continued)
securities
that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the Committee) must
reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or
material changes in interest rates. 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 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. Swaps and other
derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Open-end mutual funds are
valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market
quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this determination may include, but are not limited to,
information obtained by contacting the issuer, analysts, analysis of the issuers financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant
events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund generally values many of its foreign equity securities using fair value prices based on
third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a
liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the
valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in
|
|
|
|
|
abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 33
|
NOTES TO FINANCIAL STATEMENTS (continued)
pricing the
asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Funds own
assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which
are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
|
|
|
Level 1quoted prices in active markets for identical investments
|
|
|
|
Level 2other significant observable inputs (including quoted prices for similar investments, interest rates,
prepayment speeds, credit risk, etc.)
|
|
|
|
Level 3significant unobservable inputs (including the Funds own assumptions in determining the fair value
of investments)
|
The fair value of debt instruments, such as bonds, and
over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized modeling
techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates, yield curves, option
adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows which are then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value,
these investments will be classified as Level 3.
Other fixed income investments, including non-U.S. government and
corporate debt, are generally valued using quoted market prices, if available, which are typically impacted by current interest rates, maturity dates and any perceived credit risk of the issuer. Additionally, in the absence of quoted market prices,
these inputs are used by pricing vendors to derive a valuation based upon industry or proprietary models which incorporate issuer specific data with relevant yield/spread comparisons with more widely quoted bonds with similar key characteristics.
Those investments for which there are observable inputs are classified as Level 2. Where the inputs are not observable, the investments are classified as Level 3.
|
|
|
|
|
34 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
NOTES TO FINANCIAL STATEMENTS (continued)
The
following table summarizes the valuation of the Funds investments by the above fair value hierarchy levels as of October 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets:
|
|
Long-Term Municipal Bonds
|
|
$
|
0
|
|
|
$
|
689,287,053
|
|
|
$
|
0
|
|
|
$
|
689,287,053
|
|
Short-Term Investments
|
|
|
1,069,597
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,069,597
|
|
Liabilities:
|
|
Variable Rate MuniFund Term Preferred Shares(a)
|
|
|
0
|
|
|
|
(232,026,222
|
)
|
|
|
0
|
|
|
|
(232,026,222
|
)
|
Floating Rate Notes(a)
|
|
|
(26,095,000
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(26,095,000
|
)
|
Total Investments in Securities
|
|
|
(25,025,403
|
)
|
|
|
457,260,831
|
|
|
|
0
|
|
|
|
432,235,428
|
|
Other Financial Instruments(b)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(25,025,403
|
)
|
|
$
|
457,260,831
|
|
|
$
|
0
|
|
|
$
|
432,235,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The Fund may hold liabilities in which the fair value approximates the carrying amount for financial statement purposes.
|
(b)
|
Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the
unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value.
|
3. Taxes
It is the Funds 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.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Funds tax positions
taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Funds financial statements.
4. Investment Income and Investment Transactions
Dividend income is
recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or
sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes original issue and market discounts as adjustments to interest income. The Fund accounts for distributions received from REIT
investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
|
|
|
|
|
abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 35
|
NOTES TO FINANCIAL STATEMENTS (continued)
5.
Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. 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 the annual rate of .55% of the Funds adjusted average daily net
assets. Such advisory fee, which is calculated on the basis of the assets attributable to the Funds common and preferred shareholders, is accrued daily and paid monthly. In computing daily net assets for purposes of determining the advisory
fee payable, the Fund calculates daily the value of the total assets of the Fund, minus the value of the total liabilities of the Fund, except that the aggregate liquidation preference of Variable Rate MuniFund Term Preferred Shares (the
VMTPS), which is a liability for financial reporting purposes, is not deducted.
Under the terms of the shareholder inquiry agency agreement with
Alliance-Bernstein Investor Services, Inc. (ABIS), a wholly-owned subsidiary of the Adviser, the Fund reimburses ABIS for costs relating to servicing phone inquiries on behalf of the Fund. During the year ended October 31, 2021,
there was no reimbursement paid to ABIS.
The Fund may invest in AB Government Money Market Portfolio (the Government Money Market Portfolio) which has
a contractual annual advisory fee rate of .20% of the portfolios average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a
net advisory fee of .10%) until August 31, 2022. In connection with the investment by the Fund in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Fund in an amount equal to the
Funds pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. For the year ended October 31, 2021, such waiver amounted to $1,486.
|
|
|
|
|
36 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
NOTES TO FINANCIAL STATEMENTS (continued)
A summary of
the Funds transactions in AB mutual funds for the year ended October 31, 2021 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Market Value
10/31/20
(000)
|
|
|
Purchases
at Cost
(000)
|
|
|
Sales
Proceeds
(000)
|
|
|
Market Value
10/31/21
(000)
|
|
|
Dividend
Income
(000)
|
|
Government Money Market Portfolio
|
|
$
|
1,957
|
|
|
$
|
50,015
|
|
|
$
|
50,902
|
|
|
$
|
1,070
|
|
|
$
|
0
|
*
|
*
|
Amount is less than $500.
|
NOTE C
Investment
Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended October 31, 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
Sales
|
|
Investment securities (excluding U.S. government securities)
|
|
$
|
37,430,638
|
|
|
$
|
34,574,691
|
|
U.S. government securities
|
|
|
0
|
|
|
|
0
|
|
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows:
|
|
|
|
|
Cost
|
|
$
|
614,109,231
|
|
|
|
|
|
|
Gross unrealized appreciation
|
|
$
|
50,985,459
|
|
Gross unrealized depreciation
|
|
|
(947,309
|
)
|
|
|
|
|
|
Net unrealized appreciation
|
|
$
|
50,038,150
|
|
|
|
|
|
|
1. Derivative Financial Instruments
The
Fund may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, investment purposes), or to hedge or adjust the
risk profile of its portfolio.
The Fund did not engage in derivatives transactions for the year ended October 31, 2021.
NOTE D
Common Stock
There are 28,744,936 shares of common stock outstanding at October 31, 2021. During the year ended October 31, 2021 and the year ended
October 31, 2020, the Fund did not issue any shares in connection with the Funds dividend reinvestment plan.
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abfunds.com
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ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 37
|
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE E
Variable Rate MuniFund Term Preferred Shares
During the year ended October 31, 2019, the Fund completed private offerings of 2019 VMTPS and 2018 VMTPS, each having a liquidation preference of $25,000 per
share, on August 28, 2019 and December 19, 2018, respectively. The Fund issued and sold 5,754 2019 VMTPS and 3,531 2018 VMTPS in its offerings. The 2019 VMTPS and 2018 VMTPS rank pari passu with each other but are subject to a mandatory
redemption by the Fund in August 2049 and December 2048, respectively.
The VMTPS generally do not trade, and market quotations are generally not available. The
VMTPS pay a variable dividend rate tied to a SIFMA Municipal Swap index, plus an additional fixed spread amount of 0.90% for 2018 VMTPS and 0.98% for 2019 VMTPS, as established at the time of issuance. Effective April 22, 2021, the
spread is 1.05% for the 2018 VMTPS. As of October 31, 2021, the dividend rates for the 2018 VMTPS and 2019 VMTPS were 1.10% and 1.03%, respectively. In the Funds statement of assets and liabilities, the aggregate liquidation
preference of the VMTPS is shown as a liability in accordance with U.S. GAAP because the VMTPS have a stated mandatory redemption date. For the year ended October 31, 2021, the average amount of the VMTPS outstanding and the daily weighted
average dividend rate were $232,125,000 and 1.09%, respectively.
Dividends on the VMTPS (which are treated as interest payments for financial reporting purposes)
are accrued daily and paid monthly. Unpaid dividends on the VMTPS are recorded as Interest expense payable on the statement of assets and liabilities. Dividends accrued on the VMTPS are recorded as a component of Interest expense,
fees and amortization of offering costs on the statement of operations.
Costs incurred by the Fund in connection with its offering of the VMTPS were
recorded as a deferred charge, and are amortized over the first three years of the life of the shares and the amortization is included within Interest expense, fees and amortization of offering costs on the statement of operations. The
debt issuance costs related to the liability represented by the VMTPS under U.S. GAAP are presented as a direct deduction from the liability rather than as an asset on the statement of assets and liabilities, consistent with debt discounts. The Fund
included deferred offering costs in Variable Rate MuniFund Term Preferred Shares, at liquidation value (net of unamortized deferred offering cost) on the statement of assets and liabilities. The VMTPS are treated as equity for tax
purposes. During the year ended October 31, 2021, additional debt issuance costs of $58,767 were incurred and capitalized by the Fund as a result of amendments to the 2018 VMTPS.
|
|
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|
38 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
NOTES TO FINANCIAL STATEMENTS (continued)
The
preferred shareholders, i.e., the holders of both the 2019 VMTPS and 2018 VMTPS, voting together 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 vote as a separate class on
certain other matters as required under the Funds Charter, the Investment Company Act of 1940 and Maryland law.
NOTE F
Distributions to Common Shareholders
The tax character of distributions paid during the fiscal years ended October 31, 2021 and October 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
|
2020
|
|
Distributions paid from:
|
|
|
|
|
|
|
|
|
Ordinary income
|
|
$
|
323
|
|
|
$
|
40,583
|
|
|
|
|
|
|
|
|
|
|
Total taxable distributions paid
|
|
$
|
323
|
|
|
$
|
40,583
|
|
Tax-exempt income
|
|
|
18,408,509
|
|
|
|
16,831,832
|
|
|
|
|
|
|
|
|
|
|
Total distributions paid
|
|
$
|
18,408,832
|
|
|
$
|
16,872,415
|
|
|
|
|
|
|
|
|
|
|
As of October 31, 2021, the components of accumulated earnings/(deficit) on a tax basis were as follows:
|
|
|
|
|
Accumulated capital and other losses
|
|
$
|
(14,640,006
|
)(a)
|
Unrealized appreciation/(depreciation)
|
|
|
50,038,150
|
(b)
|
|
|
|
|
|
Total accumulated earnings/(deficit)
|
|
$
|
35,398,144
|
|
|
|
|
|
|
(a)
|
As of October 31, 2021, the Fund had a net capital loss carryforward of $14,640,006. During the fiscal year, the Fund
utilized $838,682 of capital loss carry forwards to offset current year net realized gains.
|
(b)
|
The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the
tax treatment of tender options bonds.
|
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any.
Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of October 31, 2021, the Fund had a net short-term capital loss
carryforward of $9,187,601 and a net long-term capital loss carryforward of $5,452,405, which may be carried forward for an indefinite period.
During the current
fiscal year, permanent differences primarily due to the tax treatment of offering costs and taxable overdistributions resulted in a net increase in distributable earnings and a net decrease in additional paid-in capital. These reclassifications had
no effect on net assets.
|
|
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|
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abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 39
|
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE G
Risks Involved in Investing in the Fund
Among the risks of investing in the Fund are changes in the general level of interest rates or changes in bond credit quality ratings. Changes in interest rates have a
greater effect on bonds with longer maturities than on those with shorter maturities. Please note, as interest rates rise, existing bond prices fall and can cause the value of your investment in the Fund to decline. While the Fund invests
principally in bonds and other fixed-income securities, in order to achieve its investment objectives, the Fund may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks
different from, and in certain cases, greater than, the risks presented by more traditional investments. At the discretion of the Funds Adviser, the Fund may invest up to 25% of its net assets in municipal bonds that are rated below
investment-grade (i.e., junk bonds). These securities involve greater volatility and risk than higher-quality fixed-income securities.
Market
RiskThe market value of a security may move up or down, sometimes rapidly and unpredictably. These fluctuations may cause a security to be worth less than the price originally paid for it, or less than it was worth at an earlier time.
Market risk may affect a single issuer, industry, sector of the economy or the market as a whole. Global economies and financial markets are increasingly interconnected, which increases the probabilities that conditions in one country or region
might adversely impact issuers in a different country or region. Conditions affecting the general economy, including political, social, or economic instability at the local, regional, or global level may also affect the market value of a security.
Health crises, such as pandemic and epidemic diseases, as well as other incidents that interrupt the expected course of events, such as natural disasters, including fires, earthquakes and flooding, war or civil disturbance, acts of terrorism, power
outages and other unforeseeable and external events, and the public response to or fear of such diseases or events, have had, and may in the future have, an adverse effect on the Funds investments and net asset value and can lead to increased
market volatility. For example, the diseases or events themselves or any preventative or protective actions that governments may take in respect of such diseases or events may result in periods of business disruption, inability to obtain raw
materials, supplies and component parts, and reduced or disrupted operations for issuers of securities held by the Fund. The occurrence and pendency of such diseases or events could adversely affect the economies and financial markets either in
specific countries or worldwide.
Municipal Market RiskThis is the risk that special factors may adversely affect the value of the municipal
securities and have a significant effect on the yield of value of the Funds investments in municipal securities.
|
|
|
|
|
40 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
NOTES TO FINANCIAL STATEMENTS (continued)
These
factors include economic conditions, political or legislative changes, public health crises, uncertainties related to the tax status of municipal securities, or the rights of investors in these securities. To the extent that the Fund invests more of
its assets in a particular states municipal securities, the Fund may be vulnerable to events adversely affecting that state, including economic, political and regulatory occurrences, court decisions, terrorism, public health crises (including
the occurrence of a contagious disease or illness) and catastrophic natural disasters, such as hurricanes, fires or earthquakes. For example, the novel coronavirus (COVID-19) pandemic has significantly
stressed the financial resources of many issuers of municipal securities, which could impair any such issuers ability to meet its financial obligations when due and adversely impact the value of its securities held by the Fund. As the full
effects of the COVID-19 pandemic on state and local economies and on issuers of municipal securities are still uncertain, the financial difficulties of issuers of municipal securities may continue or worsen,
adversely affecting the performance of the Fund. The Funds investment in certain municipal securities with principal and interest payments that are made from the revenues of a specific project or facility, and not general tax revenues, may
have increased risks. Factors affecting the project or facility, such as local business or economic conditions, could have a significant effect on the projects ability to make payments of principal and interest on these securities.
Financing and Related Transactions; Leverage and Other RisksThe Fund utilizes leverage to seek to enhance the yield and NAV attributable to its common
stock. These objectives may not be achieved in all interest-rate environments. Leverage creates certain risks for holders of common stock, including the likelihood of greater volatility of the NAV and market price of the common stock. If income from
the securities purchased from the funds made available by leverage is not sufficient to cover the cost of leverage, the Funds return will be less than if leverage had not been used.
As a result, the amounts available for distribution to common stockholders as dividends and other distributions will be reduced. During periods of rising short-term
interest rates, the interest paid on the preferred shares or floaters in TOB transactions would increase, which may adversely affect the Funds income and distribution to common stockholders. A decline in distributions would adversely affect
the Funds yield and possibly the market value of its shares. If rising short-term rates coincide with a period of rising long-term rates, the value of the long-term municipal bonds purchased with the proceeds of leverage would decline,
adversely affecting the NAV attributable to the Funds common stock and possibly the market value of the shares.
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abfunds.com
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ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 41
|
NOTES TO FINANCIAL STATEMENTS (continued)
The
Funds outstanding Variable Rate MuniFund Term Preferred Shares result in leverage. The Fund may also use other types of financial leverage, including TOB transactions, either in combination with, or in lieu of, the preferred shares. In a TOB
transaction, the Fund may transfer a highly rated fixed-rate municipal security into a special purpose entity (typically, a trust). The Fund receives cash and a residual interest security (sometimes referred to as an inverse floater)
issued by the trust in return. The trust simultaneously issues securities, which pay an interest rate that is reset each week based on an index of high-grade short-term [seven-day] demand notes. These
securities, sometimes referred to as floaters, are bought by third parties, including tax-exempt money market funds, and can be tendered by these holders to a liquidity provider at par, unless
certain events occur. The Fund continues to earn all the interest from the transferred bond less the amount of interest paid on the floaters and the expenses of the trust, which include payments to the trustee and the liquidity provider and
organizational costs. The Fund also uses the cash received from the transaction for investment purposes or to retire other forms of leverage. Under certain circumstances, the trust may be terminated and collapsed, either by the Fund or upon the
occurrence of certain events, such as a downgrade in the credit quality of the underlying bond, or in the event holders of the floaters tender their securities to the liquidity provider. See Note H to the financial statements for more information
about TOB transactions.
The use of derivative instruments by the Fund, such as forwards, futures, options and swaps, may also result in a form of leverage.
Because the advisory fees received by the Adviser are based on the total net assets of the Fund (including assets supported by the proceeds of the Funds
outstanding preferred shares), the Adviser has a financial incentive for the Fund to keep its preferred shares outstanding, which may create a conflict of interest between the Adviser and the common shareholders of the Fund.
Tax RiskThere is no guarantee that the income on the Funds municipal securities will be exempt from regular federal income and state income taxes.
Unfavorable legislation, adverse interpretations by federal or state authorities, litigation or noncompliant conduct by the issuer of a municipal security could affect the tax-exempt status of municipal
securities. If the Internal Revenue Service or a state authority determines that an issuer of a municipal security has not complied with applicable requirements, interest from the security could become subject to regular federal income tax and/or
state personal income tax, possibly retroactively to the date the security was issued, the value of the security could decline significantly, and a portion of the distributions to Fund shareholders could be recharacterized as
|
|
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|
|
42 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
NOTES TO FINANCIAL STATEMENTS (continued)
taxable.
Recent federal legislation included reductions in tax rates for individuals, with relatively larger reductions in tax rates for corporations. These tax rate reductions may reduce the demand for municipal bonds which could reduce the value of
municipal bonds held by the Fund.
Credit RiskAn issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other
contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The
degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security.
Investments in fixed-income securities with lower ratings tend to have a higher probability that an issuer will default or fail to meet its payment obligations.
Interest-Rate RiskChanges in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of
existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest-rate risk is generally greater for fixed-income securities with longer maturities or
durations. The current historically low interest rate environment heightens the risks associated with rising interest rates.
Inflation RiskThis is
the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Funds assets can decline as can the value of the Funds
distributions. This risk is significantly greater for fixed-income securities with longer maturities.
Derivatives RiskThe Fund may enter into
derivative transactions such as forwards, options, futures and swaps. Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Fund. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk, which is the risk that the counterparty (the party on the other side of the transaction) on a derivative
transaction will be unable or unwilling to honor its contractual obligations to the Fund. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected on the statement of assets and
liabilities.
Illiquid Investments RiskIlliquid investments risk exists when particular investments are or become difficult to purchase or sell,
possibly preventing the Fund from selling out of these securities at an advantageous price. Causes of illiquid investments risk may include low trading volumes, large positions and heavy redemptions of Fund shares. Illiquid investments risk
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abfunds.com
|
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ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 43
|
NOTES TO FINANCIAL STATEMENTS (continued)
may be
magnified in a rising interest-rate environment, when the value and liquidity of fixed-income securities generally decline. Derivatives and securities involving substantial market and credit risk tend to involve greater illiquid investments risk
than most other types of investments. The Fund is subject to illiquid investments risk because the market for municipal securities is generally smaller than many other markets, which may make municipal securities more difficult to trade than other
types of securities. Illiquid securities may also be difficult to value.
Duration RiskDuration is a measure that relates the expected price
volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to the full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk
and will decrease in price as interest rates rise.
LIBOR Transition and Associated RiskA Fund may be exposed to debt securities, derivatives or other
financial instruments that are tied to the London Interbank Offered Rate, or LIBOR, as a benchmark or reference rate for various interest rate calculations. In 2017, the United Kingdom Financial Conduct
Authority (FCA), which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. The FCA and LIBORs administrator, ICE Benchmark Administration, have since announced that most LIBOR settings (which
reflect LIBOR rates quoted in different currencies over various time periods) will no longer be published after the end of 2021 but that the most widely used U.S. dollar LIBOR settings will continue to be published until June 30, 2023. However,
banks were strongly encouraged to cease entering into agreements with counterparties referencing LIBOR by the end of 2021. It is possible that a subset of LIBOR settings will be published after these dates on a synthetic basis, but any
such publications would be considered non-representative of the underlying market. The U.S. Federal Reserve, based on the recommendations of the New York Federal Reserves Alternative Reference Rate Committee (comprised of major derivative
market participants and their regulators), has begun publishing a Secured Overnight Funding Rate (referred to as SOFR), which is intended to replace U.S. dollar LIBOR. Proposals for alternative reference rates for other currencies have also been
announced or have already begun publication. Markets are slowly developing in response to these new rates.
The elimination of LIBOR or changes to other reference
rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect a
Funds performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments.
|
|
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|
44 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
NOTES TO FINANCIAL STATEMENTS (continued)
Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations
in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, potentially adversely affecting a Funds performance.
Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. The potential
effects of a phase out of LIBOR on LIBOR-based investments are currently unknown.
Indemnification RiskIn the ordinary course of business, the Fund
enters into contracts that contain a variety of indemnifications. The Funds maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these indemnification provisions and expects the
risk of loss thereunder to be remote. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.
Management
RiskThe Fund is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques
will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE H
Floating Rate
Notes Issued in Connection with Securities Held
The Fund may engage in tender option bond (TOB) transactions in which the Fund
transfers a fixed rate bond (Fixed Rate Bond) into a Special Purpose Vehicle (the SPV, which is generally organized as a trust). The Fund buys a residual interest in the assets and cash flows of the SPV, often referred to as
an inverse floating rate obligation (Inverse Floater). The SPV also issues floating rate notes (Floating Rate Notes) which are sold to third parties. The Floating Rate Notes pay interest at rates that generally reset weekly
and their holders have the option to tender their notes to a liquidity provider for redemption at par. The Inverse Floater held by the Fund gives the Fund the right (1) to cause the holders of the Floating Rate Notes to tender their notes at
par, and (2) to have the trustee transfer the Fixed Rate Bond held by the SPV to the Fund, thereby collapsing the SPV. The SPV may also be collapsed in certain other circumstances. In accordance with U.S. GAAP requirements regarding accounting
for transfers and servicing of financial assets and extinguishments of liabilities, the Fund accounts for the transaction described above
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abfunds.com
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ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 45
|
NOTES TO FINANCIAL STATEMENTS (continued)
as a secured
borrowing by including the Fixed Rate Bond in its portfolio of investments and the Floating Rate Notes as a liability under the caption Payable for floating rate notes issued in its statement of assets and liabilities. Interest expense
related to the Funds liability with respect to Floating Rate Notes is recorded as incurred. The interest expense is also included in the Funds expense ratio. At October 31, 2021, the amount of the Funds Floating
Rate Notes outstanding was $26,095,000 and the related interest rate was 0.07% to 0.08%. For the year ended October 31, 2021, the average amount of Floating Rate Notes outstanding and the daily weighted average interest rate were
$26,095,000 and 0.75%, respectively.
The Fund may also purchase Inverse Floaters in the secondary market without first owning the underlying bond. Such an Inverse
Floater is included in the Funds portfolio of investments but is not required to be treated as a secured borrowing and reflected in the Funds financial statements as a secured borrowing. For the year ended October 31, 2021, the Fund
did not engage in such transactions.
NOTE I
Recent Accounting Pronouncements
In March
2020, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on
Financial Reporting. ASU 2020-04 provides optional guidance to ease the potential accounting burden due to the discontinuation of the LIBOR and other interbank-offered based reference rates. ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022. Management is currently evaluating the impact, if any, of applying ASU 2020-04.
NOTE J
Subsequent
Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial
statements are issued. Management has determined that there are no material events that would require disclosure in the Funds financial statements through this date.
|
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46 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended October 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
|
$ 14.94
|
|
|
|
$ 15.23
|
|
|
|
$ 13.86
|
|
|
|
$ 14.94
|
|
|
|
$ 15.36
|
|
|
|
|
|
|
Income From Investment Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income(a)(b)
|
|
|
.63
|
|
|
|
.58
|
|
|
|
.53
|
|
|
|
.61
|
|
|
|
.66
|
|
|
|
|
|
|
|
Net realized and unrealized gain (loss) on investment transactions
|
|
|
.33
|
|
|
|
(.28
|
)
|
|
|
1.36
|
|
|
|
(1.06
|
)
|
|
|
(.40
|
)
|
|
|
|
|
|
|
Dividends to auction preferred shareholders from net investment income (common stock equivalent
basis)
|
|
|
0
|
|
|
|
0
|
|
|
|
(.01
|
)
|
|
|
(.07
|
)
|
|
|
(.04
|
)
|
|
|
|
|
|
Net increase (decrease) in net asset value from operations
|
|
|
.96
|
|
|
|
.30
|
|
|
|
1.88
|
|
|
|
(.52
|
)
|
|
|
.22
|
|
|
|
|
|
|
Less: Dividends and Distributions to Common Shareholders from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(.64
|
)
|
|
|
(.59
|
)
|
|
|
(.53
|
)
|
|
|
(.54
|
)
|
|
|
(.62
|
)
|
|
|
|
|
|
|
Return of capital
|
|
|
0
|
|
|
|
0
|
|
|
|
(.02
|
)
|
|
|
(.02
|
)
|
|
|
(.02
|
)
|
|
|
|
|
|
Total dividends and distributions
|
|
|
(.64
|
)
|
|
|
(.59
|
)
|
|
|
(.55
|
)
|
|
|
(.56
|
)
|
|
|
(.64
|
)
|
|
|
|
|
|
Net increase from tender and repurchase of Auction Preferred Shares
|
|
|
0
|
|
|
|
0
|
|
|
|
.04
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
Net asset value, end of period
|
|
|
$ 15.26
|
|
|
|
$ 14.94
|
|
|
|
$ 15.23
|
|
|
|
$ 13.86
|
|
|
|
$ 14.94
|
|
|
|
|
|
|
Market value, end of period
|
|
|
$ 14.66
|
|
|
|
$ 13.58
|
|
|
|
$ 13.59
|
|
|
|
$ 11.97
|
|
|
|
$ 13.61
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount, end of period
|
|
|
(3.93
|
)%
|
|
|
(9.10
|
)%
|
|
|
(10.77
|
)%
|
|
|
(13.64
|
)%
|
|
|
(8.90
|
)%
|
|
|
|
|
|
|
Total Return
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment return based on:(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value
|
|
|
12.79
|
%
|
|
|
4.39
|
%
|
|
|
18.44
|
%
|
|
|
(8.08
|
)%
|
|
|
2.90
|
%
|
|
|
|
|
|
|
Net asset value(d)
|
|
|
6.71
|
%
|
|
|
2.48
|
%
|
|
|
14.63
|
%
|
|
|
(3.05
|
)%
|
|
|
1.93
|
%
|
|
|
|
|
|
|
Ratios/Supplemental Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets applicable to common shareholders, end of period (000s omitted)
|
|
|
$438,683
|
|
|
|
$429,462
|
|
|
|
$437,838
|
|
|
|
$398,430
|
|
|
|
$429,446
|
|
|
|
|
|
|
|
Auction Preferred Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation value ($25,000 per share) (000s omitted)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$92,125
|
|
|
|
$92,125
|
|
|
|
|
|
|
|
Asset coverage per share
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$67,709
|
|
|
|
$71,033
|
|
|
|
|
|
|
|
Variable Rate MuniFund Term Preferred Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation value ($25,000 per share) (000s omitted)
|
|
|
$232,125
|
|
|
|
$232,125
|
|
|
|
$232,125
|
|
|
|
$141,100
|
|
|
|
$141,100
|
|
|
|
|
|
|
|
Asset coverage per share
|
|
|
$72,246
|
|
|
|
$71,253
|
|
|
|
$72,155
|
|
|
|
$67,709
|
|
|
|
$71,033
|
|
|
|
|
|
|
|
Ratio to average net assets applicable to common shareholders of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses, net of waivers/reimbursements(e)(f)
|
|
|
1.56
|
%
|
|
|
2.01
|
%
|
|
|
2.56
|
%
|
|
|
2.04
|
%
|
|
|
1.78
|
%
|
|
|
|
|
|
|
Expenses, before waivers/reimbursements(e)(f)
|
|
|
1.56
|
%
|
|
|
2.01
|
%
|
|
|
2.56
|
%
|
|
|
2.04
|
%
|
|
|
1.78
|
%
|
|
|
|
|
|
|
Net investment income, before Auction Preferred Shares dividends(b)(e)
|
|
|
4.08
|
%
|
|
|
3.90
|
%
|
|
|
3.63
|
%
|
|
|
4.23
|
%
|
|
|
4.47
|
%
|
|
|
|
|
|
|
Auction Preferred Shares dividends
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
.08
|
%
|
|
|
.48
|
%
|
|
|
.27
|
%
|
|
|
|
|
|
|
Net investment income, net of Auction Preferred Shares dividends(b)
|
|
|
4.08
|
%
|
|
|
3.90
|
%
|
|
|
3.55
|
%
|
|
|
3.75
|
%
|
|
|
4.20
|
%
|
|
|
|
|
|
|
Portfolio turnover rate
|
|
|
5
|
%
|
|
|
6
|
%
|
|
|
14
|
%
|
|
|
22
|
%
|
|
|
11
|
%
|
|
|
|
|
|
|
Asset coverage ratio
|
|
|
289
|
%
|
|
|
285
|
%
|
|
|
289
|
%
|
|
|
270
|
%
|
|
|
284
|
%
|
See footnote summary on page 48.
|
|
|
|
|
abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 47
|
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
(a)
|
Based on average shares outstanding.
|
(b)
|
Net of fees waived by the Adviser.
|
(c)
|
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 each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at prices obtained under the Funds 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 the 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 such periods. Total investment return calculated for a period of less than one year is not annualized.
|
(d)
|
The total return based on net asset value reflects the impact of the tender and repurchase by the Fund of a portion of its
Auction Preferred Shares at 97% of the per share liquidation preference for the year ended October 31, 2019. Absent this transaction, the total return based on net asset values would have been 14.34% for the year ended October 31, 2019.
|
(e)
|
These expense and net investment income ratios do not reflect the effect of dividend payments to preferred shareholders.
|
(f)
|
The expense ratios presented below exclude interest expense, fees and amortization of offering costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended October 31,
|
|
|
|
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Net of waivers/reimbursements
|
|
|
.94
|
%
|
|
|
.96
|
%
|
|
|
.98
|
%
|
|
|
1.00
|
%
|
|
|
.98
|
%
|
|
|
|
|
|
|
Before waivers/reimbursements
|
|
|
.94
|
%
|
|
|
.96
|
%
|
|
|
.98
|
%
|
|
|
1.00
|
%
|
|
|
.98
|
%
|
See notes to financial statements.
|
|
|
|
|
48 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
AllianceBernstein National Municipal Income Fund, Inc.
Opinion on the Financial Statements
We have audited
the accompanying statement of assets and liabilities of AllianceBernstein National Municipal Income Fund, Inc. (the Fund), including the portfolio of investments, as of October 31, 2021, and the related statements of operations and
cash flows for the year then ended, the statements of changes in net assets applicable to common shareholders for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the
related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund at October 31, 2021, the results of its
operations and its cash flows for the year then ended, the changes in its net assets applicable to common shareholders for each of the two years in the period then ended and its financial highlights for each of the five years in the period then
ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to
have, nor were we engaged to perform, an audit of the Funds internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Funds internal control over financial reporting. Accordingly, we express no such opinion.
Our audits
included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and
|
|
|
|
|
abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 49
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)
disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2021, by correspondence with the custodian and
others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
December 29, 2021
|
|
|
|
|
50 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
2021 FEDERAL TAX INFORMATION
(unaudited)
For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Fund during the taxable year ended October 31,
2021.
The Fund designates $18,408,509 as exempt-interest dividends for the year ended October 31, 2021.
Shareholders should not use the above information to prepare their income tax returns. The information necessary to complete your income tax returns will be included
with your Form 1099-DIV which will be sent to you separately in January 2022.
|
|
|
|
|
abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 51
|
ADDITIONAL INFORMATION
(unaudited)
Shareholders whose shares are registered in their own names can elect to participate in the Dividend Reinvestment Plan (the Plan), pursuant to which
dividends and capital gain distributions to shareholders will be paid in or reinvested in additional shares of the Fund (the Dividend Shares). Computershare Trust Company NA, (the Agent) will act as agent for participants
under the Plan. Shareholders whose shares are held in the name of broker or nominee should contact such broker or nominee to determine whether or how they may participate in the Plan.
If the Board declares an income distribution or determines to make a capital gain distribution payable either in shares or in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the equivalent in shares of Common Stock of the Fund valued as follows:
|
(i)
|
If the shares of Common Stock are trading at net asset value or at a premium above net asset value at the time of
valuation, the Fund will issue new shares at the greater of net asset value or 95% of the then current market price.
|
|
(ii)
|
If the shares of Common Stock are trading at a discount from net asset value at the time of valuation, the Agent will
receive the dividend or distribution in cash and apply it to the purchase of the Funds shares of Common Stock in the open market on the New York Stock Exchange or elsewhere, for the participants accounts. Such purchases will be made
on or shortly after the payment date for such dividend or distribution and in no event more than 30 days after such date except where temporary curtailment or suspension of purchase is necessary to comply with Federal securities laws. If, before the
Agent has completed its purchases, the market price exceeds the net asset value of a share of Common Stock, the average purchase price per share paid by the Agent may exceed the net asset value of the Funds shares of Common Stock, resulting in
the acquisition of fewer shares than if the dividend or distribution had been paid in shares issued by the Fund.
|
The Agent will maintain all
shareholders accounts in the Plan and furnish written confirmation of all transactions in the account, including information needed by shareholders for tax records. Shares in the account of each Plan participant will be held by the Agent in
non-certificate form in the name of the participant, and each shareholders proxy will include those shares purchased or received pursuant to the Plan.
There
will be no charges with respect to shares issued directly by the Fund to satisfy the dividend reinvestment requirements. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Agents open
market purchases of shares.
|
|
|
|
|
52 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
ADDITIONAL INFORMATION (continued)
The automatic
reinvestment of dividends and distributions will not relieve participants of any income taxes that may be payable (or required to be withheld) on dividends and distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund reserves the right to amend or terminate the Plan as applied to any dividend
or distribution paid subsequent to written notice of the change sent to participants in the Plan at least 90 days before the record date for such dividend or distribution. The Plan may also be amended or terminated by the Agent on at least 90
days written notice to participants in the Plan. All correspondence concerning the Plan should be directed to the Agent at Computershare Trust Company N.A., P.O. Box 30170, College Station, TX 77842-3170.
|
|
|
|
|
abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 53
|
BOARD OF DIRECTORS
|
|
|
Marshall C. Turner, Jr.(1),
Chairman
Jorge A. Bermudez(1)
Michael J. Downey(1)
Onur Erzan, President and Chief Executive Officer
|
|
Nancy P. Jacklin(1)
Jeanette W. Loeb(1)
Carol C. McMullen(1)
Garry L. Moody(1)
|
OFFICERS
|
|
|
Terrance T. Hults(2), Vice President
Matthew J. Norton(2),
Vice President
Emilie D. Wrapp, Secretary
Michael B. Reyes, Senior Analyst
|
|
Joseph J. Mantineo, Treasurer
and Chief Financial Officer
Phyllis J. Clarke, Controller
Vincent S. Noto,
Chief
Compliance Officer
|
|
|
|
Custodian and Accounting Agent
State Street Bank and Trust Company
State Street Corporation CCB/5
1 Iron Street
Boston, MA 02210
Legal Counsel
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
|
|
Independent Registered Public
Accounting Firm
Ernst & Young LLP
One
Manhattan West
New York, NY 10001
Dividend Paying Agent,
Transfer Agent and Registrar
Computershare Trust
Company, N.A.
P.O. Box 505000
Louisville, KY 40233
|
1
|
Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee.
|
2
|
The day-to-day management of, and
investment decisions for, the Funds portfolio are made by the Advisers Municipal Bond Investment Team. The investment professionals with the most significant responsibility for the day-to-day management of the Funds portfolio are Terrance T. Hults and Matthew J. Norton.
|
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act 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 AllianceBernstein
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.
Annual CertificationsAs required, on April 12, 2021, the Fund submitted to the New York Stock Exchange (NYSE) the annual certification of the
Funds Chief Executive Officer certifying that he is not aware of any violation of the NYSEs Corporate Governance listing standards. The Fund also has included the certifications of the Funds Chief Executive Officer and Chief
Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 as exhibits to the Funds Form N-CSR filed with the Securities and Exchange Commission for the period.
|
|
|
|
|
54 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Funds Directors is set
forth below.
|
|
|
|
|
|
|
|
|
NAME,
ADDRESS*, AGE
(YEAR FIRST ELECTED**)
|
|
PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND
OTHER
INFORMATION***
|
|
PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR
|
|
|
OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR
|
INTERESTED DIRECTOR
|
|
|
|
|
|
|
|
|
|
|
|
|
Onur Erzan,#
1345 Avenue of the Americas
New York, NY 10105
45
(2021)
|
|
Senior Vice President of AllianceBernstein L.P. (the Adviser) and Head of the Global Client Group overseeing ABs institutional and retail businesses, where he is responsible for all client services, sales and
marketing, as well as product strategy, management and development worldwide. Director, President and Chief Executive Officer of the AB Mutual Funds as of April 1, 2021. Prior to joining the firm in January 2021, he spent 20 years with McKinsey
(management consulting firm), most recently as a senior partner and co-leader of its Wealth & Asset Management practice. In addition, he co-led McKinseys Banking & Securities Solutions (a portfolio of data, analytics, and digital
assets and capabilities) globally.
|
|
|
74
|
|
|
None
|
|
|
|
|
|
abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 55
|
MANAGEMENT OF THE FUND (continued)
|
|
|
|
|
|
|
|
|
NAME,
ADDRESS*, AGE
(YEAR FIRST ELECTED**)
|
|
PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND
OTHER
INFORMATION***
|
|
PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR
|
|
|
OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR
|
DISINTERESTED DIRECTORS
|
|
|
|
|
|
|
|
|
|
|
Marshall C. Turner, Jr.,##
Chairman of the Board
80
(2005)
|
|
Private Investor since prior to 2016. Formerly, Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semi-conductors and adaptable,
intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership and venture capital investing experience, including five interim or full-time CEO roles,
and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He
has served as a director of one AB Fund since 1992, and director or trustee of all AB Funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such AB Funds since February
2014.
|
|
|
74
|
|
|
None
|
|
|
|
|
|
56 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
MANAGEMENT OF THE FUND (continued)
|
|
|
|
|
|
|
|
|
NAME,
ADDRESS*, AGE
(YEAR FIRST ELECTED**)
|
|
PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND
OTHER
INFORMATION***
|
|
PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR
|
|
|
OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR
|
DISINTERESTED DIRECTORS
(continued)
|
|
|
|
|
|
|
|
|
|
|
Jorge A. Bermudez,##
70
(2020)
|
|
Private Investor since prior to 2016. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroups Commercial Business Group
in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013)
and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas
from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020.
|
|
|
74
|
|
|
Moodys Corporation since April 2011
|
|
|
|
|
|
abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 57
|
MANAGEMENT OF THE FUND (continued)
|
|
|
|
|
|
|
|
|
NAME,
ADDRESS*, AGE
(YEAR FIRST ELECTED**)
|
|
PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND
OTHER
INFORMATION***
|
|
PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR
|
|
|
OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR
|
DISINTERESTED DIRECTORS
(continued)
|
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|
Michael J. Downey,##
77
(2005)
|
|
Private Investor since prior to 2016. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2016 until January 2019. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund
Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities Inc. He has served as a director or trustee of the AB Funds since 2005.
|
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74
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|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
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|
Nancy P. Jacklin,##
73
(2006)
|
|
Private Investor since prior to 2016. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008-2015). U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the
stability of the international monetary system), (December 2002-May 2006); Partner, Clifford Chance (1992-2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985-1992); Assistant General Counsel
(International), Federal Reserve Board of Governors (1982-1985); and Attorney Advisor, U.S. Department of the Treasury (1973-1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She
has served as a director or trustee of the AB Funds since 2006 and has been Chair of the Governance and Nominating Committees of the AB Funds since August 2014.
|
|
|
74
|
|
|
None
|
|
|
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|
58 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
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abfunds.com
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MANAGEMENT OF THE FUND (continued)
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NAME,
ADDRESS*, AGE
(YEAR FIRST ELECTED**)
|
|
PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND
OTHER
INFORMATION***
|
|
PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR
|
|
|
OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR
|
DISINTERESTED DIRECTORS
(continued)
|
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Jeanette W. Loeb,##
69
(2020)
|
|
Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds)
from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020.
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74
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|
|
Apollo Investment Corp. (business development company) since August 2011
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ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 59
|
MANAGEMENT OF THE FUND (continued)
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|
NAME,
ADDRESS*, AGE
(YEAR FIRST ELECTED**)
|
|
PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND
OTHER
INFORMATION***
|
|
PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR
|
|
|
OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR
|
DISINTERESTED DIRECTORS
(continued)
|
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Carol C. McMullen,##
66
(2016)
|
|
Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010-2019); Director of
Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016, and Managing Director of The Crossland Group
(consulting) from 2012 until 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head
of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a
director or trustee of the AB Funds since June 2016.
|
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74
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|
|
None
|
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60 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
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abfunds.com
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MANAGEMENT OF THE FUND (continued)
|
|
|
|
|
|
|
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|
NAME,
ADDRESS*, AGE
(YEAR FIRST ELECTED**)
|
|
PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND
OTHER
INFORMATION***
|
|
PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR
|
|
|
OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR
|
DISINTERESTED DIRECTORS
(continued)
|
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Garry L. Moody,##
69
(2008)
|
|
Private Investor since prior to 2016. Formerly, Partner, Deloitte & Touche LLP (1995-2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner;
President, Fidelity Accounting and Custody Services Company (1993-1995), where he was responsible for accounting, pricing, custody and reporting for the Fidelity mutual funds; and Partner, Ernst & Young LLP (1975-1993), where he served as the
National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds.
He is also a member of the Investment Company Institutes Board of Governors and the Independent Directors Councils Governing Council. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since
2008.
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|
74
|
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|
None
|
*
|
The address for each of the Funds disinterested Directors is c/o AllianceBernstein L.P., Attention: Legal &
Compliance Dept.Mutual Fund Legal, 1345 Avenue of the Americas, New York, NY 10105.
|
**
|
There is no stated term of office for the Funds Directors.
|
***
|
The information above includes each Directors principal occupation during the last five years and other information
relating to the experience, attributes and skills relevant to each Directors qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund.
|
#
|
Mr. Erzan is an interested person of the Fund, as defined in the 1940 Act, due to his position as a Senior
Vice President of the Adviser.
|
##
|
Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee.
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abfunds.com
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ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 61
|
MANAGEMENT OF THE FUND (continued)
Officer
Information
Certain information concerning the Funds Officers is listed below.
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|
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NAME, ADDRESS*
AND AGE
|
|
POSITION(S)
HELD WITH FUND
|
|
PRINCIPAL OCCUPATION
DURING PAST FIVE YEARS
|
Onur Erzan
45
|
|
President and Chief Executive Officer
|
|
See biography above.
|
|
|
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Terrance T. Hults
55
|
|
Vice President
|
|
Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. He is also Co-Head Municipal Portfolio Management.
|
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Matthew J. Norton
38
|
|
Vice President
|
|
Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. He is also Co-Head Municipal Portfolio Management.
|
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Emilie D. Wrapp
66
|
|
Secretary
|
|
Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2016.
|
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|
Michael B. Reyes
45
|
|
Senior Analyst
|
|
Vice President of the Adviser**, with which has been associated since prior to 2016.
|
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|
|
Joseph J. Mantineo
62
|
|
Treasurer and Chief Financial Officer
|
|
Senior Vice President of AllianceBernstein Investor Services, Inc. (ABIS)**, with which he has been associated since prior to 2016.
|
|
|
|
|
|
Phyllis J. Clarke
60
|
|
Controller
|
|
Vice President of ABIS**, with which she has been associated since prior to 2016.
|
|
|
|
|
|
Vincent S. Noto
57
|
|
Chief Compliance Officer
|
|
Senior Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2016.
|
*
|
The address for each of the Funds Officers is 1345 Avenue of the Americas, New York, NY 10105.
|
**
|
The Adviser, ABI and ABIS are affiliates of the Fund.
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62 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
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|
abfunds.com
|
Information Regarding the Review and Approval of the Funds Advisory Agreement
The disinterested directors (the directors) of AllianceBernstein National Municipal Income Fund, Inc. (the Fund) unanimously approved the
continuance of the Funds Advisory Agreement with the Adviser at a meeting held by video conference on November 3-5, 2020 (the Meeting).
Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They
reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed additional materials, including
comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund gained from their experience as directors or
trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Advisers integrity and competence they have gained from that experience, the Advisers initiative in identifying and raising
potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Advisers willingness to consider and implement organizational and operational changes designed
to improve investment results and the services provided to the AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on
the investment performance of the Fund and the money market fund advised by the Adviser in which the Fund invests a portion of its assets.
The directors also
considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. The directors did not
identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of
the Adviser to manage the Fund and the overall arrangements between the Fund and the Adviser, as provided in the Advisory Agreement, including the advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such
other matters as the directors considered relevant in the exercise of their business judgment.
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ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 63
|
The material factors and conclusions that formed the basis for the directors determinations included the following:
Nature, Extent and Quality of Services Provided
The directors considered
the scope and quality of services provided by the Adviser under the Advisory Agreement, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Fund. The
directors noted that the Adviser from time to time reviews the Funds investment strategies and from time to time proposes changes intended to improve the Funds relative or absolute performance for the directors consideration. They
also noted the professional experience and qualifications of the Funds portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the
Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund by employees of the Adviser or its affiliates. The directors noted that historically, including in the most recent fiscal year of the
Fund, the Adviser has not requested such reimbursements. The quality of administrative and other services, including the Advisers role in coordinating the activities of the Funds other service providers, also was considered. The
directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs
of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the
Fund to the Adviser for calendar years 2018 and 2019 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant at the request of the directors. The directors noted the assumptions and
methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the
profitability information reflected all revenues and expenses of the Advisers relationship with the Fund, including those relating to its subsidiary that provides shareholder services to the Fund. The directors recognized that it is difficult
to make comparisons of the profitability of the Advisory Agreement with the profitability of fund advisory contracts for unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The
directors focused on the profitability of the Advisers relationship with the Fund before taxes. The directors concluded that the Advisers level of profitability from its relationship with the Fund was not unreasonable.
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64 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
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|
abfunds.com
|
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund and the money market fund advised by the Adviser in
which the Fund invests, including, but not limited to, benefits relating to shareholder servicing fees paid by the Fund to a wholly owned subsidiary of the Adviser. The directors recognized that the Advisers profitability would be somewhat
lower without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the
directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At
the Meeting, the directors reviewed performance information prepared by an independent service provider (the 15(c) service provider), showing the Funds performance against a group of similar funds (peer group) and a
larger group of similar funds (peer universe), each selected by the 15(c) service provider, and information prepared by the Adviser showing the Funds performance against a broad-based securities market index, in each case for the 1-, 3-, 5- and 10-year periods ended July 31, 2020 and (in the case of comparisons with
the broad-based securities market index) for the period from inception. Based on their review, the directors concluded that the Funds investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee
rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. The directors recognized that it is difficult to make comparisons
of advisory fees because there are variations in the services that are included in the fees payable by other funds. The directors compared the Funds contractual advisory fee rate with a peer group median.
The directors noted that the Funds Advisory Agreement provides that fees are computed based on average daily net assets (i.e., including assets supported
by the Funds preferred stock), which the directors considered appropriate because the Adviser is responsible for investing the assets supported by the preferred stock.
The directors also compared the Funds contractual advisory fee rate with the fee rates charged by the Adviser for advising several
open-end funds that invest in municipal securities and noted historical differences in their fee structures.
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ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 65
|
The Adviser informed the directors that there were no institutional products managed by the Adviser that utilize
investment strategies similar to those of the Fund.
In connection with their consideration of the Funds advisory fee, the directors also considered the
total expense ratio of the Fund in comparison to a peer group selected by the 15(c) service provider. The expense ratio of the Fund was based on the Funds latest fiscal year. The directors noted that it was likely that the expense ratios of
some of the other funds in the Funds category were lowered by waivers or reimbursements by those funds investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to
their evaluation of the Advisers services because the Adviser is responsible for coordinating services provided to the Fund by others. Based on their review, the directors concluded that the Funds expense ratio was acceptable.
Economies of Scale
The advisory fee schedule for the Fund does not contain
breakpoints that reduce the fee rates on assets above specified levels. The directors considered that the Fund is a closed-end fixed-income fund and was not expected to have meaningful asset growth (absent a
rights offering or an acquisition). In such circumstances, the directors did not view the potential for realization of economies of scale as the Funds assets grow to be a material factor in their deliberations. They noted that, if the
Funds net assets were to increase materially, they would review whether potential economies of scale were being realized.
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66 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
INFORMATION REGARDING INVESTMENT OBJECTIVE, INVESTMENT POLICIES AND PRINCIPAL RISKS
Recent Changes to Investment Objective, Investment Policies and Principal Risks
The following is a summary of certain material changes to the Funds investment objective, investment policies and principal risks during the most recent fiscal
year. This information may not reflect all of the changes that have occurred since you purchased shares of the Fund.
None.
Investment Objective
The investment objective of the Fund is to seek to
provide high current income exempt from regular federal income tax.
The investment objective is fundamental and may not be changed without the approval of a
majority of the Funds outstanding voting securities, as defined in the Investment Company Act of 1940.
Investment Policies
Under normal conditions, the Fund will seek to achieve its objective by investing substantially all of its net assets in municipal bonds that pay interest that, in the
opinion of the bond counsel to the issuer, is exempt from regular federal income tax. As a matter of fundamental policy, the Fund will normally invest at least 80% of its net assets in municipal bonds paying interest that is exempt from regular
federal income taxes. The Fund will normally invest at least 75% of its net assets in municipal bonds that, at the time of investment, are of investment grade quality or unrated municipal securities considered to be of comparable quality. Investment
grade quality municipal bonds are those rated within the four highest grades (Baa or BBB or better) by Moodys, S&P or Fitch or, if unrated, determined to be of comparable quality by the Adviser. The Fund may invest up to 25% of its net
assets in municipal bonds that, at the time of investment, are rated below investment grade by Moodys, S&P or Fitch or, if unrated, determined to be of comparable quality by the Adviser. Municipal bonds of below investment grade quality
are regarded as having predominantly speculative characteristics with respect to the issuers capacity to pay interest and repay principal, and are commonly referred to as junk bonds. Municipal bonds in the lowest investment grade
category may also be considered to possess some speculative characteristics.
The Funds credit quality policies apply only at the time a security is
purchased, and the Fund is not required to dispose of a security in the event that a rating agency or the Adviser subsequently downgrades its assessment of the credit characteristics of a particular issue. In determining whether to retain or sell
such a security, the Adviser may consider such factors as its assessment of the credit quality of the issuer of the security,
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abfunds.com
|
|
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 67
|
the price at which the security could be sold and the rating, if any, assigned to the security by other rating agencies.
While the Fund intends to invest primarily in municipal bonds that pay interest that is not subject to the federal alternative minimum tax (AMT), it may
invest without limit in municipal bonds that pay interest that is subject to the AMT. Investors who are subject to the AMT or would become subject to the AMT by investing in the Funds preferred stock should consult with their tax advisers
before purchasing such preferred stock. In addition, any capital gain dividends will be subject to capital gains taxes.
The Fund may also invest in securities of
other open- or closed-end investment companies that invest primarily in municipal bonds of the types in which the Fund may invest directly. As a shareholder in an investment company, the Fund would bear its
ratable share of the investment companys expenses in addition to the Funds own expenses.
The Fund may purchase municipal bonds that are subject to
credit enhancements, such as insurance, bank credit agreements, or escrow accounts. The credit quality of companies that provide such credit enhancements will affect the value of those securities. Although the insurance feature reduces certain
financial risks, the premiums for insurance and the higher market price paid for insured obligations may reduce the Funds income. Insurance generally will be obtained from insurers with a claims-paying ability rated A or higher by
Moodys, S&P or Fitch. The insurance feature does not guarantee the market value of the insured obligations or the NAV of the Funds common stock. For temporary or for defensive purposes, including the period during which the net
proceeds of this offering are being invested, the Fund may invest up to 100% of its net assets in short-term investments including high quality, short-term securities that may be either tax-exempt or taxable.
The Fund intends to invest in taxable short-term investments only in the event that suitable tax-exempt short-term investments are not available at reasonable prices and yields. Investments in taxable
short-term investments would result in a portion of your dividends being subject to federal income taxes.
The Funds investment objective, its policy of
investing at least 80% of its net assets in municipal bonds, and its investment restrictions are fundamental and, under the Investment Company Act of 1940, cannot be changed without the approval of a majority of the outstanding voting
shares of the Fund. A majority of the outstanding voting shares of the Fund (whether voting together as a single class or voting as a separate class) means (i) 67% or more of such shares present at a meeting, if the holders of more than
50% of those shares are present or represented by proxy, or (ii) more than 50% of such shares, whichever is less. The Funds investment objective and fundamental policies may not be changed without the approval of a majority of the
outstanding shares of the Funds common stock and preferred stock voting together and a majority of the
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68 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
outstanding preferred stock voting separately by class. Unless stated otherwise, the Funds investment policies are not fundamental and thus can be changed without a stockholder vote. When
an investment policy or restriction has a percentage limitation, such limitation is applied at the time of investment. Changes in the market value of securities in the Funds portfolio after they are purchased by the Fund will not cause the
Fund to be in violation of such limitations.
Principal Investment Risks
See the earlier description of the Funds risks under Disclosures and Risks.
Fundamental Investment Restrictions
Unless specified to the contrary, the
Fund cannot change its investment objective or fundamental policies without the approval of the holders of a majority of the outstanding voting shares of the Fund and of the holders of a majority of the outstanding preferred
stock of the Fund voting as a separate class. A majority of the outstanding shares (whether voting together as a single class or voting as a separate class) means (i) 67% or more of such shares present at a meeting, if the holders of
more than 50% of those shares are present or represented by proxy, or (ii) more than 50% of such shares, whichever is less. The Fund may not:
|
1.
|
Concentrate its investments in a particular industry, as that term is used in the 1940 Act and as interpreted, modified,
or otherwise permitted by regulatory authority having jurisdiction, from time to time.
|
|
2.
|
Purchase or sell real estate, although it may purchase securities (including municipal bonds) secured by real estate or
interests therein, or securities issued by companies that invest in real estate, or interests therein.
|
|
3.
|
Make loans except through (i) the purchase of debt obligations in accordance with its investment objectives and
policies; or (ii) the use of repurchase agreements.
|
|
4.
|
Purchase or sell commodities or commodities contracts or oil, gas or mineral programs. This restriction shall not
prohibit the Fund, subject to restrictions described in the Funds Prospectus and Statement of Additional Information, from purchasing, selling or entering into futures contracts, options on futures contracts, forward contracts, or any interest
rate, securities-related or other hedging instruments, including swap agreements and other derivative instruments, subject to compliance with any applicable provisions of the federal securities or commodities laws.
|
|
5.
|
Borrow money or issue any senior security, except in accordance with provisions of the 1940 Act and specifically the
Fund may (a) borrow from a bank or other entity in a privately arranged
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abfunds.com
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ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 69
|
|
transaction and issue commercial paper, bonds, debentures or notes, in series or otherwise, with such interest rates, conversion rights and other terms and provisions as are determined by the
Funds Board of Directors, if after such borrowing or issuance there is asset coverage of at least 300% as defined in the 1940 Act; and (b) issue preferred stock with such preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption as are determined by the Funds Board of Directors, if after such issuance there is asset coverage of at least 225% as
defined in the 1940 Act.
|
|
6.
|
Pledge, hypothecate, mortgage or otherwise encumber its assets, except (i) to secure permitted borrowings,
(ii) in connection with initial and variation margin deposits relating to futures contracts and (iii) any segregated accounts established in accordance with its investment objective and policies.
|
|
7.
|
Act as an underwriter of securities of other issuers, except to the extent that in connection with the disposition of
portfolio securities, it may be deemed to be an underwriter under the federal securities laws.
|
The Funds industry concentration policy
does not preclude it from focusing investments in issuers in a group of related industries (such as different types of utilities).
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70 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
|
|
abfunds.com
|
This page is not part of the Shareholder Report or the Financial Statements.
AB FAMILY OF FUNDS
US EQUITY
CORE
Core Opportunities Fund
Select US Equity Portfolio
Sustainable US Thematic Portfolio1
GROWTH
Concentrated Growth Fund
Discovery Growth Fund
Growth Fund
Large
Cap Growth Fund
Small Cap Growth Portfolio
VALUE
Discovery Value Fund
Equity Income Fund
Relative Value Fund
Small Cap Value Portfolio
Value Fund
INTERNATIONAL/
GLOBAL EQUITY
CORE
Global Core
Equity Portfolio
International Strategic Core Portfolio
Sustainable Global Thematic Fund
Tax-Managed Wealth Appreciation Strategy
Wealth Appreciation Strategy
GROWTH
Concentrated International Growth Portfolio
Sustainable International Thematic Fund
VALUE
All China Equity Portfolio
International Value Fund
FIXED INCOME
MUNICIPAL
High Income Municipal Portfolio
Intermediate California Municipal Portfolio
Intermediate Diversified Municipal Portfolio
Intermediate New York Municipal Portfolio
Municipal Bond Inflation Strategy
Tax-Aware Fixed Income Opportunities Portfolio
National Portfolio
Arizona Portfolio
California Portfolio
Massachusetts Portfolio
Minnesota Portfolio
New Jersey Portfolio
New York Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
TAXABLE
Bond Inflation Strategy
Global Bond Fund
High Income Fund
High Yield Portfolio1
Income Fund
Intermediate Duration Portfolio
Limited Duration High Income Portfolio
Short Duration Income Portfolio
Short Duration Portfolio
Sustainable Thematic Credit Portfolio
Total Return Bond Portfolio
ALTERNATIVES
All Market Real Return Portfolio
Global Real Estate Investment Fund
Select US Long/Short Portfolio
MULTI-ASSET
All
Market Income Portfolio
All Market Total Return Portfolio
Emerging Markets Multi-Asset Portfolio
Global Risk Allocation Fund
Sustainable Thematic Balanced Portfolio1
Tax-Managed All Market Income Portfolio
CLOSED-END FUNDS
AllianceBernstein Global High Income Fund
AllianceBernstein National Municipal Income Fund
We also offer Government Money Market Portfolio, which serves as the money market fund exchange vehicle for the AB
mutual funds. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon sale of your shares or may
temporarily suspend your ability to sell shares if the Funds liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. The Funds sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary
prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
1
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Prior to December 1, 2021, Sustainable Thematic Balanced Portfolio was named Conservative Wealth Strategy. Prior to
August 23, 2021, Sustainable US Thematic Portfolio was named FlexFee US Thematic Portfolio. Prior to April 30, 2021, High Yield Portfolio was named FlexFee High Yield Portfolio.
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abfunds.com
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ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 71
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NOTES
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72 | ALLIANCEBERNSTEIN
NATIONAL MUNICIPAL INCOME FUND
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abfunds.com
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Privacy Notice
AllianceBernstein and its affiliates (collectively referred to as AllianceBernstein, we, our, and
similar pronouns) understand the importance of maintaining the confidentiality and security of our clients nonpublic personal information. Nonpublic personal information is personally identifiable financial information about our clients who
are natural persons. To provide financial products and services to our clients, we collect nonpublic personal information from a variety of sources, including: (1) information we receive from clients, such as through applications or other
forms, which can include a clients name, address, phone number, social security number, assets, income and other household information, (2) information about client transactions with us, our affiliates and
non-affiliated third parties, which can include account balances and transactions history, and (3) information from visitors to our websites provided through online forms, site visitorship data and online
information-collecting devices known as cookies.
We may disclose all of the nonpublic personal information that we
collect about our current and former clients, as described above, to non-affiliated third parties to manage our business and as otherwise required or permitted by law, including those that perform transaction
processing or servicing functions, marketing services providers that provide marketing services on our behalf pursuant to a joint marketing agreement, and professional services firms that provide knowledge-based services such as accountants,
consultants, lawyers and auditors to help manage client accounts. We require all the third-party providers to adhere to our privacy policy or a functional equivalent.
We may also disclose the nonpublic personal information that we collect about current and former clients, as described above, to our
affiliated investment, brokerage, service and insurance companies for the purpose of marketing their products or services to clients under circumstances that are permitted by law, such as if our affiliate has its own relationship with you. We have
policies and procedures to ensure that certain conditions are met before an AllianceBernstein affiliated company may use information obtained from another affiliate to solicit clients for marketing purposes.
We will also use nonpublic personal information about our clients for our own internal analysis, analytics, research and development,
and to improve and add to our client offerings.
We have policies and procedures designed to safeguard the confidentiality and
security of nonpublic personal information about our clients that include restricting access to nonpublic personal information to personnel that have been screened and undergone security and privacy training; to personnel who need it to perform
their work functions such as our operations, customer service, account management, finance, quality, vendor management and compliance teams as required to provide services, communicate with you and fulfill our legal obligations.
We employ reasonably designed physical, electronic and procedural safeguards to secure and protect client nonpublic personal
information.
If you are in the European Economic Area (EEA) or Switzerland, we will comply with applicable legal
requirements providing adequate protection for the transfer of personal information to recipients in countries outside of the EEA and Switzerland.
For more information, our Privacy Policy statement can be viewed here:
https://www.alliancebernstein.com/abcom/Privacy_Terms/PrivacyPolicy.htm.
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND
1345 Avenue of the Americas
New York, NY 10105
800 221 5672
ABNMIF-0151-1021
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT
COMPANIES.
Statement of Policies and Procedures for
Proxy Voting
AllianceBernstein L.P.s (AB, we, us, our and similar terms) mission is to work in our clients best
interests to deliver better investment outcomes through differentiated research insights and innovative portfolio solutions. As a fiduciary and investment adviser, we place the interests of our clients first and treat all our clients fairly and
equitably, and we have an obligation to responsibly allocate, manage and oversee their investments to seek sustainable, long-term shareholder value.
AB
has authority to vote proxies relating to securities in certain client portfolios and, accordingly, ABs fiduciary obligations extend to ABs exercise of such proxy voting authority for each client AB has agreed to exercise that duty.
ABs general policy is to vote proxy proposals, amendments, consents or resolutions relating to client securities, including interests in private investment funds, if any (collectively, proxies), in a manner that serves the best
interests of each respective client as determined by AB in its discretion, after consideration of the relevant clients investment strategies, and in accordance with this Proxy Voting and Governance Policy (Proxy Voting and Governance
Policy or Policy) and the operative agreements governing the relationship with each respective client (Governing Agreements). This Policy outlines our principles for proxy voting, includes a wide range of
issues that often appear on voting ballots, and applies to all of ABs internally managed assets, globally. It is intended for use by those involved in the proxy voting decision-making process and those responsible for the administration of
proxy voting (members of Responsibility team), in order to ensure that this Policy and its procedures are implemented consistently.
To
be effective stewards of our clients investments and maximize shareholder value, we need to vote proxies on behalf of our clients responsibly. This Policy forms part of a suite of policies and frameworks beginning with
ABs Stewardship Statement that outline our approach to Responsibility, stewardship, engagement, climate change, human rights, global slavery and human trafficking, and controversial investments. Proxy voting is an integral
part of this process, enabling us to support strong corporate governance structures, shareholder rights, transparency and disclosure, and encourage corporate action on material environmental, social and governance (ESG) and climate
issues.
This Policy is overseen by the Proxy Voting and Governance Committee (Proxy Voting and Governance Committee or
Committee), which provides oversight and includes senior representatives from Equities, Fixed Income, Responsibility, Legal and Operations. It is the responsibility of the Committee to evaluate and maintain proxy
voting procedures and guidelines, to evaluate proposals and issues not covered by these guidelines, to consider changes in the Policy, and to review the Policy no less frequently than annually. In addition, the Committee meets at least three times a
year and as necessary to address special situations.
2.
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RESEARCH UNDERPINS DECISION MAKING
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As a research-driven firm, we approach our proxy voting responsibilities with the same commitment to rigorous research and engagement that we apply to all of
our investment activities. The different investment philosophies utilized by our investment teams may occasionally result in different conclusions being drawn regarding certain proposals. In turn, our votes on some proposals may vary by issuer,
while maintaining the goal of maximizing the value of the securities in client portfolios.
We sometimes manage accounts where proxy voting is directed by
clients or newly acquired subsidiary companies. In these cases, voting decisions may deviate from this Policy. Where we have agreed to vote proxies on behalf of our clients, we have an obligation to vote proxies in a timely manner and we apply the
principles in this Policy to our proxy decisions. To the extent there are any inconsistencies between this Policy and a clients Governing Agreements, the Governing Agreements shall supersede this Policy.
RESEARCH SERVICES
We subscribe to the corporate governance and
proxy research services of vendors such as Institutional Shareholder Services Inc. (ISS) and Glass Lewis at different levels. This research includes proxy voting recommendations distributed by ISS and Glass Lewis. All our
investment professionals can access these materials via the members of the Responsibility team and/or the Committee.
ENGAGEMENT
In
evaluating proxy issues and determining our votes, we welcome and seek perspectives of various parties. Internally, members of Responsibility team may consult the Committee, Chief Investment Officers, Portfolio Managers, and/or Research Analysts
across our equities platforms, and Portfolio Managers who manage accounts in which a stock is held. Externally, we may engage with companies in advance of their Annual General Meeting, and throughout the year. We believe engagement provides the
opportunity to share our philosophy, our corporate governance values, and more importantly, affect positive change that we believe will drive shareholder value. Also, these meetings often are joint efforts between the investment professionals, who
are best positioned to comment on company-specific details, and members of Responsibility team, who offer a more holistic view of ESG and climate practices and relevant trends. In addition, we engage with shareholder proposal proponents and other
stakeholders to understand different viewpoints and objectives.
3.
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PROXY VOTING GUIDELINES
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Our proxy voting guidelines are both principles-based and rules-based. We adhere to a core set of principles that are described in this Policy. We assess each
proxy proposal in light of these principles. Our proxy voting litmus test will always be guided by what we view as most likely to maximize long-term shareholder value. We believe that authority and accountability for setting and
executing corporate policies, goals and compensation generally should rest with a companys board of directors and senior management. In return, we support strong investor rights that allow shareholders to hold directors and management
accountable if they fail to act in the best interests of shareholders.
With this as a backdrop, our proxy voting guidelines pertaining to specific issues
are set forth below. We generally vote proposals in accordance with these guidelines but, consistent with our principles-based approach to proxy voting, we may deviate from these guidelines if we believe that deviating from our stated
Policy is necessary to help maximize long-term shareholder value) or as otherwise warranted by the specific facts and circumstances of an investment. In addition, these guidelines are not intended to address all issues that may appear on all proxy
ballots. We will evaluate on a case-by-case basis any proposal not specifically addressed by these guidelines, whether submitted by management or shareholders, always
keeping in mind our fiduciary duty to make voting decisions that, by maximizing long-term shareholder value, are in our clients best interests.
SHAREHOLDER PROPOSAL ASSESSMENT FRAMEWORK
ABs commitment
to maximize the long-term value of clients portfolios drives how we analyze shareholder proposals. Rather than opting to automatically support all shareholder proposals that mention an ESG or climate issue, we evaluate whether or not each
shareholder proposal promotes genuine improvement in the way a company addresses an ESG or climate issue, thereby enhancing shareholder value for our clients in managing a more comprehensive set of risks and opportunities for the companys
business. The evaluation of a proposal that addresses an ESG or climate issue will consider (among other things) the following core factors, as necessary:
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Materiality of the mentioned ESG or climate issue for the companys business
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The companys current practice, policy and framework
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Prescriptiveness of the proposal does the shareholder demand unreasonably restrict management from
conducting its business?
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Context of the shareholder proposal is the proponent tied to any particular interest group(s)? Does the
proposal aim to promote the interest of the shareholders or group that they are associated with?
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How does the proposal add value for the shareholders?
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We believe ESG and climate considerations are important elements that help improve the accuracy of our valuation of companies. We think it is in our
clients best interests to incorporate a more comprehensive set of risks and opportunities, such as ESG and climate issues, from a long-term shareholder value perspective.
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3.1
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BOARD AND DIRECTOR PROPOSALS
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1.
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Board Oversight and Director Accountability on Material Environmental and Social Topics Impacting Shareholder Value: Climate Risk Management and Human Rights Oversight
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CASE-BY-CASE
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AB believes that board oversight and director accountability are critical elements of corporate governance. Companies
demonstrate effective governance through proactive monitoring of material risks and opportunities, including ESG related risks and opportunities. In evaluating investee companies adaptiveness to evolving climate risks and human rights
oversight, AB engages its significant holdings on climate strategy through a firmwide campaign. Based on each companys response, AB will hold respective directors accountable as defined by the committee charter of the company.
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2.
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Establish New Board Committees and Elect Board Members with Specific Expertise (SHP)
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CASE-BY-CASE
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We believe that establishing committees should be the prerogative of a well-functioning board of directors. However, we may
support shareholder proposals to establish additional board committees to address specific shareholder issues, including ESG and climate issues. In some cases, oversight for material ESG issues can be managed effectively by existing committees of
the board of directors, depending on the expertise of the directors assigned to such committees. We consider on a case-by-case basis proposals that require the addition
of a board member with a specific area of expertise.
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3.
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Changes in Board Structure and Amending the Articles of Incorporation
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FOR
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Companies may propose various provisions with respect to the structure of the board of directors, including changing the manner
in which board vacancies are filled, directors are nominated and the number of directors. Such proposals may require amending the charter or by-laws or may otherwise require shareholder approval. When these
proposals are not controversial or meant as an anti-takeover device, which is generally the case, we vote in their favor. However, if we believe a proposal is intended as an anti-takeover device and diminishes shareholder rights, we generally vote
against.
We may vote against directors for amending by-laws without seeking shareholder approval and/or
restricting or diminishing shareholder rights.
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4.
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Classified Boards
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AGAINST
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A classified board typically is divided into three separate classes. Each class holds office for a term of two or three years.
Only a portion of the board can be elected or replaced each year. Because this type of proposal has fundamental anti-takeover implications, we generally oppose the adoption of classified boards unless there is a justifiable financial reason or an
adequate sunset provision. We may also vote against directors that fail to implement shareholder approved proposals to declassify boards that we previously supported.
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5.
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Director Liability and Indemnification
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CASE-BY-CASE
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Some companies argue that increased indemnification and decreased liability for directors are important to ensure the continued
availability of competent directors. However, others argue that the risk of such personal liability minimizes the propensity for corruption and recklessness.
We generally support indemnification provisions that are consistent with the local jurisdiction in which the company has been formed. We vote in favor of
proposals adopting indemnification for directors with respect to acts conducted in the normal course of business. We also vote in favor of proposals that expand coverage for directors and officers where, despite an unsuccessful legal defense, we
believe the director or officer acted in good faith and in the best interests of the company. We oppose proposals to indemnify directors for gross negligence.
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6.
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Disclose CEO Succession Plan (SHP)
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FOR
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Proposals like these are often suggested by shareholders of companies with long-tenured CEOs and/or high employee turnover
rates. Even though some markets might not require the disclosure of a CEO succession plan, we do think it is good business practice and will support these proposals.
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7.
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Election of Directors
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FOR
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The election of directors is an important vote. We expect directors to represent shareholder interests at the company and
maximize shareholder value. We generally vote in favor of the management-proposed slate of directors while considering a number of factors, including local market best practice. We believe companies should have a majority of independent directors
and independent key committees. However, we will incorporate local market regulation and corporate governance codes into our decision making. We may support requirements that surpass market regulation and corporate governance codes implemented in a
local market if we believe heightened requirements may improve corporate governance practices. We will generally regard a director as independent if the director satisfies the criteria for independence either (i) espoused by the primary
exchange on which the companys shares are traded, or (ii) set forth in the code we determine to be best practice in the country where the subject company is domiciled. We may also take into account affiliations, related-party transactions
and prior service to the company. We consider the election of directors who are bundled on a single slate to be a poor governance practice and vote on a
case-by-case basis considering the amount of information available and an assessment of the groups qualifications.
In addition:
We believe that directors have a duty to respond
to shareholder actions that have received significant shareholder support. We may vote against directors (or withhold votes for directors if plurality voting applies) who fail to act on key issues. We oppose directors who fail to attend at least 75%
of board meetings within a given year without a reasonable excuse.
We may abstain or vote against (depending on a companys history of disclosure in
this regard) directors of issuers where there is insufficient information about the nominees disclosed in the proxy statement.
We may vote against
directors for poor compensation, audit or governance practices, including the lack of a formal key committee.
We may vote against directors for unilateral bylaw amendments that diminish shareholder rights.
We also may consider engaging company management (by phone, in writing and in person), until any issues have been satisfactorily resolved.
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a.
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Controlled Company Exemption
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CASE-BY-CASE
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In certain markets, a different standard for director independence may be applicable for controlled
companies, which are companies where more than 50% of the voting power is held by an individual, group or another company, or as otherwise defined by local market standards. We may take these local standards into consideration when determining the
appropriate level of independence required for the board and key committees.
Exchanges in certain jurisdictions do not have a controlled
company exemption (or something similar). In such a jurisdiction, if a company has a majority shareholder or group of related majority shareholders with a majority economic interest, we generally will not oppose that companys directors simply
because the board does not include a majority of independent members, although we may take local standards into consideration when determining the appropriate level of independence required for the board and key committees. We will, however,
consider these directors in a negative light if the company has a history of violating the rights of minority shareholders.
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b.
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Voting for Director Nominees in a Contested Election
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CASE-BY-CASE
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Votes in a contested election of directors are evaluated on a case-by-case basis with the goal of maximizing shareholder value.
We believe that incorporating an assessment of each directors capacity into consideration for a director election is essential to promote meaningful
board oversight of the management. Director effectiveness aside, a social externality arises when the practice of directors serving on many public company boards becomes widespread, as this limits the opportunities for other board candidates,
particularly diverse candidates. AB currently votes against the appointment of directors who occupy, or would occupy following the vote: four (4) or more outside public company board seats for non-CEOs,
three (3) or more outside public company board seats for the sitting CEO of the company in question and two (2) or more outside public company board seats for sitting CEOs of companies other than the company under consideration. We may
also exercise flexibility on occasions where the over-boarded director nominees presence on the board is critical, based on company specific contexts in absence of any notable accountability concerns.
Diversity is an important element of assessing the boards quality, as it promotes wider range of perspectives to be considered for companies to both
strategize and mitigate risks. In line with this view, several European countries legally require a quota of female directors. Other European countries have a comply-or-explain policy. In the US, California
requires corporations headquartered in the State of California to have at least one female director on board.
We believe that boards should develop, as
part of their refreshment process, a framework for identifying diverse candidates for all open board positions. We believe diversity is broader than gender and should also take into consideration factors such as business experience, ethnicity,
tenure and nationality. As such, we generally vote in favor of proposals that encourage the adoption of a diverse search policy, so-called Rooney Rules, assuring that each director search includes
at least one woman, and in the US, at least one underrepresented person of color, in the slate of nominees. Our views on board diversity translate to the following two voting approaches:
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a.
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Gender Diversity: AB will generally vote against the nominating/governance committee chair, or a relevant
incumbent member in case of classified boards, when the board has no female members. In Japan, we will vote against the top management. This approach applies globally.
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b.
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Ethnic and Racial Diversity: AB will escalate the topic of board level ethnic/racial diversity and engage with
its significant holdings that lack a minority ethnic/racial representation on the board through 2021. Based on the outcome of such engagements, AB will begin voting against the nominating/governance committee chair or a relevant incumbent member for
classified boards of companies that lack minority ethnic/racial representation on their board in 2022.
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10.
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Independent Lead Director (SHP)
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FOR
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We support shareholder proposals that request a company to amend its by-laws to
establish an independent lead director if the position of chairman is non-independent. We view the existence of a strong independent lead director, whose role is robust and includes clearly defined duties and
responsibilities, such as the authority to call meetings and approve agendas, as a good example of the sufficient counter-balancing governance. If a company has such an independent lead director in place, we will generally oppose a proposal to
require an independent board chairman, barring any additional board leadership concerns.
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11.
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Limit Term of Directorship (SHP)
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CASE-BY-CASE
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These proposals seek to limit the term during which a director may serve on a board to a set number of years.
Accounting for local market practice, we generally consider a number of factors, such as overall level of board independence, director qualifications, tenure,
board diversity and board effectiveness in representing our interests as shareholders, in assessing whether limiting directorship terms is in shareholders best interests. Accordingly, we evaluate these items case-by-case.
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12.
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Majority Independent1 Directors (SHP)
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FOR
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Each companys board of directors has a duty to act in the best interest of the companys shareholders at all times.
We believe that these interests are best served by having directors who bring objectivity to the company and are free from potential conflicts of interests. Accordingly, we support proposals seeking a majority of independent directors on the board
while taking into consideration local market regulation and corporate governance codes.
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13.
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Majority of Independent Directors on Key Committees (SHP)
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FOR
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In order to ensure that those who evaluate managements performance, recruit directors and set managements
compensation are free from conflicts of interests, we believe that the audit2, nominating/governance, and compensation committees should be composed of a majority of independent directors,
considering the local market regulation and corporate governance codes as well as controlled company status.
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14.
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Majority Votes for Directors (SHP)
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FOR
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We believe that good corporate governance requires shareholders to have a meaningful voice in the affairs of the company. This
objective is strengthened if directors are elected by a majority of votes cast at an annual meeting rather than by the plurality method commonly used. With plurality voting a director could be elected by a single affirmative vote even if the rest of
the votes were withheld.
We further believe that majority voting provisions will lead to greater director accountability. Therefore, we support
shareholder proposals that companies amend their by-laws to provide that director nominees be elected by an affirmative vote of a majority of the votes cast, provided the proposal includes a carve-out to provide for plurality voting in contested elections where the number of nominees exceeds the number of directors to be elected.
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15.
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Removal of Directors Without Cause (SHP)
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FOR
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Company by-laws sometimes define cause very narrowly, including only conditions of
criminal indictment, final adverse adjudication that fiduciary duties were breached or incapacitation, while also providing shareholders with the right to remove directors only upon cause.
We believe that the circumstances under which shareholders have the right to remove directors should not be limited to those traditionally defined by
companies as cause. We also believe that shareholders should have the right to conduct a vote to remove directors who fail to perform in a manner consistent with their fiduciary duties or representative of shareholders best
interests. And, while we would prefer shareholder proposals that seek to broaden the definition of cause to include situations like these, we generally support proposals that would provide shareholders with the right to remove directors
without cause.
1
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For purposes of this Policy, generally, we will consider a director independent if the director satisfies the
independence definition set forth in the listing standards of the exchange on which the common stock is listed. However, we may deem local independence classification criteria insufficient.
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2
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Pursuant to the SEC rules, adopted pursuant to the Sarbanes-Oxley Act of 2002, as of October 31, 2004,
each U.S. listed issuer must have a fully independent audit committee.
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16.
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Require Independent Board Chairman (SHP)
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CASE-BY-CASE
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We believe there can be benefits to an executive chairman and to having the positions of chairman and CEO combined as well as
split. When the chair is non-independent, the company must have sufficient counter-balancing governance in place, generally through a strong independent lead director. Also, for companies with smaller market
capitalizations, separate chairman and CEO positions may not be practical.
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3.2
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COMPENSATION PROPOSALS
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17.
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Pro Rata Vesting of Equity Compensation Awards-Change in Control (SHP)
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CASE-BY-CASE
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We examine proposals on the treatment of equity awards in the event of a change in control on a
case-by-case basis. If a change in control is accompanied by termination of employment, often referred to as a double-trigger, we generally support accelerated vesting
of equity awards. If, however, there is no termination agreement in connection with a change in control, often referred to as a single-trigger, we generally prefer pro rata vesting of outstanding equity awards.
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18.
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Adopt Policies to Prohibit any Death Benefits to Senior Executives (SHP)
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AGAINST
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We view these bundled proposals as too restrictive and conclude that blanket restrictions on any and all such benefits,
including the payment of life insurance premiums for senior executives, could put a company at a competitive disadvantage.
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19.
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Advisory Vote to Ratify Directors Compensation (SHP)
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FOR
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Similar to advisory votes on executive compensation, shareholders may request a
non-binding advisory vote to approve compensation given to board members. We generally support this item
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20.
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Amend Executive Compensation Plan Tied to Performance (Bonus Banking) (SHP)
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AGAINST
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These proposals seek to force a company to amend executive compensation plans such that compensation awards tied to performance
are deferred for shareholder specified and extended periods of time. As a result, awards may be adjusted downward if performance goals achieved during the vesting period are not sustained during the added deferral period.
We believe that most companies have adequate vesting schedules and clawbacks in place. Under such circumstances, we will oppose these proposals. However, if a
company does not have what we believe to be adequate vesting and/or clawback requirements, we decide these proposals on a case-by-case basis.
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21.
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Approve Remuneration for Directors and Auditors
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CASE-BY-CASE
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We will vote on a case-by-case basis where we
are asked to approve remuneration for directors or auditors. We will generally oppose performance-based remuneration for non-executive directors as this may compromise independent oversight. In addition, where
disclosure relating to the details of such remuneration is inadequate or provided without sufficient time for us to consider our vote, we may abstain or vote against, depending on the adequacy of the companys prior disclosures in this regard
and the local market practice.
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22.
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Approve Retirement Bonuses for Directors (Japan and South Korea)
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CASE-BY-CASE
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Retirement bonuses are customary in Japan and South Korea. Companies seek approval to give the board authority to grant
retirement bonuses for directors and/or auditors and to leave the exact amount of bonuses to the boards discretion. We will analyze such proposals on a
case-by-case basis, considering managements commitment to maximizing long- term shareholder value. However, when the details of the retirement bonus are inadequate
or undisclosed, we may abstain or vote against.
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23.
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Approve Special Payments to Continuing Directors and Auditors (Japan)
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CASE-BY-CASE
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In conjunction with the abolition of a companys retirement allowance system, we will generally support special payment
allowances for continuing directors and auditors if there is no evidence of their independence becoming impaired. However, when the details of the special payments are inadequate or undisclosed, we may abstain or vote against.
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24.
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Disclose Executive and Director Pay (SHP)
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CASE-BY-CASE
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The United States Securities and Exchange Commission (SEC) has adopted rules requiring increased and/or
enhanced compensation-related and corporate governance-related disclosure in proxy statements and Forms 10-K. Similar steps have been taken by regulators in foreign jurisdictions. We believe the rules enacted
by the SEC and various foreign regulators generally ensure more complete and transparent disclosure. Therefore, while we will consider them on a case-by-case basis
(analyzing whether there are any relevant disclosure concerns), we generally vote against shareholder proposals seeking additional disclosure of executive and director compensation, including proposals that seek to specify the measurement of
performance-based compensation, if the company is subject to SEC rules or similar rules espoused by a regulator in a foreign jurisdiction. Similarly, we generally support proposals seeking additional disclosure of executive and director compensation
if the company is not subject to any such rules.
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25.
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Executive and Employee Compensation Plans, Policies and Reports
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CASE-BY-CASE
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Compensation plans usually are complex and are a major corporate expense, so we evaluate them carefully and on a case-by-case basis. In all cases, however, we assess each proposed Compensation Plan within the framework of four guiding principles, each of which ensures a companys
Compensation Plan helps to align the long- term interests of management with shareholders:
Valid measures of business performance tied to the firms
strategy and shareholder value creation, which are clearly articulated and incorporate appropriate time periods, should be utilized;
Compensation costs
should be managed in the same way as any other expense;
Compensation should reflect managements handling, or failure to handle, any recent social,
environmental, governance, ethical or legal issue that had a significant adverse financial or reputational effect on the company and;
In granting
compensatory awards, management should exhibit a history of integrity and decision-making based on logic and well thought out processes.
We may oppose
plans which include, and directors who establish, compensation plan provisions deemed to be poor practice such as automatic acceleration of equity, or single-triggered, in the event of a change in control. Although votes on compensation plans are by
nature only broad indications of shareholder views, they do lead to more compensation-related dialogue between management and shareholders and help ensure that management and shareholders meet their common objective: maximizing shareholder value.
In markets where votes on compensation plans are not required for all companies, we will support shareholder proposals asking the board to adopt such a
vote on an advisory basis.
Where disclosure relating to the details of Compensation Plans is inadequate or provided without sufficient time for us to
consider our vote, we may abstain or vote against, depending on the adequacy of the companys prior disclosures in this regard. Where appropriate, we may raise the issue with the company directly or take other steps.
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26.
|
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Limit Executive Pay (SHP)
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CASE-BY-CASE
|
We believe that management and directors, within reason, should be given latitude in determining the mix and types of awards
offered to executive officers. We vote against shareholder proposals seeking to limit executive pay if we deem them too restrictive. Depending on our analysis of the specific circumstances, we are generally against requiring a company to adopt a
policy prohibiting tax gross up payments to senior executives.
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27.
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|
Mandatory Holding Periods (SHP)
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|
AGAINST
|
We generally vote against shareholder proposals asking companies to require a companys executives to hold stock for a
specified period of time after acquiring that stock by exercising company-issued stock options (i.e., precluding cashless option exercises), unless we believe implementing a mandatory holding period is necessary to help resolve
underlying problems at a company that have hurt, and may continue to hurt, shareholder value. We are generally in favor of reasonable stock ownership guidelines for executives.
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28.
|
|
Performance-Based Stock Option Plans (SHP)
|
|
CASE-BY-CASE
|
These shareholder proposals require a company to adopt a policy that all or a portion of future stock options granted to
executives be performance-based. Performance-based options usually take the form of indexed options (where the option sale price is linked to the companys stock performance versus an industry index), premium priced options (where the strike
price is significantly above the market price at the time of the grant) or performance vesting options (where options vest when the companys stock price exceeds a specific target). Proponents argue that performance-based options provide an
incentive for executives to outperform the market as a whole and prevent management from being rewarded for average performance. We believe that management, within reason, should be given latitude in determining the mix and types of awards it
offers. However, we recognize the benefit of linking a portion of executive compensation to certain types of performance benchmarks. While we will not support proposals that require all options to be performance-based, we will generally support
proposals that require a portion of options granted to senior executives be performance-based. However, because performance-based options can also result in unfavorable tax treatment and the company may already have in place an option plan that
sufficiently ties executive stock option plans to the companys performance, we will consider such proposals on a case-by-case basis.
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29.
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Prohibit Relocation Benefits to Senior Executives (SHP)
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AGAINST
|
We do not consider such perquisites to be problematic pay practices as long as they are properly disclosed. Therefore we will
vote against shareholder proposals asking to prohibit relocation benefits.
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30.
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|
Recovery of Performance-Based Compensation (SHP)
|
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FOR
|
We generally support shareholder proposals requiring the board to seek recovery of performance-based compensation awards to
senior management and directors in the event of a fraud or other reasons that resulted in the detriment to shareholder value and/or company reputation due to gross ethical lapses. In deciding how to vote, we consider the adequacy of the existing
company clawback policy, if any.
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31.
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|
Submit Golden Parachutes/Severance Plans to a Shareholder Vote (SHP)
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FOR
|
Golden Parachutes assure key officers of a company lucrative compensation packages if the company is acquired and/or if the new
owners terminate such officers. We recognize that offering generous compensation packages that are triggered by a change in control may help attract qualified officers. However, such compensation packages cannot be so excessive that they are unfair
to shareholders or make the company unattractive to potential bidders, thereby serving as a constructive anti-takeover mechanism. Accordingly, we support proposals to submit severance plans (including supplemental retirement plans), to a shareholder
vote, and we review proposals to ratify or redeem such plans retrospectively on a case-by-case basis.
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32.
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Submit Golden Parachutes/Severance Plans to a Shareholder Vote Prior to Their Being Negotiated by Management (SHP)
|
|
CASE-BY-CASE
|
We believe that in order to attract qualified employees, companies must be free to negotiate compensation packages without
shareholder interference. However, shareholders must be given an opportunity to analyze a compensation plans final, material terms in order to ensure it is within acceptable limits. Accordingly, we evaluate proposals that require submitting
severance plans and/or employment contracts for a shareholder vote prior to being negotiated by management on a case-by-case basis.
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33.
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Submit Survivor Benefit Compensation Plan to Shareholder Vote (SHP)
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FOR
|
Survivor benefit compensation plans, or golden coffins, can require a company to make substantial payments or
awards to a senior executives beneficiaries following the death of the senior executive. The compensation can take the form of unearned salary or bonuses, accelerated vesting or the continuation in force of unvested equity grants, perquisites
and other payments or awards. This compensation would not include compensation that the senior executive chooses to defer during his or her lifetime.
We
recognize that offering generous compensation packages that are triggered by the passing of senior executives may help attract qualified officers. However, such compensation packages cannot be so excessive that they are unfair to shareholders or
make the company unattractive to potential bidders, thereby serving as a constructive anti-takeover mechanism.
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3.3
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CAPITAL CHANGES AND ANTI-TAKEOVER PROPOSALS
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34.
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Amend Exclusive Forum Bylaw (SHP)
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AGAINST
|
We will generally oppose proposals that ask the board to repeal the companys exclusive forum bylaw. Such bylaws require
certain legal action against the company to take place in the state of the companys incorporation. The courts within the state of incorporation are considered best suited to interpret that states laws.
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35.
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Amend Net Operating Loss (NOL) Rights Plans
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FOR
|
NOL Rights Plans are established to protect a companys net operating loss carry forwards and tax credits, which can be
used to offset future income. We believe this is a reasonable strategy for a company to employ. Accordingly, we will vote in favor of NOL Rights Plans unless we believe the terms of the NOL Rights Plan may provide for a long-term anti- takeover
device.
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36.
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Authorize Share Repurchase
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FOR
|
We generally support share repurchase proposals that are part of a well-articulated and well-conceived capital strategy. We
assess proposals to give the board unlimited authorization to repurchase shares on a case-by-case basis.
Furthermore, we would generally support the use of derivative instruments (e.g., put options and call options) as part of a share repurchase plan absent a
compelling reason to the contrary. Also, absent a specific concern at the company, we will generally support a repurchase plan that could be continued during a takeover period.
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37.
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|
Blank Check Preferred Stock
|
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AGAINST
|
Blank check preferred stock proposals authorize the issuance of certain preferred stock at some future point in time and allow
the board to establish voting, dividend, conversion and other rights at the time of issuance. While blank check preferred stock can provide a corporation with the flexibility needed to meet changing financial conditions, it also may be used as the
vehicle for implementing a poison pill defense or some other entrenchment device.
We are concerned that, once this stock has been authorized,
shareholders have no further power to determine how or when it will be allocated. Accordingly, we generally oppose this type of proposal.
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38.
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|
Corporate Restructurings, Merger Proposals and Spin-Offs
|
|
CASE-BY-CASE
|
Proposals requesting shareholder approval of corporate restructurings, merger proposals and spin-offs are determined on a case-by-case basis. In evaluating these proposals and determining our votes, we are singularly focused on meeting our goal of maximizing long-term shareholder value.
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39.
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|
Elimination of Preemptive Rights
|
|
CASE-BY-CASE
|
Preemptive rights allow the shareholders of the company to buy newly issued shares before they are offered to the public in
order to maintain their percentage ownership. We believe that, because preemptive rights are an important shareholder right, careful scrutiny must be given to managements attempts to eliminate them. However, because preemptive rights can be
prohibitively expensive to widely held companies, the benefit of such rights will be weighed against the economic effect of maintaining them.
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40.
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|
Expensing Stock Options (SHP)
|
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FOR
|
US generally accepted accounting principles require companies to expense stock options, as do the accounting rules in many
other jurisdictions (including those jurisdictions that have adopted IFRS international financial reporting standards). If a company is domiciled in a jurisdiction where the accounting rules do not already require the expensing of stock
options, we will support shareholder proposals requiring this practice and disclosing information about it.
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41.
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|
Fair Price Provisions
|
|
CASE-BY-CASE
|
A fair price provision in the companys charter or by laws is designed to ensure that each shareholders securities
will be purchased at the same price if the corporation is acquired under a plan not agreed to by the board. In most instances, the provision requires that any tender offer made by a third party must be made to all shareholders at the same price.
Fair pricing provisions attempt to prevent the two-tiered front-loaded offer where the acquirer of a
company initially offers a premium for a sufficient percentage of shares of the company to gain control and subsequently makes an offer for the remaining shares at a much lower price. The remaining shareholders have no choice but to accept the
offer. The two -tiered approach is coercive as it compels a shareholder to sell his or her shares immediately in order to receive the higher price per share. This type of tactic has caused many states to adopt fair price provision statutes to
restrict this practice.
We consider fair price provisions on a
case-by-case basis. We oppose any provision where there is evidence that management intends to use the provision as an anti-takeover device as well as any provision
where the shareholder vote requirement is greater than a majority of disinterested shares (i.e., shares beneficially owned by individuals other than the acquiring party).
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42.
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|
Increase Authorized Common Stock
|
|
CASE-BY-CASE
|
In general we regard increases in authorized common stock as serving a legitimate corporate purpose when used to: implement a
stock split, aid in a recapitalization or acquisition, raise needed capital for the firm, or provide for employee savings plans, stock option plans or executive compensation plans. That said, we may oppose a particular proposed increase if we
consider the authorization likely to lower the share price (this would happen, for example, if the firm were proposing to use the proceeds to overpay for an acquisition, to invest in a project unlikely to earn the firms cost of capital, or to
compensate employees well above market rates). We oppose increases in authorized common stock where there is evidence that the shares are to be used to implement a poison pill or another form of anti-takeover device, or if the issuance
of new shares would, in our judgment, excessively dilute the value of the outstanding shares upon issuance. In addition, a satisfactory explanation of a companys intentionsgoing beyond the standard general corporate
purposes must be disclosed in the proxy statement for proposals requesting an increase of greater than 100% of the shares outstanding. We view the use of derivatives, particularly warrants, as legitimate capital-raising instruments and
apply these same principles to their use as we do to the authorization of common stock. Under certain circumstances where we believe it is important for shareholders to have an opportunity to maintain their proportional ownership, we may oppose
proposals requesting shareholders approve the issuance of additional shares if those shares do not include preemptive rights.
In Hong Kong, it is common for companies to request board authority to issue new shares up to 20% of outstanding
share capital. The authority typically lapses after one year. We may vote against plans that do not prohibit issuing shares at a discount, taking into account whether a company has a history of doing so.
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43.
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Issuance of Equity Without Preemptive Rights
|
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FOR
|
We are generally in favor of issuances of equity without preemptive rights of up to 30% of a companys outstanding shares
unless there is concern that the issuance will be used in a manner that could hurt shareholder value (e.g., issuing the equity at a discount from the current market price or using the equity to help create a poison pill mechanism).
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44.
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Multi Class Equity Structure
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AGAINST
|
The one share, one vote principle stating that voting power should be proportional to an investors economic
ownership is generally preferred in order to hold the board accountable to shareholders. ABs general expectation of companies with multi class equity structures is to attach safeguards for minority shareholders when appropriate
and in a cost-effective manner, which may include measures such as sunset provisions or requiring periodic shareholder reauthorizations. We expect boards to routinely review existing multi-class vote structures and share their current view.
With that backdrop, we acknowledge that multi-class structures may be beneficial for a period of time, allowing management to focus on longer-term value
creation which benefits all shareholders. Accordingly, AB recommends companies that had an initial public offering (IPO) in the past two (2) years to institute a time-based sunset to be triggered seven (7) years from the year of the IPO.
In 2021, we will engage with companies in our significant holdings universe that fall under this category. We may vote against the relevant board member of companies that remain unresponsive starting 2022 AGM, unless there is a valid case to apply
an exemption.
For companies that instituted a multi-class share structure unrelated to an IPO event or had an IPO two (2) or more years ago, sunset
should be seven (7) years from the year when the issuer implemented the multi-class structure. If the structure was adopted greater than seven (7) years ago, we will expect the issuer to consider the shortest sunset plan that makes sense
based on the issuers context. In 2021, we will engage with our portfolio companies in scope. We may vote against the respective board member if we dont see any progress starting 2022 AGM, unless there is a valid case to apply an
exemption.
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45.
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Net Long Position Requirement
|
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FOR
|
We support proposals that require the ownership level needed to call a special meeting to be based on the net long position of
a shareholder or shareholder group. This standard ensures that a significant economic interest accompanies the voting power.
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46.
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|
Reincorporation
|
|
CASE-BY-CASE
|
There are many valid business reasons a corporation may choose to reincorporate in another jurisdiction. We perform a case-by-case review of such proposals, taking into consideration managements stated reasons for the proposed move.
Careful scrutiny also will be given to proposals that seek approval to reincorporate in countries that serve as tax havens. When evaluating such proposals, we
consider factors such as the location of the companys business, the statutory protections available in the country to enforce shareholder rights and the tax consequences of the reincorporation to shareholders.
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47.
|
|
Reincorporation to Another Jurisdiction to Permit Majority Voting or Other Changes in Corporate Governance (SHP)
|
|
CASE-BY-CASE
|
If a shareholder proposes that a company move to a jurisdiction where majority voting (among other shareholder-friendly
conditions) is permitted, we will generally oppose the move notwithstanding the fact that we favor majority voting for directors. Our rationale is that the legal costs, taxes, other expenses and other factors, such as business disruption, in almost
all cases would be material and outweigh the benefit of majority voting. If, however, we should find that these costs are not material and/or do not outweigh the benefit of majority voting, we may vote in favor of this kind of proposal. We will
evaluate similarly proposals that would require reincorporation in another state to accomplish other changes in corporate governance.
Stock splits are intended to increase the liquidity of a companys common stock by lowering the price, thereby making the
stock seem more attractive to small investors. We generally vote in favor of stock split proposals.
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49.
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Submit Companys Shareholder Rights Plan to Shareholder Vote (SHP)
|
|
FOR
|
Most shareholder rights plans (also known as poison pills) permit the shareholders of a target company
involved in a hostile takeover to acquire shares of the target company, the acquiring company, or both, at a substantial discount once a triggering event occurs. A triggering event is usually a hostile tender offer or the
acquisition by an outside party of a certain percentage of the target companys stock. Because most plans exclude the hostile bidder from the purchase, the effect in most instances is to dilute the equity interest and the voting rights of the
potential acquirer once the plan is triggered. A shareholder rights plan is designed to discourage potential acquirers from acquiring shares to make a bid for the issuer. We believe that measures that impede takeovers or entrench management not only
infringe on the rights of shareholders but also may have a detrimental effect on the value of the company.
We support shareholder proposals that seek to
require the company to submit a shareholder rights plan to a shareholder vote. We evaluate on a case-by-case basis proposals to implement or eliminate a shareholder
rights plan.
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50.
|
|
Transferrable Stock Options
|
|
CASE-BY-CASE
|
In cases where a compensation plan includes a transferable stock option program, we will consider the plan on a case-by-case basis.
These programs allow stock options to be transferred to third parties in exchange for cash or
stock. In effect, management becomes insulated from the downside risk of holding a stock option, while the ordinary shareholder remains exposed to downside risk. This insulation may unacceptably remove managements exposure to downside risk,
which significantly misaligns management and shareholder interests. Accordingly, we generally vote against these programs if the transfer can be executed without shareholder approval, is available to executive officers or non-employee directors, or we consider the available disclosure relating to the mechanics and structure of the program to be insufficient to determine the costs, benefits and key terms of the program.
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51.
|
|
Appointment of Auditors
|
|
FOR
|
We believe that the company is in the best position to choose its accounting firm, and we generally support managements
recommendation.
We recognize that there may be inherent conflicts when a companys independent auditors perform substantial non-audit related services for the company. Therefore, in reviewing a proposed auditor, we will consider the amount of fees paid for non-audit related services performed
compared to the total audit fees paid by the company to the auditing firm, and whether there are any other reasons for us to question the independence or performance of the firms auditor such as, for example, tenure. We generally will deem as
excessive the non-audit fees paid by a company to its auditor if those fees account for 50% or more of total fees paid. In the UK market, which utilizes a different calculation, we adhere to a non-audit fee
cap of 100% of audit fees. Under these circumstances, we generally vote against the auditor and the directors, in particular the members of the companys audit committee. In addition, we generally vote against authorizing the audit committee to
set the remuneration of such auditors. We exclude from this analysis non-audit fees related to IPOs, bankruptcy emergence, and spin-offs and other extraordinary events. We may vote against or abstain due to a
lack of disclosure of the name of the auditor while taking into account local market practice.
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52.
|
|
Approval of Financial Statements
|
|
FOR
|
In some markets, companies are required to submit their financial statements for shareholder approval. This is generally a
routine item and, as such, we will vote for the approval of financial statements unless there are appropriate reasons to vote otherwise. We may vote against if the information is not available in advance of the meeting.
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53.
|
|
Approval of Internal Statutory Auditors
|
|
FOR
|
Some markets (e.g., Japan) require the annual election of internal statutory auditors. Internal statutory auditors have a
number of duties, including supervising management, ensuring compliance with the articles of association and reporting to a companys board on certain financial issues. In most cases, the election of internal statutory auditors is a routine
item and we will support managements nominee provided that the nominee meets the regulatory requirements for serving as internal statutory auditors. However, we may vote against nominees who are designated independent statutory auditors who
serve as executives of a subsidiary or affiliate of the issuer or if there are other reasons to question the independence of the nominees.
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54.
|
|
Limitation of Liability of External Statutory Auditors (Japan)
|
|
CASE-BY-CASE
|
In Japan, companies may limit the liability of external statutory auditors in the event of a shareholder lawsuit through any of
three mechanisms: (i) submitting the proposed limits to shareholder vote; (ii) setting limits by modifying the companys articles of incorporation; and (iii) setting limits in contracts with outside directors, outside statutory
auditors and external audit firms (requires a modification to the companys articles of incorporation). A vote by 3% or more of shareholders can nullify a limit set through the second mechanism. The third mechanism has historically been the
most prevalent.
We review proposals to set limits on auditor liability on a case-by-case basis, considering whether such a provision is necessary to secure appointment and whether it helps to maximize long-term shareholder value.
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55.
|
|
Separating Auditors and Consultants (SHP)
|
|
CASE-BY-CASE
|
We believe that a company serves its shareholders interests by avoiding potential conflicts of interest that might
interfere with an auditors independent judgment. SEC rules adopted as a result of the Sarbanes-Oxley Act of 2002 attempted to address these concerns by prohibiting certain services by a companys independent auditors and requiring
additional disclosure of other non-audit related services.
We evaluate on a case-by-case basis proposals that go beyond the SEC rules or other local market standards by prohibiting auditors from performing other non-audit services or calling
for the board to adopt a policy to ensure auditor independence.
We take into consideration the policies and procedures the company already has in place
to ensure auditor independence and non-audit fees as a percentage of total fees paid to the auditor are not excessive.
|
3.5
|
SHAREHOLDER ACCESS AND VOTING PROPOSALS
|
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56.
|
|
A Shareholders Right to Call Special Meetings (SHP)
|
|
FOR
|
Most state corporation statutes (though not Delaware, where many US issuers are domiciled) allow shareholders to call a special
meeting when they want to take action on certain matters that arise between regularly scheduled annual meetings. This right may apply only if a shareholder, or a group of shareholders, owns a specified percentage as defined by the relevant company
bylaws.
We recognize the importance of the right of shareholders to remove poorly performing directors, respond to takeover offers and take other actions
without having to wait for the next annual meeting. However, we also believe it is important to protect companies and shareholders from nuisance proposals. We further believe that striking a balance between these competing interests will maximize
shareholder value. We believe that encouraging active share ownership among shareholders generally is beneficial to shareholders and helps maximize shareholder value. Accordingly, we will generally support a proposal to establish shareholders
right to call a special meeting unless we see a potential abuse of the right based on the companys current share ownership structure.
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57.
|
|
Adopt Cumulative Voting (SHP)
|
|
CASE-BY-CASE
|
Cumulative voting is a method of electing directors that enables each shareholder to multiply the number of his or her shares
by the number of directors being considered. A shareholder may then cast the total votes for any one director or a selected group of directors. For example, a holder of 10 shares normally casts 10 votes for each of 12 nominees to the board thus
giving the shareholder 120 (10 × 12) votes. Under cumulative voting, the shareholder may cast all 120 votes for a single nominee, 60 for two, 40 for three, or any other combination that the shareholder may choose.
We believe that encouraging activism among shareholders generally is beneficial to shareholders and helps maximize shareholder value. Cumulative voting
supports the interests of minority shareholders in contested elections by enabling them to concentrate their votes and dramatically increase their chances of electing a dissident director to a board.
Accordingly, we generally will support shareholder proposals to restore or provide for cumulative voting and we generally will oppose management proposals to
eliminate cumulative voting. However, we may oppose cumulative voting if a company has in place both proxy access, which allows shareholders to nominate directors to the companys ballot, and majority voting (with a carve-out for plurality voting in situations where there are more nominees than seats), which requires each director to receive the affirmative vote of a majority of votes cast and, we believe, leads to greater
director accountability to shareholders.
Also, we support cumulative voting at controlled companies regardless of any other shareholder protections that
may be in place.
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|
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|
58.
|
|
Adopt Cumulative Voting in Dual Shareholder Class Structures (SHP)
|
|
FOR
|
In dual class structures (such as A and B shares) where the shareholders with a majority economic interest have a minority
voting interest, we generally vote in favor of cumulative voting for those shareholders.
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|
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59.
|
|
Early Disclosure of Voting Results (SHP)
|
|
AGAINST
|
These proposals seek to require a company to disclose votes sooner than is required by the local market. In the US, the SEC
requires disclosure in the first periodic report filed after the companys annual meeting which we believe is reasonable. We do not support requests that require disclosure earlier than the time required by the local regulator.
|
|
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60.
|
|
Limiting a Shareholders Right to Call Special Meetings
|
|
AGAINST
|
Companies contend that limitations on shareholders rights to call special meetings are needed to prevent minority
shareholders from taking control of the companys agenda. However, such limits also have anti-takeover implications because they prevent a shareholder or a group of shareholders who have acquired a significant stake in the company from forcing
management to address urgent issues, such as the potential sale of the company. Because most states prohibit shareholders from abusing this right, we see no justifiable reason for management to eliminate this fundamental shareholder right.
Accordingly, we generally will vote against such proposals.
In addition, if the board of directors, without shareholder consent, raises the ownership
threshold a shareholder must reach before the shareholder can call a special meeting, we will vote against those directors.
|
|
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61.
|
|
Permit a Shareholders Right to Act by Written Consent (SHP)
|
|
CASE-BY-CASE
|
Action by written consent enables a large shareholder or group of shareholders to initiate votes on corporate matters prior to
the annual meeting. We believe this is a fundamental shareholder right and, accordingly, will generally support shareholder proposals seeking to restore this right. However, in cases where a company has a majority shareholder or group of related
majority shareholders with majority economic interest, we will oppose proposals seeking to restore this right as there is a potential risk of abuse by the majority shareholder or group of majority shareholders. We may also vote against the proposal
if the company provides shareholders a right to call special meetings with an ownership threshold of 15% or below in absence of material restrictions, as we believe that shareholder access rights should be considered from a holistic view rather than
promoting all possible access rights that may impede one another in contrast to long-term shareholder value.
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|
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62.
|
|
Proxy Access for Annual Meetings (SHP) (Management)
|
|
FOR
|
These proposals allow qualified shareholders to nominate directors. We generally vote in favor of management and
shareholder proposals for proxy access that employ guidelines reflecting the SEC framework for proxy access (adopted by the SEC in 2010, but vacated by the US District of Columbia Circuit Court of Appeals in 2011), which would have allowed a single
shareholder, or group of shareholders, who hold at least 3% of the voting power for at least three years continuously to nominate up to 25% of the current board seats, or two directors, for inclusion in the subject companys annual proxy
statement alongside management nominees.
We may vote against proposals that use requirements that are stricter than the SECs framework including
implementation restrictions and against individual board members, or entire boards, who exclude from their ballot properly submitted shareholder proxy access proposals or compete against shareholder proxy access proposals with stricter management
proposals on the same ballot We will generally vote in favor of proposals that seek to amend an existing right to more closely align with the SEC framework.
We will evaluate on a case-by-case basis proposals with less stringent
requirements than the vacated SEC framework.
From time to time we may receive requests to join with other shareholders to support a shareholder action.
We may, for example, receive requests to join a voting block for purposes of influencing management. If the third parties requesting our participation are not affiliated with us and have no business relationships with us, we will consider the
request on a case-by-case basis. However, where the requesting party has a business relationship with us (e.g., the requesting party is a client or a significant service
provider), agreeing to such a request may pose a potential conflict of interest. As a fiduciary we have an obligation to vote proxies in the best interest of our clients (without regard to our own interests in generating and maintaining business
with our other clients) and given our desire to avoid even the appearance of a conflict, we will generally decline such a request.
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|
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63.
|
|
Reduce Meeting Notification from 21 Days to 14 Days (UK)
|
|
FOR
|
Companies in the United Kingdom may, with shareholder approval, reduce the notice period for extraordinary general meetings
from 21 days to 14 days.
A reduced notice period expedites the process of obtaining shareholder approval of additional financing needs and other
important matters. Accordingly, we support these proposals.
|
|
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|
64.
|
|
Shareholder Proponent Engagement Process (SHP)
|
|
FOR
|
We believe that proper corporate governance requires that proposals receiving support from a majority of shareholders be
considered and implemented by the company. Accordingly, we support establishing an engagement process between shareholders and management to ensure proponents of majority-supported proposals, have an established means of communicating with
management.
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|
65.
|
|
Supermajority Vote Requirements
|
|
AGAINST
|
A supermajority vote requirement is a charter or by-law requirement that, when
implemented, raises the percentage (higher than the customary simple majority) of shareholder votes needed to approve certain proposals, such as mergers, changes of control, or proposals to amend or repeal a portion of the Articles of Incorporation.
In most instances, we oppose these proposals and support shareholder proposals that seek to reinstate the simple majority vote requirement. However, we
may support supermajority vote requirements at controlled companies as a protection to minority shareholders from unilateral action of the controlling shareholder.
|
|
|
|
|
66.
|
|
Authorize Virtual-Only Shareholder Meetings
|
|
CASE-BY-CASE
|
COVID-19 has called for a need to authorize companies in holding virtual-only
shareholder meetings. While recognizing technology has enabled shareholders to remain connected with the board and management, AB acknowledges that virtual only shareholder meetings have resulted in certain companies abusing their authority by
limiting shareholders from raising questions and demanding onerous requirements to be able to read their questions during the meeting. Because such practice vary by company and jurisdiction with different safeguard provisions, we will
consideramong other thingsa companys disclosure on elements such as those below when voting on management or shareholder proposals for authorizing the company to hold virtual-only shareholder meetings:
|
|
|
Explanation for eliminating the in-person meeting;
|
|
|
|
Clear description of which shareholders are qualified to participate in virtual-only shareholder meetings and how
attendees can join the meeting;
|
|
|
|
How to submit and ask questions;
|
|
|
|
How the company plans to mimic a real-time in-person question and answer
session; and
|
|
|
|
List of questions received from shareholders in their entirety, both prior to and during the meeting, as well as
associated responses from the company
|
|
3.6
|
ENVIRONMENTAL, SOCIAL AND DISCLOSURE PROPOSALS
|
|
|
|
|
|
67.
|
|
Animal Welfare (SHP)
|
|
CASE-BY-CASE
|
These proposals may include reporting requests or policy adoption on items such as pig gestation crates and animal welfare in
the supply chain. For proposals requesting companies to adopt a policy, we will carefully consider existing policies and the companys incorporation of national standards and best practices. In addition, we will evaluate the potential enactment
of new regulations, as well as any investment risk related to the specific issue.
We generally support shareholder proposals calling for reports and
disclosure while taking into account existing policies and procedures of the company and whether the proposed information is of added benefit to shareholders.
|
|
|
|
|
68.
|
|
Climate Change (SHP)
|
|
FOR
|
Proposals addressing climate change concerns are plentiful and their scope varies. Climate change increasingly receives
investor attention as a potentially critical and material risk to the sustainability of a wide range of business-specific activities. These proposals may include emissions standards or reduction targets, quantitative goals, and impact assessments.
We generally support these proposals, while taking into account the materiality of the issue and whether the proposed information is of added benefit to shareholders.
For proposals requesting companies to adopt a policy, we will carefully consider existing policies and the companys incorporation of national standards
and best practices. In addition, we will evaluate the potential enactment of new regulations, as well as any investment risk related to the specific issue.
We generally support shareholder proposals calling for reports and disclosure, while taking into account existing policies and procedures of the company and
whether the proposal is of added benefit to shareholders.
|
|
|
|
|
69.
|
|
Charitable Contributions (SHP) (Management)
|
|
CASE-BY-CASE
|
Proposals relating to charitable contributions may be sponsored by either management or shareholders. Management proposals may
ask to approve the amount for charitable contributions.
We generally support shareholder proposals calling for reports and disclosure while taking into
account existing policies and procedures of the company and whether the proposed information is of added benefit to shareholders.
|
|
|
|
|
70.
|
|
Environmental Proposals (SHP)
|
|
CASE-BY-CASE
|
These proposals can include reporting and policy adoption requests in a wide variety of areas, including, but not limited to,
(nuclear) waste, deforestation, packaging and recycling, renewable energy, toxic material, palm oil and water.
For proposals requesting companies to
adopt a policy, we will carefully consider existing policies and the companys incorporation of national standards and best practices. In addition, we will evaluate the potential enactment of new regulations, as well as any investment risk
related to the specific issue.
We generally support shareholder proposals calling for reports and disclosure while taking into account existing policies
and procedures of the company and whether the proposed information is of added benefit to shareholders.
|
|
|
|
|
71.
|
|
Genetically Altered or Engineered Food and Pesticides (SHP)
|
|
CASE-BY-CASE
|
These proposals may include reporting requests on pesticides monitoring/use and Genetically Modified Organism (GMO) as well as
GMO labeling.
For proposals requesting companies to adopt a policy, we will carefully consider existing policies and the companys incorporation of
national standards and best practices. In addition, we will evaluate the potential enactment of new regulations, as well as any investment risk related to the specific issue.
We generally support shareholder proposals calling for reports and disclosure while taking into account existing policies and procedures of the company and
whether the proposed information is of added benefit to shareholders.
|
|
|
|
|
72.
|
|
Health Proposals (SHP)
|
|
CASE-BY-CASE
|
These proposals may include reports on pharmaceutical pricing, antibiotic use in the meat supply, and tobacco products. We
generally support shareholder proposals calling for reports and disclosure while taking into account the current reporting policies of the company and whether the proposed information is of added benefit to shareholders.
For proposals requesting companies to adopt a policy, we will carefully consider existing policies and the companys incorporation of national standards
and best practices. In addition, we will evaluate the potential enactment of new regulations, as well as any investment risk related to the specific issue. We generally support shareholder proposals calling for reports and disclosure while taking
into account existing policies and procedures of the company and whether the proposal is of added benefit to shareholders.
|
|
|
|
|
73.
|
|
Human Rights Policies and Reports (SHP)
|
|
CASE-BY-CASE
|
These proposals may include reporting requests on human rights risk assessments, humanitarian engagement and mediation
policies, working conditions, adopting policies on supply chain worker fees and expanding existing policies in these areas. We recognize that many companies have complex supply chains which have led to increased awareness of supply chain issues as
an investment risk.
For proposals requesting companies to adopt a policy, we will carefully consider existing policies and the companys
incorporation of national standards and best practices. In addition, we will evaluate the potential enactment of new regulations, as well as any investment risk related to the specific issue.
We generally support shareholder proposals calling for reports and disclosure while taking into account existing policies and procedures of the company and
whether the proposed information is of added benefit to shareholders.
|
|
|
|
|
74.
|
|
Include Sustainability as a Performance Measure (SHP)
|
|
CASE-BY-CASE
|
We believe management and directors should be given latitude in determining appropriate performance measurements. While doing
so, consideration should be given to how long-term sustainability issues might affect future company performance. Therefore, we will evaluate on a case-by-case basis
proposals requesting companies to consider incorporating specific, measurable, practical goals consisting of sustainability principles and environmental impacts as metrics for incentive compensation and how they are linked with our objectives as
long-term shareholders.
|
|
|
|
|
75.
|
|
Lobbying and Political Spending (SHP)
|
|
FOR
|
We generally vote in favor of proposals requesting increased disclosure of political contributions and lobbying expenses,
including those paid to trade organizations and political action committees, whether at the federal, state, or local level.
These
proposals may increase transparency.
|
|
|
|
|
76.
|
|
Other Business
|
|
AGAINST
|
In certain jurisdictions, these proposals allow management to act on issues that shareholders may raise at the annual meeting.
Because it is impossible to know what issues may be raised, we will vote against these proposals.
|
|
|
|
|
77.
|
|
Reimbursement of Shareholder Expenses (SHP)
|
|
AGAINST
|
These shareholder proposals would require companies to reimburse the expenses of shareholders who submit proposals that receive
a majority of votes cast or the cost of proxy contest expenses. We generally vote against these proposals, unless reimbursement occurs only in cases where management fails to implement a majority passed shareholder proposal, in which case we may
vote in favor.
|
|
|
|
|
78.
|
|
Sustainability Report (SHP)
|
|
FOR
|
We generally support shareholder proposals calling for reports and disclosure related to sustainability while taking into
account existing policies and procedures of the company and whether the proposed information is of added benefit to shareholders.
|
|
|
|
|
79.
|
|
Workplace: Diversity (SHP)
|
|
FOR
|
We generally support shareholder proposals calling for reports and disclosure surrounding workplace diversity while taking into
account existing policies and procedures of the company and whether the proposed information is of added benefit to shareholders.
We generally support
proposals requiring a company to amend its Equal Employment Opportunity policies to prohibit workplace discrimination based on sexual orientation and gender identity.
|
|
|
|
|
80.
|
|
Workplace: Gender Pay Equity (SHP)
|
|
FOR
|
A report on pay disparity between genders typically compares the difference between male and female median earnings expressed
as a percentage of male earnings and may include, (i) statistics and rationale explanation pertaining to changes in the size of the gap, (ii) recommended actions, and (iii) information on whether greater oversight is needed over
certain aspects of the companys compensation policies. In the U.S., we are generally supportive of proposals to require companies to make similar assessments and disclosure related to the pay disparity between different gender and
ethnic/racial groups. Shareholder requests to place a limit on a global median ethnic/racial pay gap will be assessed based on the cultural and the legal context of markets to which the company is exposed.
The SEC requires US issuers with fiscal years ending on or after January 1, 2017, to contrast CEO pay with median employee pay. This requirement,
however, does not specifically address gender pay equity issues in such pay disparity reports. Accordingly, we will generally support proposals requiring gender pay metrics, taking into account the specific metrics and scope of the information
requested and whether the SECs requirement renders the proposal unnecessary.
As a fiduciary, we always must act in our clients best interests. We strive to avoid even the appearance of a conflict that may compromise the trust our
clients have placed in us, and we insist on strict adherence to fiduciary standards and compliance with all applicable federal and state securities laws. We have adopted a comprehensive Code of Business Conduct and Ethics (Code)
to help us meet these obligations. As part of this responsibility and as expressed throughout the Code, we place the interests of our clients first and attempt to avoid any perceived or actual conflicts of interest.
AB recognizes that potentially material conflicts of interest arise when we engage with a company or vote a proxy solicited by an issuer that sponsors a
retirement plan we manage (or administer), that distributes AB-sponsored mutual funds, or with which AB or one or more of our employees have another business or personal relationship , and that such conflicts
could affect how we vote on the issuers proxy. Similarly, potentially material conflicts of interest arise when engaging with and deciding how to vote on a proposal sponsored or supported by a shareholder group that is a client. In order to
address any perceived or actual conflict of interest, the procedures set forth below in sections 4.2 through 4.8 have been established for use when we encounter a potential conflict to ensure that our engagement activities and voting decisions are
in our clients best interest consistent with our fiduciary duties and seek to maximize shareholder value.
|
4.2
|
ADHERENCE TO STATED PROXY VOTING POLICIES
|
Votes generally are cast in accordance with this Policy3. In situations where our Policy involves a case-by-case assessment, the following sections provide criteria that will guide our decision. In situations where our Policy on a particular issue involves a case-by-case assessment and the vote cannot be clearly decided by an application of our stated Policy, a member of the Committee or his/her designee will make the voting
decision in accordance with the basic principle of our Policy to vote proxies with the intention of maximizing the value of the securities in our client accounts. In these situations, the voting rationale must be documented either on the voting
platform of our proxy services vendor, by retaining relevant emails or another appropriate method. Where appropriate, the views of investment professionals are considered. All votes cast contrary to our stated voting Policy on specific issues must
be documented. If a proxy vote involves a potential conflict of interest, the voting decision will be determined in accordance with the processes outlined in section 4.5 of the Policy. On an annual basis, the Committee will receive and review a
report of all such votes so as to confirm adherence with the Policy.
|
4.3
|
DISCLOSURE OF CONFLICTS
|
When considering a proxy proposal, members of the Committee or investment professionals involved in the decision-making process must disclose to the Committee
any potential conflict (including personal relationships) of which they are aware and any substantive contact that they have had with any interested outside party (including the issuer or shareholder group sponsoring a proposal) regarding the
proposal. Any previously unknown conflict will be recorded on the Potential Conflicts List (discussed below). If a member of the Committee has a material conflict of interest, he or she generally must recuse himself or herself from the
decision-making process.
|
4.4
|
POTENTIAL CONFLICTS LIST
|
No less frequently than annually, a list of companies and organizations whose engagement and proxies may pose potential conflicts of interest is compiled by
the Legal and Compliance Department (the Potential Conflicts List). The Potential Conflicts List generally includes:
|
|
|
Publicly-traded clients of AB;
|
|
|
|
Publicly-traded companies that distribute AB mutual funds;
|
|
|
|
Bernstein private clients who are directors, officers, or 10% shareholders of publicly traded companies;
|
|
|
|
Publicly-traded companies that are sell-side clients of our affiliated broker-dealer, SCB&Co.;
|
|
|
|
Companies where an employee of AB or Equitable Holdings, Inc., the parent company of AB, has identified an
interest;
|
|
|
|
Publicly-traded affiliated companies;
|
|
|
|
Clients who sponsor, publicly support or have material interest in a proposal upon which we will be eligible to
vote;
|
|
|
|
Publicly-traded companies targeted by the AFL-CIO for engagement and
voting; and
|
|
|
|
Any other company subject to a material conflict of which a Committee member becomes aware4.
|
3
|
From time to time a client may request that we vote their proxies consistent with AFL-CIO guidelines or the policy of the National Association of Pension Funds. In those situations, AB reserves the right to depart from those policies if we believe it to be in the clients best interests.
|
4
|
The Committee must notify the Legal and Compliance Department promptly of any previously unknown conflict.
|
We determine our votes for all meetings of companies that may present a conflict by applying the processes
described in Section 4.5 below. We document all instances when the Conflicts Officer determines our vote.
|
4.5
|
DETERMINE EXISTENCE OF CONFLICT OF INTEREST
|
When we encounter a potential conflict of interest, we review our proposed vote using the following analysis to ensure our voting decision is in the best
interest of our clients:
|
|
|
If our proposed vote is explicitly addressed by and consistent with the Policy, no further review is necessary.
|
|
|
|
If our proposed vote is contrary to the Policy (i.e., requires a case-by-case assessment or is not covered by the Policy), the vote will be presented to the Conflicts Officer. The Conflicts Officers review will be documented using a Proxy Voting Conflict of Interest
Form (a copy of which is attached hereto). The Conflicts Officer will determine whether the proposed vote is reasonable. If the Conflicts Officer cannot determine that the proposed vote is reasonable, the Conflicts Officer may instruct AB to refer
the votes back to the client(s) or take other actions as the Conflicts Officer deems appropriate in light of the facts and circumstances of the particular potential conflict. The Conflicts Officer may take or recommend that AB take the following
steps:
|
|
|
|
Recuse or wall-off certain personnel from the proxy voting
process;
|
|
|
|
Confirm whether ABs proposed vote is consistent with the voting recommendations of our proxy research
services vendor; or
|
|
|
|
Take other actions as the Conflicts Officer deems appropriate.
|
|
4.6
|
REVIEW OF THIRD PARTY PROXY SERVICE VENDORS
|
AB engages one or more Proxy Service Vendors to provide voting recommendations and voting execution services. From time to time, AB will evaluate each Proxy
Service Vendors services to assess that they are consistent with this Policy and the best interest of our clients. This evaluation may include: (i) a review of pre-populated votes on the Proxy
Service Vendors electronic voting platform before such votes are cast, and (ii) a review of policies that address the consideration of additional information that becomes available regarding a proposal before the vote is cast. AB will
also periodically review whether Proxy Service Vendors have the capacity and competency to adequately analyze proxy issues and provide the necessary services to AB. AB will consider, among other things, the adequacy and quality of the Proxy Service
Vendors staffing, personnel and/or technology, as well as whether the Proxy Service Vendor has adequate disclosures regarding its methodologies in formulating voting recommendations. If applicable, we will also review whether any potential
factual errors, incompleteness or methodological weaknesses materially affected the Proxy Service Vendors services and the effectiveness of the Proxy Service Vendors procedures for obtaining current and accurate information relevant to
matters included in its research.
The Committee also takes reasonable steps to review the Proxy Service Vendors policies and procedures addressing
conflicts of interest and verify that the Proxy Service Vendor(s) to which we have a full- level subscription is, in fact, independent based on all of the relevant facts and circumstances. This includes reviewing each Proxy Service Vendors
conflict management procedures on an annual basis. When reviewing these conflict management procedures, we will consider, among other things, (i) whether the Proxy Service Vendor has adequate policies and procedures to identify, disclose, and
address actual and potential conflicts of interest; and (ii) whether the Proxy Service Vendor provides adequate disclosure of actual and potential conflicts of interest with respect to the services provided to AB by the Proxy Service Vendor and
(iii) whether the Proxy Service Vendors policies and procedures utilize technology in delivering conflicts disclosure; and (iv) can offer research in an impartial manner and in the best interests of our clients.
It is ABs policy to support confidentiality before the actual vote has been cast. Employees are prohibited from revealing how we intend to vote except to
(i) members of the Committee; (ii) Portfolio Managers who hold the security in their managed accounts; (iii) the Research Analyst(s) who cover(s) the security; (iv) clients, upon request, for the securities held in their
portfolios; (v) clients who do not hold the security or for whom AB does not have proxy voting authority, but who provide AB with a signed a Non-Disclosure Agreement; or (vi) declare our stance on an
ESG related shareholder proposal(s) that is (are) deemed material for the issuers business for generating long-term value in our clients best interests. Once the votes have been cast for our mutual fund clients, they are made public in
accordance with mutual fund proxy vote disclosures required by the SEC, and we generally post all votes to our public website one business day after the meeting date.
We may participate in proxy surveys conducted by shareholder groups or consultants so long as such participation does not compromise our confidential voting
policy. Specifically, prior to our required SEC disclosures each year, we may respond to surveys asking about our proxy voting policies, but not any specific votes. After our mutual fund proxy vote disclosures required by the SEC each year have been
made public and/or votes have been posted to our public website, we may respond to surveys that cover specific votes in addition to our voting policies.
On occasion, clients for whom we do not have proxy voting authority may ask us how ABs Policy would be
implemented. A member of the Committee or one or more members of Responsibility team may provide the results of a potential implementation of the AB policy to the clients account subject to an understanding with the client that the
implementation shall remain confidential.
Any substantive contact regarding proxy issues from the issuer, the issuers agent or a shareholder group
sponsoring a proposal must be reported to the Committee if such contact was material to a decision to vote contrary to this Policy. Routine administrative inquiries from proxy solicitors need not be reported.
|
4.8
|
A NOTE REGARDING ABS STRUCTURE
|
AB and AllianceBernstein Holding L.P. (AB Holding) are Delaware limited partnerships. As limited partnerships, neither company is required
to produce an annual proxy statement or hold an annual shareholder meeting. In addition, the general partner of AB and AB Holding, AllianceBernstein Corporation is an indirect wholly owned subsidiary of Equitable Holdings, Inc.
As a result, most of the positions we express in this Proxy Voting Policy are inapplicable to our business. For example, although units in AB Holding are
publicly traded on the New York Stock Exchange (NYSE), the NYSE Listed Company Manual exempts limited partnerships and controlled companies from compliance with various listing requirements, including the requirement that our
board have a majority of independent directors.
We publish our voting records on our website one business day after the shareholder meeting date for each issuer company. Many clients have
requested that we provide them with periodic reports on how we voted their proxies. Clients may obtain information about how we voted proxies on their behalf by contacting their Advisor.
All of the records referenced below will be kept in an easily accessible place for at least the length of time required by local regulation and custom, and, if
such local regulation requires that records are kept for less than six (6) years from the end of the fiscal year during which the last entry was made on such record, we will follow the US rule of six (6) or more years. If the local
regulation requires that records are kept for more than six (6) or more years, we will comply with the local regulation.9 We maintain the vast majority of these records electronically.
|
6.1
|
PROXY VOTING AND GOVERNANCE POLICY
|
The Policy shall be maintained in the Legal and Compliance Department and posted on our company intranet and on the AB website.
|
6.2
|
PROXY STATEMENTS RECEIVED REGARDING CLIENT SECURITIES
|
For US Securities5, AB relies on the SEC to maintain copies of each proxy statement we receive regarding
client securities. For Non-US Securities, we rely on ISS, our proxy voting agent, to retain such proxy statements.
|
6.3
|
RECORDS OF VOTES CAST ON BEHALF OF CLIENTS
|
Records of votes cast by AB are retained electronically by our proxy research service vendor.
|
6.4
|
RECORDS OF CLIENTS REQUESTS FOR PROXY VOTING INFORMATION
|
Copies of written requests from clients for information on how AB voted their proxies shall be maintained by the Legal and Compliance Department. Responses to
written and oral requests for information on how we voted clients proxies will be kept in the Client Group.
|
6.5
|
DOCUMENTS PREPARED BY AB THAT ARE MATERIAL TO VOTING DECISIONS
|
The Committee is responsible for maintaining documents prepared by the Committee or any AB employee that were material to a voting decision. Therefore, where
an investment professionals opinion is essential to the voting decision, the recommendation from investment professionals must be made in writing to a member of Responsibility team.
5
|
US securities are defined as securities of issuers required to make reports pursuant to §12 of the
Securities Exchange Act of 1934, as amended. Non-US securities are defined as all other securities.
|
7.
|
PROXY VOTING PROCEDURES
|
In an effort to increase the efficiency of voting proxies, AB currently uses ISS to act as its voting agent for our clients holdings globally.
Issuers initially send proxy information to the custodians of our client accounts. We instruct these custodian banks to direct proxy related materials to
ISSs offices. ISS provides us with research related to each resolution and pre-populates certain ballots based on the guidelines contained in this Policy. Members of Responsibility team review the
ballots via ISSs web platform, ProxyExchange, and complete the ballots for any proposals where our Policy involves a case-by-case assessment. In addition, all
ABs proxy votes are double-checked by an offshore compliance team to verify that they are being voted in-line with our Policy. Using ProxyExchange, the members of Responsibility team submit our voting
decision. ISS then returns the proxy ballot forms to the designated returnee for tabulation.
If necessary, any paper ballots we receive will be voted
online using ProxyVote or via mail or fax.
|
7.2
|
SHARE BLOCKING AND ABSTAINING FROM VOTING CLIENT SECURITIES
|
Proxy voting in certain countries requires share blocking. Shareholders wishing to vote their proxies must deposit their shares shortly before the
date of the meeting (usually one week) with a designated depositary. During this blocking period, shares that will be voted at the meeting cannot be sold until the meeting has taken place and the shares are returned to the clients custodian
banks. We may determine that the value of exercising the vote is outweighed by the detriment of not being able to sell the shares during this period. In cases where we want to retain the ability to trade shares, we may determine to not vote those
shares.
We seek to vote all proxies for securities held in client accounts for which we have proxy voting authority. However, in some markets
administrative issues beyond our control may sometimes prevent us from voting such proxies. For example, we may receive meeting notices after the cut-off date for voting or without enough time to fully
consider the proxy. Similarly, proxy materials for some issuers may not contain disclosure sufficient to arrive at a voting decision, in which cases we may abstain from voting. Some markets outside the US require periodic renewals of powers of
attorney that local agents must have from our clients prior to implementing our voting instructions.
AB will abstain from voting (which generally
requires submission of a proxy voting card) or affirmatively decide not to vote if AB determines that abstaining or not voting would be in the applicable clients best interest. In making such a determination, AB will consider various factors,
including, but not limited to: (i) the costs associated with exercising the proxy (e.g., translation or travel costs); (ii) any legal restrictions on trading resulting from the exercise of a proxy (e.g., share-blocking jurisdictions); (iii)
whether ABs clients have sold the underlying securities since the record date for the proxy; and (iv) whether casting a vote would not reasonably be expected to have a material effect on the value of the clients investment.
Many of our clients have entered into securities lending arrangements with agent lenders to generate additional revenue. We will not be able to vote securities
that are on loan under these types of arrangements. However, under rare circumstances, for voting issues that may have a significant impact on the investment, we may request that clients or custodians recall securities that are on loan if we
determine that the benefit of voting outweighs the costs and lost revenue to the client or fund and the administrative burden of retrieving the securities. For the SRI labeled Thematic funds, we recall U.S. securities on loan to vote proxies and
have discontinued lending for non-U.S. securities.
If you have questions or desire additional information about
this Policy, please contact ProxyTeam@alliancebernstein.com.
PROXY VOTING GUIDELINE SUMMARY
|
|
|
|
|
|
|
|
|
Shareholder
Proposal
|
|
|
|
For
|
|
Against
|
|
Case-by-
Case
|
Board and Director Proposals
|
|
|
Board Diversity
|
|
|
|
|
|
+
|
+
|
|
Establish New Board Committees and Elect Board Members with Specific Expertise
|
|
|
|
|
|
+
|
|
|
Changes in Board Structure and Amending the Articles of Incorporation
|
|
+
|
|
|
|
|
|
|
Classified Boards
|
|
|
|
+
|
|
|
|
|
Director Liability and Indemnification
|
|
|
|
|
|
+
|
+
|
|
Disclose CEO Succession Plan
|
|
+
|
|
|
|
|
|
|
Election of Directors
|
|
+
|
|
|
|
|
|
|
Controlled Company Exemption
|
|
|
|
|
|
+
|
|
|
Voting for Director Nominees in a Contested Election
|
|
|
|
|
|
+
|
+
|
|
Independent Lead Director
|
|
+
|
|
|
|
|
+
|
|
Limit Term of Directorship
|
|
|
|
|
|
+
|
+
|
|
Majority of Independent Directors
|
|
+
|
|
|
|
|
+
|
|
Majority of Independent Directors on Key Committees
|
|
+
|
|
|
|
|
+
|
|
Majority Votes for Directors
|
|
+
|
|
|
|
|
+
|
|
Removal of Directors Without Cause
|
|
+
|
|
|
|
|
+
|
|
Require Independent Board Chairman
|
|
|
|
|
|
+
|
+
|
|
Require Two Candidates for Each Board Seat
|
|
|
|
+
|
|
|
Compensation Proposals
|
+
|
|
Elimination of Single Trigger
Change-in-Control Agreements
|
|
+
|
|
|
|
|
+
|
|
Pro Rata Vesting of Equity Compensation Awards-Change of Control
|
|
|
|
|
|
+
|
+
|
|
Adopt Policies to Prohibit any Death Benefits to Senior Executives
|
|
|
|
+
|
|
|
+
|
|
Advisory Vote to Ratify Directors Compensation
|
|
+
|
|
|
|
|
+
|
|
Amend Executive Compensation Plan Tied to Performance (Bonus Banking)
|
|
|
|
+
|
|
|
|
|
Approve Remuneration for Directors and Auditors
|
|
|
|
|
|
+
|
|
|
Approve Remuneration Reports
|
|
|
|
|
|
+
|
|
|
Approve Retirement Bonuses for Directors (Japan and South Korea)
|
|
|
|
|
|
+
|
|
|
Approve Special Payments to Continuing Directors and Auditors (Japan)
|
|
|
|
|
|
+
|
+
|
|
Disclose Executive and Director Pay
|
|
|
|
|
|
+
|
+
|
|
Exclude Pension Income from Performance-Based Compensation
|
|
+
|
|
|
|
|
|
|
Executive and Employee Compensation Plans
|
|
|
|
|
|
+
|
+
|
|
Limit Dividend Payments to Executives
|
|
|
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+
|
|
|
+
|
|
Limit Executive Pay
|
|
|
|
|
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+
|
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|
|
|
|
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|
Shareholder
Proposal
|
|
|
|
For
|
|
Against
|
|
Case-by-
Case
|
+
|
|
Mandatory Holding Periods
|
|
|
|
+
|
|
|
+
|
|
Performance-Based Stock Option Plans
|
|
|
|
|
|
+
|
+
|
|
Prohibit Relocation Benefits to Senior Executives
|
|
|
|
+
|
|
|
+
|
|
Recovery of Performance-Based Compensation
|
|
+
|
|
|
|
|
+
|
|
Submit Golden Parachutes/Severance Plans to a Shareholder Vote
|
|
|
|
+
|
|
|
+
|
|
Submit Golden Parachutes/Severance Plans to a Shareholder Vote prior to their being Negotiated by Management
|
|
|
|
|
|
+
|
+
|
|
Submit Survivor Benefit Compensation Plans to a Shareholder Vote
|
|
+
|
|
|
|
|
Capital Changes and Anti-Take Over Proposals
|
+
|
|
Amend Exclusive Forum Bylaw
|
|
|
|
+
|
|
|
|
|
Amend Net Operating Loss (NOL) Rights Plans
|
|
+
|
|
|
|
|
|
|
Authorize Share Repurchase
|
|
+
|
|
|
|
|
|
|
Blank Check Preferred Stock
|
|
|
|
+
|
|
|
|
|
Corporate Restructurings, Merger Proposals and Spin-Offs
|
|
|
|
|
|
+
|
|
|
Elimination of Preemptive Rights
|
|
|
|
|
|
+
|
+
|
|
Expensing Stock Options
|
|
+
|
|
|
|
|
|
|
Fair Price Provisions
|
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|
|
|
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+
|
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|
Increase Authorized Common Stock
|
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+
|
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|
Issuance of Equity without Preemptive Rights
|
|
+
|
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|
Issuance of Stock with Unequal Voting Rights
|
|
|
|
|
|
+
|
|
|
Net Long Position Requirement
|
|
+
|
|
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|
|
Reincorporation
|
|
|
|
|
|
+
|
+
|
|
Reincorporation to Another jurisdiction to Permit Majority Voting or Other Changes in Corporate Governance
|
|
|
|
|
|
+
|
|
|
Stock Splits
|
|
+
|
|
|
|
|
+
|
|
Submit Companys Shareholder Rights Plan to a Shareholder Vote
|
|
+
|
|
|
|
|
|
|
Transferrable Stock Options
|
|
|
|
|
|
+
|
Auditor Proposals
|
|
|
Appointment of Auditors
|
|
+
|
|
|
|
|
|
|
Approval of Financial Statements
|
|
+
|
|
|
|
|
|
|
Approval of Internal Statutory Auditors
|
|
+
|
|
|
|
|
+
|
|
Limit Compensation Consultant Services
|
|
|
|
+
|
|
|
|
|
Limitation of Liability of External Statutory Auditors (Japan)
|
|
|
|
|
|
+
|
+
|
|
Separating Auditors and Consultants
|
|
|
|
|
|
+
|
Shareholder Access & Voting Proposals
|
+
|
|
A Shareholders Right to Call Special Meetings
|
|
+
|
|
|
|
|
+
|
|
Adopt Cumulative Voting
|
|
|
|
|
|
+
|
+
|
|
Adopt Cumulative Voting in Dual Shareholder Class Structures
|
|
+
|
|
|
|
|
+
|
|
Early Disclosure of Voting Results
|
|
|
|
+
|
|
|
|
|
|
|
|
|
|
|
|
Shareholder
Proposal
|
|
|
|
For
|
|
Against
|
|
Case-by-
Case
|
+
|
|
Implement Confidential Voting
|
|
+
|
|
|
|
|
|
|
Limiting a Shareholders Right to Call Special Meetings
|
|
|
|
+
|
|
|
+
|
|
Permit a Shareholders Right to Act by Written Consent
|
|
|
|
|
|
+
|
+
|
|
Proxy Access for Annual Meetings
|
|
+
|
|
|
|
|
|
|
Reduce Meeting Notification from 21 Days to 14 Days (UK)
|
|
+
|
|
|
|
|
+
|
|
Rotation of Locale for Annual Meeting
|
|
|
|
+
|
|
|
+
|
|
Shareholder Proponent Engagement Process
|
|
+
|
|
|
|
|
|
|
Supermajority Vote Requirements
|
|
|
|
+
|
|
|
Environmental & Social, Disclosure Proposals
|
+
|
|
Animal Welfare
|
|
|
|
|
|
+
|
+
|
|
Climate Change
|
|
|
|
|
|
+
|
+
|
|
Carbon Accounting
|
|
+
|
|
|
|
|
+
|
|
Carbon Risk
|
|
+
|
|
|
|
|
+
|
|
Charitable Contributions
|
|
|
|
|
|
+
|
+
|
|
Environmental Proposals
|
|
|
|
|
|
+
|
+
|
|
Genetically Altered or Engineered Food and Pesticides
|
|
|
|
|
|
+
|
+
|
|
Health Proposals
|
|
|
|
|
|
+
|
+
|
|
Pharmaceutical Pricing (US)
|
|
|
|
|
|
+
|
+
|
|
Human Rights Policies and Reports
|
|
|
|
|
|
+
|
+
|
|
Include Sustainability as a Performance Measure (SHP)
|
|
|
|
|
|
+
|
+
|
|
Lobbying and Political Spending
|
|
+
|
|
|
|
|
+
|
|
Other Business
|
|
|
|
+
|
|
|
+
|
|
Reimbursement of Shareholder Expenses
|
|
|
|
+
|
|
|
+
|
|
Sustainability Report
|
|
|
|
|
|
+
|
+
|
|
Workplace: Diversity
|
|
+
|
|
|
|
|
+
|
|
Workplace: Pay Disparity
|
|
|
|
|
|
+
|
PROXY VOTING CONFLICT OF INTEREST FORM
|
|
|
|
|
|
|
Name of Security
|
|
|
|
Date of Shareholder Meeting
|
|
|
|
|
|
|
|
|
|
|
Short Description of the conflict (client, mutual fund distributor, etc.):
|
|
|
|
|
|
|
|
|
|
|
1.
|
|
Is our proposed vote on all issues explicitly addressed by, and consistent with our stated proxy voting policy?
|
|
☐ Yes ☐ No
|
|
|
If yes, stop here and sign below as no further review is necessary.
|
|
|
|
|
|
2.
|
|
Is our proposed vote on consistent with our clients recommended vote?
|
|
☐ Yes ☐ No
|
|
|
Leave blank if not applicable; if yes, continue to question 3; if no, provide a memo reflecting the guidelines provided below.
|
|
|
|
3.
|
|
Is our proposed vote consistent with the views of Institutional Shareholder Services?
|
|
☐ Yes ☐ No
|
Leave blank if not applicable.
Please attach a memo containing the following information and documentation supporting the proxy voting decision:
|
|
|
A list of the issue(s) where our proposed vote is contrary to our stated Policy (director election, cumulative
voting, compensation)
|
|
|
|
A description of any substantive contact with any interested outside party and a proxy voting and governance
committee or an AB investment professional that was material to our voting decision. Please include date, attendees, titles, organization they represent and topics discussed. If there was no such contact, please note as such.
|
|
|
|
If the Independent Compliance Officer has NOT determined that the proposed vote is reasonable, please explain and
indicate what action has been, or will be taken.
|
|
|
|
|
|
|
|
AB Conflicts Officer Approval (if necessary. Email approval is acceptable.):
|
|
Prepared By:
|
I hereby confirm that the proxy voting decision referenced on this form is reasonable.
|
|
|
|
|
|
|
|
Print Name:
|
|
|
AB Conflicts Officer
|
|
Date:
|
|
|
Date:
|
|
|
|
|
|
|
Please return this completed form and all supporting documentation to the Conflicts Officer in the Legal and Compliance
Department and keep a copy for your records.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT
COMPANIES.
The day-to-day management of, and investment decisions for,
the Funds portfolio are made by the Municipal Bond Investment Team. While all members of the teams work jointly to determine the majority of the investment strategy including security selection for the Fund, Messrs. Terrance T. Hults, Matthew
Norton and Andrew Potter are primarily responsible for the day-to-day management of the Funds portfolio.
(a)(1) The following table sets forth when each person became involved in the management of the Fund, and each persons principal occupation during the
past five years:
|
|
|
Employee; Year; Title
|
|
Principal Occupation During the Past Five
(5) Years
|
|
|
Terrance T. Hults; since December 2001Senior Vice President of AB
|
|
Senior Vice President of AB with which he has been associated in a substantially similar capacity to his current position since prior to 2015.
|
|
|
Matthew Norton Senior Vice President of AB
|
|
Senior Vice President of AB with which he has been associated in a substantially similar capacity to his current position since prior to 2015.
|
|
|
Andrew Potter Vice President of AB
|
|
Vice President of AB with which he has been associated in a substantially similar capacity to his current position since prior to 2015.
|
(a)(2) The following tables provide information regarding registered investment companies other than the Fund, other pooled
investment vehicles and other accounts over which the Funds portfolio managers also have day-to-day management responsibilities. The tables provide the numbers of
such accounts, the total assets in such accounts and the number of accounts and total assets whose fees are based on performance. The information is provided as of the Funds fiscal year ended October 31, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
|
|
Portfolio Managers
|
|
Total Number
of Registered
Investment
Companies
Managed
|
|
Total Assets of
Registered
Investment
Companies
Managed
|
|
|
Number of
Registered
Investment
Companies Managed
with Performance-
based Fees
|
|
Total Assets of
Registered
Investment
Companies
Managed with
Performance-based
Fees
|
|
Terrance T. Hults,
Matthew Norton,
Andrew Potter
|
|
29
|
|
$
|
24,311,000,000
|
|
|
None
|
|
|
None
|
|
POOLED INVESTMENT VEHICLES
|
|
Portfolio Managers
|
|
Total Number
of Pooled
Investment
Vehicles
Managed
|
|
Total Assets of
Pooled Investment
Vehicles Managed
|
|
|
Number of Pooled
Investment Vehicles
Managed with
Performance-based
Fees
|
|
Total Assets of
Pooled Investment
Vehicles Managed
with Performance-
based Fees
|
|
Terrance T. Hults,
Matthew Norton,
Andrew Potter
|
|
11
|
|
|
6,266,000,000
|
|
|
None
|
|
|
None
|
|
OTHER ACCOUNTS
|
|
Portfolio Managers
|
|
Total Number
of Other
Accounts
Managed
|
|
Total Assets of
Other Accounts
Managed
|
|
|
Number of Other
Accounts Managed
with Performance-
based Fees
|
|
Total Assets of
Other Accounts
with Performance-
based Fees
|
|
Terrance T. Hults,
Matthew Norton,
Andrew Potter
|
|
6,666
|
|
$
|
24,776,000,000
|
|
|
3
|
|
$
|
212,000,000
|
|
Investment Professional Conflict of Interest Disclosure
As an investment adviser and fiduciary, the Adviser owes its clients and shareholders an undivided duty of loyalty. The Adviser recognizes that conflicts of
interest are inherent in its business and accordingly has developed policies and procedures (including oversight monitoring) reasonably designed to detect, manage and mitigate the effects of actual or potential conflicts of interest in the area of
employee personal trading, managing multiple accounts for multiple clients, including AB Mutual Funds, and allocating investment opportunities. Investment professionals, including portfolio managers and research analysts, are subject to the
above-mentioned policies and oversight monitoring to ensure that all clients are treated equitably. The Adviser places the interests of its clients first and expects all of its employees to meet their fiduciary duties.
Employee Personal Trading. The Adviser has adopted a Code of Business
Conduct and Ethics that is designed to detect and prevent conflicts of interest when investment professionals and other personnel of the Adviser own, buy or
sell securities which may be owned by, or bought or sold for, clients. Personal securities transactions by an employee may raise a potential conflict of interest when an employee owns or trades in a security that is owned or considered for purchase
or sale by a client, or recommended for purchase or sale by an employee to a client. Subject to the reporting requirements and other limitations of its Code of Business Conduct and Ethics, the Adviser permits its employees to engage in personal
securities transactions, and also allows them to acquire investments in certain funds managed by the Adviser. The Advisers Code of Business Conduct and Ethics requires disclosure of all personal accounts and maintenance of brokerage accounts
with designated broker-dealers approved by the Adviser. The Code of Business Conduct and Ethics also requires preclearance of all securities transactions (except transactions in U.S. Treasuries and open-end
mutual funds other than funds advised by the Adviser) and imposes a 60-day holding period for securities purchased by employees to discourage short-term trading.
Managing Multiple Accounts for Multiple Clients
The
Adviser has compliance policies and oversight monitoring in place to address conflicts of interest relating to the management of multiple accounts for multiple clients. Conflicts of interest may arise when an investment professional has
responsibilities for the investments of more than one account because the investment professional may be unable to devote equal time and attention to each 90 account. The investment professional or investment professional teams for each client may
have responsibilities for managing all or a portion of the investments of multiple accounts with a common investment strategy, including other registered investment companies, unregistered investment vehicles, such as hedge funds, pension plans,
separate accounts, collective trusts and charitable foundations. Among other things, the Advisers policies and procedures provide for the prompt dissemination to investment professionals of initial or changed investment recommendations by
analysts so that investment professionals are better able to develop investment strategies for all accounts they manage. In addition, investment decisions by investment professionals are reviewed for the purpose of maintaining uniformity among
similar accounts and ensuring that accounts are treated equitably. Investment professional compensation reflects a broad contribution in multiple dimensions to long-term investment success for clients of the Adviser and is generally not tied
specifically to the performance of any particular clients account, nor is it generally tied directly to the level or change in level of assets under management.
Allocating Investment Opportunities and Order Aggregation
The investment professionals at the Adviser routinely are required to select and allocate investment opportunities among accounts. The Adviser has adopted
policies and procedures intended to address conflicts of interest relating to the allocation of investment opportunities. These policies and procedures are designed to ensure that information relevant to investment decisions is disseminated promptly
within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities (e.g., on a
rotational basis), and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Portfolio holdings, position sizes, and industry and sector
exposures tend to be similar across similar accounts, which minimizes the potential for conflicts of interest relating to the allocation of investment opportunities. Nevertheless, access to portfolio funds or other investment opportunities may be
allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
Generally, all orders in the same security are aggregated in each trading system by the Adviser to facilitate best execution and to reduce overall trading
costs. Executions for aggregated orders with the same executing broker are combined to determine one average price. The shares are then allocated to participating accounts using automated algorithms designed to achieve a fair, equitable and
objective distribution of the shares over time. When the liquidity in a market is not sufficient to fill all client orders, the Adviser may give priority to certain orders over others. This prioritization is based on objective factors driving the
order. Under such circumstances, the Adviser aggregates orders by these factors and subjects each aggregated order to the trade allocation algorithms discussed above. The factors used, in order of priority, are (1) correction of guideline
breaches; (2) avoidance of guideline breaches; (3) investing significant new funding and completing tax strategy implementations; (4) investing in services that focus on specific financial instruments or market sectors,
(5) avoidance of tracking error on the service/product level; and (6) portfolio rebalancing and optimization. Separate orders with the same priority may be traded using a rotational process that is fair and objective.
The Adviser may not require orders in the same security from different managers to be aggregated where one managers investment strategy requires rapid
trade execution, provided the Adviser believes that disaggregation will not materially impact other client orders. Certain other clients of the Adviser have investment objectives and policies similar to those of a Fund. The Adviser may, from time to
time, make recommendations that result in the purchase or sale of a particular security by its other clients simultaneously with a purchase or sale thereof by one or more Funds. If transactions on behalf of more than one client during the same
period increase the demand for securities being purchased or the supply of securities being sold, there may be an adverse effect on price or the quantity of securities available at a particular price. It is the policy of the Adviser to allocate
advisory recommendations and the placing of orders in a manner that is deemed equitable by the Adviser to the accounts involved, including the Funds. When two or more of the clients of the Adviser (including a Fund) are purchasing or selling the
same security on a given day through the same broker or dealer, such transactions may be averaged as to price.
The Advisers procedures are also designed to address potential conflicts of interest that may arise when
the Adviser has a particular financial incentive, such as a performance-based management fee, relating to an account. The Adviser is conscious of these potential conflicts. When the Adviser is providing fiduciary services, the goal of the
Advisers policies and procedures is to act in good faith and to treat all client accounts in a fair and equitable manner over time, regardless of their strategy, fee arrangements or the influence of their owners or beneficiaries.
Portfolio Manager Compensation
The Advisers
compensation program for portfolio managers is designed to align with clients interests, emphasizing each portfolio managers ability to generate long-term investment success for the Advisers clients, including the Funds. The
Adviser also strives to ensure that compensation is competitive and effective in attracting and retaining the highest caliber employees.
Portfolio
managers receive a base salary, incentive compensation and contributions to AllianceBernsteins 401(k) plan. Part of the annual incentive compensation is generally paid in the form of a cash bonus, and part through an award under the
firms Incentive Compensation Award Plan (ICAP). The ICAP awards vest over a four-year period. Deferred awards are paid in the form of restricted grants of the firms Master Limited Partnership Units, and award recipients have the ability
to receive a portion of their awards in deferred cash. The amount of contributions to the 401(k) plan is determined at the sole discretion of the Adviser. On an annual basis, the Adviser endeavors to combine all of the foregoing elements into a
total compensation package that considers industry compensation trends and is designed to retain its best talent.
The incentive portion of total
compensation is determined by quantitative and qualitative factors. Quantitative factors, which are weighted more heavily, are driven by investment performance. Qualitative factors are driven by contributions to the investment process and client
success.
The quantitative component includes measures of absolute, relative and riskadjusted investment performance. Relative and risk-adjusted returns
are determined based on the benchmark in the Funds prospectus and versus peers over one-, three- and five-year calendar periods, with more weight given to longer-time periods. Peer groups are chosen by
Chief Investment Officers, who consult with the product management team to identify products most similar to our investment style and most relevant within the asset class. Portfolio managers of the Funds do not receive any direct compensation based
upon the investment returns of any individual client account, and compensation is not tied directly to the level or change in level of assets under management.
Among the qualitative components considered, the most important include thought leadership, collaboration with
other investment colleagues, contributions to risk-adjusted returns of other portfolios in the firm, efforts in mentoring and building a strong talent pool and being a good corporate citizen. Other factors can play a role in determining portfolio
managers compensation, such as the complexity of investment strategies managed, volume of assets managed and experience.
The Adviser emphasizes
four behavioral competenciesrelentlessness, ingenuity, team orientation and accountabilitythat support its mission to be the most trusted advisor to its clients. Assessments of investment professionals are formalized in a year-end review process that includes 360-degree feedback from other professionals from across the investment teams and the Adviser.
Asset-Based and Performance-Based Compensation:
With
respect to the Select US Equity and Select US Long/Short, Mr. Feuerman and members of the investment team he leads (the Investment Team) were hired by the Adviser in 2011. At that time, the Adviser entered into an employment
agreement with Mr. Feuerman under which a compensation pool for Mr. Feuerman and members of the Investment Team was created based on specified percentages of the fees (both asset-based and performance-based fees) received by the Adviser
from the accounts managed by the Investment Team. Performance fees are not assessed on the Fund or the assets of the Fund. In general, a larger percentage of the fees received by the Adviser is allocated to the compensation pool with respect to
assets that were managed by Mr. Feuerman at his prior employer and that followed Mr. Feuerman to the Adviser than with respect to assets, such as the Fund, that were obtained or created after Mr. Feuerman joined the Adviser. The
compensation pool is allocated among the members of the Investment Team based on the recommendations of Mr. Feuerman subject to approval by the Advisers Compensation Committee. This compensation represents a portion of the overall
compensation received by members of the Investment Team.
(a) (4) The dollar range of the Funds equity securities owned directly
or beneficially by the Funds portfolio managers as of the Funds fiscal year ended October 31, 2021 is set forth below:
|
|
|
|
|
DOLLAR RANGE OF EQUITY
SECURITIES IN THE FUND
|
Terrance T. Hults
|
|
None
|
Matthew Norton
|
|
None
|
Andrew Potter
|
|
None
|
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
There have been no purchases of equity securities by the Fund or by affiliated parties for the reporting
period.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may recommend nominees to the Funds Board of Directors since the Fund last
provided disclosure in response to this item.