UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-10573
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Joseph J. Mantineo
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrants telephone number, including area code: (800) 221-5672
Date of fiscal year end: October 31, 2016
Date of reporting period: October 31, 2016
ITEM 1. | REPORTS TO STOCKHOLDERS. |
OCT 10.31.16
Investment Products Offered
Are Not FDIC Insured May Lose Value Are Not Bank Guaranteed |
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 on Form N-Q. The Funds Forms N-Q are available on the Commissions website at www.sec.gov. The Funds Forms N-Q 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.
December 15, 2016
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 1 |
2 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 3 |
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 page 50.
Benchmark Disclosure
The Bloomberg Barclays Municipal Bond Index is unmanaged and does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Bloomberg Barclays Municipal Bond Index represents the performance of the long-term tax-exempt bond market consisting of investment-grade bonds. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Fund. In addition, the Index does not reflect the use of leverage, whereas the Fund utilizes leverage.
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.
Leverage Risks: The Fund uses financial leverage for investment purposes, which involves leverage risk. The Funds outstanding auction preferred shares and variable rate municipal fund term preferred shares (together Preferred Shares) result in leverage. The Fund may also use other types of financial leverage, including TOBs, either in combination with, or in lieu of, the Preferred Shares. 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
(Disclosures, Risks and Note about Historical Performance continued on next page)
4 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Disclosures and Risks
DISCLOSURES AND RISKS
(continued from previous page)
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 the floaters issued in connection with the Funds TOB transactions would increase. In addition, the interest paid on inverse floaters held by the Fund, whether issued in connection with the Funds TOB transactions or purchased in a secondary market transaction, would decrease. Under such circumstances, the Funds income and distributions to Common Stockholders may decline, which 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 net asset value attributable to the Funds common stock and possibly the market value of the shares.
Tax Risk: There is no guarantee that all of the Funds income will remain exempt from federal or state income taxes. From time to time, the US government and the US Congress consider changes in federal tax law that could limit or eliminate the federal tax exemption for municipal bond income, which would in effect reduce the net income received by shareholders from the Fund by increasing taxes on that income. In such event, the Funds NAV could also decline as yields on municipal bonds, which are typically lower than those on taxable bonds, would be expected to increase to approximately the yield of comparable bonds.
Market Risk: The value of the Funds assets will fluctuate as the bond market fluctuates. The value of the Funds investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market.
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. 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 investments in fixed-income securities tends to fall and this decrease in
(Disclosures, Risks and Note about Historical Performance continued on next page)
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 5 |
Disclosures and Risks
DISCLOSURES AND RISKS
(continued from previous page)
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.
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 as can the value of the Funds distributions. This risk is significantly greater for fixed-income securities with longer maturities.
Derivatives Risk: Investments in derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Fund, and may be subject to counterparty risk to a greater degree than more traditional investments.
Liquidity Risk: Liquidity risk occurs when certain investments become difficult to purchase or sell. Difficulty in selling less liquid securities may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of liquidity risk may include low trading volumes and large positions. Municipal securities may have more liquidity risk than other fixed-income securities because they trade less frequently and the market for municipal securities is generally smaller than many other markets.
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 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. For example, a fixed-income security with a duration of three years will decrease in value by approximately 3% if interest rates increase by 1%.
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.
These risks are fully discussed in the Funds prospectus. As with all investments, you may lose money by investing in the Fund.
An Important Note About Historical Performance
The performance on the following page 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.
6 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Disclosures and Risks
HISTORICAL PERFORMANCE
THE FUND VS. ITS BENCHMARK PERIODS ENDED OCTOBER 31, 2016 (unaudited) |
Returns | |||||||||||
6 Months | 12 Months | |||||||||||
AllianceBernstein National Municipal Income Fund (NAV) | 0.99% | 8.63% | ||||||||||
|
||||||||||||
Bloomberg Barclays Municipal Bond Index | 0.49% | 4.06% | ||||||||||
The Funds market price per share on October 31, 2016 was $13.86. The Funds NAV price per share on October 31, 2016 was $15.36. For additional Financial Highlights, please see pages 46-47. | ||||||||||||
See Disclosures, Risks and Note about Historical Performance on pages 4-6.
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 7 |
Historical Performance
PORTFOLIO SUMMARY
October 31, 2016 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $441.5
* | All data are as of October 31, 2016. The Funds quality rating breakdown is expressed as a percentage of the Funds total investments in municipal securities and may vary over time. The Fund also enters into derivative transactions, which may be used for hedging or investment purposes (see Portfolio of Investments section of the report for additional details). The quality ratings are determined by using the Standard & Poors Ratings Services (S&P), Moodys Investors Services, Inc. (Moodys) and Fitch Ratings, Ltd. (Fitch). The Strategy considers the credit ratings issued by S&P, Moodys and Fitch and uses the highest rating issued by the agencies. These ratings are a measure of the quality and safety of a bond or portfolio, based on the issuers financial condition. AAA is the highest (best) and D is the lowest (worst). If applicable, the pre-refunded category includes bonds which are secured by U.S. Government securities and therefore are 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. |
8 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Portfolio Summary
PORTFOLIO OF INVESTMENTS
October 31, 2016
Principal Amount (000) |
U.S. $ Value | |||||||
|
||||||||
MUNICIPAL OBLIGATIONS 158.0% |
||||||||
Long-Term Municipal Bonds 156.7% |
||||||||
Alabama 1.5% |
||||||||
Alabama Public School & College Authority |
$ | 3,000 | $ | 3,297,240 | ||||
County of Jefferson AL |
3,100 | 3,133,622 | ||||||
|
|
|||||||
6,430,862 | ||||||||
|
|
|||||||
Arizona 1.1% |
||||||||
Salt Verde Financial Corp. |
4,150 | 4,943,448 | ||||||
|
|
|||||||
Arkansas 0.5% |
||||||||
Pulaski County Public Facilities Board |
2,000 | 2,283,460 | ||||||
|
|
|||||||
California 24.4% |
||||||||
Anaheim Public Financing Authority |
5,500 | 6,553,780 | ||||||
Bay Area Toll Authority |
5,720 | 6,858,051 | ||||||
California Econ Recovery |
4,860 | 5,415,984 | ||||||
California Pollution Control Financing Authority |
7,000 | 7,804,140 | ||||||
City of Los Angeles Department of Airports |
5,700 | 6,302,946 | ||||||
County of San Bernardino CA COP |
1,455 | 1,601,955 | ||||||
Los Angeles Community College District/CA |
5,800 | 6,217,948 |
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 9 |
Portfolio of Investments
Principal Amount (000) |
U.S. $ Value | |||||||
|
||||||||
Los Angeles County Metropolitan Transportation Authority |
$ | 1,770 | $ | 2,111,751 | ||||
Los Angeles Department of Water & Power |
90 | 109,178 | ||||||
Los Angeles Department of Water & Power PWR |
6,165 | 7,398,062 | ||||||
Series 2013B |
10,000 | 12,154,000 | ||||||
Los Angeles Department of Water & Power WTR |
3,840 | 4,640,141 | ||||||
San Bernardino County Transportation Authority |
11,340 | 13,497,500 | ||||||
State of California |
5,800 | 7,035,864 | ||||||
University of California |
7,000 | 8,275,820 | ||||||
Series 2013A |
9,855 | 11,819,768 | ||||||
|
|
|||||||
107,796,888 | ||||||||
|
|
|||||||
Colorado 2.0% |
||||||||
City & County of Denver CO Airport System Revenue |
6,680 | 7,924,284 | ||||||
Colorado Health Facilities Authority |
705 | 707,212 | ||||||
|
|
|||||||
8,631,496 | ||||||||
|
|
|||||||
Connecticut 9.6% |
||||||||
State of Connecticut |
7,165 | 8,541,038 | ||||||
Series 2013E |
4,800 | 5,665,680 |
10 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Portfolio of Investments
Principal Amount (000) |
U.S. $ Value | |||||||
|
||||||||
Series 2015F |
$ | 5,000 | $ | 5,903,150 | ||||
State of Connecticut Special Tax Revenue |
5,000 | 5,812,600 | ||||||
Series 2012 |
13,855 | 16,261,475 | ||||||
|
|
|||||||
42,183,943 | ||||||||
|
|
|||||||
District of Columbia 1.6% |
||||||||
District of Columbia |
5,000 | 5,954,100 | ||||||
Metropolitan Washington Airports Authority |
1,000 | 1,180,690 | ||||||
|
|
|||||||
7,134,790 | ||||||||
|
|
|||||||
Florida 12.1% |
||||||||
Alachua County Health Facilities Authority |
4,560 | 5,151,843 | ||||||
Brevard County Health Facilities Authority |
1,000 | 1,151,350 | ||||||
City of Orlando FL |
7,720 | 8,838,551 | ||||||
5.25%, 11/01/33 |
5,620 | 6,819,982 | ||||||
County of Miami-Dade FL Aviation Revenue |
1,000 | 1,139,140 | ||||||
Series 2016 |
3,290 | 3,871,278 | ||||||
Florida Higher Educational Facilities Financial Authority |
2,075 | 2,431,589 | ||||||
Florida Ports Financing Commission |
4,205 | 4,890,847 | ||||||
Halifax Hospital Medical Center |
2,655 | 3,028,054 |
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 11 |
Portfolio of Investments
Principal Amount (000) |
U.S. $ Value | |||||||
|
||||||||
Miami Beach Health Facilities Authority |
$ | 9,250 | $ | 10,400,237 | ||||
South Florida Water Management District COP |
5,000 | 5,908,950 | ||||||
|
|
|||||||
53,631,821 | ||||||||
|
|
|||||||
Georgia 1.2% |
||||||||
City of Atlanta Department of Aviation |
4,675 | 5,478,152 | ||||||
|
|
|||||||
Hawaii 2.8% |
||||||||
State of Hawaii |
3,500 | 3,884,930 | ||||||
State of Hawaii Airports System Revenue |
5,000 | 5,585,400 | ||||||
Series 2015A |
2,500 | 2,835,925 | ||||||
|
|
|||||||
12,306,255 | ||||||||
|
|
|||||||
Illinois 7.9% |
||||||||
Cook County High School District No 29 Proviso Township |
2,000 | 2,006,460 | ||||||
Illinois Finance Authority |
1,250 | 1,251,575 | ||||||
Illinois Finance Authority |
4,500 | 5,108,355 | ||||||
Illinois State Toll Highway Authority |
8,800 | 10,256,596 | ||||||
Series 2016A |
2,025 | 2,391,687 | ||||||
State of Illinois |
1,000 | 1,056,350 | ||||||
Series 2014 |
12,070 | 12,774,937 | ||||||
|
|
|||||||
34,845,960 | ||||||||
|
|
12 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Portfolio of Investments
Principal Amount (000) |
U.S. $ Value | |||||||
|
||||||||
Indiana 0.7% |
||||||||
Indiana Finance Authority |
$ | 250 | $ | 261,175 | ||||
5.25%, 9/01/34 |
1,500 | 1,607,160 | ||||||
Indiana Finance Authority |
1,250 | 1,404,700 | ||||||
|
|
|||||||
3,273,035 | ||||||||
|
|
|||||||
Kentucky 2.0% |
||||||||
Kentucky Municipal Power Agency |
2,500 | 2,910,450 | ||||||
Kentucky Turnpike Authority |
5,000 | 5,910,450 | ||||||
|
|
|||||||
8,820,900 | ||||||||
|
|
|||||||
Louisiana 1.8% |
||||||||
City of New Orleans LA |
5,875 | 6,140,550 | ||||||
Louisiana Agricultural Finance Authority |
1,200 | 1,233,000 | ||||||
Louisiana Local Government Environmental Facilities & Community Development Auth |
535 | 586,253 | ||||||
|
|
|||||||
7,959,803 | ||||||||
|
|
|||||||
Maryland 1.7% |
||||||||
Maryland Health & Higher Educational Facilities Authority |
6,725 | 7,483,378 | ||||||
|
|
|||||||
Massachusetts 4.1% |
||||||||
Massachusetts School Building Authority |
13,000 | 15,216,890 |
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 13 |
Portfolio of Investments
Principal Amount (000) |
U.S. $ Value | |||||||
|
||||||||
Series 2012B |
$ | 2,480 | $ | 2,960,575 | ||||
|
|
|||||||
18,177,465 | ||||||||
|
|
|||||||
Michigan 8.6% |
||||||||
Detroit City School District |
6,045 | 6,910,073 | ||||||
Michigan Finance Authority |
1,250 | 1,422,675 | ||||||
Michigan Finance Authority |
2,815 | 2,904,292 | ||||||
Michigan Finance Authority |
2,250 | 2,534,535 | ||||||
Michigan Strategic Fund |
3,795 | 4,034,313 | ||||||
Plymouth Educational Center Charter School |
2,140 | 2,027,286 | ||||||
Wayne State University |
7,840 | 8,759,632 | ||||||
5.00%, 11/15/29 |
8,660 | 9,528,338 | ||||||
|
|
|||||||
38,121,144 | ||||||||
|
|
|||||||
Minnesota 0.7% |
||||||||
City of Minneapolis MN |
2,700 | 3,159,432 | ||||||
|
|
|||||||
Missouri 0.5% |
||||||||
City of Kansas City MO |
2,000 | 2,116,160 | ||||||
|
|
|||||||
New Jersey 8.5% |
||||||||
New Jersey Economic Development Authority |
7,500 | 8,255,275 |
14 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Portfolio of Investments
Principal Amount (000) |
U.S. $ Value | |||||||
|
||||||||
New Jersey Economic Development Authority |
$ | 1,000 | $ | 1,144,300 | ||||
New Jersey Health Care Facilities Financing Authority |
6,450 | 7,317,396 | ||||||
New Jersey Transportation Trust Fund Authority |
1,100 | 1,227,996 | ||||||
New Jersey Turnpike Authority |
6,500 | 7,633,145 | ||||||
Series 2013A |
5,000 | 5,892,750 | ||||||
Series 2016A |
5,000 | 5,905,400 | ||||||
|
|
|||||||
37,376,262 | ||||||||
|
|
|||||||
New York 28.2% |
||||||||
City of New York NY |
5,070 | 5,960,596 | ||||||
Series 2012I |
8,780 | 10,364,351 | ||||||
Metropolitan Transportation Authority |
4,000 | 4,774,120 | ||||||
Series 2012F |
1,575 | 1,881,810 | ||||||
Series 2013A |
1,830 | 2,162,200 | ||||||
Series 2014B |
4,000 | 4,842,640 | ||||||
Series 2014C |
1,000 | 1,192,960 | ||||||
Metropolitan Transportation Authority |
14,260 | 17,606,679 | ||||||
New York City Municipal Water Finance Authority |
5,000 | 5,843,400 | ||||||
Series 2013D |
3,600 | 4,273,488 |
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 15 |
Portfolio of Investments
Principal Amount (000) |
U.S. $ Value | |||||||
|
||||||||
New York City NY Transitional |
$ | 10,000 | $ | 11,821,520 | ||||
New York City Transitional Finance Authority Future Tax Secured Revenue |
3,040 | 3,104,114 | ||||||
5.00%, 11/01/24 |
2,485 | 2,538,403 | ||||||
New York State Dormitory Authority |
1,135 | 1,352,568 | ||||||
New York State Dormitory Authority |
7,600 | 8,851,340 | ||||||
Series 2012D |
6,865 | 8,016,260 | ||||||
New York State Environmental Facilities Corp. |
7,000 | 7,456,610 | ||||||
Port Authority of New York & New Jersey |
4,400 | 5,159,264 | ||||||
Series 2014-186 |
8,000 | 9,277,440 | ||||||
Ulster County Industrial Development Agency |
1,775 | 1,801,501 | ||||||
Utility Debt Securitization Authority |
5,000 | 6,067,900 | ||||||
|
|
|||||||
124,349,164 | ||||||||
|
|
|||||||
North Carolina 2.3% |
||||||||
County of Iredell NC COP |
1,080 | 1,149,908 | ||||||
North Carolina Medical Care Commission |
4,445 | 5,109,216 | ||||||
University of North Carolina at Greensboro |
3,145 | 3,669,209 | ||||||
|
|
|||||||
9,928,333 | ||||||||
|
|
|||||||
Ohio 0.0% |
||||||||
Columbiana County Port Authority |
1,840 | 36,800 |
16 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Portfolio of Investments
Principal Amount (000) |
U.S. $ Value | |||||||
|
||||||||
Series 2014 |
$ | 248 | $ | 4,954 | ||||
|
|
|||||||
41,754 | ||||||||
|
|
|||||||
Oklahoma 0.4% |
||||||||
Tulsa Airports Improvement Trust |
1,700 | 1,898,356 | ||||||
|
|
|||||||
Oregon 1.3% |
||||||||
Oregon State Lottery |
4,305 | 5,045,804 | ||||||
5.25%, 4/01/25 |
695 | 813,289 | ||||||
|
|
|||||||
5,859,093 | ||||||||
|
|
|||||||
Pennsylvania 9.0% |
||||||||
Allegheny County Industrial Development Authority |
500 | 501,160 | ||||||
Butler County Hospital Authority |
3,510 | 4,028,724 | ||||||
Montgomery County Industrial Development Authority/PA |
3,480 | 4,015,224 | ||||||
Montour School District |
6,520 | 7,562,039 | ||||||
Pennsylvania Economic Development |
9,270 | 10,286,813 | ||||||
Pennsylvania Turnpike Commission |
6,355 | 7,448,656 | ||||||
Philadelphia Authority for Industrial Development |
1,150 | 11,500 | ||||||
School District of Philadelphia (The) |
5,000 | 5,516,600 |
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 17 |
Portfolio of Investments
Principal Amount (000) |
U.S. $ Value | |||||||
|
||||||||
Wilkes-Barre Finance Authority |
$ | 400 | $ | 404,828 | ||||
|
|
|||||||
39,775,544 | ||||||||
|
|
|||||||
South Carolina 1.3% |
||||||||
South Carolina Ports Authority |
5,000 | 5,615,550 | ||||||
|
|
|||||||
Tennessee 1.9% |
||||||||
Chattanooga-Hamilton County Hospital Authority |
7,500 | 8,364,600 | ||||||
|
|
|||||||
Texas 16.3% |
||||||||
Alvin Independent School District/TX |
960 | 1,048,512 | ||||||
Arlington Higher Education Finance Corp. |
4,805 | 5,561,307 | ||||||
Arlington Higher Education Finance Corp. |
1,740 | 1,983,791 | ||||||
Austin Community College District Public Facility Corp. |
5,000 | 5,847,750 | ||||||
Bexar County Health Facilities Development Corp. |
405 | 410,034 | ||||||
Central Texas Regional Mobility Authority |
3,350 | 3,822,551 | ||||||
City of Austin TX Water & Wastewater System Revenue |
8,075 | 9,711,404 | ||||||
City of Houston TX Combined Utility System Revenue |
6,000 | 7,043,040 |
18 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Portfolio of Investments
Principal Amount (000) |
U.S. $ Value | |||||||
|
||||||||
Dallas Independent School District |
$ | 2,500 | $ | 2,664,625 | ||||
Dripping Springs Independent School District/TX |
5,715 | 5,787,066 | ||||||
Fort Bend Independent School District |
7,560 | 8,368,240 | ||||||
Love Field Airport Modernization Corp. |
1,000 | 1,159,200 | ||||||
North Texas Tollway Authority |
5,000 | 5,721,800 | ||||||
Texas Private Activity Bond Surface |
1,720 | 2,010,147 | ||||||
Texas Private Activity Bond Surface Transportation Corp. |
3,000 | 3,662,790 | ||||||
University of Texas System (The) |
6,825 | 7,345,133 | ||||||
|
|
|||||||
72,147,390 | ||||||||
|
|
|||||||
Washington 2.5% |
||||||||
FYI Properties |
3,885 | 4,254,425 | ||||||
5.125%, 6/01/28 |
5,200 | 5,705,336 | ||||||
Port of Seattle WA |
1,000 | 1,162,050 | ||||||
|
|
|||||||
11,121,811 | ||||||||
|
|
|||||||
Wisconsin 0.2% |
||||||||
State of Wisconsin |
725 | 727,552 | ||||||
|
|
|||||||
Total Long-Term Municipal Bonds |
691,983,801 | |||||||
|
|
|||||||
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 19 |
Portfolio of Investments
Principal Amount (000) |
U.S. $ Value | |||||||
|
||||||||
Short-Term Municipal Notes 1.3% |
||||||||
California 1.3% |
||||||||
California Statewide Communities Development Authority |
$ | 5,500 | $ | 5,500,000 | ||||
|
|
|||||||
Total Municipal Obligations |
697,483,801 | |||||||
|
|
|||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS 1.3% |
||||||||
Investment Companies 1.3% |
||||||||
AB Fixed Income Shares, Inc. |
5,721,045 | 5,721,045 | ||||||
|
|
|||||||
Total Investments 159.3% |
703,204,846 | |||||||
Other assets less liabilities (38.4)% |
(169,566,339 | ) | ||||||
Auction Preferred Shares at liquidation value (20.9)% |
(92,125,000 | ) | ||||||
|
|
|||||||
Net Assets Applicable to Common Shareholders 100.0%(k) |
$ | 441,513,507 | ||||||
|
|
INTEREST RATE SWAPS (see Note C)
Rate Type | ||||||||||||||||
Swap Counterparty |
Notional Amount (000) |
Termination Date |
Payments made by the Fund |
Payments received by the Fund |
Unrealized Appreciation/ (Depreciation) |
|||||||||||
Goldman Sachs Bank USA |
$ | 84,000 | 9/01/17 | 0.638% | SIFMA* | $ | 36,805 |
* | Variable interest rate based on the Securities Industry & Financial Markets Association (SIFMA) Municipal Swap Index. |
20 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Portfolio of Investments
(a) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At October 31, 2016, the aggregate market value of these securities amounted to $11,838,453 or 2.7% of net assets. |
(b) | Security represents the underlying municipal obligation of an inverse floating rate obligation held by the Fund (see Note I). |
(c) | Restricted and illiquid security. |
Restricted & Illiquid Securities |
Acquisition Date |
Cost | Market Value |
Percentage of Net Assets |
||||||||||||
Plymouth Educational Center Charter School |
11/30/05 | $ | 2,125,672 | $ | 2,027,286 | 0.46 | % |
(d) | When-Issued or delayed delivery security. |
(e) | Illiquid security. |
(f) | Non-income producing security. |
(g) | Defaulted. |
(h) | Variable Rate Demand Notes are instruments whose interest rates change on a specific date (such as coupon date or interest payment date) or whose interest rates vary with changes in a designated base rate (such as the prime interest rate). This instrument is payable on demand and is secured by letters of credit or other credit support agreements from major banks. |
(i) | To obtain a copy of the funds financial statements, please go to the Securities and Exchange Commissions website at www.sec.gov, or call AB at (800) 227-4618. |
(j) | Investment in affiliated money market mutual fund. The rate shown represents the 7-day yield as of period end. |
(k) | Portfolio percentages are calculated based on net assets applicable to common shareholders. |
As of October 31, 2016, 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 3.3% and 0.9%, respectively.
Glossary:
AGC Assured Guaranty Corporation
AGM Assured Guaranty Municipal
BAM Build American Mutual
COP Certificate of Participation
ETM Escrowed to Maturity
NATL National Interstate Corporation
OSF Order of St. Francis
See notes to financial statements.
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 21 |
Portfolio of Investments
STATEMENT OF ASSETS & LIABILITIES
October 31, 2016
Assets | ||||
Investments in securities, at value |
||||
Unaffiliated issuers (cost $643,779,224) |
$ | 697,483,801 | ||
Affiliated issuers (cost $5,721,045) |
5,721,045 | |||
Interest receivable |
9,719,950 | |||
Deferred offering costs |
258,956 | |||
Unrealized appreciation on interest rate swaps |
36,805 | |||
Affiliated dividends receivable |
1,415 | |||
|
|
|||
Total assets |
713,221,972 | |||
|
|
|||
Liabilities | ||||
Variable Rate MuniFund Term Preferred Shares, at liquidation value |
141,100,000 | |||
Payable for floating rate notes issued* |
30,995,000 | |||
Payable for investment securities purchased |
6,728,539 | |||
Advisory fee payable |
294,175 | |||
Interest expense payable |
249,910 | |||
Dividends payableAuction Preferred Shares |
15,449 | |||
Other liabilities |
63,822 | |||
Accrued expenses |
136,570 | |||
|
|
|||
Total liabilities |
179,583,465 | |||
|
|
|||
Auction Preferred Shares, at Liquidation Value | ||||
Auction Preferred shares, $.001 par value per share; 11,400 shares authorized, 3,685 shares issued and outstanding at $25,000 per share liquidation preference |
$ | 92,125,000 | ||
|
|
|||
Net Assets Applicable to Common Shareholders |
$ | 441,513,507 | ||
|
|
|||
Composition of Net Assets Applicable to Common Shareholders | ||||
Common stock, $.001 par value per share; 1,999,988,600 shares authorized, 28,744,936 shares issued and outstanding |
$ | 28,745 | ||
Additional paid-in capital |
415,396,953 | |||
Distributions in excess of net investment income |
(280,715 | ) | ||
Accumulated net realized loss on investment transactions |
(27,372,858 | ) | ||
Net unrealized appreciation on investments |
53,741,382 | |||
|
|
|||
Net Assets Applicable to Common Shareholders |
$ | 441,513,507 | ||
|
|
|||
Net Asset Value Applicable to Common Shareholders (based on 28,744,936 common shares outstanding) |
$ | 15.36 | ||
|
|
* | Represents short-term floating rate certificates issued by tender option bond trusts (see Note H). |
See notes to financial statements.
22 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Statement of Assets & Liabilities
STATEMENT OF OPERATIONS
Year Ended October 31, 2016
Investment Income | ||||||||
Interest |
$ | 27,517,047 | ||||||
DividendsAffiliated issuers |
8,344 | $ | 27,525,391 | |||||
|
|
|||||||
Expenses | ||||||||
Advisory fee (see Note B) |
3,730,152 | |||||||
Auction Preferred Shares-auction agents fees |
51,566 | |||||||
Custodian |
158,469 | |||||||
Audit and tax |
80,582 | |||||||
Legal |
49,833 | |||||||
Transfer agency |
35,290 | |||||||
Printing |
31,420 | |||||||
Registration fees |
27,992 | |||||||
Directors fees and expenses |
23,702 | |||||||
Miscellaneous |
94,047 | |||||||
|
|
|||||||
Total expenses before interest expense, fees and amortization of offering costs |
4,283,053 | |||||||
Interest expense, fees and amortization of offering costs |
2,792,218 | |||||||
|
|
|||||||
Total expenses |
7,075,271 | |||||||
Less: expenses waived and reimbursed by the Adviser (see Note B) |
(2,534 | ) | ||||||
|
|
|||||||
Net expenses |
7,072,737 | |||||||
|
|
|||||||
Net investment income |
20,452,654 | |||||||
|
|
|||||||
Realized and Unrealized Gain (Loss) on Investment Transactions | ||||||||
Net realized loss on investment transactions |
(846,455 | ) | ||||||
Net change in unrealized appreciation/depreciation of: |
||||||||
Investments |
15,717,786 | |||||||
Swaps |
36,805 | |||||||
|
|
|||||||
Net gain on investment transactions |
14,908,136 | |||||||
|
|
|||||||
Dividends to Auction Preferred Shareholders from | ||||||||
Net investment income |
(581,040 | ) | ||||||
|
|
|||||||
Net Increase in Net Assets Applicable to Common Shareholders Resulting from Operations |
$ | 34,779,750 | ||||||
|
|
See notes to financial statements.
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 23 |
Statement of Operations
STATEMENT OF CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS
Year Ended October 31, 2016 |
Year Ended October 31, 2015 |
|||||||
Increase (Decrease) in Net Assets Applicable to Common Shareholders Resulting from Operations | ||||||||
Net investment income |
$ | 20,452,654 | $ | 23,422,122 | ||||
Net realized gain (loss) on investment transactions |
(846,455 | ) | 3,841,171 | |||||
Net change in unrealized appreciation/depreciation of investments |
15,754,591 | (9,928,843 | ) | |||||
Dividends to Auction Preferred Shareholders from | ||||||||
Net investment income |
(581,040 | ) | (266,117 | ) | ||||
|
|
|
|
|||||
Net increase in net assets applicable to common shareholders resulting from operations |
34,779,750 | 17,068,333 | ||||||
Dividends to Common Shareholders from | ||||||||
Net investment income |
(20,037,447 | ) | (23,319,885 | ) | ||||
Return of capital |
(755,490 | ) | (216,468 | ) | ||||
|
|
|
|
|||||
Total dividends and distributions to common shareholders |
(20,792,937 | ) | (23,536,353 | ) | ||||
Auction Preferred Shares Transaction | ||||||||
Net increase on tendered and repurchased Auction Preferred Shares |
0 | | 8,915,239 | |||||
|
|
|
|
|||||
Total increase |
13,986,813 | 2,447,219 | ||||||
Net Assets Applicable to Common Shareholders | ||||||||
Beginning of period |
427,526,694 | 425,079,475 | ||||||
|
|
|
|
|||||
End of period (including distributions in excess of net investment income of ($280,715) and ($159,291), respectively) |
$ | 441,513,507 | $ | 427,526,694 | ||||
|
|
|
|
See notes to financial statements.
24 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Statement of Changes in Net Assets Applicable to Common Shareholders
STATEMENT OF CASH FLOWS
For the Year Ended October 31, 2016
Cash Flows from Operating Activities | ||||||||
Net increase in net assets from operations |
$ | 35,360,790 | ||||||
Reconciliation of Net Increase in Net Assets from Operations to Net Increase in Cash from Operating Activities: | ||||||||
Purchases of long-term investments |
$ | (99,567,053 | ) | |||||
Purchases of short-term investments |
(69,668,353 | ) | ||||||
Proceeds from disposition of long-term investments |
118,032,858 | |||||||
Proceeds from disposition of short-term investments |
58,447,309 | |||||||
Net realized loss on investment transactions |
846,455 | |||||||
Net change in unrealized appreciation/depreciation on investment transactions |
(15,754,591 | ) | ||||||
Net accretion of bond discount and amortization of bond premium |
3,993,641 | |||||||
Decrease in receivable for investments sold |
2,500,000 | |||||||
Decrease in interest receivable |
88,638 | |||||||
Increase in affiliated dividends receivable |
(1,191 | ) | ||||||
Decrease in deferred offering costs |
8,228 | |||||||
Decrease in payable for investments purchased |
(1,130,386 | ) | ||||||
Decrease in advisory fee payable |
(14,056 | ) | ||||||
Increase in interest expense payable |
91,705 | |||||||
Decrease in other liabilities |
(18,443 | ) | ||||||
Decrease in accrued expenses |
(100,534 | ) | ||||||
|
|
|||||||
Total adjustments |
(2,245,773 | ) | ||||||
|
|
|||||||
Net increase in cash from operating activities |
$ | 33,115,017 | ||||||
|
|
|||||||
Cash Flows from Financing Activities | ||||||||
Cash dividends paid |
(21,359,614 | ) | ||||||
Repayment of floating rate notes issued |
(11,780,000 | ) | ||||||
|
|
|||||||
Net decrease in cash from financing activities |
(33,139,614 | ) | ||||||
|
|
|||||||
Net decrease in cash |
(24,597 | ) | ||||||
Net change in cash |
||||||||
Cash at beginning of year |
24,597 | |||||||
|
|
|||||||
Cash at end of year |
$ | | ||||||
|
|
|||||||
Supplemental disclosure of cash flow information: |
||||||||
Interest expense paid during the year |
$ | 2,656,104 |
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.
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 25 |
Statement of Cash Flows
NOTES TO FINANCIAL STATEMENTS
October 31, 2016
NOTE A
Significant Accounting Policies
AllianceBernstein National Municipal Income Fund, Inc. (the Fund) was incorporated in the State of Maryland on November 9, 2001 and is registered under the Investment Company Act of 1940 as a 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
26 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Notes to Financial Statements
term 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. Such 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 may frequently value 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
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 27 |
Notes to Financial Statements
in 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. In addition, non-agency rated investments are 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.
28 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Notes to Financial Statements
The following table summarizes the valuation of the Funds investments by the above fair value hierarchy levels as of October 31, 2016:
Investments in |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: |
||||||||||||||||
Long-Term Municipal Bonds |
$ | 0 | | $ | 663,708,213 | $ | 28,275,588 | $ | 691,983,801 | |||||||
Short-Term Municipal Notes |
0 | | 5,500,000 | 0 | | 5,500,000 | ||||||||||
Short-Term Investments |
5,721,045 | 0 | | 0 | | 5,721,045 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
5,721,045 | 669,208,213 | 28,275,588 | 703,204,846 | ||||||||||||
Other Financial |
||||||||||||||||
Assets: |
||||||||||||||||
Interest Rate Swaps |
0 | | 36,805 | 0 | | 36,805 | ||||||||||
Liabilities |
0 | | 0 | | 0 | | 0 | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total(b) |
$ | 5,721,045 | $ | 669,245,018 | $ | 28,275,588 | $ | 703,241,651 | ||||||||
|
|
|
|
|
|
|
|
(a) | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument. |
(b) | There were no transfers between Level 1 and Level 2 during the reporting period. |
The Fund recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value.
Long-Term Municipal Bonds |
Total | |||||||
Balance as of 10/31/15 |
$ | 25,616,290 | $ | 25,616,290 | ||||
Accrued discounts/(premiums) |
(77,178 | ) | (77,178 | ) | ||||
Realized gain (loss) |
(2,532,718 | ) | (2,532,718 | ) | ||||
Change in unrealized appreciation/depreciation |
3,430,188 | 3,430,188 | ||||||
Purchases |
8,060,524 | 8,060,524 | ||||||
Sales |
(10,324,542 | ) | (10,324,542 | ) | ||||
Transfers in to Level 3 |
4,103,024 | 4,103,024 | ||||||
Transfers out of Level 3 |
0 | | 0 | | ||||
|
|
|
|
|||||
Balance as of 10/31/16 |
$ | 28,275,588 | $ | 28,275,588 | (a) | |||
|
|
|
|
|||||
Net change in unrealized appreciation/depreciation from investments held as of 10/31/16(b) |
$ | 723,184 | $ | 723,184 | ||||
|
|
|
|
(a) | There were de minimis transfers under 1% of net assets during the reporting period. |
(b) | The unrealized appreciation/depreciation is included in net change in unrealized appreciation/depreciation on investments and other financial instruments in the accompanying statement of operations. |
As of October 31, 2016 all Level 3 securities were priced by third party vendors.
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 29 |
Notes to Financial Statements
The Adviser established the Committee to oversee the pricing and valuation of all securities held in the Fund. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committees responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Advisers pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
The Committee is also responsible for monitoring the implementation of the pricing policies by the Advisers Pricing Group (the Pricing Group) and a third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Advisers prices).
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
30 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Notes to Financial Statements
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 discounts and market discounts as adjustments to interest income.
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 0.55% of the Funds 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 the VMTP shares, which is a liability for financial reporting purposes, is not deducted.
Under the terms of the Shareholder Inquiry Agency Agreement with AllianceBernstein 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, 2016, there was no reimbursement paid to ABIS.
The AB Fixed-Income Shares, Inc.Government STIF Portfolio (the Government STIF Portfolio), prior to June 1, 2016, was offered as a cash management option to mutual funds and other institutional accounts of the Adviser, and was not available for direct purchase by members of the public. Prior to June 1, 2016, the Government STIF Portfolio paid no advisory fees but did bear its own expenses. As of
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 31 |
Notes to Financial Statements
June 1, 2016, the Government STIF Portfolio, which was renamed AB Government Money Market Portfolio (the Government Money Market Portfolio), has a contractual advisory fee rate of .20% and continues to bear its own expenses. In connection with the investment by the Fund in the Government Money Market Portfolio, the Adviser has agreed to waive its investment advisory fee from the Fund in an amount equal to the Funds share of the advisory fees of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. For the year ended October 31, 2016, such waiver amounted to $2,534. A summary of the Funds transactions in shares of the Government Money Market Portfolio for the year ended October 31, 2016 is as follows:
Market Value 10/31/15 (000) |
Purchases at Cost (000) |
Sales Proceeds (000) |
Market Value 10/31/16 (000) |
Dividend Income (000) |
||||||||||||||
$ | 0 | $ | 64,168 | $ | 58,447 | $ | 5,721 | $ | 8 |
NOTE C
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended October 31, 2016 were as follows:
Purchases | Sales | |||||||
Investment securities (excluding U.S. government securities) |
$ | 99,567,053 | $ | 120,140,220 | ||||
U.S. government securities |
0 | | 0 | |
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding swap transactions) are as follows:
Cost |
$ | 618,672,329 | ||
|
|
|||
Gross unrealized appreciation |
$ | 54,985,445 | ||
Gross unrealized depreciation |
(1,490,302 | ) | ||
|
|
|||
Net unrealized appreciation |
$ | 53,495,143 | ||
|
|
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.
32 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Notes to Financial Statements
The principal type of derivative utilized by the Fund, as well as the methods in which they may be used are:
| Swaps |
The Fund may enter into swaps to hedge its exposure to interest rates or credit risk. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. In addition, collateral may be pledged or received by the Fund in accordance with the terms of the respective swaps to provide value and recourse to the Fund or its counterparties in the event of default, bankruptcy or insolvency by one of the parties to the swap.
Risks may arise as a result of the failure of the counterparty to the swap to comply with the terms of the swap. The loss incurred by the failure of a counterparty is generally limited to the net interim payment to be received by the Fund, and/or the termination value at the end of the contract. Therefore, the Fund considers the creditworthiness of each counterparty to a swap in evaluating potential counterparty risk. This risk is mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Funds exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Fund accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or received are recognized as cost or proceeds on the statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the statement of operations.
Certain standardized swaps, including certain interest rate swaps and credit default swaps, are (or soon will be) subject to mandatory central clearing. Cleared swaps are transacted through
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 33 |
Notes to Financial Statements
futures commission merchants (FCMs) that are members of central clearinghouses, with the clearinghouse serving as central counterparty, similar to transactions in futures contracts. Centralized clearing will be required for additional categories of swaps on a phased-in basis based on requirements published by the Securities and Exchange Commission and Commodity Futures Trading Commission.
At the time the Fund enters into a centrally cleared swap, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the clearinghouse on which the transaction is effected. Such amount is shown as cash collateral due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for centrally cleared swaps is generally less than non-centrally cleared swaps, since the clearinghouse, which is the issuer or counterparty to each centrally cleared swap, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Interest Rate Swaps:
The Fund is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Fund holds fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Fund may enter into interest rate swaps. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional amount. The Fund may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional amount.
In addition, the Fund may also enter into interest rate swap transactions to preserve a return or spread on a particular investment or portion of its portfolio, or protecting against an increase in the price of securities the Fund anticipates purchasing at a later date. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for
34 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Notes to Financial Statements
fixed rate payments) computed based on a contractually-based principal (or notional) amount. Interest rate swaps are entered into on a net basis (i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments).
During the year ended October 31, 2016, the Fund held interest rate swaps for hedging purposes.
The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (ISDA Master Agreement) or similar master agreements (collectively, Master Agreements) with its derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the counterparty certain derivative financial instruments payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination.
Various Master Agreements govern the terms of certain transactions with counterparties, including transactions such as derivative transactions, repurchase and reverse repurchase agreements. These Master Agreements typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements typically provide that a default in connection with one transaction between the Fund and a counterparty gives the non-defaulting party the right to terminate any other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party. In the event of a default by a Master Agreements counterparty, the return of collateral with market value in excess of the Funds net liability, held by the defaulting party, may be delayed or denied.
The Funds Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Fund decline below specific levels (net asset contingent features). If these levels are triggered, the Funds counterparty has the right to terminate such transaction and require the Fund to pay or receive a settlement amount in connection with the terminated transaction. For additional details, please refer to netting arrangements by counterparty tables below.
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 35 |
Notes to Financial Statements
During the year ended October 31, 2016, the Fund had entered into the following derivatives:
Asset Derivatives |
Liability Derivatives |
|||||||||||
Derivative Type |
Statement of |
Fair Value |
Statement of |
Fair Value | ||||||||
Interest rate contracts |
Unrealized appreciation on interest rate swaps | $ | 36,805 | |||||||||
|
|
|||||||||||
Total |
$ | 36,805 | ||||||||||
|
|
Derivative Type |
Location of Gain |
Realized Gain or (Loss) on Derivatives |
Change in Unrealized Appreciation or (Depreciation) |
|||||||
Interest rate contracts |
Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | $ | 36,805 | |||||||
|
|
|||||||||
Total |
$ | 36,805 | ||||||||
|
|
The following table represents the average monthly volume of the Funds derivative transactions during the year ended October 31, 2016:
Interest Rate Swaps: |
||||
Average notional amount |
$ | 84,000,000 | (a) |
(a) | Positions were open for three months during the year. |
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the statement of assets and liabilities.
All derivatives held at period end were subject to netting arrangements. The following table presents the Funds derivative assets and liabilities by counterparty net of amounts available for offset under Master Agreements (MA) and net of the related collateral received/pledged by the Fund as of October 31, 2016:
Counterparty |
Derivative Assets Subject to a MA |
Derivative Available for Offset |
Cash Collateral Received |
Security Collateral Received |
Net Amount of Derivatives Assets |
|||||||||||||||
OTC Derivatives: |
||||||||||||||||||||
Goldman Sachs Bank USA |
$ | 36,805 | $ | 0 | | $ | 0 | | $ | 0 | | $ | 36,805 | |||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 36,805 | $ | 0 | | $ | 0 | | $ | 0 | | $ | 36,805 | ^ | ||||||
|
|
|
|
|
|
|
|
|
|
^ | Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
36 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Notes to Financial Statements
NOTE D
Common Stock
There are 28,744,936 shares of common stock outstanding at October 31, 2016. During the year ended October 31, 2016 and October 31, 2015, the Fund did not issue any shares in connection with the Funds dividend reinvestment plan.
NOTE E
Auction Preferred Shares
The Fund has 11,400 shares authorized and 3,685 shares issued and outstanding of auction preferred stock (the APS), consisting of 894 of Series M, 654 shares of Series T, 706 shares of Series W and 1,431 shares of Series TH. The APS have a liquidation value of $25,000 per share plus accumulated, unpaid dividends. The dividend rate on the APS may change every 7 days as set by the auction agent for series M, T, W and TH. Due to the recent failed auctions, the dividend rate is the maximum rate set by the terms of the APS, which is based on AA commercial paper rates and short-term municipal bond rates. The dividend rate on Series M is 1.03% effective through November 7, 2016, Series T is 1.03% effective through November 8, 2016, Series W is 1.21% effective through November 2, 2016 and Series TH is 1.03% effective through November 3, 2016.
At certain times, the Fund may voluntarily redeem the APS in certain circumstances. The Fund is not required to redeem any of its APS and expects to continue to rely on the APS for a portion of its leverage exposure. The Fund may also pursue other liquidity solutions for the APS. During the year ended October 31, 2015, the Fund conducted a tender offer (the Offer) for its APS at a price reflecting a discount to its liquidation preference. The Fund offered to purchase up to 100% of its APS, at a price equal to 94% of the liquidation preference of $25,000 per share (or $23,500 per share), plus any unpaid dividends accrued through the termination date of the Offer. The Offer expired on Monday, August 24, 2015, and all shares that were validly tendered and not withdrawn during the offering period were accepted for payment. In aggregate, the Fund accepted for payment 6,004 APS, which represented approximately $150,100,000 or 62% of its outstanding APS (at $25,000 per share). Payment for such shares was made by the Fund on September 1, 2015. APS that were not tendered remain outstanding. The shares accepted represent, approximately 67%, 61%, 74% and 47% of outstanding Series M, Series T, Series W and Series TH, respectively. The difference of $9,006,000 between the liquidation preference of the APS and the actual purchase price of the tendered APS, net of legal, printing, mailing, information agent and registration fees of $90,761, was recorded by the Fund as Net increase on tendered and repurchased
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 37 |
Notes to Financial Statements
Auction Preferred Shares on the statement of changes in net assets. The Fund financed the tender offer payment by issuing Variable Rate MuniFund Term Preferred Shares.
Variable Rate MuniFund Term Preferred Shares
During the year ended October 31, 2015, the Fund also completed a private offering of Variable Rate MuniFund Term Preferred Shares (VMTPS), having a liquidation preference of $25,000 per share. The Fund issued and sold 5,644 VMTPS in its offering. The net proceeds from the offering were used to repurchase the APS that were accepted for payment pursuant to the Offer. The VMTPS rank pari passu with the remaining outstanding APS but are subject to a mandatory redemption by the Fund in September 2022. The cost of leverage to the Fund resulting from the issuance of VMTPS is expected to vary over time and to differ from, and in some cases may exceed, the cost of leverage associated with the APS, as is the case at October 31, 2016, although the Adviser anticipates that, in general, an increase in interest rates beyond a certain level may result in the VMTPS being more economical to the Fund.
VMTPS generally do not trade, and market quotations are generally not available. VMTPS are short-term or short/intermediate-term instruments that pay a variable dividend rate tied to the SIFMA Municipal Swap Index, plus an additional fixed spread amount of 1.30%, established at the time of issuance. As of October 31, 2016, the dividend rate for the VMTPS was 1.93%. 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, 2016, the average amount of VMTPS outstanding and the daily weighted average dividend rate were $141,100,000 and 1.62%, respectively.
Dividends on the VMTPS (which are treated as interest payments for financial reporting purposes) are set weekly. Unpaid dividends on VMTPS are recorded as Interest expense payable on the statement of assets and liabilities. Dividends accrued on 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 VMTPS were recorded as a deferred charge, which are amortized over the life of the shares and are recorded as Deferred offering costs on the statement of assets and liabilities and included within Interest expense, fees and amortization of offering costs on the statement of operations. Additional costs of $35,955 were incurred and capitalized by the Fund during the year ended October 31, 2016. The VMTPS are treated as equity for tax purposes.
38 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Notes to Financial Statements
The preferred shareholders, including the holders of both the APS and 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 will vote as a separate class on certain other matters as required under the Funds Charter, the Investment Company Act of 1940 and Maryland law, and management regularly evaluates, and discusses with the Funds Board of Directors, the costs and potential benefits of alternative sources of leverage for the Fund.
NOTE F
Distributions to Common Shareholders
The tax character of distributions paid during the fiscal years ended October 31, 2016 and October 31, 2015 were as follows:
2016 | 2015 | |||||||
Distributions paid from: |
||||||||
Ordinary income |
$ | 22,254 | $ | 4,479 | ||||
Tax-exempt income |
20,015,193 | 23,315,406 | ||||||
|
|
|
|
|||||
Distributions Paid |
20,037,447 | 23,319,885 | ||||||
Tax return of capital |
755,490 | 216,468 | ||||||
|
|
|
|
|||||
Total distributions paid |
$ | 20,792,937 | $ | 23,536,353 | ||||
|
|
|
|
As of October 31, 2016, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Accumulated capital and other gains/losses |
$ | (27,145,470 | )(a) | |
Unrealized appreciation/(depreciation) |
53,498,637 | (b) | ||
|
|
|||
Total accumulated earnings/(deficit) |
$ | 26,353,167 | (c) | |
|
|
(a) | On October 31, 2016, the Fund had a net capital loss carryforward of $27,145,470. |
(b) | The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax treatment of tender option bonds and swaps. |
(c) | The difference between book-basis and tax-basis components of accumulated earnings/(deficit) is attributable primarily to dividends payable. |
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 incurred in taxable years beginning after December 22, 2010 for an indefinite period. These post-December 22, 2010 capital losses must be utilized prior to the earlier capital losses, which are subject to expiration. Post-December 22, 2010 capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous regulation.
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 39 |
Notes to Financial Statements
As of October 31, 2016, the Fund had a net capital loss carryforward of $27,145,470 which will expire as follows:
Short-Term |
Long-Term |
Expiration | ||
$979,235 | n/a | 2017 | ||
5,292,453 | n/a | 2018 | ||
4,345,107 | n/a | 2019 | ||
6,929,515 | $9,599,160 | no expiration |
During the current fiscal year, permanent differences primarily due to the tax treatment of offering costs resulted in a net decrease in distributions in excess of net investment income and a net decrease in additional paid-in capital. These reclassifications had no effect on net assets.
NOTE G
Risks Involved in Investing in 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.
Municipal Market RiskThis is the risk that special factors may adversely affect the value of 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, 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 and catastrophic natural disasters, such as hurricanes or earthquakes. The Funds investments 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.
40 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Notes to Financial Statements
Tax RiskThere is no guarantee that all of the Funds income will remain exempt from federal or state income taxes. From time to time, the U.S. Government and the U.S. Congress consider changes in federal tax law that could limit or eliminate the federal tax exemption for municipal bond income, which would in effect reduce the income received by shareholders from the Fund by increasing taxes on that income. In such event, the Funds net asset value could also decline as yields on municipal bonds, which are typically lower than those on taxable bonds, would be expected to increase to approximately the yield of comparable taxable bonds.
Interest Rate RiskChanges in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. The Fund may be subject to a heightened risk of rising interest rates due to the current period of historically low rates and the effect of government fiscal policy initiatives, including Federal Reserve actions, and market reaction to these initiatives. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations.
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 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. For example, a fixed-income security with a duration of three years will decrease in value by approximately 3% if interest rates increase by 1%.
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.
Liquidity RiskLiquidity risk occurs when certain investments become difficult to purchase or sell. Difficulty in selling less liquid securities may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of liquidity risk may include low trading volumes and large positions of Fund shares. Over recent years liquidity risk has also increased because the capacity of dealers in the secondary market for fixed-income securities to make markets in these securities has decreased, even as the overall bond market has grown significantly, due to, among other things, structural changes, additional regulatory requirements and capital and risk restraints that have led to reduced
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 41 |
Notes to Financial Statements
inventories. Liquidity risk may be higher in a rising interest rate environment, when the value and liquidity of fixed-income securities generally decline. Municipal securities may have more liquidity risk than other fixed-income securities because they trade less frequently and the market for municipal securities is generally smaller than many other markets.
Derivatives RiskThe Fund may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses, and may be subject to counterparty risk to a greater degree than more traditional investments. 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.
Financing and Related Transactions; Leverage and Other RisksThe Fund utilizes leverage to seek to enhance the yield and net asset value 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 net asset value 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 tender option bond 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 net asset value attributable to the Funds common stock and possibly the market value of the shares.
The Funds outstanding APS and VMTPS result in leverage. The Fund may also use other types of financial leverage, including tender option bond transactions, either in combination with, or in lieu of, the preferred shares. In a tender option bond transaction, the Fund may transfer a highly rated fixed-rate municipal security to a broker, which, in turn, deposits the bond into a special purpose vehicle (typically, a trust) usually sponsored by the broker. 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
42 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Notes to Financial Statements
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 tender option bond 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.
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.
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) to a broker for cash. The broker deposits the Fixed Rate Bond into a Special Purpose Vehicle (the SPV, which is generally organized as a trust), organized by the broker. 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
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 43 |
Notes to Financial Statements
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 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, 2016, the amount of the Funds Floating Rate Notes outstanding was $30,995,000 and the related interest rate was 0.66% to 0.71%. For the year ended October 31, 2016, the average amount of Floating Rate Notes outstanding and the daily weighted average interest rate were $42,887,432 and 1.06%, 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, 2016, the Fund did not engage in such transactions.
The final rules implementing section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Volcker Rule) were issued on December 10, 2013. The Volcker Rule precludes banking entities and their affiliates from (i) sponsoring residual interest bond programs, such as the Funds TOB transactions (as such programs were then previously or are presently structured), and (ii) continuing certain relationships with or certain services for residual interest bond programs. As a result, such residual interest bond trusts need to be restructured or unwound. The effects of the Volcker Rule may make it more difficult for the Fund to maintain current or desired levels of leverage and may cause the Fund to incur additional expenses to maintain its leverage. Banking entities subject to the Volcker Rule were required to comply by July 21, 2015 for TOBs established after December 31, 2013, and by July 21, 2017 for TOBs established prior to December 31, 2013.
NOTE I
New Accounting Pronouncements
In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2015-03 (ASU 2015-03). Under this guidance, debt issuance costs related to a recognized debt liability are
44 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Notes to Financial Statements
to be presented as a direct deduction from the debt liability rather than as an asset on the statement of assets and liabilities, consistent with debt discounts. ASU 2015-03 is effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods. At this time, management is evaluating the implications of these changes on the financial statements.
In May 2015, the FASB issued Accounting Standards Update ASU 2015-07 (ASU 2015-07) which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. ASU 2015-07 also removes the requirement to make certain disclosures for investments that are eligible to be measured at fair value using the net asset value per share practical expedient but do not utilize that practical expedient. ASU 2015-07 is effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods. Management has evaluated the implications of these changes and there will be no impact to the financial statements.
Note J
Other
In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management is currently evaluating the impact that the adoption of the amendments to Regulation S-X will have on the financial statements and related disclosures.
NOTE K
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.
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 45 |
Notes to Financial Statements
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
Year Ended October 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
|
|
|||||||||||||||||||
Net asset value, beginning of period |
$ 14.87 | $ 14.79 | $ 13.73 | $ 15.24 | $ 14.26 | |||||||||||||||
|
|
|||||||||||||||||||
Income From Investment Operations |
||||||||||||||||||||
Net investment income(a) |
.71 | (b) | .81 | .85 | .82 | .95 | ||||||||||||||
Net realized and unrealized gain (loss) on investment transactions |
.52 | (.21 | ) | 1.09 | (1.42 | ) | .98 | |||||||||||||
Dividends to auction preferred shareholders from net investment income (common stock equivalent basis) |
(.02 | ) | (.01 | ) | (.01 | ) | (.02 | ) | (.02 | ) | ||||||||||
|
|
|||||||||||||||||||
Net increase (decrease) in net asset value from operations |
1.21 | .59 | 1.93 | (.62 | ) | 1.91 | ||||||||||||||
|
|
|||||||||||||||||||
Less: Dividends and Distributions to Common Shareholders from |
||||||||||||||||||||
Net investment income |
(.69 | ) | (.81 | ) | (.84 | ) | (.89 | ) | (.93 | ) | ||||||||||
Return of capital |
(.03 | ) | (.01 | ) | (.03 | ) | 0 | | 0 | | ||||||||||
|
|
|||||||||||||||||||
Total dividends and distributions |
(.72 | ) | (.82 | ) | (.87 | ) | (.89 | ) | (.93 | ) | ||||||||||
|
|
|||||||||||||||||||
Net increase from tender and repurchase of Auction Preferred Shares |
0 | | .31 | 0 | | 0 | | 0 | | |||||||||||
|
|
|||||||||||||||||||
Net asset value, end of period |
$ 15.36 | $ 14.87 | $ 14.79 | $ 13.73 | $ 15.24 | |||||||||||||||
|
|
|||||||||||||||||||
Market value, end of period |
$ 13.86 | $ 13.55 | $ 14.04 | $ 12.95 | $ 16.16 | |||||||||||||||
|
|
|||||||||||||||||||
Premium/(Discount), end of period |
(9.77 | )% | (8.88 | )% | (5.07 | )% | (5.68 | )% | 6.04 | % | ||||||||||
Total Return |
||||||||||||||||||||
Total investment return based on:(c) |
||||||||||||||||||||
Market value |
7.57 | % | 2.52 | % | 15.72 | % | (14.62 | )% | 23.57 | % | ||||||||||
Net asset value |
8.63 | % | 6.80 | %(d) | 14.98 | % | (4.01 | )% | 13.76 | % | ||||||||||
Ratios/Supplemental Data |
||||||||||||||||||||
Net assets applicable to common shareholders, end of period (000s omitted) |
$441,514 | $427,527 | $425,079 | $394,775 | $437,749 | |||||||||||||||
Auction Preferred Shares: |
||||||||||||||||||||
Liquidation value ($25,000 per share)(000s omitted) |
$92,125 | $92,125 | $242,225 | $242,225 | $242,225 | |||||||||||||||
Asset coverage per share |
$72,327 | $70,828 | $68,750 | $65,750 | $70,250 | |||||||||||||||
Variable Rate MuniFund Term Preferred Shares: |
||||||||||||||||||||
Liquidation value ($25,000 per share)(000s omitted) |
$141,100 | $141,100 | N/A | N/A | N/A | |||||||||||||||
Asset coverage per share |
$72,327 | $70,828 | N/A | N/A | N/A | |||||||||||||||
Ratio to average net assets applicable to common shareholders of: |
||||||||||||||||||||
Expenses, net of waivers/reimbursements(e)(f) |
1.59 | % | 1.16 | % | 1.17 | % | 1.11 | % | 1.10 | % | ||||||||||
Expenses, before waivers/reimbursements(e)(f) |
1.59 | % | 1.16 | % | 1.17 | % | 1.11 | % | 1.10 | % | ||||||||||
Net investment income, before Auction Preferred Shares dividends(e) |
4.60 | %(b) | 5.56 | % | 6.03 | % | 5.63 | % | 6.42 | % | ||||||||||
Auction Preferred Shares dividends |
.13 | % | .06 | % | .06 | % | .11 | % | .14 | % | ||||||||||
Net investment income, net of Auction Preferred Shares dividends |
4.47 | %(b) | 5.50 | % | 5.97 | % | 5.52 | % | 6.28 | % | ||||||||||
Portfolio turnover rate |
14 | % | 24 | % | 26 | % | 41 | % | 28 | % | ||||||||||
Asset coverage ratio |
289 | % | 283 | % | 275 | % | 263 | % | 281 | % |
See footnote summary on page 47.
46 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Financial Highlights
(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 94% of the per share liquidation preference. Absent this transaction, the total return based on net asset values would have been 4.57%. |
(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: |
Year Ended October 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
|
|
|||||||||||||||||||
Expenses |
.96 | % | 1.01 | % | 1.04 | % | 1.02 | % | 1.00 | % | ||||||||||
Before waivers |
.96 | % | 1.01 | % | 1.04 | % | 1.02 | % | 1.00 | % |
See notes to financial statements.
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 47 |
Financial Highlights
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of AllianceBernstein National Municipal Income Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of AllianceBernstein National Municipal Income Fund, Inc. (the Fund) as of October 31, 2016, and the related statement 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, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2016, by correspondence with the custodian and others, or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AllianceBernstein National Municipal Income Fund, Inc. at October 31, 2016, 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 the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
December 30, 2016
48 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Report of Independent Registered Public Accounting Firm
2016 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, 2016.
The Fund designates $22,869,280 as exempt-interest dividends for the year ended October 31, 2016.
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 2017.
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 49 |
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.
50 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Additional Information
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.
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.
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 51 |
Additional Information
BOARD OF DIRECTORS
Marshall C. Turner, Jr.,(1) Chairman John H. Dobkin(1) Michael J. Downey(1) William H. Foulk, Jr.(1) D. James Guzy(1) |
Nancy P. Jacklin(1) Robert M. Keith, President and Chief Executive Officer Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
OFFICERS
Philip L. Kirstein, Robert Guy B. Davidson III,(2) Senior Vice President Fred S. Cohen,(2) Vice President Terrance T. Hults,(2) Vice President |
Matthew J. Norton,(2) Vice President Emilie D. Wrapp, Secretary 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
Preferred Shares: Dividend Paying Agent, Transfer Agent and Registrar The Bank of New York 101 Barclay Street - 7W New York, NY 10286 |
Independent Registered Public Accounting Firm Ernst & Young LLP 5 Times Square New York, NY 10036
Common Stock: Dividend Paying Agent, Transfer Agent and Registrar Computershare Trust Company, N.A. P.O. Box 30170 College Station, TX 77842-3170 |
(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 Municipal Bond Investment Team. The investment professionals with the most significant responsibility for the day-to-day management of the Funds
portfolio are: Robert Guy B. Davidson III, Fred S. Cohen, 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 29, 2016, 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.
52 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Board of Directors
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 |
PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR |
OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD | |||||
INTERESTED DIRECTOR | ||||||||
Robert M. Keith, # 1345 Avenue of the Americas New York, NY 10105 56 (2010) |
Senior Vice President of AllianceBernstein L.P. (the Adviser) and the head of AllianceBernstein Investments, Inc. (ABI) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Advisers institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Advisers institutional investment management business, with which he had been associated since prior to 2004. | 108 | None |
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 53 |
Management of the Fund
NAME, ADDRESS*, AGE (YEAR FIRST ELECTED**) |
PRINCIPAL OCCUPATION(S) DURING PAST
FIVE YEARS |
PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR |
OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD | |||||
DISINTERESTED DIRECTORS | ||||||||
Marshall C. Turner, Jr., ## Chairman of the Board 75 (2005) |
Private Investor since prior to 2011. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). 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 multiple 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. | 108 | Xilinx, Inc. (programmable logic semi-conductors) since 2007 | |||||
John H. Dobkin, ## 74 (2001) |
Independent Consultant since prior to 2011. Formerly, President of Save Venice, Inc. (preservation organization) from 20012002; Senior Advisor from June 1999-June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design. He has served as a director or trustee of various AB Funds since 1992, and as Chairman of the Audit Committees of a number of such AB Funds from 2001-2008. | 108 | None |
54 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Management of the Fund
NAME, ADDRESS*, AGE (YEAR FIRST ELECTED**) |
PRINCIPAL OCCUPATION(S) DURING PAST
FIVE YEARS |
PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR |
OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD | |||||
DISINTERESTED DIRECTORS (continued) |
||||||||
Michael J. Downey, ## 72 (2005) |
Private Investor since prior to 2011. Formerly, managing partner of Lexington Capital, LLC (investment advisory firm) from December 1997 until December 2003. He served as a Director of Prospect Acquisition Corp. (financial services) from 2007 until 2009. 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 and is a director and Chairman of one other registered investment company. | 108 | Asia Pacific Fund, Inc. (registered investment company) since prior to 2011 | |||||
William H. Foulk, Jr., ## 84 (2001) |
Investment Adviser and an Independent Consultant since prior to 2011. Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. He has served as a director or trustee of various AB Funds since 1983, and was Chairman of the Independent Directors Committees of the AB Funds from 2003 until early February 2014. He served as Chairman of such AB Funds from 2003 through December 2013. He is also active in a number of mutual fund related organizations and committees. | 108 | None |
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 55 |
Management of the Fund
NAME, ADDRESS*, AGE (YEAR FIRST ELECTED**) |
PRINCIPAL OCCUPATION(S) DURING PAST
FIVE YEARS |
PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR |
OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD | |||||
DISINTERESTED DIRECTORS (continued) |
||||||||
D. James Guzy, ## 80 (2005) |
Chairman of the Board of SRC Computers, Inc. (semi-conductors), with which he has been associated since prior to 2011. He served as Chairman of the Board of PLX Technology (semi-conductors) since prior to 2011 until November 2013. He was a director of Intel Corporation (semi-conductors) from 1969 until 2008, and served as Chairman of the Finance Committee of such company for several years until May 2008. He has served as a director or trustee of one or more of the AB Funds since 1982. | 108 | None | |||||
Nancy P. Jacklin, ## 68 (2006) |
Private Investor since prior to 2011. 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 Chairman of the Governance and Nominating Committees of the AB Funds since August 2014. | 108 | None |
56 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Management of the Fund
NAME, ADDRESS*, AGE (YEAR FIRST ELECTED**) |
PRINCIPAL OCCUPATION(S) DURING PAST
FIVE YEARS |
PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR |
OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD | |||||
DISINTERESTED DIRECTORS (continued) |
||||||||
Carol C. McMullen, ## 61 (2016) |
Managing Director of Slalom Consulting (consulting) since 2014 and private investor; Director of Norfolk & Dedham Group (mutual property and casualty insurance) since 2011; and Director of Partners Community Physicians Organization (healthcare) since 2014. Formerly, Managing Director of The Crossland Group (consulting) from 2012 to 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 Head of Global Investment Research). She has served on a number of private company and nonprofit boards, and as a director or trustee of the AB Funds since June 2016. | 108 | None | |||||
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 57 |
Management of the Fund
NAME, ADDRESS*, AGE (YEAR FIRST ELECTED**) |
PRINCIPAL OCCUPATION(S) DURING PAST
FIVE YEARS |
PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR |
OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD | |||||
DISINTERESTED DIRECTORS (continued) |
||||||||
Garry L. Moody, ## 64 (2008) |
Independent Consultant. 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 has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | 108 | None | |||||
Earl D. Weiner, ## 77 (2007) |
Of Counsel, and Partner prior to January 2007, of the law firm Sullivan & Cromwell LLP and is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Directors Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | 108 | None |
58 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Management of the Fund
* | The address for each of the Funds disinterested Directors is c/o AllianceBernstein L.P., Attention: Philip L. Kirstein, 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. Keith 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. |
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 59 |
Management of the Fund
Officer Information
Certain information concerning the Funds Officers is listed below.
NAME, ADDRESS* AND AGE |
POSITION(S) HELD WITH FUND |
PRINCIPAL OCCUPATION DURING PAST FIVE YEARS | ||
Robert M. Keith 56 |
President and Chief Executive Officer | See biography above. | ||
Philip L. Kirstein 71 |
Senior Vice President and Independent Compliance Officer | Senior Vice President and Independent Compliance Officer of the AB Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers, L.P. since prior to March 2003. | ||
Robert Guy B. Davidson III 55 |
Senior Vice President | Senior Vice President of the Adviser,** with which he has been associated since prior to 2011. | ||
Fred S. Cohen 58 |
Vice President | Senior Vice President of the Adviser,** with which he has been associated since prior to 2011. | ||
Terrance T. Hults 50 |
Vice President | Senior Vice President of the Adviser,** with which he has been associated since prior to 2011. | ||
Matthew J. Norton 33 |
Vice President | Senior Vice President of the Adviser,** with which he has been associated since prior to 2011. | ||
Emilie D. Wrapp 60 |
Secretary | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI,** with which she has been associated since prior to 2011. | ||
Joseph J. Mantineo 57 |
Treasurer and Chief Financial Officer | Senior Vice President of AllianceBernstein Investor Services, Inc. (ABIS),** with which he has been associated since prior to 2011. | ||
Phyllis J. Clarke 55 |
Controller | Vice President of ABIS,** with which she has been associated since prior to 2011. | ||
Vincent S. Noto 52 |
Chief Compliance Officer | Senior Vice President since 2014 and Mutual Fund Chief Compliance Officer of the Adviser** since 2014. Prior thereto, he was Vice President and Director of Mutual Fund Compliance of the Adviser** since 2011. |
* | 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. |
60 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Management of the Fund
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 on November 3-5, 2015.
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 discussed the proposed continuance in private sessions with counsel and the Funds Senior Officer (who is also the Funds Independent Compliance Officer).
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 receive presentations from the Adviser on the investment results of the Fund and review extensive materials and information presented by the Adviser.
The directors also considered all other factors they believed relevant, including the specific matters discussed below. In their deliberations, the directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors 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. 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
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 61 |
investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Fund. 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. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. Reimbursements, to the extent requested and paid, result in a higher rate of total compensation from the Fund to the Adviser than the fee rate stated in the Funds Advisory Agreement. The directors noted that to date the Adviser had not requested such reimbursements from the Fund. 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, expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2013 and 2014 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Funds Senior Officer. 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 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 were satisfied that the Advisers level of profitability from its relationship with the Fund was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund, 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.
62 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME 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 November 2015 meeting, the directors reviewed information prepared by Broadridge showing the performance of the Fund as compared with that of a group of similar funds selected by Broadridge (the Performance Group), and information prepared by the Adviser showing the Funds performance as compared with the Barclays Municipal Bond Index (the Index), in each case for the 1-, 3-, 5- and 10-year periods ended July 31, 2015 and (in the case of comparisons with the Index) the period since inception (January 2002 inception). The directors noted that the Fund was in the 5th quintile of the Performance Group for the 1-, 3-, 5- and 10-year periods. The Fund outperformed the Index in all periods. The directors also noted that the Fund utilizes leverage whereas the Index is not leveraged. Based on their review and their discussion with the Adviser of the reasons for the Funds performance, the directors retained confidence in the Advisers ability to manage the Funds assets.
Advisory Fees and Other Expenses
The directors considered the latest fiscal year actual advisory fee rate paid by the Fund to the Adviser and information prepared by Broadridge concerning advisory fee rates paid by other funds in the same Broadridge category as the Fund. The directors also took into account their general knowledge of advisory fees paid by open-end and closed-end funds that invest in fixed-income municipal securities. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds.
The directors noted that the Funds latest fiscal year actual management fee rate of 55 basis points was lower than the Expense Group and the Expense Universe medians. The directors noted that Broadridge calculates the fee rate based on the Funds net assets attributable to common stockholders, whereas 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). The advisory fee rate and expense ratio information in this section is based on common and leveraged assets.
The directors noted that the Adviser advises several open-end funds that invest in municipal securities similar to those the Fund invests in at fee rates that are lower than the fee rate charged to the Fund, and that such rates reflect fee reductions agreed to by the Adviser in connection with the settlement of the market timing matter with the New York Attorney General in December 2003.
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 63 |
The Adviser informed the directors that there were no institutional products managed by it that have a substantially similar investment style. The directors reviewed the relevant advisory fee information from the Advisers Form ADV and noted that the Adviser charged institutional clients lower fees for advising comparably sized institutional accounts using strategies that differ from those of the Fund but which invest in fixed income municipal securities. The Adviser reviewed with the directors the significantly greater scope of the services it provides the Fund relative to institutional clients. In light of the substantial differences in services rendered by the Adviser to institutional clients as compared to funds such as the Fund, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
The directors also considered the total expense ratio of the Fund in comparison to the fees and expenses of funds within two comparison groups created by Broadridge: an Expense Group and an Expense Universe. Broadridge described an Expense Group as a representative sample of funds similar to the Fund and an Expense Universe as a broader group than the Expense Group, consisting of all funds in the Funds investment classification/objective. 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 Broadridge category were lowered by waivers or reimbursements by those funds investment advisers, which in some cases might be voluntary or temporary. The directors view the 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.
The directors noted that the Funds total expense ratio was lower than the Expense Group and the Expense Universe medians. The directors concluded that the Funds expense ratio was satisfactory.
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 that it 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.
64 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
SUMMARY OF GENERAL INFORMATION
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 65 |
Summary of General Information
THIS PAGE IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
AB FAMILY OF FUNDS
We also offer Government Exchange Reserves, which serves as the money market fund exchange vehicle for the AB mutual funds. An investment in Government Exchange Reserves is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
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.
* Prior to November 1, 2016, the Fund was named Global Thematic Growth Fund.
66 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
AB Family of Funds
NOTES
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND | 67 |
NOTES
68 | ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND |
Privacy Policy Statement
AllianceBernstein and its affiliates (collectively AllianceBernstein) understand the importance of maintaining the confidentiality of their 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 may collect information about clients from a variety of sources, including: (1) account documentation, including applications or other forms, which may include information such as a clients name, address, phone number, social security number, assets, income and other household information, (2) client transactions with us and others, such as 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.
It is our policy not to disclose nonpublic personal information about our clients or former clients (collectively clients), except to our affiliates, or to others as permitted or required by law. From time to time, we may disclose nonpublic personal information that we collect about our clients to non-affiliated third parties, including those that perform transaction processing or servicing functions, those that provide marketing services for us or on our behalf pursuant to a joint marketing agreement or those that provide professional services to us under a professional services agreement, all of which require the third party provider to adhere to our privacy policy. We have policies and procedures to safeguard nonpublic personal information about our clients that include restricting access to nonpublic personal information and maintaining physical, electronic and procedural safeguards which comply with applicable standards.
It is also our policy to prohibit the sharing of our clients personal information among our affiliated group of investment, brokerage, service and insurance companies for the purpose of marketing their products or services to clients, except as permitted by law. This information includes, but is not limited to, a clients income and account history.
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.
ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND
1345 Avenue of the Americas
New York, NY 10105
800.221.5672
ABNMIF-0151-1016
ITEM 2. | CODE OF ETHICS. |
(a) The registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer and principal accounting officer. A copy of the registrants code of ethics is filed herewith as Exhibit 12(a)(1).
(b) During the period covered by this report, no material amendments were made to the provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers to the provisions of the code of ethics adopted in 2(a) above were granted.
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
The registrants Board of Directors has determined that independent directors Garry L. Moody, William H. Foulk, Jr. and Marshall C. Turner, Jr. qualify as audit committee financial experts.
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
(a) - (c) The following table sets forth the aggregate fees billed by the independent registered public accounting firm Ernst & Young LLP, for the Funds last two fiscal years for professional services rendered for: (i) the audit of the Funds annual financial statements included in the Funds annual report to stockholders; (ii) assurance and related services that are reasonably related to the performance of the audit of the Funds financial statements and are not reported under (i), which include advice and education related to accounting and auditing issues and quarterly press release review (for those Funds which issue press releases), and preferred stock maintenance testing (for those Funds that issue preferred stock); and (iii) tax compliance, tax advice and tax return preparation.
Audit Fees | Audit-Related Fees |
Tax Fees | ||||||||||||||
AB National Muni Income |
2015 | $ | 41,200 | $ | 8,000 | $ | 17,685 | |||||||||
2016 | $ | 42,412 | $ | 18,609 | $ | 18,014 |
(d) Not applicable.
(e) (1) Beginning with audit and non-audit service contracts entered into on or after May 6, 2003, the Funds Audit Committee policies and procedures require the pre-approval of all audit and non-audit services provided to the Fund by the Funds independent registered public accounting firm. The Funds Audit Committee policies and procedures also require pre-approval of all audit and non-audit services provided to the Adviser and Service Affiliates to the extent that these services are directly related to the operations or financial reporting of the Fund.
(e) (2) All of the amounts for Audit Fees, Audit-Related Fees and Tax Fees in the table under Item 4 (a) (c) are for services pre-approved by the Funds Audit Committee.
(f) Not applicable.
(g) The following table sets forth the aggregate non-audit services provided to the Fund, the Funds Adviser and entities that control, are controlled by or under common control with the Adviser that provide ongoing services to the Fund:
All Fees for Non-Audit Services Provided to the Portfolio, the Adviser and Service Affiliates |
Total Amount of Foregoing Column Pre- approved by the Audit Committee (Portion Comprised of Audit Related Fees) (Portion Comprised of Tax Fees) |
|||||||||||
AB National Muni Income |
2015 | $ | 443,760 | $ | 25,685 | |||||||
$ | (8,000 | ) | ||||||||||
$ | (17,685 | ) | ||||||||||
2016 | $ | 472,443 | $ | 36,623 | ||||||||
$ | (18,609 | ) | ||||||||||
$ | (18,014 | ) |
(h) The Audit Committee of the Fund has considered whether the provision of any non-audit services not pre-approved by the Audit Committee provided by the Funds independent registered public accounting firm to the Adviser and Service Affiliates is compatible with maintaining the auditors independence.
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
The registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The audit committee members are as follows:
Garry L. Moody | D. James Guzy | |
John H. Dobkin Michael J. Downey William H. Foulk, Jr. Carol C. McMullen |
Nancy P. Jacklin Marshall C. Turner, Jr. Earl D. Weiner |
ITEM 6. | SCHEDULE OF INVESTMENTS. |
Please see Schedule of Investments contained in the Report to Shareholders included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Statement of Policies and Procedures for
Proxy Voting
INTRODUCTION
| As an investment adviser, we are shareholder advocates and have a fiduciary duty to make investment decisions that are in our clients best interests by maximizing the value of their shares. Proxy voting is an integral part of this process, through which we support strong corporate governance structures, shareholder rights, and transparency. |
| We have an obligation to vote proxies in a timely manner and we apply the principles in this policy to our proxy decisions. We believe a companys environmental, social and governance (ESG) practices may have a significant effect on the value of the company, and we take these factors into consideration when voting. For additional information regarding our ESG policies and practices, please refer to our firms Statement of Policy Regarding Responsible Investment (RI Policy). |
| This Proxy Voting Policy (Proxy Voting Policy or Policy), which outlines our policies for proxy voting and includes a wide range of issues that often appear on proxies, applies to all of ABs investment management subsidiaries and investment services groups investing on behalf of clients 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 (Proxy Managers), in order to ensure that our proxy voting policies and procedures are implemented consistently. |
| 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. |
RESEARCH UNDERPINS DECISION MAKING
| 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 and, in turn, may result in the Proxy Manager making different voting decisions on the same proposal. Nevertheless, the Proxy Manager votes proxies with the goal of maximizing the value of the securities in client portfolios. |
| In addition to our firm-wide proxy voting policies, we have a Proxy Committee, which provides oversight and includes senior investment professionals from Equities, Legal personnel and Operations personnel. It is the responsibility of the Proxy Committee to evaluate and maintain proxy voting procedures and guidelines, to evaluate proposals and issues not covered by these guidelines, to consider changes in policy, and to review the Proxy Voting Policy no less frequently than annually. In addition, the Proxy Committee meets at least three times a year and as necessary to address special situations. |
RESEARCH SERVICES
| We subscribe to the corporate governance and proxy research services of Institutional Shareholder Services Inc. (ISS). All our investment professionals can access these materials via the Proxy Manager and/or Proxy Committee. |
ENGAGEMENT
| In evaluating proxy issues and determining our votes, we welcome and seek out the points of view of various parties. Internally, the Proxy Manager may consult the Proxy Committee, Chief Investment Officers, Directors of Research, and/or Research Analysts across our equities platforms, and Portfolio Managers in whose managed accounts 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. Also, these meetings often are joint efforts between the investment professionals, who are best positioned to comment on company-specific details, and the Proxy Manager(s), who offer a more holistic view of governance practices and relevant trends. In addition, we engage with shareholder proposal proponents and other stakeholders to understand different viewpoints and objectives. |
PROXY VOTING GUIDELINES
| Our proxy voting guidelines are both principles-based and rules-based. We adhere to a core set of principles that are described in this Proxy Voting Policy. We assess each proxy proposal in light of these principles. Our proxy voting litmus test will always be 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 the 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 the guidelines if warranted by the specific facts and circumstances of the situation (i.e., if, under the circumstances, we believe that deviating from our stated policy is necessary to help maximize long-term shareholder value). 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. |
1.1 | BOARD AND DIRECTOR PROPOSALS |
Board Diversity (SHP) |
CASE-BY-CASE |
| Board diversity is increasingly an important topic. In a number of European countries, legislation requires a quota of female directors. Other European countries have a comply-or-explain policy. We believe diversity is broader than gender and should also take into consideration factors such as business experience, ethnicity, tenure and nationality. We evaluate these proposals on a case-by-case basis while examining if there are other general governance concerns. |
Establish New Board Committees and Elect Board Members with Specific Expertise (SHP) |
CASE-BY-CASE |
| 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 issues. We consider on a case-by-case basis proposals that require the addition of a board member with a specific area of expertise. |
Changes in Board Structure and Amending the Articles of Incorporation |
FOR |
| 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. |
Classified Boards |
AGAINST |
| 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 oppose the adoption of classified boards unless there is a justifiable financial reason or an adequate sunset provision exists. However, where a classified board already exists, we will not oppose directors who sit on such boards for that reason. We will vote against directors that fail to implement shareholder approved proposals to declassify boards. |
Director Liability and Indemnification |
CASE-BY-CASE |
| 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 indemnification for gross negligence. |
Disclose CEO Succession Plan (SHP) |
FOR |
| 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. |
Election of Directors |
FOR |
| 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 more progressive requirements than those implemented in a local market if we believe more progressive requirements may improve corporate governance practices. We will generally regard a director as independent if the director satisfies the criteria for independence (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 consider the election of directors who are bundled on a single slate 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, such as failure to implement proposals to declassify boards, failure to implement a majority vote requirement, failure to submit a rights plan to a shareholder vote and failure to act on tender offers where a majority of shareholders have tendered their shares (provided we supported, or would have supported, the original proposal).
We oppose directors who fail to attend at least 75% of board meetings within a given year without a reasonable excuse.
We may consider the number of boards on which a director sits and/or their length of service on a particular board.
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 practices.
We may vote against directors for not representing shareholder interests and maximizing long-term shareholder value
| We also may consider engaging company management (by phone, in writing and in person), until any issues have been satisfactorily resolved. |
Controlled Company Exemption |
CASE-BY-CASE |
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.
Voting for Director Nominees in a Contested Election |
CASE-BY-CASE |
Votes in a contested election of directors are evaluated on a case-by-case basis with the goal of maximizing shareholder value.
Independent Lead Director (SHP) |
FOR |
| We support shareholder proposals that request a company to amend its by-laws to establish an independent lead director, if the positions of chairman and CEO are not separated. 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 separate the positions of chairman and CEO, barring any additional board leadership concerns. |
Limit Term of Directorship (SHP) |
CASE-BY-CASE |
| 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. |
Majority of Independent1 Directors (SHP) |
FOR |
| 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. |
Majority of Independent Directors on Key Committees (SHP) |
FOR |
| 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 while taking into consideration local market regulation and corporate governance codes. |
Majority Votes for Directors (SHP) |
FOR |
| 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. |
Removal of Directors Without Cause (SHP) |
FOR |
| 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. |
Require Independent Board Chairman (SHP) |
CASE-BY-CASE |
| We believe there can be benefits to having the positions of chairman and CEO combined as well as split. When the position is combined 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. |
Require Two Candidates for Each Board Seat (SHP) |
AGAINST |
| We believe that proposals like these are detrimental to a companys ability to attract highly qualified candidates. Accordingly, we oppose them. |
1.2 | COMPENSATION PROPOSALS |
Elimination of Single-Trigger Change in Control Agreements (SHP) |
FOR |
| Companies sometimes include single trigger change in control provisions (e.g., a provision stipulating that an employees unvested equity awards become fully vested upon a change in control of the company without any additional requirement) in employment agreements and compensation plans. |
| We may oppose directors who establish these provisions, or we may oppose compensation plans that include them. We will support shareholder proposals calling for future employment agreements and compensation plans to include double trigger change in control provisions (e.g., a provision stipulating that an employees unvested equity awards become fully vested only after a change in control of the company and termination of employment). |
1 | 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. |
2 | 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. |
Pro Rata Vesting of Equity Compensation Awards-Change in Control (SHP) |
CASE-BY-CASE |
| 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. |
Adopt Policies to Prohibit any Death Benefits to Senior Executives (SHP) |
AGAINST |
| 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. |
Advisory Vote to Ratify Directors Compensation (SHP) |
FOR |
| 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. |
Amend Executive Compensation Plan Tied to Performance (Bonus Banking) (SHP) |
AGAINST |
| 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. |
Approve Remuneration for Directors and Auditors |
CASE-BY-CASE |
| We will vote on a case-by-case basis where we are asked to approve remuneration for directors or auditors. However, 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. |
Approve Remuneration Reports and Policies |
CASE-BY-CASE |
| In certain markets, (e.g., Australia, Canada, Germany and the United States), publicly traded issuers are required by law to submit their companys remuneration report to a non-binding shareholder vote. The report contains, among other things, the nature and amount of the compensation of the directors and certain executive officers as well as a discussion of the companys performance. In other markets, remuneration policy resolutions are binding. |
| We evaluate remuneration reports and policies on a case-by-case basis, taking into account the reasonableness of the companys compensation structure and the adequacy of the disclosure. Where a compensation plan permits retesting of performance-based awards, we will consider the specific terms of the plan, including the volatility of the industry and the number and duration of the retests. We may abstain or vote against a plan if disclosure of the remuneration details is inadequate or the report is not provided to shareholders with sufficient time prior to the meeting to consider its terms. |
| In markets where remuneration reports are not required for all companies, we will support shareholder proposals asking the board to adopt a policy (i.e., say on pay) that the companys shareholders be given the opportunity to vote on an advisory resolution to approve the compensation committees report. Although say on pay votes 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 the value of the company. |
Approve Retirement Bonuses for Directors (Japan and South Korea) |
CASE-BY-CASE |
| 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. |
Approve Special Payments to Continuing Directors and Auditors (Japan) |
CASE-BY-CASE |
| 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. |
Disclose Executive and Director Pay (SHP) |
CASE-BY-CASE |
| In December 2006 and again in February 2010, the SEC 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. |
Executive and Employee Compensation Plans |
CASE-BY-CASE |
| Executive and employee compensation plans (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.
| 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. |
Limit Executive Pay (SHP) |
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. |
Mandatory Holding Periods (SHP) |
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. |
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. |
Prohibit Relocation Benefits to Senior Executives (SHP) |
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. |
Recovery of Performance-Based Compensation (SHP) |
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 financial restatement (whether for fraud or other reasons) that resulted in their failure to achieve past performance targets. In deciding how to vote, we consider the adequacy of existing company clawback policy, if any. |
Submit Golden Parachutes/Severance Plans to a Shareholder Vote (SHP) |
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. |
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. |
Submit Survivor Benefit Compensation Plan to Shareholder Vote (SHP) |
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. |
1.3 | CAPITAL CHANGES AND ANTI-TAKEOVER PROPOSALS |
Amend Exclusive Forum Bylaw (SHP) |
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. |
Amend Net Operating Loss (NOL) Rights Plans |
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. |
Authorize Share Repurchase |
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. |
Blank Check Preferred Stock |
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. |
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. |
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. |
Expensing Stock Options (SHP) |
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. |
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). |
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 purposesmust 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. |
Issuance of Equity Without Preemptive Rights |
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). |
Issuance of Stock with Unequal Voting Rights |
CASE-BY-CASE |
| Unequal voting rights plans are designed to reduce the voting power of existing shareholders and concentrate a significant amount of voting power in the hands of management. In the majority of instances, they serve as an effective deterrent to takeover attempts. These structures, however, may be beneficial, allowing management to focus on longer-term value creation, which benefits all shareholders. We evaluate these proposals on a case-by-case basis and take into consideration the alignment of management incentives with appropriate performance, metrics, and the effectiveness of the companys strategy. |
Net Long Position Requirement |
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. |
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. |
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 |
FOR |
| 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. |
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. |
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. |
1.4 | AUDITOR PROPOSALS |
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. |
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. |
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. |
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. |
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 others 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. |
1.5 | SHAREHOLDER ACCESS AND VOTING PROPOSALS |
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, often 10% of the outstanding shares. |
| 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 call a special meeting if the proposing shareholder owns, or the proposing shareholders as a group own, 5% or more of the outstanding voting equity of the company. |
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. |
Adopt Cumulative Voting in Dual Shareholder Class Structures (SHP) |
FOR |
| In dual class structures (such as A&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. |
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. |
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. |
Permit a Shareholders Right to Act by Written Consent (SHP) |
FOR |
| 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 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. |
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 US Securities and Exchange Commission (SEC) in 2010, but vacated by the DC 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 will generally vote against proposals that use requirements that are more strict than the SECs framework 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 may vote against individual directors or entire boards who a) exclude from their ballot properly submitted shareholder proxy access proposals; b) compete against shareholder proxy access proposals with stricter management proposals on the same ballot. |
| 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. |
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. |
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. |
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. |
1.6 | ENVIRONMENTAL, SOCIAL AND DISCLOSURE PROPOSALS |
Animal Welfare (SHP) |
CASE-BY-CASE |
| These proposals may include reporting requests on items such as pig gestation crates and animal welfare in the supply chain, or policy adoption requests on items such as dehorning cattle and animal testing. |
| 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. |
Climate Change (SHP) |
CASE-BY-CASE |
| 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. |
Carbon Accounting (SHP) |
FOR |
These proposals may include greenhouse gas emissions (GHG) standards or reduction targets and/or methane reduction targets. Companies also may be asked to set quantitative goals, which may pertain to the companys operations or product development and distribution. We generally support these proposals, while taking into account whether the proposed information is of added benefit to shareholders and the degree to which this issue is material to the company and the industry in which the company operates.
Carbon Risk |
FOR |
This set of proposals focusses on the risks associated with climate change. It may include proposals on GHG emission and finance, hydraulic fracturing/shale risk, offshore oil wells, oil and gas transport risk, and coal ash 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. |
Charitable Contributions (SHP) (MGMT) |
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. |
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 while taking into account existing policies and procedures of the company and whether the proposed information is of added benefit to shareholders. |
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 while taking into account existing policies and procedures of the company and whether the proposed information is of added benefit to shareholders. |
Health Proposals (SHP) |
CASE-BY-CASE |
| These proposals may include reports on pharmaceutical pricing, the link between fast food and childhood obesity, and tobacco products. We generally support shareholder proposals calling for reports while taking into account the current reporting policies of the company and whether the proposed information is of added benefit to shareholders. |
| Proposals relating to tobacco issues are wide-ranging. They include proposals to have a company issue warnings on the environmental risks of tobacco smoke and the risks of smoking-related diseases, as well as proposals to link executive compensation with reductions in teen smoking. |
End Production of Tobacco Products |
AGAINST |
These proposals seek to phase-out all production, promotion and marketing of tobacco products by a specified date. When evaluating these resolutions, we must consider the companys risks and liabilities associated with those lines of business, and evaluate the overall strategic business plans and how those plans will serve to maximize long-term shareholder value.
Because phasing out all tobacco-related operations by a tobacco company is very likely to result in the end of the company, which clearly is not in the best interests of shareholders, we will generally oppose these proposals.
Spin-Off Tobacco-Related Business |
CASE-BY-CASE |
Proponents seek for the subject company to phase-out all production, promotion and marketing of tobacco products by a specified date, citing health risks and tobacco companies systemic failure to honestly inform the public about these health risks until recently. Unlike the type of proposal cited above in (a), which would be put to a company that derives most, if not all, of its revenues from tobacco-related operations, a spin-off proposal would request that a company that derives only a portion (often a substantial portion) of its revenues from tobacco-related operations spin-off its tobacco-related operating segment / subsidiary.
When evaluating resolutions requesting a company divest itself from one or more lines of business, we must consider the companys risks and liabilities associated with those lines of business, evaluate the overall strategic business plans and determine how those plans will serve to maximize long-term shareholder value.
Pharmaceutical Pricing (US) |
CASE-BY-CASE |
These proposals seek to require a company to report on the risk of high specialty drug prices in the US.
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. |
Human Rights Policies and Reports (SHP) |
CASE-BY-CASE |
| These proposals may include reporting requests on human rights risk assessment, humanitarian engagement policies, 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. |
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. |
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. |
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. |
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. |
Sustainability Report (SHP) |
FOR |
| 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. |
Work Place: Diversity (SHP) |
FOR |
| Work place diversity reports generally fall in two categories: Disclosing EEO Data and Adopting Sexual Orientation/Gender Identification (ID) policies. |
| 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. |
| We generally support proposals requiring a company to amend its Equal Employment Opportunity policies to specifically reference sexual orientation and gender ID. |
Work Place: Pay Disparity (SHP) |
CASE-BY-CASE |
| A report on pay disparity compares the total compensation of a companys executive officers with that of the companys lowest paid workers and/or between genders, including statistics and rationale pertaining to changes in the size of the gap, information on whether executive compensation is excessive, and information on whether greater oversight is needed over certain aspects of the companys compensation policies. |
| In the US, the SEC, in August 2015, adopted a rule requiring US issuers, for fiscal years ending on or after January 1, 2017, to contrast CEO pay with median employee pay. This rule, however, does not address all of the issues addressed by pay disparity reports. Accordingly, we will continue to evaluate these proposals on a case-by-case basis, taking into account the specific metrics and scope of the information requested and whether the SECs rule renders the proposal unnecessary. |
2. | CONFLICTS OF INTEREST |
2.1 | INTRODUCTION |
| 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. |
| AllianceBernstein L.P. (AB) recognizes that there may be a potential material conflict of interest when we 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 that may |
affect how we vote on the issuers proxy. Similarly, we may have a potential material conflict of interest when deciding how to vote on a proposal sponsored or supported by a shareholder group that is a client. In order to avoid 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 voting decisions are based on our clients best interests and are not the product of a conflict. |
2.2 | ADHERENCE TO STATED PROXY VOTING POLICIES |
| Votes generally are cast in accordance with this policy3. In situations where our policy is case-by-case, this Manual often provides criteria that will guide our decision. In situations where our policy on a particular issue is case-by-case and the vote cannot be clearly decided by an application of our stated policy, a member of the Proxy 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 ISS, 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. On an annual basis, the Proxy Committee will receive a report of all such votes so as to confirm adherence of the policy. |
2.3 | DISCLOSURE OF CONFLICTS |
| When considering a proxy proposal, members of the Proxy Committee or investment professionals involved in the decision-making process must disclose to the Proxy 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 Proxy Committee has a conflict of interest, he or she must also remove himself or herself from the decision-making process. |
2.4 | POTENTIAL CONFLICTS LIST |
| No less frequently than annually, a list of companies and organizations whose proxies may pose potential conflicts of interest is compiled by the Legal and Compliance Department (the Potential Conflicts List). The Potential Conflicts List includes: |
Publicly-traded Clients from the Russell 3000 Index, the Morgan Stanley Capital International (MSCI) Europe Australia Far East Index (MSCI EAFE), the MSCI Canada Index and the MSCI Emerging Markets Index;
Publicly-traded companies that distribute AB mutual funds;
Bernstein private clients who are directors, officers or 10% shareholders of publicly traded companies;
Clients who sponsor, publicly support or have material interest in a proposal upon which we will be eligible to vote;
Publicly-traded affiliated companies;
Companies where an employee of AB or AXA Financial, Inc., a parent company of AB, has identified an interest;
Any other conflict of which a Proxy Committee member becomes aware4.
| We determine our votes for all meetings of companies on the Potential Conflicts List by applying the tests described in Section 4.5 below. We document all instances when the independent compliance officer determines our vote. |
2.5 | 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 does not generate a conflict of interest: |
If our proposed vote is consistent with our Proxy Voting Policy, no further review is necessary.
If our proposed vote is contrary to our Proxy Voting Policy and our clients position on the proposal, no further review is necessary.
If our proposed vote is contrary to our Proxy Voting Policy or is not covered herein, is consistent with our clients position, and is also consistent with the views of ISS, no further review is necessary.
If our proposed vote is contrary to our Proxy Voting Policy or is not covered herein, is consistent with our clients position and is contrary to the views of ISS, the vote will be presented to an independent compliance officer (ICO). The ICO will determine whether the proposed vote is reasonable. If the ICO cannot determine that the proposed vote is reasonable, the ICO may instruct AB to refer the votes back to the client(s) or take other actions as the ICO deems appropriate. The ICOs review will be documented using a Proxy Voting Conflict of Interest Form (a copy of which is attached hereto).
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 Proxy Committee must notify the Legal and Compliance Department promptly of any previously unknown conflict. |
2.6 | REVIEW OF THIRD PARTY RESEARCH SERVICE CONFLICTS OF INTEREST |
| We consider the research of ISS, so the Proxy Committee takes reasonable steps to verify that ISS is, in fact, independent based on all of the relevant facts and circumstances. This includes reviewing ISSs conflict management procedures on an annual basis. When reviewing these conflict management procedures, we will consider, among other things, whether ISS (i) has the capacity and competency to adequately analyze proxy issues; and (ii) can offer research in an impartial manner and in the best interests of our clients. |
2.7 | CONFIDENTIAL VOTING |
| 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 Proxy 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; and (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. Once the votes have been cast, 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 the quarter after the vote has been cast. |
| 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 for advice on proxy votes that they cast. A member of the Proxy Committee or a Proxy Manager may offer such advice subject to an understanding with the client that the advice 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 Proxy 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. |
2.8 | 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 a wholly-owned subsidiary of AXA, a French holding company for an international group of insurance and related financial services companies. |
| 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. |
3. | VOTING TRANSPARENCY |
| We publish our voting records on our website quarterly, 30 days after the end of the previous quarter. 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. Alternatively, clients may make a written request to the Chief Compliance Officer. |
4. | RECORDKEEPING |
| 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 five 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 five years. We maintain the vast majority of these records electronically. We will keep paper records, if any, in one of our offices for at least two years. |
4.1 | PROXY VOTING POLICY |
| The Proxy Voting Policy shall be maintained in the Legal and Compliance Department and posted on our company intranet and the AB website (https://www.abglobal.com). |
4.2 | 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. |
4.3 | RECORDS OF VOTES CAST ON BEHALF OF CLIENTS |
| Records of votes cast by AB are retained electronically by our proxy voting agent, ISS. |
4.4 | 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. |
4.5 | DOCUMENTS PREPARED BY AB THAT ARE MATERIAL TO VOTING DECISIONS |
| The Proxy 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 the Proxy Manager. |
5. | PROXY VOTING PROCEDURES |
5.1 | VOTE ADMINISTRATION |
| In an effort to increase the efficiency of voting proxies, AB 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. A Proxy Manager reviews the ballots via ISSs web platform, ProxyExchange. Using ProxyExchange, the Proxy Manager submits our voting decision. ISS then returns the proxy ballot forms to the designated returnee for tabulation. Clients may request that, when voting their proxies, we utilize an ISS recommendation or ISSs Taft-Hartley Voting Policy. |
| If necessary, any paper ballots we receive will be voted online using ProxyVote or via mail or fax. |
5.2 | SHARE BLOCKING |
| 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 abstain from voting 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. |
5.3 | LOANED SECURITIES |
| 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. |
PROXY | COMMITTEE MEMBERS |
| The members of the Proxy Committee establish general proxy policies for AB and consider specific proxy voting matters as necessary. Members include senior investment personnel and representatives of the Legal and Compliance Department and the Operations Department. The Proxy Committee is chaired by Linda Giuliano, Senior Vice President, Chief Administrative Officer-Equities, and Head of Responsible Investment. If you have questions or desire additional information about this Policy, please contact the Proxy Team at: ProxyTeam@ABGlobal.com. |
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. |
Chief Administrative Officer-Equities, and Head of Responsible Investment. If you have questions or desire additional information about this Policy, please contact the Proxy Team at: ProxyTeam@ABGlobal.com.
PROXY COMMITTEE
Vincent DuPont, SVPEquities
Linda Giuliano, SVPEquities
Saskia Kort-Chick, VPEquities
David Lesser, VPLegal
James MacGregor, SVPEquities
Mark Manley, SVPLegal
Ryan Oden, AOEquities
Anthony Rizzi, VPOperations
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 |
+ | ||||||
+ |
Limit Executive Pay |
+ | ||||||
+ |
Mandatory Holding Periods |
+ | ||||||
+ |
Performance-Based Stock Option Plans |
+ | ||||||
+ |
Prohibit Relocation Benefits to Senior Executives |
+ |
Shareholder Proposal |
For | Against | Case-by- Case | |||||
+ |
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 | + | |||||||
Increase Authorized Common Stock | + | |||||||
Issuance of Equity without Preemptive Rights | + |
|||||||
Issuance of Stock with Unequal Voting Rights | + | |||||||
Net Long Position Requirement | + |
|||||||
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 | + |
||||||
+ |
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) | + |
Shareholder Proposal |
For | Against | Case-by- Case | |||||
+ |
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 |
+ | ||||||
+ |
End Production of Tobacco Products |
+ |
||||||
+ |
Spin-Off Tobacco-Related Business |
+ | ||||||
+ |