<DOCUMENT>
<TYPE>EX-99.77E LEGAL
<SEQUENCE>2
<FILENAME>legal.txt
<DESCRIPTION>LEGAL FILE
<TEXT>
National Municipal Income Fund, Inc.

October-06

Item 77E
Legal Proceedings

As has been previously reported, the staff of the U.S. Securities and
Exchange Commission (SEC) and the Office of the New York Attorney
General (NYAG) have been investigating practices in the mutual fund
industry identified as market timing and late trading of mutual fund
shares. Certain other regulatory authorities have also been conducting
investigations into these practices within the industry and have
requested that the Adviser provide information to them. The Adviser has
been cooperating and will continue to cooperate with all of these
authorities. The shares of the Fund are not redeemable by the Fund,
but are traded on an exchange at prices established by the market.
Accordingly, the Fund and its shareholders are not subject to the
market timing and late trading practices that are the subject of the
investigations mentioned above or the lawsuits described below. Please
see below for a description of the agreements reached by the Adviser
and the SEC and NYAG in connection with the investigations mentioned
above.

Numerous lawsuits have been filed against the Adviser and certain other
defendants in which plaintiffs make claims purportedly based on or
related to the same practices that are the subject of the SEC and NYAG
investigations referred to above. Some of these lawsuits name the Fund
as a party. The lawsuits are now pending in the United States District
Court for the District of Maryland pursuant to a ruling by the
Judicial Panel on Multidistrict Litigation transferring and centralizing
all of the mutual funds involving market and late trading in the
District of Maryland (the Mutual Fund MDL). Management of the Adviser
believes that these private lawsuits are not likely to have a material
adverse effect on the results of operations or financial condition of
the Fund.

On December 18, 2003, the Adviser confirmed that it had reached terms
with the SEC and the NYAG for the resolution of regulatory claims
relating to the practice of market timing mutual fund shares in some
of the AllianceBernstein Mutual Funds. The agreement with the SEC is
reflected in an Order of the Commission (SEC Order). The agreement with
the NYAG is memorialized in an Assurance of Discontinuation dated
September 1, 2004 (NYAG Order). Among the key provisions of these
agreements are the following:

(i) The Adviser agreed to establish a $250 million fund (the Reimbursement
Fund) to compensate mutual fund shareholders for the adverse effects of
market timing attributable to market timing relationships described in the
SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot
share of losses suffered by the fund due to market timing, and (ii) a
proportionate share of advisory fees paid by such fund during the period
of such market timing;

(ii) The Adviser agreed to reduce the advisory fees it receives from some
of the AllianceBernstein long-term, open-end retail funds, commencing
January 1, 2004, for a period of at least five years; and

(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order contemplates that
the Advisers registered investment company clients, including the Fund,
will introduce governance and compliance changes.



The shares of the Fund are not redeemable by the Fund, but are traded on
an exchange at prices established by the market. Accordingly, the Fund
and its shareholders are not subject to the market timing practices
described in the SEC Order and are not expected to participate in the
Reimbursement Fund. Since the Fund is a closed-end fund, it will not have
its advisory fee reduced pursuant to the terms of the agreements mentioned
above.

On February 10, 2004, the Adviser received (i) a subpoena duces tecum
from the Office of the Attorney General of the State of West Virginia
and (ii) a request for information from West Virginias Office of the
State Auditor, Securities Commission (the West Virginia Securities
Commissioner) (together, the Information Requests). Both Information
Requests require the Adviser to produce documents concerning, among
other things, any market timing or late trading in the Advisers sponsored
mutual funds. The Adviser responded to the Information Requests and
has been cooperating fully with the investigation.

On April 11, 2005, a complaint entitled The Attorney General of the State
of West Virginia v. AIM Advisors, Inc., et al. (WVAG Complaint) was filed
against the Adviser, Alliance Capital Management Holding L.P.
(Alliance Holding), and various other defendants not affiliated with the
Adviser. The WVAG Complaint was filed in the Circuit Court of Marshall
County, West Virginia by the Attorney General of the State of
West Virginia. The WVAG Complaint makes factual Allegations generally
similar to those in certain of the complaints related to the Lawsuits
discussed above. On October 19, 2005, the WVAG Complaint was transferred
to the Mutual Fund MDL.

On August 30, 2005, the West Virginia Securities Commissioner signed a
Summary Order to Cease and Desist, and Notice of Right to Hearing addressed
to the Adviser and Alliance Holding. The Summary Order claims that the
Adviser and Alliance Holding violated the West Virginia Uniform Securities
Act, and makes factual allegations generally similar to those in the SEC
Order and the NYAG Order.  On January 26, 2006, the Adviser, Alliance Holding,
and various unaffiliated defendants filed a Petition for Writ of Prohibition
and Order Suspending Proceedings in West Virginia state court seeking to
vacate the Summary Order and for other relief. The court denied the writ
and in September 2006 the Supreme Court of Appeals declined the defendants
petition for appeal. On September 22, 2006, Alliance and Alliance Holding
filed an answer and motion to dismiss the Summary Order with the Securities
Commissioner.

On June 22, 2004, a purported class action complaint entitled Aucoin, et al.
v.Alliance Capital Management L.P., et al. (Aucoin Complaint) was filed
against the Adviser, Alliance Capital Management Holding L.P.,
Alliance Capital Management Corporation, AXA Financial, Inc., Alliance
Bernstein Investment Research & Management, Inc., certain current and
former directors of the AllianceBernstein Mutual Funds, and unnamed
Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein
mutual funds as nominal defendants. The Fund was not named as a defendant
in the Aucoin Complaint.

The Aucoin Complaint was filed in the United States District Court for the
Southern District of New York by alleged shareholders of an AllianceBernstein
mutual fund. The Aucoin Complaint alleges, among other things, (i) that
certain of the defendants improperly authorized the payment of excessive
commissions and other fees from fund assets to broker-dealers in exchange
for preferential marketing services, (ii) that certain of the defendants
misrepresented and omitted from registration statements and other reports
material facts concerning such payments, and (iii) that certain defendants
caused such conduct as control persons of other defendants. The Aucoin
Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of
the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach
of common law fiduciary duties, and aiding and abetting breaches of
common law fiduciary duties. Plaintiffs seek an unspecified amount of
compensatory damages and punitive damages, rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser
pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully
or discriminatorily obtained fees and expenses.

Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against
the Adviser and certain other defendants. All nine of the lawsuits
(i) were brought as class actions filed in the United States District Court
for the Southern District of New York, (ii) assert claims substantially
identical to the Aucoin Complaint, and (iii) are brought on behalf of
shareholders of the Funds.

On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint (Aucoin Consolidated Amended Complaint) that asserts claims
substantially similar to the Aucoin Complaint and the nine additional
lawsuits referenced above. On October 19, 2005, the District Court
dismissed each of the claims set forth in the Aucoin Consolidated
Amended Complaint, except for plaintiffs claim under Section 36(b) of
the Investment Company Act. On January 11, 2006, the District Court
granted defendants motion for reconsideration and dismissed the
remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs motion for leave to file an amended complaint.
On July 5, 2006, plaintiffs filed a notice of appeal. On October 4, 2006
the appeal was withdrawn by stipulation, with plaintiffs reserving the
right to reinstate it at a later date.

The Adviser believes that these matters are not likely to have a material
adverse effect on the Fund or the Advisers ability to perform advisory
services relating to the Fund.

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