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: 811-07510
ACM MUNICIPAL SECURITIES INCOME FUND, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Mark R. Manley
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: October 31, 2006
Date of reporting period: October 31, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
ACM Municipal Securities Income Fund
October 31, 2006
Annual Report
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
You may obtain a description of the Fund's proxy voting policies and
procedures, 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 AllianceBernstein's web site at
www.alliancebernstein.com, or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein(R) 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 Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's 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. is an affiliate of AllianceBernstein L.P.,
the manager of the AllianceBernstein funds, and is a member of the NASD.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
December 12, 2006
Annual Report
This report provides management's discussion of fund performance for ACM
Municipal Securities Income Fund (the "Fund") for the annual reporting period
ended October 31, 2006. The Fund is a closed-end fund that trades under the New
York Stock Exchange symbol "AMU".
Investment Objective and Policies
The Fund is a closed-end management investment company that seeks high current
income exempt from regular federal income tax. The Fund will invest a
substantial portion of its assets in investment-grade municipal securities,
with up to 20% of the Fund's total assets invested in unrated municipal
securities of equivalent credit quality as determined by the Fund's adviser.
The Fund is designed for investors who are not subject to the federal
Alternative Minimum Tax ("AMT"), as all or a significant portion of the Fund's
dividends may be subject to such tax. The Fund expects that it will invest a
significant portion of its assets in municipal securities, the interest on
which is subject to such tax. For more information regarding the Fund's risks,
please see "A Word About Risk" on page 3 and "Note G--Risks Involved in
Investing in the Fund" of the Notes to Financial Statements on page 24.
Investment Results
The table on page 4 provides performance data for the Fund and its benchmark,
the Lehman Brothers (LB) Municipal Index, for the six- and 12-month periods
ended October 31, 2006.
The Fund outperformed its benchmark during both the six- and 12-month reporting
periods ended October 31, 2006. The Fund's stronger relative performance during
the 12-month period under review was largely the result of security selection
in the insured and pre-refunded sectors. In addition, the Fund's leveraged
structure slightly aided its performance.
Market Review and Investment Strategy
The U.S. Federal Reserve (the "Fed") raised the target for the Fed funds rate
six times over the past 12 months and thereby increased it by 1.50% to the
current level of 5.25%. This caused short-term municipal rates to rise. For
instance, since October 31, 2005, one-year municipal bond yields have risen
0.48%. Over the same time period, 20-year municipal bond yields declined by
0.41%. As a result of this rate movement, the difference between municipal
short-and long-term rates is less than it has been in 30 years. In other words,
the municipal yield curve is flatter than it has been in 30 years. U.S.
Treasury bond yields rose more than comparable maturity municipal bond yields,
as one-year U.S. Treasury rates rose 0.77% and 20-year U.S. Treasury yields
rose by 0.19%. As a result of the relative movement, the municipal market
outperformed the U.S. Treasury market; the LB Municipal Index return for the
12-month period was 5.75% versus 4.43% for the LB U.S. Treasury Index. Most of
the return for the municipal market was due to its return of 4.05% during the
past four months after the Fed signaled that it had stopped raising short-term
rates.
ACM MUNICIPAL SECURITIES INCOME FUND o 1
Over the 12-month reporting period, municipal bonds issued by lower-credit
quality borrowers continued to outperform bonds issued by high-grade borrowers.
The LB Municipal Non-Investment Grade (High Yield) Index returned 11.87% versus
the 5.75% return for the LB Municipal Index, which represents the overall
investment-grade market. The result of this outperformance has been that the
incremental yield, or credit spread, investors earn by owning lower-rated bonds
is extremely low by historic standards. The performance of the high yield
municipal market has benefited from the strong demand from individual
investors. Investor flows into high yield municipal bond funds continue to
represent about 40% of all municipal bond flows. Despite the fact that the high
yield municipal market only represents about 4% of the overall municipal
market, the assets in high yield municipal funds now represent over 20% of the
assets in all municipal funds.
With the municipal yield curve flat, and credit spreads low, investors
generally are being rewarded less than the market has historically offered for
taking risk. Accordingly, the Fund's Municipal Bond Investment Team (the
"team") has sought opportunities to raise the overall credit quality of the
Fund and to diversify the Fund's exposure to individual issuers. In addition,
where possible, the team has focused new purchases on bonds maturing in 10-15
years, rather than longer maturity bonds. Both of these strategies should be
beneficial to the Fund's performance if the market returns to more typical
relationships.
2 o ACM MUNICIPAL SECURITIES INCOME FUND
HISTORICAL PERFORMANCE
An Important Note About the Value of 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.
ACM Municipal Securities Income Fund Shareholder Information
The Fund's NYSE trading symbol is "AMU." Weekly comparative net asset value
(NAV) and market price information about the Fund is published each Monday in
The Wall Street Journal, each Sunday in The New York Times and each Saturday in
Barron's and other newspapers in a table called "Closed-End Bond Funds." For
additional shareholder information regarding this Fund, please see page 41.
Benchmark Disclosure
The unmanaged Lehman Brothers (LB) Municipal Index does not reflect fees and
expenses associated with the active management of a fund portfolio. The Index
is a total return performance benchmark for the long-term, investment grade,
tax-exempt bond market. An investor cannot invest directly in an index, and its
results are not indicative of the performance for any specific investment,
including the Fund.
A Word About Risk
Among the risks of investing in the Fund are changes in the general level of
interest rates or 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
Fund's Adviser, the Fund may invest up to 20% of its total assets in securities
that are not rated and up to 10% in securities that are not readily marketable.
Leverage Risk - The Fund may use certain investment techniques that have
increased risks. For example, the issuance of the Fund's preferred stock
results in leveraging of the Common Stock, an investment technique usually
considered speculative. The Fund utilizes leveraging to seek to enhance the
yield and net asset value of its Common Stock. However, these objectives cannot
be achieved in all interest rate environments. Leverage creates certain risks
for holders of Common Stock, including higher volatility of both the net asset
value and market value of the Common Stock, and fluctuations in the dividend
rates on the Preferred Stock will affect the return to holders of Common Stock.
To leverage, the Fund issues Preferred Stock, which pays dividends at
prevailing short-term interest rates, and invests the proceeds in long-term
municipal bonds. If the Fund were fully invested in longer-term securities and
if short-term interest rates were to increase, then the amount of dividends
paid on the preferred shares would increase and both net investment income
available for distribution to the holders of Common Stock and the net asset
value of the Common Stock would decline. At the same time, the market value of
the Fund's Common Stock (that is, its price as listed on the New York Stock
Exchange) may, as a result, decline. Furthermore, if long-term interest rates
rise, the Common Stock's net asset value will reflect the full decline in the
price of the portfolio's investments, since the value of the Fund's Preferred
Stock does not fluctuate. In addition to the decline in net asset value, the
market value of the Fund's Common Stock may also decline.
(Historical Performance continued on next page)
ACM MUNICIPAL SECURITIES INCOME FUND o 3
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE FUND VS. ITS BENCHMARK --------------------
PERIODS ENDED OCTOBER 31, 2006 6 Months 12 Months
---------------------------------------------------------------------
ACM Municipal Securities Income Fund (NAV) 6.09% 8.31%
LB Municipal Index 4.12% 5.75%
The Fund's Market Price per share on October 31, 2006 was $10.64. The Fund's
Net Asset Value Price per share on October 31, 2006 was $11.43. For additional
Financial Highlights, please see page 30.
GROWTH OF A $10,000 INVESTMENT IN THE FUND
10/31/96 TO 10/31/06
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
ACM Municipal Securities
Income Fund (NAV) LB Municipal Index
------------------------------------------------------------------------------
10/31/96 $10,000 $10,000
10/31/97 $11,324 $10,849
10/31/98 $12,104 $11,719
10/31/99 $11,165 $11,512
10/31/00 $12,141 $12,491
10/31/01 $13,548 $13,804
10/31/02 $13,093 $14,614
10/31/03 $14,322 $15,361
10/31/04 $15,925 $16,288
10/31/05 $16,684 $16,701
10/31/06 $18,072 $17,662
ACM Municipal Securities Income Fund (NAV): $18,072
LB Municipal Index: $17,662
This chart illustrates the total value of an assumed $10,000 investment in ACM
Municipal Securities Income Fund at net asset value (NAV) (from 10/31/96 to
10/31/06) as compared to the performance of the Fund's benchmark. The chart
assumes the reinvestment of dividends and capital gains distributions at prices
obtained pursuant to the Fund's dividend reinvestment plan.
See Historical Performance and Benchmark disclosures on previous page.
4 o ACM MUNICIPAL SECURITIES INCOME FUND
PORTFOLIO SUMMARY
October 31, 2006
PORTFOLIO STATISTICS
Net Assets ($mil): $127.4
[PIE CHART OMITTED]
QUALITY RATING DISTRIBUTION*
o 56.7% AAA
o 20.0% AA
o 10.6% A
o 10.7% BBB
o 2.0% BB
* All data are as of October 31, 2006. The Fund's quality rating distribution
is expressed as a percentage of the Fund's total investments rated in
particular ratings categories by Standard & Poor's Rating Services and Moody's
Investors Service. The distributions may vary over time. If ratings are not
available, the Fund's Adviser will assign ratings that are considered to be of
equivalent quality to such ratings.
ACM MUNICIPAL SECURITIES INCOME FUND o 5
PORTFOLIO OF INVESTMENTS
October 31, 2006
Principal
Amount
(000) U.S. $ Value
----------------------------------------------------------------------
Long-Term Municipal Bonds-169.4%
Alabama-5.8%
Jefferson Cnty Ltd Oblig Sch Warrants
Ser 04A
5.25%, 1/01/18-1/01/23 $ 1,825 $ 1,954,649
Jefferson Cnty SWR Rev
(Capital Improvement Warrants)
FGIC Ser 02
5.00%, 2/01/41 1,535 1,644,722
Jefferson Cnty Wtr and SWR Rev
FGIC Ser 02B
5.00%, 2/01/41 2,465 2,647,804
Montgomery Spl Care Facs Fin Auth Rev
(Baptist Health)
Ser 04C
5.25%, 11/15/29 1,000 1,103,930
--------------
7,351,105
Alaska-8.4%
Alaska Intl Arpt Rev
MBIA Ser 03B
5.00%, 10/01/26 1,000 1,052,420
Alaska Muni Bond Bank Auth
MBIA Ser 04G
5.00%, 2/15/22 1,585 1,679,054
MBIA Ser 03E
5.25%, 12/01/26 3,000 3,231,000
Anchorage Waste Wtr Rev
MBIA Ser 04
5.125%, 5/01/29 2,300 2,447,752
Four Dam Pool Alaska
Ser 04
5.25%, 7/01/25 2,195 2,313,640
--------------
10,723,866
Arizona-2.3%
Arizona Cap Facs Fin Corp Student Hsg Rev
(Arizona St Univ Proj)
Ser 00
6.25%, 9/01/32 1,550 1,613,349
Phoenix Civic Impt Corp Waste Wtr Sys Rev
MBIA Ser 04
5.00%, 7/01/23 1,250 1,330,025
--------------
2,943,374
California-14.2%
Burbank Redev Agy
FGIC Ser 03
5.625%, 12/01/28 2,700 3,020,949
6 o ACM MUNICIPAL SECURITIES INCOME FUND
Principal
Amount
(000) U.S. $ Value
----------------------------------------------------------------------
California Dept of Wtr
Ser 02A
5.375%, 5/01/22 $ 2,000 $ 2,206,720
California GO
Ser 03
5.00%, 2/01/32-2/01/33 3,550 3,696,011
Golden St Tobacco Settlement Bonds
RADIAN Ser 03
5.50%, 6/01/43 2,250 2,498,333
XLCA Ser 03B
5.50%, 6/01/33 3,000 3,331,110
Pomona COP
AMBAC Ser 03
5.50%, 6/01/34 3,000 3,336,030
--------------
18,089,153
Colorado-4.4%
Colorado Hlth Facs Auth Rev
(Evangelical Lutheran Proj)
Ser 06
5.25%, 6/01/19 700 754,579
(Parkview Med Ctr)
Ser 04
5.00%, 9/01/25 760 782,078
Colorado Toll Rev
(Hwy E-470)
Ser 00
Zero coupon, 9/01/35 10,000 1,315,700
Northwest Metro Dist No. 3 GO
6.125%, 12/01/25 500 531,110
Park Creek Metro Dist Rev Ltd
(Ref-Sr-Ltd Tax Pty Tax)
Ser 05
5.25%, 12/01/25 1,160 1,213,998
Todd Creek Farms Metro Dist No 1
6.125%, 12/01/22 580 594,674
Todd Creek Farms Metro Dist No 1 Wtr Rev
(Ref & Impt)
Ser 04
6.125%, 12/01/19 400 422,536
--------------
5,614,675
Florida-17.5%
Florida Hsg Fin Corp Rev MFHR
(Westlake Apts) AMT
FSA Ser 02-D1
5.40%, 3/01/42 8,780 9,041,117
ACM MUNICIPAL SECURITIES INCOME FUND o 7
Principal
Amount
(000) U.S. $ Value
----------------------------------------------------------------------
Lee Cnty Hlth Facs Auth Rev
(Shell Point)
Ser 99A
5.50%, 11/15/29 $ 3,670 $ 3,764,025
Miami Beach Hlth Facs Auth Hosp Rev
(Mount Sinai Med Ctr)
6.75%, 11/15/24(a) 2,000 2,268,100
Miami-Dade Cnty Spl Oblig
MBIA Ser 04B
5.00%, 4/01/24 4,000 4,243,680
Orange Cnty Hosp Rev
(Orlando Regional)
Ser 02
5.75%, 12/01/32 1,400 1,562,148
UCF Assn Ctfs
FGIC Ser 04A
5.125%, 10/01/24 1,325 1,416,849
--------------
22,295,919
Hawaii-2.0%
Hawaii St Elec Rev AMT
XLCA Ser 03B
5.00%, 12/01/22 2,500 2,604,175
Illinois-10.8%
Chicago Arpt Rev
(O'Hare Intl Arpt)
XLCA Ser 03B-1
5.25%, 1/01/34 3,100 3,301,314
Chicago GO
FSA Ser 04A
5.00%, 1/01/25 2,165 2,284,746
Chicago Hsg Agy SFMR
(Mortgage Rev) AMT
GNMA/FNMA Ser 02B
6.00%, 10/01/33 570 590,748
Chicago Park Dist GO
(Ltd Tax)
AMBAC Ser 04A
5.00%, 1/01/25 2,585 2,753,981
Cook Cnty Sch Dist
FSA Ser 04
5.00%, 12/01/20(b) 1,000 1,015,560
Illinois Fin Auth
(Loyola Univ Chicago)
XLCA Ser 04A
5.00%, 7/01/24 1,495 1,574,579
Illinois Fin Auth Rev
(Inst of Technology)
Ser 06A
5.00%, 4/01/31 365 378,578
8 o ACM MUNICIPAL SECURITIES INCOME FUND
Principal
Amount
(000) U.S. $ Value
----------------------------------------------------------------------
Met Pier & Expo Rev
(McCormick Place)
MBIA Ser 02A
5.25%, 6/15/42 $ 1,750 $ 1,861,195
--------------
13,760,701
Indiana-2.5%
Hendricks Cnty Bldg Facs GO
Ser 04
5.50%, 7/15/21 1,045 1,151,548
Indiana Bd Bk Rev
FSA Ser 04B
5.00%, 2/01/21 1,100 1,167,815
Indiana St Dev Fin Auth Rev
(Exempt Facs Inland Steel)
Ser 97
5.75%, 10/01/11 865 887,326
--------------
3,206,689
Louisiana-1.9%
Ernest N. Morial Exhibit Hall Auth Spl Tax
AMBAC Ser 03A
5.25%, 7/15/16-7/15/17 1,185 1,267,344
New Orleans GO
MBIA
5.25%, 12/01/20 1,000 1,087,200
--------------
2,354,544
Massachusetts-10.1%
Mass Hlth & Ed Fac Hosp Rev
(New England Med Ctr)
MBIA Ser 94
6.40%, 7/01/18(c)(d) 5,000 5,024,800
Mass Hsg Fin Agy
(Rental Rev)
AMBAC Ser 95E
6.00%, 7/01/41 1,740 1,852,996
Mass Hsg Fin Agy MFHR
(Rental Rev) AMT
MBIA Ser 00H
6.65%, 7/01/41 540 578,329
Massachusetts GO
Ser 02C
5.25%, 11/01/30 1,690 1,833,464
Prerefunded
Ser 02
5.25%, 11/01/30 3,310 3,590,986
--------------
12,880,575
ACM MUNICIPAL SECURITIES INCOME FUND o 9
Principal
Amount
(000) U.S. $ Value
----------------------------------------------------------------------
Michigan-5.2%
Kent Hosp Fin Auth Rev
(Metropolitan Hosp Proj)
Ser 05A
5.75%, 7/01/25 $ 310 $ 336,595
Michigan Hosp Fin Auth
(Trinity Health)
Ser 00A
6.00%, 12/01/27 3,000 3,284,670
Saginaw Hosp Fin Auth
(Covenant Med Ctr)
Ser 00F
6.50%, 7/01/30 2,775 3,055,830
--------------
6,677,095
Minnesota-1.4%
Shakopee Health Care Facs
(St Francis Regional Med Ctr)
Ser 04
5.10%, 9/01/25 1,200 1,256,664
St. Paul Hsg & Redev Auth Hosp Rev
(Healtheast Proj)
Ser 05
6.00%, 11/15/25 500 552,420
--------------
1,809,084
Mississippi-4.1%
Adams Cnty Poll Ctl Rev
(International Paper Co) AMT
Ser 99
6.25%, 9/01/23 1,000 1,066,300
Gulfport Hosp Fac Rev
(Mem Hosp at Gulfport Proj)
Ser 01A
5.75%, 7/01/31 4,000 4,158,440
--------------
5,224,740
Nevada-1.7%
Carson City Hosp Rev
(Carson-Tahoe Hosp Proj)
RADIAN Ser 03A
5.00%, 9/01/23 2,100 2,168,481
New Hampshire-0.7%
New Hampshire Health & Ed Facs
(Covenant Health)
Ser 04
5.375%, 7/01/24 820 873,661
New Jersey-7.5%
Morris Union Jointure Commission COP
RADIAN Ser 04
5.00%, 5/01/24 2,000 2,100,200
10 o ACM MUNICIPAL SECURITIES INCOME FUND
Principal
Amount
(000) U.S. $ Value
----------------------------------------------------------------------
New Jersey St Edl Facs Auth Rev
AMBAC Ser 02A
5.25%, 9/01/21 $ 6,800 $ 7,399,692
--------------
9,499,892
New Mexico-4.9%
Dona Ana Cnty Tax Rev
AMBAC Ser 03
5.25%, 5/01/25 500 535,730
University of New Mexico FHA
FSA Ser 04
5.00%, 1/01/24-7/01/24 5,430 5,711,763
--------------
6,247,493
New York-3.5%
Erie Cnty IDA Sch Fac Rev
(Buffalo Sch Dist Proj) FHA
FSA
5.75%, 5/01/24 810 913,299
New York City GO
Ser 04I
5.00%, 8/01/21 3,300 3,497,406
--------------
4,410,705
North Carolina-3.9%
Charlotte NC Arpt Rev
MBIA Ser 04
5.25%, 7/01/24 1,000 1,085,160
North Carolina Eastern Municipal Power Agy
Power Sys Rev
AMBAC Ser 05A
5.25%, 1/01/20 3,500 3,829,805
--------------
4,914,965
North Dakota-1.9%
North Dakota Hsg Fin Agy SFMR
(Mortgage Rev) AMT
Ser 98E
5.25%, 1/01/30 1,925 1,949,890
Ward Cnty Health Care Fac Rev
(Trinity Obligated Group)
Ser 06
5.125%, 7/01/18(e) 500 531,490
--------------
2,481,380
Ohio-5.6%
Cuyahoga Cnty Hosp Facs Rev
(University Hosp Hlth)
Ser 00
7.50%, 1/01/30 2,400 2,691,816
Fairfield Cnty Hosp Rev
(Fairfield Med Ctr Proj)
RADIAN Ser 03
5.00%, 6/15/23 1,255 1,296,465
ACM MUNICIPAL SECURITIES INCOME FUND o 11
Principal
Amount
(000) U.S. $ Value
----------------------------------------------------------------------
Ohio Hsg Fin Agy MFHR
(Mortgage Rev) AMT
GNMA Ser 97
6.15%, 3/01/29 $ 2,610 $ 2,676,894
Port Auth Columbiana Cnty SWR
(Apex Environmental LLC) AMT
Ser 04A
7.125%, 8/01/25 500 509,225
--------------
7,174,400
Oregon-1.2%
Forest Grove Rev
(Ref & Campus Impt Pacific Proj A)
RADIAN Ser 05A
5.00%, 5/01/28 1,420 1,485,987
Pennsylvania-4.3%
Pennsylvania Eco Dev Auth Parking Facs Rev
(30th St Station) AMT
ACA Ser 02
5.875%, 6/01/33 2,050 2,229,129
Philadelphia Gas Wks Rev
ASSURED GTY Ser 04A-1
5.25%, 9/01/19-8/01/21 3,045 3,300,569
--------------
5,529,698
Puerto Rico-1.8%
Puerto Rico Cmwlth GO
(Pub Impt)
Ser 01A
5.50%, 7/01/19 500 565,925
Ser 03A
5.25%, 7/01/23 500 532,890
Ser 06A
5.25%, 7/01/23 575 624,410
Puerto Rico Cmwlth Govt Dev Bank
(Sr Notes)
Ser 06B
5.00%, 12/01/15 500 537,735
--------------
2,260,960
Rhode Island-2.3%
Rhode Island Hlth & Ed Bldg Corp Rev
(Times2 Academy)
Ser 04
5.00%, 12/15/24 1,745 1,804,888
(Univ of Rhode Island)
AMBAC Ser 04A
5.50%, 9/15/24 1,000 1,111,020
--------------
2,915,908
12 o ACM MUNICIPAL SECURITIES INCOME FUND
Principal
Amount
(000) U.S. $ Value
----------------------------------------------------------------------
South Carolina-3.8%
Charleston Cnty Sch Dist
5.25%, 12/01/30 $ 2,000 $ 2,144,600
Dorchester Cnty Sch Dist No 2
ASSURED GTY
5.00%, 12/01/29 800 846,056
Newberry Investing In Childrens Ed
ASSURED GTY
5.00%, 12/01/27 1,560 1,642,508
(Newberry Cny Sch Dist Proj)
5.00%, 12/01/30 165 169,476
---------------
4,802,640
Tennessee-8.8%
Johnson City Hlth & Edl Facs Hosp Rev
(First Mtg-MTN Sts Hlth)
Ser 06A
5.50%, 7/01/31 640 688,096
Sullivan Cnty Hlth Edl & Hsg Facs Rev
(Wellmont Health Sys Proj)
Ser 06C
5.25%, 9/01/26(e) 725 761,294
Tenn Ed Loan Rev
(Educational Funding of South) AMT
Ser 97A
6.20%, 12/01/21 9,600 9,716,352
---------------
11,165,742
Texas-19.5%
Dallas Arpt Rev
(Fort Worth Intl Arpt) AMT
MBIA Ser 03A
5.25%, 11/01/25 2,000 2,114,960
Frisco TX GO
FGIC
5.00%, 2/15/23 3,220 3,441,697
Garza Cnty Pub Facs Corp
5.50%, 10/01/19 255 268,135
Harris Cnty
(Flood Ctl)
Ser 03B
5.00%, 10/01/23 1,400 1,473,388
Harris Cnty Toll Road Rev
FSA Ser 02
5.125%, 8/15/32 5,000 5,255,950
Hidalgo Cnty Hlth Svcs
(Mission Hosp Inc Proj)
Ser 05
5.00%, 8/15/14-8/15/19 325 334,291
ACM MUNICIPAL SECURITIES INCOME FUND o 13
Principal
Amount
(000) U.S. $ Value
----------------------------------------------------------------------
Lewisville Combination Contract
(Spl Assmt Cap Impt Dist No 2)
ACA Ser 05
6.00%, 10/01/25 $ 550 $ 611,270
Lower Colorado Riv Auth
AMBAC Ser 03
5.25%, 5/15/25 1,800 1,921,824
Lower Colorado Riv Auth Tex Rev
MBIA Ser 02A
5.00%, 5/15/31 1,490 1,560,939
Prerefunded
MBIA Ser 02A
5.00%, 5/15/31 10 10,790
Matagorda Cnty Rev
(Centerpoint Energy Houston Electric LLC)
Ser 04
5.60%, 3/01/27 1,000 1,061,700
McAllen Wtr & SWR Rev
FSA
5.25%, 2/01/21-2/01/22 3,215 3,497,029
Richardson Hosp Auth Rev
(Richardson Regional)
FSA Ser 04
5.875%, 12/01/24 1,155 1,253,221
Ser 04
6.00%, 12/01/19 915 1,004,341
Seguin Hgr Ed Rev
(Texas Lutheran Univ Project)
Ser 04
5.25%, 9/01/28 1,000 1,030,980
---------------
24,840,515
Utah-2.1%
Davis Cnty Sales Tax Rev
AMBAC Ser 03B
5.25%, 10/01/23 1,005 1,081,511
Salt Lake City Wtr Rev
AMBAC Ser 04
5.00%, 7/01/23 1,500 1,589,940
---------------
2,671,451
Washington-1.2%
Seattle Hsg Auth Rev MFHR
(Wisteria Ct Proj)
GNMA Ser 03
5.20%, 10/20/28 1,475 1,552,674
14 o ACM MUNICIPAL SECURITIES INCOME FUND
Principal
Amount
(000) U.S. $ Value
----------------------------------------------------------------------
Wisconsin-4.1%
Wisconsin GO
Ser 03
5.00%, 11/01/26 $ 3,700 $ 3,832,423
Wisconsin Hlth & Ed Facs Auth Rev
(Bell Tower Residence Proj)
Ser 05
5.00%, 7/01/20 1,300 1,361,321
--------------
5,193,744
Total Investments-169.4%
(cost $206,433,035) 215,725,991
Other assets less liabilities-1.3% 1,624,370
Preferred Stock, at redemption value-(70.7)% (90,000,000)
--------------
Net Assets Applicable to Common
Shareholders-100%(f) $ 127,350,361
==============
(a) Private Placement.
(b) Indicates a security that has a zero coupon that remains in effect until a
predetermined date at which time the stated coupon rate becomes effective until
final maturity.
(c) Inverse Floater Security-Security with variable or floating interest rate
that moves in the opposite direction of short-term interest rates.
(d) Position, or a portion thereof, has been segregated to collateralize when
issued securities.
(e) When-Issued Security.
(f) Portfolio percentages are calculated based on net assets applicable to
common shareholders.
Glossary
ACA - American Capital Access Financial Guarantee Corporation
AMBAC - American Municipal Bond Assurance Corporation
AMT - Alternative Minimum Tax (subject to)
ASSURED GTY - Assured Guaranty
COP - Certificate of Participation
FGIC - Financial Guarantee Insurance Company
FHA - Federal Housing Administration
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance Inc.
GNMA - Government National Mortgage Association
GO - General Obligation
IDA - Industrial Development Authority/Agency
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-Family Housing Revenue
MTN - Medium Term Note
RADIAN - Radian Group, Inc.
SFMR - Single Family Mortgage Revenue
SWR - Solid Waste Removal
XLCA - XL Capital Assurance Inc.
See notes to financial statements.
ACM MUNICIPAL SECURITIES INCOME FUND o 15
STATEMENT OF ASSETS & LIABILITIES
October 31, 2006
Assets
Investments in securities, at value (cost $206,433,035) $ 215,725,991
Interest receivable 3,646,759
Prepaid expenses 2,082
--------------
Total assets 219,374,832
--------------
Liabilities
Due to custodian 539,449
Payable for investment securities purchased 1,281,097
Advisory fee payable 88,762
Accrued expenses and other liabilities 85,392
Dividend payable--preferred shares 20,300
Administrative fee payable 9,471
--------------
Total liabilities 2,024,471
--------------
Preferred Stock, at redemption value
$.01 par value per share; 3,600 shares
Auction Preferred Stock authorized,
issued and outstanding at $25,000
per share liquidation preference 90,000,000
--------------
Net Assets Applicable to Common Shareholders $ 127,350,361
==============
Composition of Net Assets Applicable to
Common Shareholders
Common Stock, $.01 par value per share;
99,996,400 shares authorized,
11,145,261 shares issued and outstanding $ 111,453
Additional paid-in capital 140,181,561
Distributions in excess of net investment income (20,300)
Accumulated net realized loss on investment transactions (22,215,309)
Net unrealized appreciation of investments 9,292,956
--------------
Net Assets Applicable to Common Shareholders $ 127,350,361
==============
Net Asset Value Applicable to Common Shareholders
(based on 11,145,261 common shares outstanding) $11.43
======
See notes to financial statements.
16 o ACM MUNICIPAL SECURITIES INCOME FUND
STATEMENT OF OPERATIONS
Year Ended October 31, 2006
Investment Income
Interest $ 10,963,379
Expenses
Advisory fee $ 1,073,074
Administrative fee 321,923
Auction Preferred Stock--auction
agent's fees 225,252
Custodian 110,699
Audit 80,000
Legal 58,759
Printing 43,512
Directors' fees and expenses 34,000
Registration fees 23,756
Transfer agency 7,716
Miscellaneous 56,832
-------------
Total expenses 2,035,523
Less: Administration fee reimbursement
(see Note B) (214,615)
-------------
Net expenses 1,820,908
-------------
Net investment income 9,142,471
-------------
Realized and Unrealized Gain (Loss)
on Investments
Net realized gain (loss) on
Investment transactions 438,104
Futures transactions (17,077)
Net change in unrealized
appreciation/depreciation of:
Investments 2,870,509
Futures 41,445
-------------
Net gain on investments 3,332,981
-------------
Dividends to Auctioned Preferred
Shareholders from
Net investment income (2,924,685)
-------------
Net Increase in Net Assets Applicable
to Common Shareholders Resulting
from Operations $ 9,550,767
=============
See notes to financial statements.
ACM MUNICIPAL SECURITIES INCOME FUND o 17
STATEMENT OF CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS
Year Ended Year Ended
October 31, October 31,
2006 2005
============= =============
Increase (Decrease) in Net Assets
Applicable to Common Shareholders
Resulting from Operations
Net investment income $ 9,142,471 $ 9,387,397
Net realized gain on investment
transactions 421,027 1,027,530
Net change in unrealized
appreciation/depreciation
of investments 2,911,954 (2,915,211)
Dividends to Auction Preferred
Shareholders from
Net investment income (2,924,685) (1,905,523)
------------- -------------
Net increase in net assets
applicable to common shareholders
resulting from operations 9,550,767 5,594,193
Dividends to Common
Shareholders from
Net investment income (6,714,555) (7,873,611)
Common Stock Transactions
Reinvestment of dividends resulting in the
issuance of common stock -0- 55,061
------------- -------------
Total increase (decrease) 2,836,212 (2,224,357)
Net Assets Applicable to Common
Shareholders
Beginning of period 124,514,149 126,738,506
------------- -------------
End of period (including distributions in
excess of net investment income of
($20,300) and ($14,194),
respectively) $ 127,350,361 $ 124,514,149
============= =============
See notes to financial statements.
18 o ACM MUNICIPAL SECURITIES INCOME FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2006
NOTE A
Significant Accounting Policies
ACM Municipal Securities Income Fund, Inc. (the "Fund") was incorporated in the
state of Maryland on February 11, 1993 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, 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 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 Fund's Board
of Directors.
In general, the market value 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 mean of
the closing bid and asked prices on such 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 put or call options
are valued at the last sale price. If there has been no sale on that day, such
securities will be valued at the closing bid prices on that day; open futures
contracts and options thereon are valued using the closing settlement price or,
in the absence of such a price, the most recent quoted bid price. If there are
no quotations available for the day of valuation, the last available closing
settlement price is used; securities traded in the over-the-counter market,
(OTC) are valued at the mean of the current bid and asked prices as reported by
the National Quotation Bureau or other comparable sources; U.S. Government
securities and other debt instruments having 60 days or less remaining until
maturity are valued at amortized cost if their original maturity was 60 days or
less; or by amortizing their fair value as of the 61st day prior to maturity if
their original term to maturity exceeded 60 days; fixed-income securities,
including mortgage backed and asset backed securities, may be valued on the
basis of prices 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, AllianceBernstein L.P. (prior to February 24, 2006 known as Alliance
Capital Management L.P.), (the "Adviser") may establish procedures
ACM MUNICIPAL SECURITIES INCOME FUND o 19
whereby changes in market yields or spreads are used to adjust, on a daily
basis, a recently obtained quoted price on a security; and OTC and other
derivatives are valued on the basis of a quoted bid price or spread from a
major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's 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.
2. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute substantially
all of its investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. Investment Income and Investment Transactions
Interest income is accrued daily. Investment transactions are accounted for on
the trade date securities are purchased or sold. Investment gains and losses
are determined on the identified cost basis. The Fund amortizes premiums and
accretes original issue discounts and market discounts as adjustments to
interest income.
4. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
U.S. generally accepted accounting principles. 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, Administrative Fees and Other Transactions with Affiliates
Under the terms of an investment advisory agreement, the Fund pays the Adviser
an advisory fee at an annual rate of .50 of 1% of the average weekly net assets
of the Fund. Such fee is accrued daily and paid monthly.
Under the terms of a Shareholder Inquiry Agency Agreement with
AllianceBernstein Investor Services, Inc. (prior to February 24, 2006 known as
Alliance
20 o ACM MUNICIPAL SECURITIES INCOME FUND
Global Investor Services, Inc.) ("ABIS"), an affiliate of the Adviser, the Fund
reimburses ABIS for costs relating to servicing phone inquiries for the Fund.
During the year ended October 31, 2006, there was no reimbursement paid to ABIS.
Under the terms of an Administration Agreement, the Fund is required to pay
AllianceBernstein L.P. (the "Administrator") an administration fee at an annual
rate of .15 of 1% of the average weekly net assets of the Fund. Such fee is
accrued daily and paid monthly. Effective February 11, 2005, the Administrator
has voluntarily agreed to reimburse the Fund for administrative expenses at an
annual rate of .10 of 1% of the average weekly net assets of the Fund. For the
year ended October 31, 2006, the amount of such reimbursement was $214,615. The
Administrator has engaged Prudential Investments LLC (the "Sub-Administrator"),
an indirect, wholly-owned subsidiary of Prudential Financial, Inc., to act as
sub-administrator. The Administrator, out of its own assets, will pay the
Sub-Administrator a monthly fee equal to an annual rate of .10 of 1% of the
Fund's average weekly net assets. The Sub-Administrator prepares financial and
regulatory reports for the Fund and provides other clerical services.
NOTE C
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the year ended October 31, 2006, were as follows:
Purchases Sales
------------- -------------
Investment securities (excluding
U.S. government securities) $ 43,392,989 $ 36,062,545
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes, gross unrealized
appreciation and unrealized depreciation are as follows:
Cost $ 206,570,449
-------------
Gross unrealized appreciation $ 10,253,824
Gross unrealized depreciation (1,098,282)
-------------
Net unrealized appreciation $ 9,155,542
=============
1. Swap Agreements
The Fund may enter into swaps to hedge its exposure to interest rates and
credit risk and for investment purposes. A swap is an agreement that obligates
two parties to exchange a series of cash flows at specified intervals based
upon or calculated by reference to changes in specified prices or rates for a
specific amount of an underlying asset. The payment flows are usually netted
against each other, with the difference being paid by one party to the other.
Risks may arise as a result of the failure of the counterparty to the swap
contract to comply with the terms of the swap contract. The loss incurred by
the failure of
ACM MUNICIPAL SECURITIES INCOME FUND o 21
the counterparty is generally limited to the net interest payment to be
received by the Fund, and/or the termination value at the end of the contract.
Therefore, the Fund considers the creditworthiness of each counterparty to a
swap contract in evaluating potential credit risk. Additionally, risks may
arise from unanticipated movements in interest rates or in the value of the
underlying securities.
As of November 1, 2003, the Fund has adopted the method of accounting for
interim payments on swap contracts in accordance with Financial Accounting
Standards Board Statement No. 133. The Fund accrues for the interim payments on
swap contracts on a daily basis, with the net amount recorded within unrealized
appreciation/depreciation of swap contracts on the statement of assets and
liabilities. Once the interim payments are settled in cash, the net amount is
recorded as realized gain/loss on swaps, in addition to realized gain/loss
recorded upon the termination of swap contracts on the statement of operations.
Prior to November 1, 2003, these interim payments were reflected within
interest income/expense in the statement of operations. Fluctuations in the
value of swap contracts are recorded as a component of net change in unrealized
appreciation/depreciation of investments.
2. Financial Futures Contracts
The Fund may buy or sell financial futures contracts for the purpose of hedging
the portfolio against adverse effects of anticipated movements in the market.
The Fund bears the market risk that arises from changes in the value of these
financial instruments and the imperfect correlation between movements in the
price of the futures contracts and movements in the price of the securities
hedged or used for cover.
At the time the Fund enters into a futures contract, the Fund deposits and
maintains as collateral an initial margin with the broker, as required by the
exchange on which the transaction is effected. 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 the counterparty to
meet the terms of the contract. 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.
22 o ACM MUNICIPAL SECURITIES INCOME FUND
NOTE D
Distributions To Common Shareholders
The tax character of distributions paid to common shareholders during the
fiscal years ended October 31, 2006 and October 31, 2005 were as follows:
2006 2005
------------ ------------
Distributions paid from:
Ordinary income $ 341,789 $ 262,628
Tax-exempt income 6,372,766 7,610,983
------------ ------------
Total distributions paid $ 6,714,555 $ 7,873,611
============ ============
As of October 31, 2006, the components of accumulated earnings/(deficit)
applicable to common shareholders on a tax basis were as follows:
Accumulated capital and other losses $(22,077,895)(a)
Unrealized appreciation/(depreciation) 9,155,542(b)
------------
Total accumulated earnings/(deficit) $(12,922,353)(c)
============
(a) On October 31, 2006, the Fund had a net capital loss carryforward of
$22,077,895 of which $4,722,588 expires in the year 2007, $10,294,946 expires
in the year 2008, $1,971,343 expires in the year 2010, and $5,089,018 expires
in the year 2011. To the extent future capital gains are offset by capital loss
carryforward, such gains will not be distributed. During the fiscal year
October 31, 2006, the Fund utilized capital loss carryforwards of $462,472.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
(c) The difference between book-basis and tax-basis components of accumulated
earnings/(deficits) is attributable primarily to dividends payable.
During the current fiscal year, permanent differences, primarily due to
distributions in excess of net investment income, resulted in a net decrease in
distributions in excess of net investment income and a decrease in additional
paid in capital. This reclassification had no effect on net assets.
NOTE E
Common Stock
There are 99,996,400 shares of $0.01 par value common stock authorized. There
are 11,145,261 shares of common stock outstanding at October 31, 2006. During
the year ended October 31, 2006, the Fund did not issue any shares in
connection with the Fund's dividend reinvestment plan. During the year ended
October 31, 2005, the Fund issued 4,791 shares in connection with the Fund's
dividend reinvestment plan.
ACM MUNICIPAL SECURITIES INCOME FUND o 23
NOTE F
Preferred Stock
The Fund has issued and outstanding 3,600 shares of Auction Preferred Stock,
consisting of 1,200 shares each of Series A, Series B and Series C. The
preferred shares have a liquidation value of $25,000 per share plus
accumulated, unpaid dividends.
The dividend rate on Series A is 3.50%, effective through October 31, 2006. The
dividend rate on Series B is 3.42%, effective through November 5, 2006. The
dividend rate on Series C is 3.60%, effective through November 1, 2006.
At certain times, the Preferred Shares are redeemable by the Fund, in whole or
in part, at $25,000 per share plus accumulated, unpaid dividends.
Although the Fund will not ordinarily redeem the Preferred Shares, it may be
required to redeem shares if, for example, the Fund does not meet an asset
coverage ratio required by law or to correct a failure to meet a rating agency
guideline in a timely manner. The Fund voluntarily may redeem the Preferred
Shares in certain circumstances.
The Preferred Shareholders, voting as a separate class, have the right to elect
at least two Directors at all times and to elect a majority of the Directors in
the event two years' dividends on the Preferred Shares are unpaid. In each
case, the remaining Directors will be elected by the Common Shareholders and
Preferred Shareholders voting together as a single class. The Preferred
Shareholders will vote as a separate class on certain other matters as required
under the Fund's Charter, the Investment Company Act of 1940 and Maryland law.
NOTE G
Risks Involved in Investing in the Fund
Interest Rate Risk and Credit Risk--Interest rate risk is the risk that changes
in interest rates will affect the value of the Fund's investments in
fixed-income debt securities such as bonds or notes. Increases in interest
rates may cause the value of the Fund's investments to decline. Credit risk is
the risk that the issuer or guarantor of a debt security, or the counterparty
to a derivative contract, will be unable or unwilling to make timely principal
and/or interest payments, or to otherwise honor its obligations. The degree of
risk for a particular security may be reflected in its credit risk rating.
Credit risk is greater for medium quality and lower-rated securities.
Lower-rated debt securities and similar unrated securities (commonly known as
"junk bonds") have speculative elements or are predominantly speculative risks.
24 o ACM MUNICIPAL SECURITIES INCOME FUND
Leverage Risk--The Fund may use certain investment techniques that have
increase risks. For example, the issuance of the Fund's preferred stock results
in leveraging of the Common Stock, an investment technique usually considered
speculative. The Fund utilizes leveraging to seek to enhance the yield and net
asset value of its Common Stock. However, these objectives cannot be achieved
in all interest rate environments. Leverage creates certain risks for holders
of Common Stock, including higher volatility of both the net asset value and
market value of the Common Stock and fluctuations in the dividend rates on the
Preferred Stock will affect the return to holders of Common Stock. To leverage,
the Fund issues Preferred Stock, which pays dividends at prevailing short-term
interest rates, and invests the proceeds in long-term municipal bonds. If the
Fund were fully invested in longer-term securities and if short-term interest
rates were to increase, then the amount of dividends paid on the preferred
shares would increase and both net investment income available for distribution
to the holders of Common Stock and the net asset value of the Common Stock
would decline. At the same time, the market value of the Fund's Common Stock
(that is, its price as listed on the New York Stock Exchange) may, as a result,
decline. Furthermore, if long-term interest rates rise, the Common Stock's net
asset value will reflect the full decline in the price of the portfolio's
investments, since the value of the Fund's Preferred Stock does not fluctuate.
In addition to the decline in net asset value, the market value of the Fund's
Common Stock may also decline.
Indemnification Risk--In the ordinary course of business, the Fund enters into
contracts that contain a variety of indemnifications. The Fund's maximum
exposure under these arrangements is unknown. However, the Fund has not had
prior claims or losses pursuant to these indemnification provisions and expects
the risk of loss thereunder to be remote.
NOTE H
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.
ACM MUNICIPAL SECURITIES INCOME FUND o 25
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 ("NYAGOrder"). 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
Adviser's registered investment company clients, including the Fund, will
introduce governance and compliance changes.
The shares of the Fund are not redeemable by the Fund, but are traded on an
exchange at prices established by the market. Accordingly, the Fund and its
shareholders are not subject to the market timing practices described in the
SEC Order and are not expected to participate in the Reimbursement Fund. Since
the Fund is a closed-end fund, it will not have its advisory fee reduced
pursuant to the terms of the agreements mentioned above.
26 o ACM MUNICIPAL SECURITIES INCOME FUND
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 Virginia's 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 Adviser's 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 deputy commissioner of securities of 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
defendant's petition for appeal. On September 22, 2006, Alliance and Alliance
Holding filed an answer and motion to dismiss the Standing 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., AllianceBernstein 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
ACM MUNICIPAL SECURITIES INCOME FUND o 27
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 plaintiff 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 Adviser's ability to perform advisory
services relating to the Fund.
28 o ACM MUNICIPAL SECURITIES INCOME FUND
NOTE I
Recent Accounting Pronouncements
On July 13, 2006, the Financial Accounting Standards Board ("FASB") released
FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN
48"). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in
the course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded in the current period. Adoption of FIN 48 is required for
fiscal years beginning after December 15, 2006 and is to be applied to all open
tax years as of the effective date. At this time, management is evaluating the
implications of FIN 48 and its impact in the financial statements has not yet
been determined.
On September 20, 2006, the FASB released Statement of Financial Accounting
Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an
authoritative definition of fair value, sets out a framework for measuring fair
value, and requires additional disclosures about fair-value measurements. The
application of FAS 157 is required for fiscal years beginning after November
15, 2007 and interim periods within those fiscal years. At this time,
management is evaluating the implications of FAS 157 and its impact on the
financial statements has not yet been determined.
ACM MUNICIPAL SECURITIES INCOME FUND o 29
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Year Ended October 31,
2006 2005 2004(a) 2003 2002
----------------------------------------------------------
Net asset value, beginning
of period $ 11.17 $ 11.38 $ 11.05 $ 10.85 $ 12.10
----------------------------------------------------------
Income From Investment
Operations
Net investment income .82 .84 .88 .97 1.08
Net realized and unrealized
gain (loss) on investment
transactions .30 (.17) .41 .12 (1.32)
Dividends to preferred
shareholders from net
investment income (common
stock equivalent basis) (.26) (.17) (.09) (.09) (.14)
----------------------------------------------------------
Net increase (decrease) in net
asset value from operations .86 .50 1.20 1.00 (.38)
----------------------------------------------------------
Less: Dividends to
Common Shareholders
Dividends from net investment
income (.60) (.71) (.87) (.80) (.87)
----------------------------------------------------------
Net asset value, end of period $ 11.43 $ 11.17 $ 11.38 $ 11.05 $ 10.85
==========================================================
Market price, end of period $ 10.64 $ 10.41 $ 12.09 $ 11.62 $ 11.50
==========================================================
Premium (Discount) (6.91)% (6.80)% 6.24% 5.16% 5.99%
Total Return
Total investment return
based on:(b)
Market price 8.18% (8.09)% 12.34% 8.53% (2.44)%
Net asset value 8.31% 4.77% 11.20% 9.39% (3.35)%
Ratios/Supplemental Data
Net assets, applicable to
common shareholders, end
of period (000's omitted) $127,350 $124,514 $126,739 $122,322 $119,323
Preferred stock, at redemption
value ($25,000 per share
liquidation preference)
(000's omitted) $90,000 $90,000 $90,000 $90,000 $90,000
Ratios to average net assets
applicable to common
shareholders of:
Expenses(c) 1.46%(d) 1.49%(d) 1.65% 1.71% 1.65%
Net investment income,
before preferred stock
dividends(c) 7.34%(d) 7.39%(d) 7.87% 8.78% 9.32%
Preferred stock dividends 2.35% 1.50% .79% .84% 1.19%
Net investment income, net of
preferred stock dividends 4.99%(d) 5.89%(d) 7.08% 7.94% 8.13%
Portfolio turnover rate 17% 13% 36% 32% 24%
Asset coverage ratio 242% 238% 241% 236% 233%
See footnote summary on page 31.
30 o ACM MUNICIPAL SECURITIES INCOME FUND
(a) As of November 1, 2003, the Fund has adopted the method of accounting for
interim payments on swap contracts in accordance with Financial Accounting
Standards Board Statement No. 133. These interim payments are reflected within
net realized and unrealized gain (loss) on swap contracts, however, prior to
November 1, 2003, these interim payments were reflected within interest
income/expense on the statement of operations. For the year ended October 31,
2004, the effect of this change to the net investment income and the net
realized and unrealized gain (loss) on investment transactions was less than
$0.01 per share and the ratio of net investment income to average net assets
was less than .01%.
(b) 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
Fund's dividend reinvestment plan. Generally, total investment return based on
net asset value will be higher than total investment return based on market
value in periods where there is an increase in the discount or a decrease in
the premium of the market value to net asset value from the beginning to the
end of such periods. Conversely, total investment return based on net asset
value will be lower than total investment return based on market value in
periods where there is a decrease in the discount or an increase in the premium
of the market value to the net asset value from the beginning to the end of the
period. Total investment returns for periods of less than one full year are not
annualized.
(c) These expense and net investment income ratios do not reflect the effect
of dividend payments to preferred shareholders.
(d) Net of fee waiver. If the Administrator had not waived expenses, the
ratios to average net assets applicable to common shareholders for expenses,
net investment income before preferred stock dividends and net investment
income net of preferred stock dividends would have been 1.63%, 7.16% and 4.82%,
respectively, for the year ended October 31, 2006 and 1.61%, 7.26% and 5.76%,
respectively, for the year ended October 31, 2005.
ACM MUNICIPAL SECURITIES INCOME FUND o 31
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
ACM Municipal Securities Income Fund, Inc.
We have audited the accompanying statement of assets and liabilities of ACM
Municipal Securities Income Fund, Inc. (the "Fund"), including the portfolio of
investments, as of October 31, 2006, and the related statement of operations
for the year then ended, the statement of changes in net assets 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 Fund's 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 Fund's 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 Fund's 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, 2006 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 ACM
Municipal Securities Income Fund, Inc. at October 31, 2006, the results of its
operations for the year then ended, the changes in its net assets 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.
/s/ Ernst & Young LLP
New York, New York
December 19, 2006
32 o ACM MUNICIPAL SECURITIES INCOME FUND
FEDERAL TAX INFORMATION
(unaudited)
In accordance with Federal tax law, the Fund's designation of "exempt-interest
dividends" paid during the fiscal year ended October 31, 2006 was $9,148,577.
For foreign shareholders, the Fund designates 100% of its ordinary dividends as
qualified interest income.
As required by Federal tax law rules, shareholders will receive notification of
their portion of the Fund's taxable ordinary dividends (if any) and capital
gain distributions (if any) paid for the 2006 calendar year on Form 1099-DIV
which will be mailed by January 31, 2007.
ACM MUNICIPAL SECURITIES INCOME FUND o 33
ADDITIONAL INFORMATION
(unaudited)
Shareholders whose shares are registered in their own names will automatically
be participants in the Dividend Reinvestment and Cash Purchase 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 N.A. (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, as holders of the Common
Stock may have elected, 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 Plan Agent will receive the dividend or
distribution in cash and apply it to the purchase of the Fund's 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 Plan 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 Plan agent may exceed the net asset value of the Fund's
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 shareholder's proxy will include those shares
purchased or received pursuant to the Plan.
There will be no charges with respect to shares issued directly by the Fund to
satisfy the dividend reinvestment requirements. However, each participant will
pay a pro rata share of brokerage commissions incurred with respect to the
Agent's open market purchases of shares. In each case, the cost per share of
shares purchased for each share-
34 o ACM MUNICIPAL SECURITIES INCOME FUND
holder's account will be the average cost, including brokerage commissions, of
any shares purchased in the open market plus the cost of any shares issued by
the Fund.
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
voluntary cash payments made and 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 43010,
Providence, RI 02940-3010.
Since the filing of the most recent amendment to the Fund's registration
statement with the Securities and Exchange Commission, there have been (i) no
material changes in the Fund's investment objectives or policies, (ii) no
changes to the Fund's charter or by-laws that would delay or prevent a change
of control of the Fund, and (iii) no material changes in the principal risk
factors associated with investment in the Fund, and (iv) Mr. David M. Dowden is
no longer one of the persons primarily responsible for the day-to-day
management of the Fund's investment portfolio. Messrs. Michael G. Brooks, Fred
S. Cohen, Robert B. (Guy) Davidson, III and Terrance T. Hults are the persons
primarily responsible for the day-to-day management of the Fund's investment
portfolio.
ACM MUNICIPAL SECURITIES INCOME FUND o 35
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Marc O. Mayer, President
David H. Dievler(1)
John H. Dobkin(1)
Michael J. Downey(1)
D. James Guzy(1)
Nancy P. Jacklin(1)
Marshall C. Turner, Jr.(1)
OFFICERS
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer
Robert B. (Guy) Davidson, III(2), Senior Vice President
Douglas J. Peebles, Senior Vice President
Jeffrey S. Phlegar, Senior Vice President
Michael G. Brooks(2), Vice President
Fred S. Cohen(2), Vice President
Terrance T. Hults(2), Vice President
Emilie D. Wrapp, Secretary
Joseph J. Mantineo, Treasurer and Chief Financial Officer
Thomas R. Manley, Controller
Administrator
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, NY 10105
Sub-Administrator
Prudential Investments LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Common Stock: Dividend Paying Agent,
Transfer Agent and Registrar
Computershare Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-3010
Legal Counsel
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
Preferred Stock: Dividend Paying
Agent, Transfer Agent and
Registrar
The Bank of New York
101 Barclay Street - 7W
New York, NY 10286
Independent Registered Public
Accounting Firm
Ernst & Young LLP
5 Times Square
New York, NY 10036
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Notice is hereby given in accordance with Section 23(c) of the Investment
CompanyAct of 1940 that the Fund may purchase at market prices from time to
time shares of its Common Stock in the open market.
This report, including the financial statements therein, is transmitted to the
shareholders of ACM Municipal Securities 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 Certifications--As required, on April 20, 2006, the Fund submitted to
the New YorkStock Exchange ("NYSE") the annual certification of the Fund's
Chief Executive Officer certifying that he is not aware of any violation of the
NYSE's Corporate Governance listing standards.The Fund also has included the
certifications of the Fund's Chief Executive Officer and Chief Financial
Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 as exhibits
to the Fund's Form N-CSR filed with the Securities and Exchange Commission for
the annual period.
(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 Fund's
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 Fund's portfolio are Michael G. Brooks, Fred S. Cohen, Robert
B. (Guy) Davidson, III and Terrance T. Hults.
36 o ACM MUNICIPAL SECURITIES INCOME FUND
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 Fund's Directors is set
forth below.
PORTFOLIOS
IN FUND OTHER
NAME, PRINCIPAL COMPLEX DIRECTORSHIPS
ADDRESS, AGE OCCUPATION(S) OVERSEEN BY HELD BY
(YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
---------------------------------------------------------------------------------------------------------
INTERESTED DIRECTOR
Marc O. Mayer, + Executive Vice President of the 111 SCB Partners,
1345 Avenue of the Adviser since 2001 and Executive Inc.; and SCB
Americas Managing Director of Inc.
New York, NY 10105 AllianceBernstein Investments, Inc.
49 ("ABI") since 2003; prior thereto he
(2003) was head of AllianceBernstein
Institutional Investments, a unit of
the Adviser, from 2001-2003. Prior
thereto, Chief Executive Officer of
Sanford C. Bernstein & Co., LLC
(institutional research and brokerage
arm of Bernstein & Co. LLC) ("SCB &
Co.") and its predecessor since prior
to 2001.
DISINTERESTED DIRECTORS
William H. Foulk, Jr., #++ Investment Adviser and an 113 None
P.O. Box 5060 Independent Consultant. He was
Greenwich, CT 06831 formerly Senior Manager of Barrett
74 Associates, Inc., a registered
(1998) investment adviser, with which he
Chairman of the Board had been associated since prior
to 2001. 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.
David H. Dievler, # Independent Consultant. Until 112 None
P.O. Box 167 December 1994 he was Senior
Spring Lake, NJ 07762 Vice President of AllianceBernstein
77 Corporation ("AB Corp"), (formerly,
(1993) Alliance Capital Management
Corporation) responsible for mutual
fund administration. Prior to joining
AB Corp. in 1984, he was Chief
Financial Officer of Eberstadt
Asset Management since 1968.
Prior to that, he was a Senior
Manager at Price Waterhouse & Co.
Member of American Institute of
Certified Public Accountants
since 1953.
ACM MUNICIPAL SECURITIES INCOME FUND o 37
PORTFOLIOS
IN FUND OTHER
NAME, PRINCIPAL COMPLEX DIRECTORSHIPS
ADDRESS, AGE OCCUPATION(S) OVERSEEN BY HELD BY
(YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
---------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
John H. Dobkin, # Consultant. Formerly President of 111 None
P.O. Box 12 Save Venice, Inc. (preservation
Annandale, NY 12504 organization) from 2001-2002,
64 Senior Advisor from June
(1998) 1999-June 2000 and President
of Historic Hudson Valley (historic
preservation) from December
1989-May 1999. Previously,
Director of the National Academy
of Design and during 1988-1992,
Director and Chairman of the Audit
Committee of AB Corp. (formerly,
Alliance Capital Management
Corporation).
Michael J. Downey, # Consultant since 2004. Formerly 111 Asia Pacific
c/o AllianceBernstein L.P. managing partner of Lexington Fund, Inc.;
Attn: Philip L. Kirstein Capital, LLC (investment advisory and The
1345 Avenue of the firm) from December 1997 until Merger Fund
Americas December 2003. Prior thereto,
New York, NY 10105 Chairman and CEO of Prudential
62 Mutual Fund Management from
(2005) 1987 to 1993.
D. James Guzy, # Chairman of the Board of PLX 111 Intel Corporation
P.O. Box 128 Technology (semi-conductors) and (semi-
Glenbrook, NV 89413 of SRC Computers Inc., with which conductors);
70 he has been associated since prior to Cirrus Logic
(2005) 2001. He is also President of the Arbor Corporation
Company (private family investments). (semi-
conductors);
and
the Davis
Selected
Advisors Group
of Mutual Funds.
Nancy P. Jacklin, # Formerly U.S. Executive Director of the 111 None
4046 Chancery Court, NW International Monetary Fund (December
Washington, DC 20007 2002-May 2006); Partner, Clifford Chance
58 (1992-2002); Senior Counsel, International
(2006) 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.
38 o ACM MUNICIPAL SECURITIES INCOME FUND
PORTFOLIOS
IN FUND OTHER
NAME, PRINCIPAL COMPLEX DIRECTORSHIPS
ADDRESS, AGE OCCUPATION(S) OVERSEEN BY HELD BY
(YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
---------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
Marshall C. Turner, Jr., # Principal of Turner Venture Associates 111 The
220 Montgomery Street (venture capital and consulting) George Lucas
Penthouse 10 since prior to 2001. From 2003 until Educational
San Francisco, May 31, 2006, he was CEO of Foundation and
CA 94104-3402 Toppan Photomasks, Inc., Austin, National
65 Texas (semi-conductor manufacturing Datacast, Inc.
(2005) services).
* There is no stated term of office for the Fund's Directors.
# Member of the Audit Committee, the Governance and Nominating Committee
and the Independent Directors Committee.
+ Mr. Mayer is an "interested person", as defined in the 1940 Act, due to
his position as an Executive Vice President of the Adviser.
++ Member of the Fair Value Pricing Committee.
ACM MUNICIPAL SECURITIES INCOME FUND o 39
Officer Information
Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) PRINCIPAL OCCUPATION
AND AGE HELD WITH FUND DURING PAST 5 YEARS
--------------------------------------------------------------------------------------------------------------
Marc O. Mayer President and See biography above.
49 Chief Executive Officer
Robert B. (Guy) Senior Vice President Senior Vice President of the Adviser,**
Davidson, III with which he has been associated
45 since prior to 2001.
Philip L. Kirstein Senior Vice President Senior Vice President and Independent
61 and Independent Compliance Officer of the Alliance-
Compliance Officer Bernstein 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 2001 until March 2003.
Douglas J. Peebles Senior Vice President Executive Vice President of the
41 Adviser,** with which he has been
associated since prior to 2001.
Jeffrey S. Phlegar Senior Vice President Executive Vice President of the
40 Adviser,** with which he has been
associated since prior to 2001.
Michael G. Brooks Vice President Senior Vice President of the Adviser,**
58 with which he has been associated since
prior to 2001.
Fred S. Cohen Vice President Senior Vice President of the Adviser,**
48 with which he has been associated since
prior to 2001.
Terrance T. Hults Vice President Senior Vice President of the Adviser,**
40 with which he has been associated since
prior to 2001.
Emilie D. Wrapp Secretary Senior Vice President, Assistant
51 General Counsel and Assistant Secretary
of ABI,** with which she has been
associated since prior to 2001.
Joseph J. Mantineo Treasurer and Chief Senior Vice President of ABIS,**
47 Financial Officer with which he has been
associated since prior to 2001.
Thomas R. Manley Controller Vice President of the Adviser,** with
55 which he has been associated since prior
to 2001.
* The address for each of the Fund's Officers is 1345 Avenue of the
Americas, New York, NY 10105.
** The Adviser, ABI, ABIS and SCB & Co. are affiliates of the Fund.
40 o ACM MUNICIPAL SECURITIES INCOME FUND
SUMMARY OF GENERAL INFORMATION
Shareholder Information
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transaction section of The Wall Street Journal under the
abbreviation "ACM MuniSec." The Fund's NYSEtrading symbol is "AMU." Weekly
comparative net asset value (NAV) and market price information about the Fund
is published each Monday in The Wall Street Journal, each Sunday in The New
York Times and each Saturday in Barron's and other newspapers in a table called
"Closed-End Bond Funds."
Dividend Reinvestment Plan
A Dividend Reinvestment Plan provides automatic reinvestment of dividends and
capital gains in additional Fund shares.
For questions concerning shareholder account information, or if you would like
a brochure describing the Dividend Reinvestment Plan, please call Computershare
Trust Company, N.A. at (800) 219-4218.
ACM MUNICIPAL SECURITIES INCOME FUND o 41
THIS PAGE IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
ALLIANCEBERNSTEIN FAMILY OF FUNDS
--------------------------------------------
Wealth Strategies Funds
--------------------------------------------
Balanced Wealth Strategy
Wealth Appreciation Strategy
Wealth Preservation Strategy
Tax-Managed Balanced Wealth Strategy
Tax-Managed Wealth Appreciation Strategy
Tax-Managed Wealth Preservation Strategy
--------------------------------------------
Blended Style Funds
--------------------------------------------
U.S. Large Cap Portfolio
International Portfolio
Tax-Managed International Portfolio
--------------------------------------------
Growth Funds
--------------------------------------------
Domestic
Growth Fund
Mid-Cap Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
Global & International
Global Health Care Fund
Global Research Growth Fund
Global Technology Fund
Greater China '97 Fund
International Growth Fund
International Research Growth Fund
--------------------------------------------
Value Funds
--------------------------------------------
Domestic
Balanced Shares
Focused Growth & Income Fund
Growth & Income Fund
Real Estate Investment Fund
Small/Mid-Cap Value Fund
Utility Income Fund
Value Fund
Global & International
Global Value Fund
International Value Fund
--------------------------------------------
Taxable Bond Funds
--------------------------------------------
Global Government Income Trust*
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Intermediate Bond Portfolio*
Short Duration Portfolio
U.S. Government Portfolio
--------------------------------------------
Municipal Bond Funds
--------------------------------------------
National Michigan
Insured National Minnesota
Arizona New Jersey
California New York
Insured California Ohio
Florida Pennsylvania
Massachusetts Virginia
--------------------------------------------
Intermediate Municipal Bond Funds
--------------------------------------------
Intermediate California
Intermediate Diversified
Intermediate New York
--------------------------------------------
Closed-End Funds
--------------------------------------------
All-Market Advantage Fund
ACM Income Fund
ACM Government Opportunity Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
California Municipal Income Fund
National Municipal Income Fund
New York Municipal Income Fund
The Spain Fund
World Dollar Government Fund
World Dollar Government Fund II
--------------------------------------------
Retirement Strategies Funds
--------------------------------------------
2000 Retirement Strategy
2005 Retirement Strategy
2010 Retirement Strategy
2015 Retirement Strategy
2020 Retirement Strategy
2025 Retirement Strategy
2030 Retirement Strategy
2035 Retirement Strategy
2040 Retirement Strategy
2045 Retirement Strategy
We also offer Exchange Reserves,** which serves as the money market fund
exchange vehicle for the AllianceBernstein mutual funds.
For more complete information on any AllianceBernstein mutual fund, including
investment objectives and policies, sales charges, expenses, risks and other
matters of importance to prospective investors, visit our website at
www.alliancebernstein.com or call us at 800.227.4618 for a current prospectus.
You should read the prospectus carefully before you invest.
* Prior to February 1, 2006, Global Government Income Trust was named Americas
Government Income Trust and Intermediate Bond Portfolio was named Quality Bond
Portfolio.
** An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
42 o ACM MUNICIPAL SECURITIES INCOME FUND
NOTES
ACM MUNICIPAL SECURITIES INCOME FUND o 43
NOTES
44 o ACM MUNICIPAL SECURITIES INCOME FUND
Privacy Notice
AllianceBernstein, the AllianceBernstein Family of Funds and AllianceBernstein
Investments, Inc. (collectively, "AllianceBernstein" or "we") understand the
importance of maintaining the confidentiality of our customers' nonpublic
personal information. In order to provide financial products and services to
our customers efficiently and accurately, we may collect nonpublic personal
information about our customers from the following sources: (1) information we
receive from account documentation, including applications or other forms
(which may include information such as a customer's name, address, social
security number, assets and income) and (2) information about our customers'
transactions with us, our affiliates and others (including information such as
a customer's account balances and account activity).
It is our policy not to disclose nonpublic personal information about our
customers (or former customers) except to our affiliates, or to others as
permitted or required by law. From time to time, AllianceBernstein may disclose
nonpublic personal information that we collect about our customers (or former
customers), as described above, to non-affiliated third party providers,
including those that perform processing or servicing functions and those that
provide marketing services for us or on our behalf pursuant to a joint
marketing agreement that requires the third party provider to adhere to
AllianceBernstein's privacy policy. We have policies and procedures to
safeguard nonpublic personal information about our customers (or former
customers) which include: (1) restricting access to such nonpublic personal
information and (2) maintaining physical, electronic and procedural safeguards
that comply with federal standards to safeguard such nonpublic personal
information.
ACM MUNICIPAL SECURITIES INCOME FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
ACMVII-0151-1006
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 registrant's 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 registrant's Board of Directors has determined that independent directors
David H. Dievler and William H. Foulk, 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 Fund's
last two fiscal years for professional services rendered for: (i) the audit of
the Fund's annual financial statements included in the Fund's annual report to
stockholders; (ii) assurance and related services that are reasonably related
to the performance of the audit of the Fund's 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 that
issue quarterly 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-Related
Audit Fees Fees Tax Fees
---------- ------------- --------
2005 $48,000 $9,180 $14,741
2006 $50,000 $15,750 $15,275
(d) Not applicable.
(e) (1) Beginning with audit and non-audit service contracts entered into on or
after May 6, 2003, the Fund's Audit Committee policies and procedures require
the pre-approval of all audit and non-audit services provided to the Fund by
the Fund's independent registered public accounting firm. The Fund's 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 Fund's
Audit Committee.
(f) Not applicable.
(g) The following table sets forth the aggregate non-audit services provided to
the Fund, the Fund's Adviser and entities that control, are controlled by or
under common control with the Adviser that provide ongoing services to the
Fund, which include conducting an annual internal control report pursuant to
Statement on Auditing Standards No. 70 ("Service Affiliates"):
Total Amount of
Foregoing Column Pre-
approved by the Audit
All Fees for Committee
Non-Audit Services (Portion Comprised of
Provided to the Audit Related Fees)
Portfolio, the Adviser (Portion Comprised of
and Service Affiliates Tax Fees)
----------------------- ----------------------
2005 $905,214 [ $193,921 ]
( $179,180 )
( $14,741 )
2006 $1,043,069 [ $164,696 ]
( $149,421 )
( $15,275 )
(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
Fund's independent registered public accounting firm to the Adviser and Service
Affiliates is compatible with maintaining the auditor's 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:
David H. Dievler William H. Foulk, Jr
John H. Dobkin Michael J. Downey
D. James Guzy Nancy P. Jacklin
Marshall C. Turner, Jr.
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
October 2006
1. Introduction
As a registered investment adviser, AllianceBernstein L.P.
("AllianceBernstein", "we" or "us") has a fiduciary duty to act solely in the
best interests of our clients. We recognize that this duty requires us to vote
client securities in a timely manner and make voting decisions that are in the
best interests of our clients. Consistent with these obligations, we will
disclose our clients' voting records only to them and as required by mutual
fund vote disclosure regulations. In addition, the proxy committees may, after
careful consideration, choose to respond to surveys regarding past votes.
This statement is intended to comply with Rule 206(4)-6 of the Investment
Advisers Act of 1940. It sets forth our policies and procedures for voting
proxies for our discretionary investment advisory clients, including investment
companies registered under the Investment Company Act of 1940. This statement
applies to AllianceBernstein's growth, value and blend investment groups
investing on behalf of clients in both US and non-US securities.
2. Proxy Policies
This statement is designed to be responsive to the wide range of proxy voting
subjects that can have a significant effect on the investment value of the
securities held in our clients' accounts. These policies are not exhaustive
due to the variety of proxy voting issues that we may be required to consider.
AllianceBernstein reserves the right to depart from these guidelines in order
to avoid voting decisions that we believe may be contrary to our clients' best
interests. In reviewing proxy issues, we will apply the following general
policies:
2.1 Corporate Governance
AllianceBernstein's proxy voting policies recognize the importance of good
corporate governance in ensuring that management and the board of directors
fulfill their obligations to the shareholders. We favor proposals promoting
transparency and accountability within a company. We will vote for proposals
providing for equal access to the proxy materials so that shareholders can
express their views on various proxy issues. We also support the appointment
of a majority of independent directors on key committees and separating the
positions of chairman and chief executive officer. Finally, because we believe
that good corporate governance requires shareholders to have a meaningful voice
in the affairs of the company, we will support shareholder proposals that
request that companies amend their by-laws to provide that director nominees be
elected by an affirmative vote of a majority of the votes cast.
2.2 Elections of Directors
Unless there is a proxy fight for seats on the Board or we determine that there
are other compelling reasons for withholding votes for directors, we will vote
in favor of the management proposed slate of directors. That said, we believe
that directors have a duty to respond to shareholder actions that have received
significant shareholder support. We may withhold votes for directors (or vote
against in non-US markets) that 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 or failure
to act on tender offers where a majority of shareholders have tendered their
shares. In addition, we will withhold votes for directors who fail to attend
at least seventy-five percent of board meetings within a given year without a
reasonable excuse. Finally, we may abstain or vote against directors of
non-U.S. issuers where there is insufficient information about the nominees
disclosed in the proxy statement.
2.3 Appointment of Auditors
AllianceBernstein believes that the company remains in the best position to
choose the auditors and will generally support management's recommendation.
However, we recognize that there may be inherent conflicts when a company's
independent auditor performs substantial non-audit related services for the
company. The Sarbanes-Oxley Act of 2002 prohibited certain categories of
services by auditors to US issuers, making this issue less prevalent in the US.
Nevertheless, in reviewing a proposed auditor, we will consider the fees paid
for non-audit services relative to total fees as well as if there are other
reasons to question the independence of the auditors.
2.4 Changes in Legal and Capital Structure
Changes in a company's charter, articles of incorporation or by-laws are often
technical and administrative in nature. Absent a compelling reason to the
contrary, AllianceBernstein will cast its votes in accordance with the
company's management on such proposals. However, we will review and analyze on
a case-by-case basis any non-routine proposals that are likely to affect the
structure and operation of the company or have a material economic effect on
the company. For example, we will generally support proposals to increase
authorized common stock when it is necessary to implement a stock split, aid in
a restructuring or acquisition or provide a sufficient number of shares for an
employee savings plan, stock option or executive compensation plan. However, a
satisfactory explanation of a company's intentions must be disclosed in the
proxy statement for proposals requesting an increase of greater than one
hundred percent of the shares outstanding. We will oppose increases in
authorized common stock where there is evidence that the shares will be used to
implement a poison pill or another form of anti-takeover device. We will
support shareholder proposals that seek to eliminate dual class voting
structures.
2.5 Corporate Restructurings, Mergers and Acquisitions
AllianceBernstein believes proxy votes dealing with corporate reorganizations
are an extension of the investment decision. Accordingly, we will analyze such
proposals on a case-by-case basis, weighing heavily the views of our research
analysts that cover the company and our investment professionals managing the
portfolios in which the stock is held.
2.6 Proposals Affecting Shareholder Rights
AllianceBernstein believes that certain fundamental rights of shareholders must
be protected. We will generally vote in favor of proposals that give
shareholders a greater voice in the affairs of the company and oppose any
measure that seeks to limit those rights. However, when analyzing such
proposals we will weigh the financial impact of the proposal against the
impairment of shareholder rights.
2.7 Anti-Takeover Measures
AllianceBernstein believes that measures that impede corporate transactions
such as takeovers or entrench management not only infringe on the rights of
shareholders but may also have a detrimental effect on the value of the
company. We will generally oppose proposals, regardless of whether they are
advanced by management or shareholders, the purpose or effect of which is to
entrench management or excessively or inappropriately dilute shareholder
ownership. Conversely, we support proposals that would restrict or otherwise
eliminate anti-takeover or anti-shareholder measures that have already been
adopted by corporate issuers. For example, we will support shareholder
proposals that seek to require the company to submit a shareholder rights plan
to a shareholder vote. We will evaluate, on a case-by-case basis, proposals to
completely redeem or eliminate such plans. Furthermore, we will generally
oppose proposals put forward by management (including the authorization of
blank check preferred stock, classified boards and supermajority vote
requirements) that appear to be anti-shareholder or intended as management
entrenchment mechanisms.
2.8 Executive Compensation
AllianceBernstein believes that company management and the compensation
committee of the board of directors should, within reason, be given latitude to
determine the types and mix of compensation and benefit awards offered to
company employees. Whether proposed by a shareholder or management, we will
review proposals relating to executive compensation plans on a case-by-case
basis to ensure that the long-term interests of management and shareholders are
properly aligned. In general, we will analyze the proposed plan to ensure that
shareholder equity will not be excessively diluted taking into account shares
available for grant under the proposed plan as well as other existing plans.
We generally will oppose plans that have below market value grant or exercise
prices on the date of issuance or permit repricing of underwater stock options
without shareholder approval. Other factors such as the company's performance
and industry practice will generally be factored into our analysis. We
generally will support shareholder proposals seeking additional disclosure of
executive and director compensation. This policy includes proposals that seek
to specify the measurement of performance based compensation. In addition, we
will support proposals requiring managements to submit severance packages that
exceed 2.99 times the sum of an executive officer's base salary plus bonus that
are triggered by a change in control to a shareholder vote. Finally, we will
support shareholder proposals requiring companies to expense stock options
because we view them as a large corporate expense that should be appropriately
accounted for.
2.9 Social and Corporate Responsibility
AllianceBernstein will review and analyze on a case-by-case basis proposals
relating to social, political and environmental issues to determine whether
they will have a financial impact on shareholder value. We will vote against
proposals that are unduly burdensome or result in unnecessary and excessive
costs to the company. We may abstain from voting on social proposals that do
not have a readily determinable financial impact on shareholder value.
3. Proxy Voting Procedures
3.1 Proxy Voting Committees
Our growth and value investment groups have formed separate proxy voting
committees to establish general proxy policies for AllianceBernstein and
consider specific proxy voting matters as necessary. These committees
periodically review these policies and new types of corporate governance
issues, and decide how we should vote on proposals not covered by these
policies. When a proxy vote cannot be clearly decided by an application of our
stated policy, the proxy committee will evaluate the proposal. In addition,
the committees, in conjunction with the analyst that covers the company, may
contact corporate management and interested shareholder groups and others as
necessary to discuss proxy issues. Members of the committee include senior
investment personnel and representatives of the Legal and Compliance
Department. The committees may also evaluate proxies where we face a potential
conflict of interest (as discussed below). Finally, the committees monitor
adherence to these policies.
3.2 Conflicts of Interest
AllianceBernstein recognizes that there may be a potential conflict of interest
when we vote a proxy solicited by an issuer whose retirement plan we manage, or
we administer, who distributes AllianceBernstein sponsored mutual funds, or
with whom we or an employee has another business or personal relationship that
may affect how we vote on the issuer's proxy. Similarly, AllianceBernstein 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. We
believe that centralized management of proxy voting, oversight by the proxy
voting committees and adherence to these policies ensures that proxies are
voted with only our clients' best interests in mind. Additionally, we have
implemented procedures to ensure that our votes are not the product of a
material conflict of interests, including: (i) on an annual basis, the proxy
committees will take reasonable steps to evaluate the nature of
AllianceBernstein's and our employees' material business and personal
relationships (and those of our affiliates) with any company whose equity
securities are held in client accounts and any client that has sponsored or has
material interest in a proposal upon which we will be eligible to vote; (ii)
requiring anyone involved in the decision making process to disclose to the
chairman of the appropriate proxy committee any potential conflict that they
are aware of (including personal relationships) and any contact that they have
had with any interested party regarding a proxy vote; (iii) prohibiting
employees involved in the decision making process or vote administration from
revealing how we intend to vote on a proposal in order to reduce any attempted
influence from interested parties; and (iv) where a material conflict of
interests exists, reviewing our proposed vote by applying a series of objective
tests and, where necessary, considering the views of third party research
services to ensure that our voting decision is consistent with our clients'
best interests.
Because under certain circumstances AllianceBernstein considers the
recommendation of third party research services, the proxy committees will take
reasonable steps to verify that any third party research service is in fact
independent based on all of the relevant facts and circumstances. This
includes reviewing the third party research service's conflict management
procedures and ascertaining, among other things, whether the third party
research service (i) has the capacity and competency to adequately analyze
proxy issues; and (ii) can make such recommendations in an impartial manner and
in the best interests of our clients.
3.3 Proxies of Certain Non-US Issuers
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 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.
Absent compelling reasons to the contrary, AllianceBernstein believes that the
benefit to the client of exercising the vote does not outweigh the cost of
voting (i.e. not being able to sell the shares during this period).
Accordingly, if share blocking is required we generally abstain from voting
those shares.
In addition, voting proxies of issuers in non-US markets may give rise to a
number of administrative issues that may prevent AllianceBernstein from voting
such proxies. For example, AllianceBernstein may receive meeting notices
without enough time to fully consider the proxy or after the cut-off date for
voting. Other markets require AllianceBernstein to provide local agents with
power of attorney prior to implementing AllianceBernstein's voting
instructions. Although it is AllianceBernstein's policy to seek to vote all
proxies for securities held in client accounts for which we have proxy voting
authority, in the case of non-US issuers, we vote proxies on a best efforts
basis.
3.4 Loanned Securities
Many clients of AllianceBernstein have entered into securities lending
arrangements with agent lenders to generate additional revenue.
AllianceBernstein 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 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.
3.5 Proxy Voting Records
You may obtain 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 AllianceBernstein's web site at
www.alliancebernstein.com, go to the Securities and Exchange Commission's web
site at www.sec.gov or call AllianceBernstein at (800) 227-4618.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
The day-to-day management of, and investment decisions for, the Fund's
portfolio are made by the Municipal Bond Investment Team. While all members of
the Team work jointly to determine the majority of the investment strategy
including security selection for the Fund, Messrs. Michael Brooks, Fred S.
Cohen, R. B. Davidson III and Terrence T. Hults, members of the Team, are
primarily responsible for the day-to-day management of the Fund's portfolio.
The following table sets forth when each person became involved in the
management of the Fund, and each person's principal occupation during the past
five years:
Employee; Year; Title Principal Occupation During the Past Five (5) Years
--------------------- ----------------------------------------------------
Michael Brooks; since 2002- Senior Vice President of the Adviser with which
Senior Vice President he has been associated in a substantially similar
capacity since prior to 2002.
Fred S. Cohen; since 2002- Senior Vice President of the Adviser, with which
Senior Vice President he has has been associated in a substantially
similar capacity since prior to 2002.
R. B. Davidson II; since 2002- Senior Vice President of the Adviser, with which
Senior Vice President he has been associated in a substantially similar
capacity since prior to 2002.
Terrence T. Hults; since 1995- Senior Vice President of the Adviser, with which
Senior Vice President he has been associated in a substantially similar
capacity since prior to 2002.
(a) (2) The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which the Fund's portfolio managers also have day-to-day
management responsibilities. The tables provide the numbers of such accounts,
the total assets in such accounts and the number of accounts and total assets
whose fees are based on performance. The information is provided as of the
Fund's fiscal year ended October 31, 2006.
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
Total Assets of
Number of Registered
Total Number Total Assets of Registered Investment
of Registered Registered Investment Companies
Investment Investment Companies Managed Managed with
Portfolio Companies Companies with Performance- Performance-based
Manager Managed Managed based Fees Fees
------------------------------------------------------------------------------------------------
Michael 29 $16,160,000,000 None None
Brooks
Fred S. 29 $16,160,000,000 None None
Cohen
R. B. 29 $16,160,000,000 None None
Davidson III
Terrence T. 29 $16,160,000,000 None None
Hults
POOLED INVESTMENT VEHICLES
Total Number Number of Pooled Total Assets of
of Pooled Investment Vehicles Pooled Investment
Investment Total Assets of Managed with Vehicles Managed
Portfolio Vehicles Pooled Investment Performance-based with Performance-
Manager Managed Vehicles Managed Fees based Fees
------------------------------------------------------------------------------------------------
Michael None None None None
Brooks
Fred S. None None None None
Cohen
R. B. None None None None
Davidson III
Terrence T. None None None None
Hults
OTHER ACCOUNTS
Total Number Number of Other Total Assets of
of Other Total Assets of Accounts Managed Other Accounts
Portfolio Accounts Other Accounts with Performance- with Performance-
Manager Managed Managed based Fees based Fees
------------------------------------------------------------------------------------------------
Michael
Brooks 1,398 $10,110,000,000 2 $67,000,000
Fred S.
Cohen 1,398 $10,110,000,000 2 $67,000,000
R. B.
Davidson III 1,398 $10,110,000,000 2 $67,000,000
Terrence T.
Hults 1,398 $10,110,000,000 2 $67,000,000
Investment Professional Conflict of Interest Disclosure
As an investment adviser and fiduciary, Alliance owes its clients
and shareholders an undivided duty of loyalty. We recognize that conflicts of
interest are inherent in our business and accordingly have developed policies
and procedures (including oversight monitoring) reasonably designed to detect,
manage and mitigate the effects of actual or potential conflicts of interest in
the area of employee personal trading, managing multiple accounts for multiple
clients, including AllianceBernstein Mutual Funds, and allocating investment
opportunities. Investment professionals, including portfolio managers and
research analysts, are subject to the above-mentioned policies and oversight
monitoring to ensure that all clients are treated equitably. We place the
interests of our clients first and expect all of our employees to meet their
fiduciary duties.
Employee Personal Trading. Alliance has adopted a Code of
Business Conduct and Ethics that is designed to detect and prevent conflicts of
interest when investment professionals and other personnel of Alliance own, buy
or sell securities which may be owned by, or bought or sold for, clients.
Personal securities transactions by an employee may raise a potential conflict
of interest when an employee owns or trades in a security that is owned or
considered for purchase or sale by a client, or recommended for purchase or
sale by an employee to a client. Subject to the reporting requirements and
other limitations of its Code of Business Conduct and Ethics, Alliance permits
its employees to engage in personal securities transactions, and also allows
them to acquire investments in the AllianceBernstein Mutual Funds through
direct purchase, 401K/profit sharing plan investment and/or notionally in
connection with deferred incentive compensation awards. Alliance's Code of
Ethics and Business Conduct requires disclosure of all personal accounts and
maintenance of brokerage accounts with designated broker-dealers approved by
Alliance. The Code also requires preclearance of all securities transactions
and imposes a one-year holding period for securities purchased by employees to
discourage short-term trading.
Managing Multiple Accounts for Multiple Clients. Alliance has
compliance policies and oversight monitoring in place to address conflicts of
interest relating to the management of multiple accounts for multiple clients.
Conflicts of interest may arise when an investment professional has
responsibilities for the investments of more than one account because the
investment professional may be unable to devote equal time and attention to
each account. The investment professional or investment professional teams for
each client may have responsibilities for managing all or a portion of the
investments of multiple accounts with a common investment strategy, including
other registered investment companies, unregistered investment vehicles, such
as hedge funds, pension plans, separate accounts, collective trusts and
charitable foundations. Among other things, Alliance's policies and procedures
provide for the prompt dissemination to investment professionals of initial or
changed investment recommendations by analysts so that investment professionals
are better able to develop investment strategies for all accounts they manage.
In addition, investment decisions by investment professionals are reviewed for
the purpose of maintaining uniformity among similar accounts and ensuring that
accounts are treated equitably. No investment professional that manages client
accounts carrying performance fees is compensated directly or specifically for
the performance of those accounts. Investment professional compensation
reflects a broad contribution in multiple dimensions to long-term investment
success for our clients and is not tied specifically to the performance of any
particular client's account, nor is it directly tied to the level or change in
level of assets under management.
Allocating Investment Opportunities. Alliance has policies and
procedures intended to address conflicts of interest relating to the allocation
of investment opportunities. These policies and procedures are designed to
ensure that information relevant to investment decisions is disseminated
promptly within its portfolio management teams and investment opportunities are
allocated equitably among different clients. The investment professionals at
Alliance routinely are required to select and allocate investment opportunities
among accounts. Portfolio holdings, position sizes, and industry and sector
exposures tend to be similar across similar accounts, which minimizes the
potential for conflicts of interest relating to the allocation of investment
opportunities. Nevertheless, investment opportunities may be allocated
differently among accounts due to the particular characteristics of an account,
such as size of the account, cash position, tax status, risk tolerance and
investment restrictions or for other reasons.
Alliance's procedures are also designed to prevent potential
conflicts of interest that may arise when Alliance has a particular financial
incentive, such as a performance-based management fee, relating to an account.
An investment professional may perceive that he or she has an incentive to
devote more time to developing and analyzing investment strategies and
opportunities or allocating securities preferentially to accounts for which
Alliance could share in investment gains.
To address these conflicts of interest, Alliance's policies and
procedures require, among other things, the prompt dissemination to investment
professionals of any initial or changed investment recommendations by analysts;
the aggregation of orders to facilitate best execution for all accounts; price
averaging for all aggregated orders; objective allocation for limited
investment opportunities (e.g., on a rotational basis) to ensure fair and
equitable allocation among accounts; and limitations on short sales of
securities. These procedures also require documentation and review of
justifications for any decisions to make investments only for select accounts
or in a manner disproportionate to the size of the account.
(a) (3) Portfolio Manager Compensation
Alliance's compensation program for investment professionals is
designed to be competitive and effective in order to attract and retain the
highest caliber employees. The compensation program for investment
professionals is designed to reflect their ability to generate long-term
investment success for our clients, including shareholders of the
AllianceBernstein Mutual Funds. Investment professionals do not receive any
direct compensation based upon the investment returns of any individual client
account, nor is compensation tied directly to the level or change in level of
assets under management. Investment professionals' annual compensation is
comprised of the following:
(i) Fixed base salary: This is generally the smallest portion of
compensation. The base salary is a relatively low, fixed salary within a
similar range for all investment professionals. The base salary is determined
at the outset of employment based on level of experience, does not change
significantly from year-to-year and hence, is not particularly sensitive to
performance.
(ii) Discretionary incentive compensation in the form of an annual
cash bonus: Alliance's overall profitability determines the total amount of
incentive compensation available to investment professionals. This portion of
compensation is determined subjectively based on qualitative and quantitative
factors. In evaluating this component of an investment professional's
compensation, Alliance considers the contribution to his/her team or discipline
as it relates to that team's overall contribution to the long-term investment
success, business results and strategy of Alliance. Quantitative factors
considered include, among other things, relative investment performance (e.g.,
by comparison to competitor or peer group funds or similar styles of
investments, and appropriate, broad-based or specific market indices), and
consistency of performance. There are no specific formulas used to determine
this part of an investment professional's compensation and the compensation is
not tied to any pre-determined or specified level of performance. Alliance
also considers qualitative factors such as the complexity and risk of
investment strategies involved in the style or type of assets managed by the
investment professional; success of marketing/business development efforts and
client servicing; seniority/length of service with the firm; management and
supervisory responsibilities; and fulfillment of Alliance's leadership criteria.
(iii) Discretionary incentive compensation in the form of awards
under Alliance's Partners Compensation Plan ("deferred awards"): Alliance's
overall profitability determines the total amount of deferred awards available
to investment professionals. The deferred awards are allocated among
investment professionals based on criteria similar to those used to determine
the annual cash bonus. There is no fixed formula for determining these
amounts. Deferred awards, for which there are various investment options, vest
over a four-year period and are generally forfeited if the employee resigns or
Alliance terminates his/her employment. Investment options under the deferred
awards plan include many of the same AllianceBernstein Mutual Funds offered to
mutual fund investors, thereby creating a close alignment between the financial
interests of the investment professionals and those of Alliance's clients and
mutual fund shareholders with respect to the performance of those mutual funds.
Alliance also permits deferred award recipients to allocate up to 50% of their
award to investments in Alliance's publicly traded equity securities.(1)
(iv) Contributions under Alliance's Profit Sharing/401(k) Plan:
The contributions are based on Alliance's overall profitability. The amount
and allocation of the contributions are determined at the sole discretion of
Alliance.
(1) Prior to 2002, investment professional compensation also included
discretionary long-term incentive in the form of restricted grants of Alliance
Capital's Master Limited Partnership Units.
(a) (4) The dollar range of the Fund's equity securities owned directly
or beneficially by the Fund's portfolio managers as of the Fund's fiscal year
ended October 31, 2006 is set forth below:
DOLLAR RANGE OF EQUITY
SECURITIES IN THE FUND
------------------------
Michael Brooks None
Fred S. Cohen None
R. B. Davidson III None
Terrence T. Hults None
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
There have been no purchases of equity securities by the Fund or by affiliated
parties for the reporting period.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Fund's Board of Directors since the Fund last
provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and procedures
(as defined in Rule 30a-3 (c) under the Investment Company Act of 1940, as
amended) are effective at the reasonable assurance level based on their
evaluation of these controls and procedures as of a date within 90 days of the
filing date of this document.
(b) There were no changes in the registrant's internal controls over financial
reporting that occurred during the second fiscal quarter of the period that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
12 (a) (1) Code of Ethics that is subject to the disclosure of
Item 2 hereof
12 (b) (1) Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
12 (b) (2) Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
12 (c) Certification of Principal Executive Officer and
Principal Financial Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): ACM Municipal Securities Income Fund, Inc.
By: /s/ Marc O. Mayer
---------------------
Marc O. Mayer
President
Date: December 29, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Marc O. Mayer
---------------------
Marc O. Mayer
President
Date: December 29, 2006
By: /s/ Joseph J. Mantineo
---------------------
Joseph J. Mantineo
Treasurer and Chief Financial Officer
Date: December 29, 2006