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: 811-10575
ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Joseph J. Mantineo
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant’s telephone number, including area code: (800) 221-5672
Date of fiscal year end: October 31, 2013
Date of reporting period: October 31, 2013
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL REPORT
Alliance California Municipal
Income Fund
(NYSE: AKP)
Annual Report
Investment Products Offered
|
•Are Not FDIC Insured •May Lose Value •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 website at www.alliancebernstein.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AllianceBernstein 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 website 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 publishes full portfolio holdings for the Fund monthly at www.alliancebernstein.com.
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AllianceBernstein family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the manager of the funds.
AllianceBernstein® and the AB Logo are registered trademarks and service marks used by permission of the owner, AllianceBernstein L.P.
December 17, 2013
Annual Report
This report provides management’s discussion of fund performance for Alliance California Municipal Income Fund (the “Fund”) for the annual reporting period ended October 31, 2013. The Fund is a closed-end fund and its shares are listed and traded on the New York Stock Exchange.
Investment Objectives and Policies
This closed-end fund seeks to provide high current income exempt from regular federal and California state income tax by investing substantially all of its net assets in municipal securities that are exempt from state taxes. The Fund will normally invest at least 80%, and normally substantially all, of its net assets in municipal securities paying interest that is exempt from regular federal and California state income tax. In addition, the Fund normally invests at least 75% of its net assets in investment-grade municipal securities or unrated municipal securities considered by AllianceBernstein L.P. (the “Adviser”) to be of comparable quality as determined by the Adviser. The Fund may invest up to 25% of its net assets in municipal securities rated below investment-grade and unrated municipal securities considered to be of comparable quality. The Fund intends to invest primarily in municipal securities that pay interest that is not subject to the federal Alternative Minimum Tax (“AMT”), but may invest without limit in municipal securities paying interest that is subject to the federal AMT. For more information regarding the Fund’s risks, please see “Disclosures and Risks” on pages 5-6 and “Note G—Risks Involved in Investing in the Fund” of the Notes to Financial Statements on pages 28-30.
Investment Results
The table on page 7 provides performance data for the Fund and its benchmark, the Barclays Municipal Bond Index, for the six and 12-month periods ended October 31, 2013.
The Fund underperformed its benchmark for both periods. During both periods, an underweight in long-maturity bonds benefited performance, as did an underweight in health care. An overweight in special tax bonds detracted. Security selection in the education and water sectors contributed to returns, while security selection in the transportation and state general obligation sectors detracted.
Leverage was beneficial to the Fund’s income since the cost of leverage remained significantly below the average earnings on the Fund’s investments for the period. However, leverage, achieved through the usage of both auction rate preferred stock and tender option bonds (“TOBs”), detracted from the Fund’s total return for both the six- and 12-month periods, as it increased the Fund’s overall interest rate sensitivity, and longer-term interest rates generally rose. The Fund also used interest rate swaps for hedging purposes, which had an immaterial impact on performance for the six- and 12-month periods.
Market Review and Investment Strategy
Most of the volatility in the municipal market took place at the end of the second quarter and throughout the third quarter. When the U.S. Federal Reserve (the “Fed”) announced in mid-May that it had plans to gradually
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| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 1 | |
reduce its monthly purchases of $85 billion of Treasuries and mortgage securities, investors began to pull money from municipal bond funds, causing a sharp increase in bond yields and a drop in prices. As the third quarter began, long-maturity bond yields continued their sharp upward climb. In early September, yields reversed course and started to fall in response to weaker-than-expected economic data. Then, two closely-spaced announcements in mid-September accelerated the drop in yields; former U.S. Treasury secretary Lawrence Summers announcing he was no longer a candidate to replace Fed Chairman Ben Bernanke, which seemed to calm investor fears that Summers would abandon Bernanke’s approach; and the Fed’s surprising announcement that it was delaying its expected reduction in the amount of its monthly purchases. By the end of the third quarter, 10-year AAA municipal yields had fallen by about 0.50% from their peak in early September, and 5-year AAA municipal yields dropped by 0.25%. From the end of the third quarter to October 31, 2013 yields were relatively unchanged to down slightly.
The State of California’s fiscal situation continues to strengthen with a steady overall economy and a strong recovery in tax revenues. The state, which faced a $26 billion deficit in January of 2010, has since restrained spending and passed a series of tax increases which together has balanced the state’s budget. As a result, two of the three major ratings agencies have upgraded the state this year. In the next year, steady revenue collections, which are historically volatile in California due to its highly progressive income tax, will be a key factor
to continued credit improvement. Ongoing fiscal discipline in the budgetary process will also be important. While there has been progress on pension reform, the Municipal Bond Investment Team (the “Team”) is monitoring the debate over the underfunded teacher’s retirement system. California has a history of strained finances, weak governance, and more headline risk than most states, yet the state’s general obligation bonds are constitutionally protected and debt service is paid second only after education.
Recently, one of the most discussed credit issues in the municipal market has been Puerto Rico. Puerto Rico bonds lost significant value in the third quarter, as their yields rose sharply relative to comparable maturity AAA bonds. While the Commonwealth has taken substantial steps to improve its finances over the past 12 months, there continue to be major concerns about Puerto Rico’s weak economy and large debt load. Positions in bonds directly tied to Puerto Rico’s economy represent less than 5% of the Fund’s holdings as of October 31, 2013.
The Fund remained neutral with respect to interest rate risk as the difference between short- and long-term yields was still near all-time highs at the end of the reporting period. Shortening the Fund’s duration generally would require buying shorter-maturity bonds and this would significantly reduce the yield of the Fund. The Team believes that lengthening the Fund’s duration beyond a neutral level would result in too much interest rate risk with interest rates still low by historical standards.
With respect to maturity selection, the Team has been attempting to take
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| 2 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
advantage of “roll”– the expected price appreciation of a bond as it moves closer to maturity each year. The return potential from roll is greater in bonds maturing in the 10-15 year maturity range than in bonds with maturities beyond 20 years. As a result, the combination of roll plus yield for bonds maturing in 10-15 years offers a similar expected return to longer bonds. In addition, bonds in the shorter range have less risk of price declines should interest rates rise. Underweighting these longer-maturity bonds benefited performance over the past six to 12 months, and remains a theme in the Fund.
The Fund may purchase municipal securities that are insured under policies issued by certain insurance companies. Historically, insured municipal securities typically received a higher credit rating, which meant that the issuer of the securities paid a lower interest rate. As a result of declines in the credit quality and associated downgrades of most municipal bond insurers, insurance has less value than it did in the past. The market now values insured municipal securities primarily based on the credit quality of the issuer of the security with little value given to the insurance feature. In purchasing such insured securities, the Adviser evaluates the risk and return of municipal securities through its own research. The ratings of most insurance companies have been downgraded and it is possible that an insurance company may become insolvent. If an insurance company’s rating is downgraded or the company becomes insolvent, the prices of municipal securities insured by the insurance company may decline. As of October 31, 2013, 26.93% of the Fund’s
total municipal bond investments were in insured bonds (of this amount, 0% represents the Fund’s holdings in pre-refunded/escrowed to maturity bonds). The Team believes that downgrades of insurance company ratings or insurance company insolvencies present limited risk to the Fund.
Since February 2008, auctions of the Fund’s Preferred Shares have had fewer buyers than sellers and, as a result, the auctions have “failed”. The failed auctions did not lower the credit quality of the Preferred Shares, but rather meant that a holder was unable to sell the Preferred Shares in the auctions, so that there was a loss of liquidity for the holders of the Preferred Shares. When an auction fails, the Preferred Shares pay interest on a formula-based maximum rate based on AA-commercial paper and short-term municipal bond rates. This interest rate has been and remains generally economical compared to the earnings of the Fund’s investments. However, to the extent that the cost of this leverage increases in the future and earnings from the Fund’s investments do not increase, to a commensurate extent, the Fund’s net investment returns may decline. The Team continues to explore other liquidity and leverage options, including TOBs, which it has used in the past; this may result in Preferred Shares being redeemed in the future. The Fund is not required to redeem any Preferred Shares, and the Team expects to continue to rely on the Preferred Shares for a portion of the Fund’s leverage exposure.
Following the financial crisis that began in 2008, major rating agencies have
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| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 3 | |
undertaken reviews of their methodologies for rating various types of instruments, including securities issued by closed-end funds. Moody’s Investor Service, Inc. (“Moody’s”) previously announced a revised methodology for rating closed-end fund securities and also announced that it had placed on review for possible downgrade the ratings of a large number of securities issued by closed-end funds, including the Preferred Shares issued by the Fund. On July 12, 2012, Moody’s downgraded the AAA rating assigned to the Fund’s Preferred Shares to AA as a result of its revised rating methodology. The preferred shares of a number of other funds were also downgraded by Moody’s. Under the formula used to determine the dividend rate for the
Fund’s Preferred Shares, the downgrade to an AA rating had no impact on the Preferred Shares’ dividend rate, although a downgrade below AA- may result in an increase in the Preferred Shares’ dividend rate (assuming all factors used to determine the dividend rate being equal), resulting in higher leveraging costs for the Fund.
The Adviser is currently reviewing the potential implications of the downgrades of the Preferred Shares by any of the other major ratings agencies, including by Standard and Poor’s Rating Services (“S&P”) which recently announced changes to their rating methodologies for closed-end fund securities, to be implemented in March 2014.
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| 4 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
DISCLOSURES AND RISKS
Alliance California Municipal Income Fund Shareholder Information
Weekly comparative net asset value (“NAV”) and market price information about the Fund is published each Saturday in Barron’s and in other newspapers in a table called “Closed End Funds”. Daily NAV and market price information, and additional information regarding the Fund, is available at www.alliancebernstein.com and www.nyse.com. For additional shareholder information regarding this Fund, please see page 47.
Benchmark Disclosure
The unmanaged Barclays Municipal Bond Index does not reflect fees and expenses associated with the active management of a fund portfolio. The Barclays Municipal Bond Index represents the performance of the long-term tax-exempt bond market consisting of investment grade bonds. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Fund. In addition, the Index does not reflect the use of leverage, whereas the Fund utilizes leverage.
A Word About Risk
Among the risks of investing in the Fund are changes in the general level of interest rates or changes in bond credit quality ratings. Changes in interest rates have a greater effect on bonds with longer maturities than on those with shorter maturities. Please note, as interest rates rise, existing bond prices fall and can cause the value of your investment in the Fund to decline. While the Fund invests principally in bonds and other fixed-income securities, in order to achieve its investment objectives, the Fund may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. At the discretion of the Fund’s Adviser, the Fund may invest up to 25% of its net assets in municipal bonds that are rated below investment grade (i.e., “junk bonds”). These securities involve greater volatility and risk than higher-quality fixed-income securities. The Fund will invest substantially all of its net assets in California Municipal Bonds and is therefore susceptible to political, economic or regulatory factors specifically affecting California municipal bond issuers.
Leverage Risk: The Fund uses financial leverage for investment purposes, which involves leverage risk. The Fund’s outstanding Auction Rate Preferred Stock results in leverage. The Fund may also use other types of financial leverage, including TOBs, either in combination with, or in lieu of, the Auction Preferred Stock. The Fund utilizes leverage to seek to enhance the yield and NAV attributable to its Common Stock. These objectives may not be achieved in all interest rate environments. Leverage creates certain risks for holders of Common Stock, including the likelihood of greater volatility of the NAV and market price of the Common Stock. If income from the securities purchased from the funds made available by leverage is not sufficient to cover the cost of leverage, the Fund’s return will be less than if leverage had not been used. As a result, the amounts available for distribution to Common Stockholders as dividends and other distributions will be reduced. During periods of rising short-term interest rates, the interest paid on the Auction Rate Preferred Stock or the floaters issued in connection with the Fund’s TOB transactions would increase. In addition, the interest paid on inverse floaters held by the Fund, whether issued in connection with the Fund’s TOB transactions or purchased in a secondary market transaction, would decrease. Under such circumstances, the Fund’s income and distributions to Common Stockholders may decline, which would adversely affect the Fund’s yield and possibly the market value of its shares.
(Disclosures, Risks and Note about Historical Performance continued on next page)
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| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 5 | |
Disclosures and Risks
DISCLOSURES AND RISKS
(continued from previous page)
Tax Risk: There is no guarantee that all of the Fund’s income will remain exempt from federal or state income taxes. From time to time, the U.S. Government and the U.S. Congress consider changes in federal tax law that could limit or eliminate the federal tax exemption for municipal bond income, which would in effect reduce the net income received by shareholders from the Fund by increasing taxes on that income. In such event, the Fund’s NAV, could also decline as yields on municipal bonds, which are typically lower than those on taxable bonds, would be expected to increase to approximately the yield of comparable bonds.
An Important Note About Historical Performance
The performance on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. All fees and expenses related to the operation of the Fund have been deducted. Performance assumes reinvestment of distributions and does not account for taxes.
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| 6 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Disclosures and Risks
HISTORICAL PERFORMANCE
| | | | | | | | | | |
| | | | | | | | | | |
THE FUND VS. ITS BENCHMARK PERIODS ENDED OCTOBER 31, 2013 (unaudited) | | Returns | | | |
| | 6 Months | | | 12 Months | | | |
| Alliance California Municipal Income Fund (NAV) | | | -6.13% | | | | -3.13% | | | |
|
| Barclays Municipal Bond Index | | | -3.44% | | | | -1.72% | | | |
|
| | | | | | | | | | |
| The Fund’s market price per share on October 31, 2013 was $12.45. The Fund’s NAV price per share on October 31, 2013 was $13.78. For additional Financial Highlights, please see page 32. |
| | | | | | | | | | |
See Disclosures, Risks and Note about Historical Performance on pages 5-6.
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| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 7 | |
Historical Performance
PORTFOLIO SUMMARY
October 31, 2013 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $117.9
| * | | All data are as of October 31, 2013. The Fund’s quality rating breakdown is expressed as a percentage of the Fund’s total investments in municipal securities and may vary over time. The Fund also enters into derivative transactions, which may be used for hedging or investments purposes (see “Portfolio of Investments” section of the report for additional details).The quality ratings are determined by using the Standard & Poor’s Ratings Services (“S&P”), Moody’s Investors Services, Inc.(“Moody’s”) and Fitch Ratings, Ltd.(“Fitch”). These ratings are a measure of the quality and safety of a bond or portfolio, based on the issuer’s financial condition. AAA is the highest (best) and D is the lowest (worst). If applicable, the pre-refunded category includes bonds which are secured by US Government Securities and therefore are deemed high-quality investment grade by the Adviser. If applicable, Not Applicable (N/A) includes non credit worthy investments; such as, equities, currency contracts, futures and options. If applicable, the Not Rated category includes bonds that are not rated by a Nationally Recognized Statistical Rating Organization. |
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| 8 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Portfolio Summary
PORTFOLIO OF INVESTMENTS
October 31, 2013
| | | | | | | | |
| | | Principal
Amount
(000) | | | U.S. $ Value | |
| |
| | | | | | | | |
MUNICIPAL OBLIGATIONS – 165.6% | | | | | | | | |
Long-Term Municipal Bonds – 165.6% | | | | | | | | |
California – 155.9% | | | | | | | | |
Assn Bay Area Govt CA Non-prof
(Bijou Woods Apts)
Series 2001A
5.30%, 12/01/31 | | $ | 2,735 | | | $ | 2,735,656 | |
Banning CA Util Auth Wtr
NPFGC-RE
Series 05
5.25%, 11/01/30 | | | 1,850 | | | | 1,970,879 | |
Bay Area Toll Auth CA
Series 2013S
5.00%, 4/01/33 | | | 5,000 | | | | 5,280,100 | |
Beaumont CA Fing Auth
AMBAC
Series 2007C
5.00%, 9/01/26 | | | 755 | | | | 734,056 | |
Bellflower CA Redev Agy MFHR
(Bellflower Terrace Apts)
Series 2002A
5.50%, 6/01/35 | | | 2,970 | | | | 2,975,316 | |
California Dept Wtr Res Pwr
Series 2010L
5.00%, 5/01/22 | | | 3,430 | | | | 4,001,026 | |
California Econ Recovery
(California Econ Rec Spl Tax)
Series 2009A
5.25%, 7/01/21 | | | 1,465 | | | | 1,749,503 | |
California Ed Fac Auth
(California Lutheran Univ)
Series 2004C
5.00%, 10/01/24 | | | 1,125 | | | | 1,129,196 | |
California Ed Fac Auth
(Pepperdine University)
5.00%, 9/01/27 | | | 1,125 | | | | 1,255,703 | |
California Ed Fac Auth
(Univ of The Pacific)
5.00%, 11/01/21 | | | 260 | | | | 276,973 | |
California GO
5.00%, 11/01/31(a) | | | 2,000 | | | | 2,136,160 | |
5.30%, 4/01/14 (Pre-refunded/ETM) | | | 1,000 | | | | 1,020,830 | |
California Hlth Fac Fin Auth
(Cottage Healthcare Sys)
NPFGC Series 2003B
5.00%, 11/01/23 | | | 2,770 | | | | 2,774,321 | |
California Poll Cntl Fin Auth
(Poseidon Resources LP)
5.00%, 7/01/37 | | | 3,450 | | | | 3,113,315 | |
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| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 9 | |
Portfolio of Investments
| | | | | | | | |
| | | Principal
Amount
(000) | | | U.S. $ Value | |
| |
| | | | | | | | |
California Pub Wks Brd
Series 2011G
5.25%, 12/01/21 (Pre-refunded/ETM) | | $ | 6,000 | | | $ | 7,396,500 | |
California Pub Wks Brd
(CA Lease Richmond Lab)
XLCA
Series 2005B
5.00%, 11/01/30 | | | 3,500 | | | | 3,611,580 | |
California Statewide CDA
(Bentley School)
Zero Coupon, 7/01/50 | | | 810 | | | | 38,402 | |
Series 2010A | | | | | | | | |
7.00%, 7/01/40 | | | 2,625 | | | | 2,808,566 | |
Coast CA CCD GO
AGM
5.00%, 8/01/23-8/21/24(b) | | | 6,000 | | | | 6,742,260 | |
Fontana CA CFD #22
(Fontana CA CFD #22 Sierra Hills South)
Series 04
5.85%, 9/01/25 | | | 2,000 | | | | 2,011,920 | |
Fullerton CA Redev Agy
RADIAN
5.00%, 4/01/21 | | | 2,050 | | | | 2,098,196 | |
Garden Grove CA USD GO
Series 2013C
5.00%, 8/01/34 | | | 3,650 | | | | 3,869,219 | |
Grossmont-Cuyamaca CCD CA GO
AGC
5.00%, 8/01/22-8/01/23(b) | | | 6,000 | | | | 6,767,592 | |
La Quinta CA Fin Auth
(La Quinta CA Local Agy Pool)
AMBAC
Series 2004A
5.25%, 9/01/24 | | | 3,000 | | | | 3,072,060 | |
Long Beach CA Bond Fin Auth
(Long Beach CA Lease Aquarium)
5.00%, 11/01/27 | | | 3,500 | | | | 3,732,365 | |
Los Angeles CA CCD GO
Series 2008F-1
5.00%, 8/01/28 | | | 4,200 | | | | 4,531,674 | |
Los Angeles CA Cmnty Redev Agy
(Los Angeles CA CRA Grand Ctrl)
AMBAC
Series 2002A
5.375%, 12/01/26 | | | 6,635 | | | | 6,638,317 | |
Los Angeles CA Dept Arpts
(Los Angeles Intl Airport)
5.00%, 5/15/26 | | | 1,500 | | | | 1,644,030 | |
Series 2009A
5.25%, 5/15/29 | | | 1,700 | | | | 1,851,895 | |
| | |
| 10 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Portfolio of Investments
| | | | | | | | |
| | | Principal
Amount
(000) | | | U.S. $ Value | |
| |
| | | | | | | | |
Series 2010A
5.00%, 5/15/27 | | $ | 1,440 | | | $ | 1,565,064 | |
Los Angeles CA Harbor Dept
Series 2009C
5.00%, 8/01/26 | | | 5,550 | | | | 6,152,563 | |
Los Angeles Cnty CA Met Trnsp Auth
(Los Angeles Cnty CA MTA Sales Tax)
5.00%, 7/01/25 | | | 6,700 | | | | 7,627,347 | |
Mt. Diablo CA USD GO
Series 2012B-2
5.00%, 7/01/27 | | | 3,500 | | | | 3,847,795 | |
Norco CA Redev Agy
(Norco CA Redev Agy Proj #1)
Series 2010
5.875%, 3/01/32 | | | 420 | | | | 443,402 | |
6.00%, 3/01/36 | | | 325 | | | | 351,579 | |
Richmond CA Cmnty Redev Agy
(Richmond CA Merged Proj Areas)
Series 2010A
5.75%, 9/01/24-9/01/25 | | | 530 | | | | 580,329 | |
6.00%, 9/01/30 | | | 370 | | | | 404,995 | |
Riverside CA CCD GO
NPFGC
Series 2007C
5.00%, 8/01/25 | | | 455 | | | | 497,902 | |
Riverside Cnty CA Trnsp Comm Sales Tax
Series 2013A
5.25%, 6/01/32 | | | 2,000 | | | | 2,195,480 | |
Sacramento CA USD GO
5.50%, 7/01/29 | | | 4,000 | | | | 4,389,320 | |
Salinas Vly CA Solid Wst
AMBAC
Series 02
5.25%, 8/01/31 | | | 3,930 | | | | 3,935,856 | |
San Diego CA Pub Fac Fin Auth
(San Diego CA Lease)
Series 2010A
5.10%, 9/01/29 | | | 2,360 | | | | 2,494,756 | |
San Diego CA USD GO
Series 2013C
5.00%, 7/01/32 | | | 5,125 | | | | 5,493,693 | |
NPFGC Series 04E-1
5.00%, 7/01/23-7/01/24 | | | 2,000 | | | | 2,078,320 | |
San Diego CA Wtr
5.00%, 5/01/31 | | | 4,300 | | | | 4,724,152 | |
San Diego Cnty CA Regl Trnsp Commn
Series 2012A
5.00%, 4/01/28 | | | 4,285 | | | | 4,802,414 | |
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 11 | |
Portfolio of Investments
| | | | | | | | |
| | | Principal
Amount
(000) | | | U.S. $ Value | |
| |
| | | | | | | | |
San Diego Cnty CA Wtr Auth
AGM
Series 2008A-COPS
5.00%, 5/01/25 | | $ | 3,140 | | | $ | 3,474,159 | |
San Francisco CA Bay Area Rapid Transit
(San Francisco City/Cnty CA Sales Tax)
Series 2012A
5.00%, 7/01/29-7/01/32 | | | 6,855 | | | | 7,449,295 | |
San Francisco City/Cnty CA Pub Util Wtr
Series 2013B
5.00%, 10/01/32 | | | 4,735 | | | | 5,086,668 | |
Southern CA Pub Pwr Auth
(Los Angeles CA Dept W&P Pwr)
5.25%, 7/01/25 | | | 4,000 | | | | 4,596,600 | |
Series 2010 PJ-1
5.00%, 7/01/27 | | | 2,525 | | | | 2,757,830 | |
Torrance CA COP
(Torrance CA COP Pub Impt)
AMBAC
Series 2004A
5.00%, 6/01/24 | | | 2,275 | | | | 2,300,435 | |
AMBAC
Series 2005B
5.00%, 6/01/24 | | | 665 | | | | 672,548 | |
Turlock CA lrr Dist
5.50%, 1/01/41 | | | 2,200 | | | | 2,300,320 | |
Univ of California
Series 2012G
5.00%, 5/15/31 | | | 8,000 | | | | 8,627,120 | |
Upper Santa Clara Vly CA Jt Pwr
Series 2011A
5.00%, 8/01/23 | | | 3,385 | | | | 3,851,825 | |
Westlands CA Wtr Dist Rev
AGM
Series 2012A
5.00%, 9/01/29-9/01/34 | | | 3,000 | | | | 3,129,160 | |
| | | | | | | | |
| | | | | | | 183,798,537 | |
| | | | | | | | |
Guam – 1.6% | | | | | | | | |
Guam Power Auth
Series 2012A
5.00%, 10/01/34 | | | 2,000 | | | | 1,946,800 | |
| | | | | | | | |
| | |
Nevada – 1.8% | | | | | | | | |
Henderson NV LID # T-14 AGM
Series 2007A
5.00%, 3/01/18 | | | 1,960 | | | | 2,091,712 | |
| | | | | | | | |
| | |
| 12 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Portfolio of Investments
| | | | | | | | |
| | | Principal
Amount
(000) | | | U.S. $ Value | |
| |
| | | | | | | | |
| | |
Ohio – 0.3% | | | | | | | | |
Columbiana Cnty Port Auth OH
(Apex Environmental LLC)
Series 2004A
7.125%, 8/01/25(c) | | $ | 500 | | | $ | 368,210 | |
| | | | | | | | |
| | |
Puerto Rico – 6.0% | | | | | | | | |
Puerto Rico GO | | | | | | | | |
Series 2001A
5.50%, 7/01/19 | | | 500 | | | | 417,615 | |
Series 2004A
5.25%, 7/01/19 | | | 900 | | | | 745,470 | |
Series 2006A
5.25%, 7/01/22 | | | 500 | | | | 389,350 | |
Puerto Rico Govt Dev Bank
Series 2006B
5.00%, 12/01/15 | | | 500 | | | | 489,325 | |
Puerto Rico Pub Bldgs Auth
(Puerto Rico GO)
Series 2007N
5.50%, 7/01/22 | | | 700 | | | | 548,331 | |
Puerto Rico Sales Tax Fin Corp.
Series 2011A
5.00%, 8/01/43 | | | 6,000 | | | | 4,518,600 | |
| | | | | | | | |
| | | | | | | 7,108,691 | |
| | | | | | | | |
| | |
Total Municipal Obligations
(cost $192,777,431) | | | | | | | 195,313,950 | |
| | | | | | | | |
| | |
| | | Shares | | | | |
SHORT-TERM INVESTMENTS – 2.9% | | | | | | | | |
Investment Companies – 2.9% | | | | | | | | |
AllianceBernstein Fixed-Income Shares, Inc. – Government STIF Portfolio, 0.08%(d)
(cost $3,395,293) | | | 3,395,293 | | | | 3,395,293 | |
| | | | | | | | |
| | |
Total Investments – 168.5%
(cost $196,172,724) | | | | | | | 198,709,243 | |
Other assets less liabilities – (7.0)% | | | | | | | (8,256,651 | ) |
Preferred Shares at liquidation value – (61.5)% | | | | | | | (72,550,000 | ) |
| | | | | | | | |
| | |
Net Assets Applicable to Common
Shareholders – 100.0%(e) | | | | | | $ | 117,902,592 | |
| | | | | | | | |
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 13 | |
Portfolio of Investments
INTEREST RATE SWAPS (see Note C)
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Rate Type | | | | |
Swap
Counterparty | | Notional
Amount
(000) | | | Termination
Date | | | Payments
made
by the
Fund | | | Payments
received
by the
Fund | | | Unrealized
Appreciation/
(Depreciation) | |
Merrill Lynch Capital Services, Inc. | | $ | 2,300 | | | | 10/21/16 | | | | SIFMA | * | | | 4.129 | % | | $ | 278,178 | |
| * | | Variable interest rate based on the Securities Industry & Financial Markets Association (SIFMA) Municipal Swap Index. |
| (a) | | When-Issued or delayed delivery security. |
| (b) | | Security represents the underlying municipal obligation of an inverse floating rate obligation held by the Fund (see Note H). |
| (d) | | Investment in affiliated money market mutual fund. The rate shown represents the 7-day yield as of period end. |
| (e) | | Portfolio percentages are calculated based on net assets applicable to common shareholders. |
As of October 31, 2013, the Fund held 44.6% of net assets in insured bonds (of this amount 0.0% represents the Fund’s holding in pre-refunded or escrowed to maturity bonds).
Glossary:
AGC – Assured Guaranty Corporation
AGM – Assured Guaranty Municipal
AMBAC – Ambac Assurance Corporation
CCD – Community College District
CDA – Community Development Authority
CFD – Community Facilities District
COP – Certificate of Participation
CRA – Community Redevelopment Agency
ETM – Escrowed to Maturity
GO – General Obligation
LID – Local Improvement District
MFHR – Multi-Family Housing Revenue
MTA – Metropolitan Transportation Authority
NPFGC – National Public Finance Guarantee Corporation
NPFGC-RE – National Public Finance Guarantee Corporation Reinsuring Financial Guaranty Insurance Company
RADIAN – Radian Asset Assurance Inc.
USD – Unified School District
XLCA – XL Capital Assurance Inc.
See notes to financial statements.
| | |
| 14 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Portfolio of Investments
STATEMENT OF ASSETS & LIABILITIES
October 31, 2013
| | | | |
| Assets | | | | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $192,777,431) | | $ | 195,313,950 | |
Affiliated issuers (cost $3,395,293) | | | 3,395,293 | |
Receivable for investment securities sold | | | 4,412,977 | |
Dividends and interest receivable | | | 2,938,938 | |
Unrealized appreciation on interest rate swaps | | | 278,178 | |
| | | | |
Total assets | | | 206,339,336 | |
| | | | |
| Liabilities | | | | |
Payable for floating rate notes issued* | | | 8,450,000 | |
Payable for investment securities purchased | | | 7,207,322 | |
Advisory fee payable | | | 104,187 | |
Dividends payable—preferred shares | | | 819 | |
Accrued expenses | | | 124,416 | |
| | | | |
Total liabilities | | | 15,886,744 | |
| | | | |
| Preferred Shares, at Liquidation Value | | | | |
Preferred shares, $.001 par value per share; 3,240 shares authorized, 2,902 shares issued and outstanding at $25,000 per share liquidation preference | | | 72,550,000 | |
| | | | |
Net Assets Applicable to Common Shareholders | | $ | 117,902,592 | |
| | | | |
| Composition of Net Assets Applicable to Common Shareholders | | | | |
Common stock, $.001 par value per share; 1,999,996,760 shares authorized, 8,554,668 shares issued and outstanding | | $ | 8,555 | |
Additional paid-in capital | | | 119,931,948 | |
Distributions in excess of net investment income | | | (26,982 | ) |
Accumulated net realized loss on investment transactions | | | (4,825,626 | ) |
Net unrealized appreciation on investments | | | 2,814,697 | |
| | | | |
Net Assets Applicable to Common Shareholders | | $ | 117,902,592 | |
| | | | |
Net Asset Value Applicable to Common Shareholders
(based on 8,554,668 common shares outstanding) | | $ | 13.78 | |
| | | | |
| * | | Represents short-term floating rate certificates issued by tender option bond trusts (see Note H). |
See notes to financial statements.
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 15 | |
Statement of Assets & Liabilities
STATEMENT OF OPERATIONS
Year Ended October 31, 2013
| | | | | | | | |
| Investment Income | | | | | | | | |
Interest | | $ | 8,126,972 | | | | | |
Dividends—Affiliated issuers | | | 1,432 | | | $ | 8,128,404 | |
| | | | | | | | |
| Expenses | | | | | | | | |
Advisory fee (see Note B) | | | 1,276,893 | | | | | |
Preferred Shares-auction agent’s fees | | | 45,348 | | | | | |
Custodian | | | 89,430 | | | | | |
Directors’ fees | | | 63,601 | | | | | |
Audit | | | 54,171 | | | | | |
Legal | | | 49,068 | | | | | |
Printing | | | 30,705 | | | | | |
Registration fees | | | 23,829 | | | | | |
Transfer agency | | | 7,335 | | | | | |
Miscellaneous | | | 52,959 | | | | | |
| | | | | | | | |
Total expenses before interest expense and fees | | | 1,693,339 | | | | | |
Interest expense and fees | | | 75,939 | | | | | |
| | | | | | | | |
Total expenses | | | | | | | 1,769,278 | |
| | | | | | | | |
Net investment income | | | | | | | 6,359,126 | |
| | | | | | | | |
| Realized and Unrealized Gain (Loss) on Investment Transactions | | | | | | | | |
Net realized gain (loss) on: | | | | | | | | |
Investment transactions | | | | | | | (2,514,909 | ) |
Swaps | | | | | | | 68,955 | |
Net change in unrealized appreciation/depreciation of: | | | | | | | | |
Investments | | | | | | | (8,034,367 | ) |
Swaps | | | | | | | (56,220 | ) |
| | | | | | | | |
Net loss on investment transactions | | | | | | | (10,536,541 | ) |
| | | | | | | | |
Dividends to Preferred Shareholders from | | | | | | | | |
Net investment income | | | | | | | (134,220 | ) |
| | | | | | | | |
Net Decrease in Net Assets Applicable to Common Shareholders Resulting from Operations | | | | | | $ | (4,311,635 | ) |
| | | | | | | | |
See notes to financial statements.
| | |
| 16 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Statement of Operations
STATEMENT OF CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS
| | | | | | | | |
| | | Year Ended
October 31,
2013 | | | Year Ended
October 31,
2012 | |
| Increase (Decrease) in Net Assets Applicable to Common Shareholders Resulting from Operations | | | | | | | | |
Net investment income | | $ | 6,359,126 | | | $ | 7,249,990 | |
Net realized gain (loss) on investment transactions | | | (2,445,954 | ) | | | 834,887 | |
Net change in unrealized appreciation/depreciation of investments | | | (8,090,587 | ) | | | 8,439,989 | |
| Dividends to Preferred Shareholders from | | | | | | | | |
Net investment income | | | (134,220 | ) | | | (184,485 | ) |
| | | | | | | | |
Net increase (decrease) in net assets applicable to common shareholders resulting from operations | | | (4,311,635 | ) | | | 16,340,381 | |
| Dividends and Distributions to Common Shareholders from | | | | | | | | |
Net investment income | | | (6,318,352 | ) | | | (7,810,705 | ) |
Return of capital | | | (233,192 | ) | | | – 0 | – |
| | | | | | | | |
Total dividends and distributions to common shareholders | | | (6,551,544 | ) | | | (7,810,705 | ) |
| | | | | | | | |
| Common Stock Transactions | | | | | | | | |
Reinvestment of dividends resulting in the issuance of common stock | | | 53,066 | | | | 217,840 | |
| | | | | | | | |
Total increase (decrease) | | | (10,810,113 | ) | | | 8,747,516 | |
| Net Assets Applicable to Common Shareholders | | | | | | | | |
Beginning of period | | | 128,712,705 | | | | 119,965,189 | |
| | | | | | | | |
End of period (including distributions in excess of net investment income of ($26,982) and ($2,491), respectively) | | $ | 117,902,592 | | | $ | 128,712,705 | |
| | | | | | | | |
See notes to financial statements.
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 17 | |
Statement of Changes in Net Assets
NOTES TO FINANCIAL STATEMENTS
October 31, 2013
NOTE A
Significant Accounting Policies
Alliance California Municipal Income Fund, Inc. (the “Fund”) was incorporated in the State of Maryland on November 9, 2001 and is registered under the Investment Company Act of 1940 as a diversified, closed-end management investment company. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The 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 (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g. last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. government securities and 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, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently
| | |
| 18 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Notes to Financial Statements
obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Investment companies are valued at their net asset value each day.
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. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| | • | | Level 1—quoted prices in active markets for identical investments |
| | • | | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| | • | | Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates, yield curves, option adjusted
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 19 | |
Notes to Financial Statements
spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows which are then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3. In addition, non-agency rated investments are classified as Level 3.
Other fixed income investments, including non-U.S. government and corporate debt, are generally valued using quoted market prices, if available, which are typically impacted by current interest rates, maturity dates and any perceived credit risk of the issuer. Additionally, in the absence of quoted market prices, these inputs are used by pricing vendors to derive a valuation based upon industry or proprietary models which incorporate issuer specific data with relevant yield/spread comparisons with more widely quoted bonds with similar key characteristics. Those investments for which there are observable inputs are classified as Level 2. Where the inputs are not observable, the investments are classified as Level 3.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2013:
| | | | | | | | | | | | | | | | |
Investments in Securities: | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Assets: | | | | | | | | | | | | | | | | |
Long-Term Municipal Bonds | | $ | – 0 | – | | $ | 189,352,796 | | | $ | 5,961,154 | | | $ | 195,313,950 | |
Short-Term Investments | | | 3,395,293 | | | | – 0 | – | | | – 0 | – | | | 3,395,293 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 3,395,293 | | | | 189,352,796 | | | | 5,961,154 | | | | 198,709,243 | |
Other Financial
Instruments* : | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Interest Rate Swaps | | | – 0 | – | | | 278,178 | | | | – 0 | – | | | 278,178 | |
Liabilities | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | | | | | | | | | | | | | |
Total^ | | $ | 3,395,293 | | | $ | 189,630,974 | | | $ | 5,961,154 | | | $ | 198,987,421 | |
| | | | | | | | | | | | | | | | |
| * | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument. |
| ^ | | There were no transfers between Level 1 and Level 2 during the reporting period. |
The Fund recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value.
| | |
| 20 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Notes to Financial Statements
| | | | | | | | | | | | |
| | | Long-Term
Municipal
Bonds | | | Interest Rate Swaps | | | Total | |
Balance as of 10/31/12 | | $ | 6,421,651 | | | $ | 334,398 | | | $ | 6,756,049 | |
Accrued discounts/(premiums) | | | 106,304 | | | | – 0 | – | | | 106,304 | |
Realized gain (loss) | | | (490,003 | ) | | | – 0 | – | | | (490,003 | ) |
Change in unrealized appreciation/depreciation | | | 190,683 | | | | – 0 | – | | | 190,683 | |
Purchases | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Sales | | | (267,481 | ) | | | – 0 | – | | | (267,481 | ) |
Transfers in to Level 3 | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Transfers out of Level 3 | | | – 0 | – | | | (334,398 | ) | | | (334,398 | ) |
| | | | | | | | | | | | |
Balance as of 10/31/13+ | | $ | 5,961,154 | | | $ | – 0 | – | | $ | 5,961,154 | |
| | | | | | | | | | | | |
Net change in unrealized appreciation/depreciation from Investments held as of 10/31/13* | | $ | 190,683 | | | $ | – 0 | – | | $ | 190,683 | |
| | | | | | | | | | | | |
| * | | The unrealized appreciation/depreciation is included in net change in unrealized appreciation/depreciation of investments in the accompanying statement of operations. |
| + | | There were de minimis transfers under 1% of net assets during the reporting period. |
The following presents information about significant unobservable inputs related to the Fund with material categories of Level 3 investments at October 31, 2013:
| | | | | | | | | | | | |
Quantitative Information about Level 3 Fair Value Measurements | |
| | | Fair Value at
10/31/13 | | | Valuation
Technique | | Unobservable
Input | | Range/
Weighted Average | |
Long-Term
Municipal
Bonds | | $ | 5,961,154 | | | Third Party Vendor | | Evaluated Quotes | | $
$ | 4.74 - $ 106.99/
100.91 |
|
The Adviser has established a Valuation Committee (the “Committee”) which is responsible for overseeing the pricing and valuation of all securities held in the Fund. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and a
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 21 | |
Notes to Financial Statements
third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).
3. Taxes
It is the Fund’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Fund’s financial statements.
4. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes original issue discounts and market discounts as adjustments to interest income.
5. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.
| | |
| 22 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Notes to Financial Statements
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of an investment advisory agreement, the Fund pays the Adviser an advisory fee at an annual rate of 0.65 of 1% of the Fund’s average daily net assets applicable to common and preferred shareholders. Such fee is accrued daily and paid monthly. The Adviser had voluntarily agreed to waive a portion of its fees or reimburse the Fund for expenses in the amount of 0.30% of the Fund’s average daily net assets applicable to common and preferred shareholders for the first 5 full years of the Fund’s operations, 0.25% of the Fund’s average daily net assets applicable to common and preferred shareholders in year 6, 0.20% in year 7, 0.15% in year 8, 0.10% in year 9, and 0.05% in year 10. The voluntary waiver ended on January 29, 2012. The Fund commenced operations on January 29, 2002.
Under the terms of the Shareholder Inquiry Agency Agreement with AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, the Fund reimburses ABIS for costs relating to servicing phone inquiries on behalf of the Fund. During the year ended October 31, 2013, there was no reimbursement paid to ABIS.
The Fund may invest in the AllianceBernstein Fixed-Income Shares, Inc. – Government STIF Portfolio (“Government STIF Portfolio”), an open-end management investment company managed by the Adviser. The Government STIF Portfolio is offered as a cash management option to mutual funds and other institutional accounts of the Adviser, and is not available for direct purchase by members of the public. The Government STIF Portfolio pays no investment management fees but does bear its own expenses. A summary of the Fund’s transactions in shares of the Government STIF Portfolio for the year ended October 31, 2013 is as follows:
| | | | | | | | | | | | | | | | |
Market Value October 31, 2012 (000) | | Purchases
at Cost
(000) | | | Sales
Proceeds
(000) | | | Market Value
October 31, 2013
(000) | | | Dividend
Income
(000) | |
| $ – 0 – | | $ | 27,087 | | | $ | 23,692 | | | $ | 3,395 | | | $ | 1 | |
NOTE C
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended October 31, 2013 were as follows:
| | | | | | | | |
| | | Purchases | | | Sales | |
Investment securities (excluding
U.S. government securities) | | $ | 48,098,977 | | | $ | 57,466,028 | |
U.S. government securities | | | – 0 | – | | | – 0 | – |
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 23 | |
Notes to Financial Statements
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding swap transactions) are as follows:
| | | | |
Cost | | $ | 187,743,370 | |
| | | | |
Gross unrealized appreciation | | $ | 7,048,858 | |
Gross unrealized depreciation | | | (4,571,771 | ) |
| | | | |
Net unrealized appreciation | | $ | 2,477,087 | |
| | | | |
1. Derivative Financial Instruments
The Fund may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The principal type of derivatives utilized by the Fund, as well as the methods in which they may be used are:
The Fund may enter into swaps to hedge its exposure to interest rates or credit risk. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. In addition, collateral may be pledged or received by the Fund in accordance with the terms of the respective swaps to provide value and recourse to the Fund or its counterparties in the event of default, bankruptcy or insolvency by one of the parties to the swap.
Risks may arise as a result of the failure of the counterparty to the swap to comply with the terms of the swap. The loss incurred by the failure of a counterparty is generally limited to the net interim payment to be received by the Fund, and/or the termination value at the end of the contract. Therefore, the Fund considers the creditworthiness of each counterparty to a swap in evaluating potential counterparty risk. This risk is mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Fund accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or received are recognized as cost or proceeds on the statement of assets and liabilities and are amortized
| | |
| 24 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Notes to Financial Statements
on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the statement of operations.
Interest Rate Swaps:
The Fund is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Fund holds fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Fund may enter into interest rate swaps. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional amount. The Fund may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional amount.
In addition, a Fund may also enter into interest rate swap transactions to preserve a return or spread on a particular investment or portion of its portfolio, or protecting against an increase in the price of securities the Fund anticipates purchasing at a later date. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments) computed based on a contractually-based principal (or “notional”) amount. Interest rate swaps are entered into on a net basis (i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments).
During the year ended October 31, 2013, the Fund held interest rate swaps for hedging purposes.
Documentation governing the Fund’s OTC derivatives may contain provisions for early termination of such transaction in the event the net assets of the Fund decline below specific levels set forth in the documentation (“net asset contingent features”). If these levels are triggered, the Fund’s counterparty has the right to terminate such transaction and require the Fund to pay or receive a settlement amount in connection with the terminated transaction. As of October 31, 2013, the Fund had no OTC derivatives with contingent features in net liability positions.
At October 31, 2013, the Fund had entered into the following derivatives:
| | | | | | | | | | |
| | | Asset Derivatives | | | Liability Derivatives |
Derivative Type | | Statement of
Assets and
Liabilities
Location | | Fair Value | | | Statement of
Assets and
Liabilities
Location | | Fair Value |
Interest rate contracts | | Unrealized appreciation on interest rate swaps | | $ | 278,178 | | | | | |
| | | | | | | | | | |
Total | | | | $ | 278,178 | | | | | |
| | | | | | | | | | |
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 25 | |
Notes to Financial Statements
The effect of derivative instruments on the statement of operations for the year ended October 31, 2013:
| | | | | | | | | | |
Derivative Type | | Location of Gain
or (Loss) on
Derivatives | | Realized Gain
or (Loss) on
Derivatives | | | Change in
Unrealized
Appreciation or
(Depreciation) | |
Interest rate contracts | | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | | $ | 68,955 | | | $ | (56,220 | ) |
| | | | | | | | | | |
Total | | | | $ | 68,955 | | | $ | (56,220 | ) |
| | | | | | | | | | |
The following table represents the volume of the Fund’s derivative transactions during the year ended October 30, 2013:
| | | | |
Interest Rate Swaps: | | | | |
Average notional amount | | $ | 2,300,000 | |
NOTE D
Common Stock
There are 8,554,668 shares of common stock outstanding at October 31, 2013. During the year ended October 31, 2013, the Fund issued 3,470 shares in connection with the Fund’s dividend reinvestment plan. During the year ended October 31, 2012, the Fund issued 14,665 shares in connection with the Fund’s dividend reinvestment plan.
NOTE E
Preferred Shares
The Fund has 3,240 shares authorized, and 2,902 shares issued and outstanding of auction preferred stock (the “Preferred Shares”), consisting of 1,451 shares each of series M and series T. The Preferred Shares have a liquidation value of $25,000 per share plus accumulated, unpaid dividends. The dividend rate on the Preferred Shares may change every 7 days as set by the auction agent for series M and T. Due to the recent failed auctions, the dividend rate is the “maximum rate” set by the terms of the Preferred Shares, which is based on AA commercial paper rates and short-term municipal bond rates. The dividend rate on series M is 0.16% effective through November 4, 2013. The dividend rate on series T is 0.16% effective through November 5, 2013.
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. The Fund voluntarily may redeem the Preferred Shares in certain circumstances.
The Fund is not required to redeem any of its Preferred Shares and expects to continue to rely on the Preferred Shares for a portion of its leverage exposure. The Fund may also pursue other liquidity solutions for the Preferred Shares.
| | |
| 26 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Notes to Financial Statements
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 F
Distributions to Common Shareholders
The tax character of distributions paid during the fiscal years ended October 31, 2013 and October 31, 2012 were as follows:
| | | | | | | | |
| | | 2013 | | | 2012 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 122,370 | | | $ | 165,646 | |
Tax-exempt income | | | 6,195,982 | | | | 7,645,059 | |
| | | | | | | | |
Total distributions paid | | | 6,318,352 | | | | 7,810,705 | |
Tax return of capital | | | 233,192 | | | | – 0 | – |
| | | | | | | | |
Total distributions paid | | $ | 6,551,544 | | | $ | 7,810,705 | |
| | | | | | | | |
As of October 31, 2013, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed tax-exempt income | | $ | – 0 | – |
Accumulated capital and other losses | | | (4,768,141 | )(a) |
Unrealized appreciation/(depreciation) | | | 2,731,049 | (b) |
| | | | |
Total accumulated earnings/(deficit) | | $ | (2,037,092 | )(c) |
| | | | |
| (a) | | On October 31, 2013, the Fund had a net capital loss carryforward of $4,768,141. |
| (b) | | The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax treatment of tender option bonds and swaps. |
| (c) | | The difference between book-basis and tax-basis components of accumulated earnings/(deficit) is attributable primarily to dividends payable. |
For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an indefinite period. These post-enactment capital losses must be utilized prior to the pre-enactment capital losses, which are subject to expiration. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous regulation.
As of October 31, 2013, the Fund had a net capital loss carryforward of $4,768,141 which will expire as follows:
| | | | |
Short-Term
Amount | | Long-Term
Amount | | Expiration |
| $ 2,248,276 | | n/a | | 2019 |
| 1,250,962 | | $ 1,268,903 | | No expiration |
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 27 | |
Notes to Financial Statements
During the current fiscal year, permanent differences primarily due to the tax treatment of swaps and an overdistribution of dividends resulted in a net decrease in distributions in excess of net investment income, a net increase in accumulated net realized loss on investment transactions, and a net decrease in additional paid-in capital. These reclassifications had no effect on net assets.
NOTE G
Risks Involved in Investing in the Fund
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.
Municipal Market Risk and Concentration of Credit Risk—This is the risk that special factors may adversely affect the value of municipal securities and have a significant effect on the yield or value of the Fund’s investments in municipal securities. These factors include economic conditions, political or legislative changes, uncertainties related to the tax status of municipal securities, or the rights of investors in these securities. The Fund invests primarily in securities issued by the State of California and its various political subdivisions. The Fund’s investments in California municipal securities may be vulnerable to events adversely affecting California’s economy. California, largest of the 50 states, is relatively diverse, which makes it less vulnerable to events affecting a particular industry. Its economy, however, continues to be affected by serious fiscal conditions as a result of voter passed initiatives that limit the ability of state and local governments to raise revenues, particularly with respect to real property taxes. In addition, state expenditures are difficult to reduce because of constitutional provisions that require a minimum level of spending, for certain government programs, such as education. California’s economy may also be affected by natural disasters, such as earthquakes or fires. The Fund’s investments in certain municipal securities with principal and interest payments that are made from the revenues of a specific project or facility, and not general tax revenues, may have increased risks. Factors affecting the project or facility, such as local business or economic conditions, could have a significant effect on the project’s ability to make payments of principal and interest on these securities.
Derivatives Risk—The Fund may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses
| | |
| 28 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Notes to Financial Statements
for the Fund, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected in the statement of assets and liabilities.
Financing and Related Transactions; Leverage and Other Risks—The Fund utilizes leverage to seek to enhance the yield and net asset value attributable to its common stock. These objectives may not be achieved in all interest rate environments. Leverage creates certain risks for holders of common stock, including the likelihood of greater volatility of the net asset value and market price of the common stock. If income from the securities purchased from the funds made available by leverage is not sufficient to cover the cost of leverage, the Fund’s return will be less than if leverage had not been used. As a result, the amounts available for distribution to common stockholders as dividends and other distributions will be reduced. During periods of rising short-term interest rates, the interest paid on the Preferred Shares or floaters in tender option bond transactions would increase, which may adversely affect the Fund’s income and distribution to common stockholders. A decline in distributions would adversely affect the Fund’s yield and possibly the market value of its shares. If rising short-term rates coincide with a period of rising long-term rates, the value of the long-term municipal bonds purchased with the proceeds of leverage would decline, adversely affecting the net asset value attributable to the Fund’s common stock and possibly the market value of the shares.
The Fund’s outstanding Preferred Shares results in leverage. The Fund may also use other types of financial leverage, including tender option bond transactions, either in combination with, or in lieu of, the Preferred Shares. In a tender option bond transaction, the Fund may transfer a highly rated fixed-rate municipal security to a broker, which, in turn, deposits the bond into a special purpose vehicle (typically, a trust) usually sponsored by the broker. The Fund receives cash and a residual interest security (sometimes referred to as an “inverse floater”) issued by the trust in return. The trust simultaneously issues securities, which pay an interest rate that is reset each week based on an index of high-grade short-term seven-day demand notes. These securities, sometimes referred to as “floaters”, are bought by third parties, including tax-exempt money market funds, and can be tendered by these holders to a liquidity provider at par, unless certain events occur. The Fund continues to earn all the interest from the transferred bond less the amount of interest paid on the floaters and the expenses of the trust, which include payments to the trustee and the liquidity provider and organizational costs. The Fund also uses the cash received from the transaction for investment purposes or to retire other forms of leverage. Under certain circumstances, the trust may be terminated and collapsed, either by the Fund or upon the occurrence of certain events, such as a downgrade in the credit quality of the underlying bond, or in the event holders of the floaters tender their securities to the liquidity provider. See Note H to the financial statements for more information about tender option bond transactions.
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 29 | |
Notes to Financial Statements
The Fund may also purchase inverse floaters from a tender option bond trust in a secondary market transaction without first owning the underlying bond. The income received from an inverse floater varies inversely with the short-term interest rate paid on the floaters issued by the trust. The prices of inverse floaters are subject to greater volatility than the prices of fixed-income securities that are not inverse floaters. Investments in inverse floaters may amplify the risks of leverage. If short-term interest rates rise, the interest payable on the floaters would increase and income from the inverse floaters decrease, resulting in decreased amounts of income available for distribution to common stockholders.
The use of derivative instruments by the Fund, such as forwards, futures, options and swaps, may also result in a form of leverage.
Tax Risk—There is no guarantee that all of the Fund’s income will remain exempt from federal or state income taxes. From time to time, the U.S. Government and the U.S. Congress consider changes in federal tax law that could limit or eliminate the federal tax exemption for municipal bond income, which would in effect reduce the net income received by shareholders from the Fund by increasing taxes on that income. In such event, the Fund’s NAV could also decline as yields on municipal bonds, which are typically lower than those on taxable bonds, would be expected to increase to approximately the yield of comparable taxable bonds.
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. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.
NOTE H
Floating Rate Notes Issued in Connection with Securities Held
The Fund may engage in tender option bond transactions in which the Fund may transfer a fixed rate bond (“Fixed Rate Bond”) to a broker for cash. The broker deposits the Fixed Rate Bond into a Special Purpose Vehicle (the “SPV”, which is generally organized as a trust), organized by the broker. The Fund buys a residual interest in the assets and cash flows of the SPV, often referred to as an inverse floating rate obligation (“Inverse Floater”). The SPV also issues floating rate notes (“Floating Rate Notes”) which are sold to third parties. The Floating Rate Notes pay interest at rates that generally reset weekly and their holders have the option to tender their notes to a liquidity provider for redemption at par. The Inverse Floater held by the Fund gives the Fund the right (1) to cause the holders of the Floating Rate Notes to tender their notes at par, and (2) to have the trustee transfer the Fixed Rate Bond held by the SPV to the Fund, thereby collapsing the SPV. The SPV may also be collapsed in certain other circumstances. In accordance with U.S. GAAP requirements regarding accounting for
| | |
| 30 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Notes to Financial Statements
transfers and servicing of financial assets and extinguishments of liabilities, the Fund accounts for the transaction described above as a secured borrowing by including the Fixed Rate Bond in its portfolio of investments and the Floating Rate Notes as a liability under the caption “Payable for floating rate notes issued” in its statement of assets and liabilities. Interest expense related to the Fund’s liability with respect to Floating Rate Notes is recorded as incurred. The interest expense is also included in the Fund’s expense ratio. At October 31, 2013, the amount of the Fund’s Floating Rate Notes outstanding was $8,450,000 and the related interest rate was 0.10% to 0.12%.
The Fund may also purchase Inverse Floaters in the secondary market without first owning the underlying bond. Such an Inverse Floater is included in the Fund’s portfolio of investments but is not required to be treated as a secured borrowing and reflected in the Fund’s financial statements as a secured borrowing. For the year ended October 31, 2013, the Fund did not engage in such transactions.
NOTE I
Recent Accounting Pronouncements
In December 2011, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) related to disclosures about offsetting assets and liabilities in financial statements. The amendments in this update require an entity to disclose both gross and net information for derivatives and other financial instruments that are either offset in the statement of assets and liabilities or subject to an enforceable master netting arrangement or similar agreement. In January 2013, the FASB issued an ASU to clarify the scope of disclosures about offsetting assets and liabilities. The ASU limits the scope of the new balance sheet offsetting disclosures to derivatives, repurchase agreements and securities lending transactions. The ASU is effective during interim or annual reporting periods beginning on or after January 1, 2013. At this time, management is evaluating the implication of this ASU and its impact on the financial statements has not been determined.
NOTE J
Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 31 | |
Notes to Financial Statements
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| | | 2013 | | | 2012 | | | 2011 | | | 2010. | | | 2009 | |
| | | | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | | $ 15.05 | | | | $ 14.05 | | | | $ 14.67 | | | | $ 13.95 | | | | $ 12.58 | |
| | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | .74 | | | | .85 | (b) | | | .98 | (b) | | | 1.02 | (b) | | | 1.02 | (b) |
Net realized and unrealized gain (loss) on investment transactions | | | (1.22 | ) | | | 1.08 | | | | (.66 | ) | | | .64 | | | | 1.25 | |
Dividends to preferred shareholders from net investment income (common stock equivalent basis) | | | (.02 | ) | | | (.02 | ) | | | (.03 | ) | | | (.03 | ) | | | (.08 | ) |
| | | | |
Net increase (decrease) in net asset value from operations | | | (.50 | ) | | | 1.91 | | | | .29 | | | | 1.63 | | | | 2.19 | |
| | | | |
Less: Dividends and Distributions to Common Shareholders from | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | (.74 | ) | | | (.91 | ) | | | (.91 | ) | | | (.91 | ) | | | (.82 | ) |
Return of capital | | | (.03 | ) | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions to common shareholders | | | (.77 | ) | | | (.91 | ) | | | (.91 | ) | | | (.91 | ) | | | (.82 | ) |
| | | | |
Net asset value, end of period | | | $ 13.78 | | | | $ 15.05 | | | | $ 14.05 | | | | $ 14.67 | | | | $ 13.95 | |
| | | | |
Market value, end of period | | | $ 12.45 | | | | $ 15.70 | | | | $ 13.69 | | | | $ 14.21 | | | | $ 12.68 | |
| | | | |
Premium/(Discount), end of period | | | (9.65 | )% | | | 4.32 | % | | | (2.56 | )% | | | (3.14 | )% | | | (9.10 | )% |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on:(c) | | | | | | | | | | | | | | | | | | | | |
Market value | | | (16.10 | )% | | | 22.02 | % | | | 3.28 | % | | | 19.82 | % | | | 22.04 | % |
Net asset value | | | (3.13 | )% | | | 13.97 | % | | | 2.67 | % | | | 12.44 | % | | | 19.22 | % |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets applicable to common shareholders, end of period (000’s omitted) | | | $117,903 | | | | $128,713 | | | | $119,965 | | | | $125,231 | | | | $119,113 | |
Preferred Shares, at liquidation value ($25,000 per share)(000’s omitted) | | | $72,550 | | | | $72,550 | | | | $72,550 | | | | $72,550 | | | | $72,550 | |
Ratio to average net assets applicable to common shareholders of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers(d)(e) | | | 1.43 | % | | | 1.39 | % | | | 1.30 | % | | | 1.26 | % | | | 1.37 | % |
Expenses, before waivers(d)(e) | | | 1.43 | % | | | 1.41 | % | | | 1.40 | % | | | 1.44 | % | | | 1.64 | % |
Net investment income, before Preferred Shares dividends(d) | | | 5.13 | % | | | 5.79 | %(b) | | | 7.20 | %(b) | | | 7.18 | %(b) | | | 7.81 | %(b) |
Preferred Shares dividends | | | .11 | % | | | .15 | % | | | .20 | % | | | .24 | % | | | .59 | % |
Net investment income, net of Preferred Shares dividends | | | 5.02 | % | | | 5.64 | %(b) | | | 7.00 | %(b) | | | 6.94 | %(b) | | | 7.22 | %(b) |
Portfolio turnover rate | | | 25 | % | | | 46 | % | | | 14 | % | | | 17 | % | | | 4 | % |
Asset coverage ratio | | | 263 | % | | | 277 | % | | | 265 | % | | | 273 | % | | | 264 | % |
See footnote summary on page 33.
| | |
| 32 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Financial Highlights
| (a) | | Based on average shares outstanding. |
| (b) | | Net of fees waived by the Adviser. |
| (c) | | Total investment return is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last day of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at prices obtained under the 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 the net asset value from the beginning to the end of such periods. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in periods where there is a decrease in the discount or an increase in the premium of the market value to the net asset value from the beginning to the end of such periods. Total investment return calculated for a period of less than one year is not annualized. |
| (d) | | These expense and net investment income ratios do not reflect the effect of dividend payments to preferred shareholders. |
| (e) | | The expense ratios presented below exclude interest expense: |
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| | | 2013 | | | 2012 | | | 2011 | | | 2010 | | | 2009 | |
Net of waivers | | | 1.37 | % | | | 1.32 | % | | | 1.23 | % | | | 1.19 | % | | | 1.27 | % |
Before waivers | | | 1.37 | % | | | 1.34 | % | | | 1.34 | % | | | 1.37 | % | | | 1.54 | % |
See notes to financial statements.
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 33 | |
Financial Highlights
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Alliance California Municipal Income Fund, Inc.
We have audited the accompanying statement of assets and liabilities of Alliance California Municipal Income Fund, Inc. (the “Fund”), including the portfolio of investments, as of October 31, 2013, and the related statement of operations for the year then ended, the statements of changes in net assets applicable to common shareholders for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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, 2013 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 Alliance California Municipal Income Fund, Inc. at October 31, 2013, the results of its operations for the year then ended, the changes in its net assets applicable to common shareholders for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
December 27, 2013
| | |
| 34 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Report of Independent Registered Public Accounting Firm
2013 FEDERAL TAX INFORMATION
(unaudited)
For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Fund during the taxable year ended October 31, 2013.
The Fund designates $6,327,695 as exempt-interest dividends for the year ended October 31, 2013.
Shareholders should not use the above information to prepare their income tax returns. The information necessary to complete your income tax returns will be included with your Form 1099-DIV which will be sent to you separately in January 2014.
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 35 | |
2013 Federal Tax Information
ADDITIONAL INFORMATION
(unaudited)
Shareholders whose shares are registered in their own names can elect to participate in the Dividend Reinvestment Plan (the “Plan”), pursuant to which dividends and capital gain distributions to shareholders will be paid in or reinvested in additional shares of the Fund (the “Dividend Shares”). Computershare Trust Company 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, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent in shares of Common Stock of the Fund valued as follows:
| | (i) | If the shares of Common Stock are trading at net asset value or at a premium above net asset value at the time of valuation, the Fund will issue new shares at the greater of net asset value or 95% of the then current market price. |
| | (ii) | If the shares of Common Stock are trading at a discount from net asset value at the time of valuation, the Agent will receive the dividend or distribution in cash and apply it to the purchase of the 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 Agent has completed its purchases, the market price exceeds the net asset value of a share of Common Stock, the average purchase price per share paid by the Agent may exceed the net asset value of the 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.
| | |
| 36 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Additional Information
The automatic reinvestment of dividends and distributions will not relieve participants of any income taxes that may be payable (or required to be withheld) on dividends and distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund reserves the right to amend or terminate the Plan as applied to any dividend or distribution paid subsequent to written notice of the change sent to participants in the Plan at least 90 days before the record date for such dividend or distribution. The Plan may also be amended or terminated by the Agent on at least 90 days’ written notice to participants in the Plan. All correspondence concerning the Plan should be directed to the Agent at Computershare Trust Company N.A., P.O. Box 43010, Providence, RI 02940-3010.
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 37 | |
Additional Information
BOARD OF DIRECTORS
| | |
William H. Foulk, Jr.,(1) Chairman John H. Dobkin(1) Michael J. Downey(1) D. James Guzy(1) Nancy P. Jacklin(1) | | Robert M. Keith, President and Chief Executive Officer Garry L. Moody(1) Marshall C. Turner, Jr.(1) Earl D. Weiner(1) |
OFFICERS
| | |
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer Robert “Guy” B. Davidson III,(2)
Senior Vice President Douglas J. Peebles, 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 Phyllis J. Clarke, Controller |
| | |
Custodian and Accounting Agent State Street Bank and Trust Company One Lincoln Street Boston, MA 02111 Legal Counsel Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 Preferred Shares: Dividend Paying Agent, Transfer Agent and Registrar The Bank of New York
101 Barclay Street – 7W
New York, NY 10286 | | Independent Registered Public
Accounting Firm Ernst & Young LLP 5 Times Square New York, NY 10036 Common Stock: Dividend Paying Agent, Transfer Agent and Registrar Computershare Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-3010 |
| (1) | | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. Mr. Foulk is the sole member of the Fair Value Pricing 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 “Guy” B. Davidson III and Terrance T. Hults. |
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may purchase at market prices from time-to-time shares of its Common Stock in the open market.
This report, including the financial statements therein, is transmitted to the shareholders of Alliance California Municipal Income Fund for their information. This is not a prospectus, circular or representation intended for use in the purchase of shares of the Fund or any securities mentioned in the report.
Annual Certifications — As required, on May 13, 2013, the Fund submitted to the New York Stock 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 period.
| | |
| 38 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Board of Directors
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
| | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
AND OTHER RELEVANT
QUALIFICATIONS*** | | PORTFOLIOS IN FUND
COMPLEX OVERSEEN BY
DIRECTOR | | OTHER
DIRECTORSHIPS
HELD BY
DIRECTOR IN THE
PAST FIVE YEARS |
| INTERESTED DIRECTOR | | | | | | |
Robert M. Keith, + 1345 Avenue of the Americas New York, NY 10105 53
(2010) | | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AllianceBernstein Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | | 100 | | None |
| | | | | | |
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 39 | |
Management of the Fund
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
AND OTHER RELEVANT
QUALIFICATIONS*** | | PORTFOLIOS IN FUND
COMPLEX OVERSEEN BY
DIRECTOR | | | OTHER
DIRECTORSHIPS
HELD BY
DIRECTOR IN THE
PAST FIVE YEARS |
| DISINTERESTED DIRECTORS | | | | | | |
Chairman of the Board
William H. Foulk, Jr., #, ##
81
(2001) | | Investment Adviser and an Independent Consultant since prior to 2008. Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. He has served as a director or trustee of various AllianceBernstein Funds since 1983 and has been Chairman of the AllianceBernstein Funds and of the Independent Directors Committee of such Funds since 2003. He is also active in a number of mutual fund related organizations and committees. | | | 100 | | | None |
| | | | | | | | |
John H. Dobkin, #
71
(2001) | | Independent Consultant since prior to 2008. Formerly, President of Save Venice, Inc. (preservation organization) from 2001-2002; Senior Advisor from June 1999-June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design. He has served as a director or trustee of various AllianceBernstein Funds since 1992, and as Chairman of the Audit Committees of a number of such Funds from 2001-2008. | | | 100 | | | None |
| | | | | | | | |
| | |
| 40 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Management of the Fund
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
AND OTHER RELEVANT
QUALIFICATIONS*** | | PORTFOLIOS IN FUND
COMPLEX OVERSEEN BY
DIRECTOR | | | OTHER
DIRECTORSHIPS
HELD BY
DIRECTOR IN THE
PAST FIVE YEARS |
DISINTERESTED DIRECTORS
(continued) | | | | | | |
Michael J. Downey, #
69
(2005) | | Private Investor since prior to 2008. Formerly, managing partner of Lexington Capital, LLC (investment advisory firm) from December 1997 until December 2003. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds and member of the Executive Committee of Prudential Securities, Inc. He has served as a director or trustee of the AllianceBernstein Funds since 2005 and is a director and Chairman of one other registered investment company. | | | 100 | | | Asia Pacific Fund, Inc. since prior to 2008, Prospect Acquisition Corp. (financial services) from 2007 until 2009 and The Merger Fund since prior to 2008 until 2013 |
| | | | | | | | |
D. James Guzy, #
77
(2005) | | Chairman of the Board of PLX Technology (semi-conductors) and of SRC Computers Inc., with which he has been associated since prior to 2008. He was a director of Intel Corporation (semi-conductors) from 1969 until 2008, and served as Chairman of the Finance Committee of such company for several years until May 2008. He has served as a director or trustee of one or more of the AllianceBernstein Funds since 1982. | | | 100 | | | PLX Technology (semi-conductors) since prior to 2008, Cirrus Logic Corporation (semi-conductors) since prior to 2008 until July 2011, and Intel Corporation (semi-conductors) until 2008 |
| | | | | | | | |
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 41 | |
Management of the Fund
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
AND OTHER RELEVANT
QUALIFICATIONS*** | | PORTFOLIOS IN FUND
COMPLEX OVERSEEN BY
DIRECTOR | | | OTHER
DIRECTORSHIPS
HELD BY
DIRECTOR IN THE
PAST FIVE YEARS |
DISINTERESTED DIRECTORS
(continued) | | | | | | |
Nancy P. Jacklin, #
65
(2006) | | Professorial Lecturer at the Johns Hopkins School of Advanced International Studies since 2008. Formerly, U.S. Executive Director of the International Monetary Fund (December 2002-May 2006); Partner, Clifford Chance (1992-2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985-1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982-1985); and Attorney Advisor, U.S. Department of the Treasury (1973-1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AllianceBernstein Funds since 2006. | | | 100 | | | None |
| | | | | | | | |
| | |
| 42 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Management of the Fund
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
AND OTHER RELEVANT
QUALIFICATIONS*** | | PORTFOLIOS IN FUND
COMPLEX OVERSEEN BY
DIRECTOR | | | OTHER
DIRECTORSHIPS
HELD BY
DIRECTOR IN THE
PAST FIVE YEARS |
DISINTERESTED DIRECTORS
(continued) | | | | | | |
Garry L. Moody, #
61
(2008) | | Independent Consultant. Formerly, Partner, Deloitte & Touche LLP, (1995-2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993-1995); and Partner, Ernst & Young LLP (1975-1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of both the Governing Council of the Independent Directors Council (IDC), an organization of independent directors of mutual funds and the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He has served as a director or trustee, and as Chairman of the Audit Committee, of the AllianceBernstein Funds since 2008. | | | 100 | | | Greenbacker Renewable Energy Company LLC (renewable energy and energy efficiency projects) since August 2013 |
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 43 | |
Management of the Fund
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
AND OTHER RELEVANT
QUALIFICATIONS*** | | PORTFOLIOS IN FUND
COMPLEX OVERSEEN BY
DIRECTOR | | | OTHER
DIRECTORSHIPS
HELD BY
DIRECTOR IN THE
PAST FIVE YEARS |
DISINTERESTED DIRECTORS
(continued) | | | | | | |
Marshall C. Turner, Jr., #
72
(2005) | | Private Investor since prior to 2008. Interim CEO of MEMC Electronic Materials, Inc. (semi-conductor and solar cell substrates) since November 2008 until March 2009. He was Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing), 2003-2005, and President and CEO, 2005-2006, after the company was acquired and renamed Toppan Photomasks, Inc. He has extensive experience in venture capital investing including prior service as general partner of three institutional venture capital partnerships, and serves on the boards of a number of education and science-related non-profit organizations. He has served as a director or trustee of one or more of the AllianceBernstein Funds since 1992. | | | 100 | | | Xilinx, Inc. (programmable logic semi-conductors) and MEMC Electronic Materials, Inc. (semi-conductor and solar cell substrates) since prior to 2008 |
| | | | | | | | |
Earl D. Weiner, #
74
(2007) | | Of Counsel, and Partner prior to January 2007, of the law firm Sullivan & Cromwell LLP and member of ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AllianceBernstein Funds since 2007 and is Chairman of the Governance and Nominating Committees of the Funds. | | | 100 | | | None |
| | |
| 44 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Management of the Fund
| * | | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New York, NY 10105. |
| ** | | There is no stated term of office for the Fund’s Directors. |
| *** | | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
| + | | Mr. Keith is an “interested person” of the Fund, as defined in the 1940 Act, due to his position as a Senior Vice President of the Adviser. |
| # | | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
| ## | | Member of the Fair Value Pricing Committee. |
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 45 | |
Management of the Fund
Officer Information
Certain information concerning the Fund’s Officers is listed below.
| | | | |
NAME, ADDRESS* AND AGE | | POSITION(S) HELD WITH FUND | | PRINCIPAL OCCUPATION DURING PAST FIVE YEARS |
Robert M. Keith
53 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Philip L. Kirstein
68 | | Senior Vice President and Independent Compliance Officer | | Senior Vice President and Independent Compliance Officer of the AllianceBernstein Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers, L.P. since prior to March 2003. |
| | | | |
Robert “Guy” B. Davidson III
52 | | Senior Vice President | | Senior Vice President of the Adviser,** with which he has been associated since prior to 2008. |
| | | | |
Douglas J. Peebles
48 | | Senior Vice President | | Senior Vice President of the Adviser,** with which he has been associated since prior to 2008. |
| | | | |
Michael G. Brooks
65 | | Vice President | | Senior Vice President of the Adviser,** with which he has been associated since prior to 2008. |
| | | | |
Fred S. Cohen
55 | | Vice President | | Senior Vice President of the Adviser,** with which he has been associated since prior to 2008. |
| | | | |
Terrance T. Hults
47 | | Vice President | | Senior Vice President of the Adviser,** with which he has been associated since prior to 2008. |
| | | | |
Emilie D. Wrapp
57 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI,** with which she has been associated since prior to 2008. |
| | | | |
Joseph J. Mantineo
54 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”),** with which he has been associated since prior to 2008. |
| | | | |
Phyllis J. Clarke
52 | | Controller | | Vice President of ABIS,** with which she has been associated since prior to 2008. |
| * | | The address for each of the Fund’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
| ** | | The Adviser, ABI and ABIS are affiliates of the Fund. |
| | |
| 46 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Management of the Fund
SUMMARY OF GENERAL INFORMATION
Shareholder Information
Weekly comparative net asset value (NAV) and market price information about the Fund is published each Saturday in Barron’s and other newspapers in a table called “Closed-End Funds.” Daily net asset value and market price information, and additional information regarding the Fund, is available at www.alliancebernstein.com and at www.nyse.com.
Dividend Reinvestment Plan
Pursuant to the Fund’s Dividend Reinvestment Plan, shareholders whose shares are registered in their own names may elect to have all distributions reinvested automatically in additional shares of the Fund by ComputerShare Trust Company, N.A., as agent under the Plan. Shareholders whose shares are held in the name of the broker or nominee should contact the broker or nominee for details. All Distributions to investors who elect not to participate in the Plan will be paid by check mailed directly to the record holder by or under the direction of ComputerShare Trust Company, N.A.
For questions concerning shareholder account information, or if you would like a brochure describing the Dividend Reinvestment Plan, please call Computershare Trust Company at (800) 219-4218.
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 47 | |
Summary of General Information
THIS PAGE IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
ALLIANCEBERNSTEIN FAMILY OF FUNDS
US Equity
US Core
Core Opportunities Fund
Growth & Income Fund
Select US Equity Portfolio
US Growth
Discovery Growth Fund
Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
US Value
Discovery Value Fund
Equity Income Fund
Value Fund
International/Global Equity
International/Global Core
Global Thematic Growth Fund
International Portfolio
Tax-Managed International Portfolio
International/Global Growth
International Discovery Equity Portfolio
International Growth Fund
International/Global Value
Global Value Fund
International Value Fund
Fixed Income
Municipal
High Income Municipal Portfolio
Intermediate California Portfolio
Intermediate Diversified Portfolio
Intermediate New York Portfolio
Municipal Bond Inflation Strategy
National Portfolio
Arizona Portfolio
California Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
New York Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
Fixed Income (continued)
Taxable
Bond Inflation Strategy
Global Bond Fund
High Income Fund
Intermediate Bond Portfolio
Limited Duration High Income Portfolio
Short Duration Portfolio
Alternatives
Dynamic All Market Fund
Global Real Estate Investment Fund
Global Risk Allocation Fund
Market Neutral Strategy-Global
Market Neutral Strategy-U.S.
Real Asset Strategy
Select US Long/Short Portfolio
Unconstrained Bond Fund
Asset Allocation/Multi-Asset
Multi-Asset
Emerging Markets Multi-Asset Portfolio
Retirement Strategies
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
2050 Retirement Strategy
2055 Retirement Strategy
Wealth Strategies
Balanced Wealth Strategy
Conservative Wealth Strategy
Wealth Appreciation Strategy
Tax-Managed Balanced Wealth Strategy
Tax-Managed Conservative Wealth Strategy
Tax-Managed Wealth Appreciation Strategy
Closed-End Funds
Alliance California Municipal Income Fund
Alliance New York Municipal Income Fund
AllianceBernstein Global High Income Fund
AllianceBernstein Income Fund
AllianceBernstein National Municipal Income Fund
We also offer Exchange Reserves, which serves as the money market fund exchange vehicle for the AllianceBernstein mutual funds. An investment in Exchange Reserves is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.alliancebernstein.com or contact your AllianceBernstein investments representative. Please read the prospectus and/or summary prospectus carefully before investing.
| | |
| 48 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
AllianceBernstein Family of Funds
NOTES
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 49 | |
NOTES
| | |
| 50 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
NOTES
| | | | |
| ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND • | | | 51 | |
NOTES
| | |
| 52 | | • ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND |
Privacy Notice (This information is not part of the Shareholder Report.)
AllianceBernstein L.P., the AllianceBernstein Family of Funds and AllianceBernstein Investments, Inc. (collectively, “AllianceBernstein” or “we”) understand the importance of maintaining the confidentiality of our clients’ nonpublic personal information. Nonpublic personal information is personally identifiable financial information about our clients who are natural persons. To provide financial products and services to our clients, we may collect information about clients from sources, including: (1) account documentation, including applications or other forms, which may contain information such as a client’s name, address, phone number, social security number, assets, income, and other household information, (2) clients’ transactions with us and others, such as account balances and transactions history, and (3) information from visitors to our websites provided through online forms, site visitorship data, and online information collecting devices known as “cookies.”
It is our policy not to disclose nonpublic personal information about our clients (or former clients) 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 clients (or former clients), as described above, to non-affiliated third parties, including those that perform processing or servicing functions and those that provide marketing services for us or on our behalf under 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 clients (and former clients) that include restricting access to such nonpublic personal information and maintaining physical, electronic and procedural safeguards, that comply with applicable standards, to safeguard such nonpublic personal information.
ALLIANCE CALIFORNIA MUNICIPAL INCOME FUND
1345 Avenue of the Americas
New York, NY 10105
800.221.5672
| | |
| |
| ACMIF-0151-1013 | |  |
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 Garry L. Moody 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 which issue press releases), and preferred stock maintenance testing (for those Funds that issue preferred stock); and (iii) tax compliance, tax advice and tax return preparation.
| | | | | | | | | | | | | | | | |
| | | Audit Fees | | | Audit-Related
Fees | | | Tax Fees | |
AB California Muni Income | | | 2012 | | | $ | 32,500 | | | $ | 8,326 | | | $ | 12,967 | |
| | | 2013 | | | $ | 32,500 | | | $ | 10,000 | | | $ | 12,967 | |
(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:
| | | | | | | | | | | | |
| | | | | | All Fees
for Non-Audit
Services Provided to
the Portfolio,
the Adviser and Service
Affiliates | | | Total Amount of Foregoing Column Pre- approved by the Audit Committee (Portion Comprised of Audit Related Fees) (Portion Comprised of
Tax Fees) | |
| | | 2012 | | | $ | 720,058 | | | $
$ $ | 21,293
(8,326 (12,967 |
) ) |
| | | |
| | | 2013 | | | $ | 344,478 | | | $
$ $ | 22,967
(10,000 (12,967 |
) ) |
(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:
| | |
| Garry L. Moody | | D. James Guzy |
John H. Dobkin Michael J. Downey William H. Foulk, Jr. | | Nancy P. Jacklin Marshall C. Turner, Jr. Earl D. Weiner |
ITEM 6. SCHEDULE OF INVESTMENTS.
Please see Schedule of Investments contained in the Report to Shareholders included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Statement of Policies and Procedures for
Proxy Voting
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 intended to maximize long-term shareholder value. Generally, our clients’ objective is to maximize the financial return of their portfolios within appropriate risk parameters. We have long recognized that environmental, social and governance (“ESG”) issues can impact the performance of investment portfolios. Accordingly, we have sought to integrate ESG factors into our investment process to the extent that the integration of such factors is consistent with our fiduciary duty to help our clients achieve their investment objectives and protect their economic interests. For additional information regarding our ESG policies and practices, please refer to our firm’s Statement of Policy Regarding Responsible Investment.
We consider ourselves shareholder advocates and take this responsibility very seriously. Consistent with our commitments, we will disclose our clients’ voting records only to them and as required by mutual fund vote disclosure regulations. In addition, our Proxy Committee may, after careful consideration, choose to respond to surveys so long as doing so does not compromise confidential voting.
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 investment groups investing on behalf of clients in both U.S. and non-U.S. securities.
2. Proxy Policies
Our proxy voting policies are principle-based rather than rules-based. We adhere to a core set of principles that are described in this Statement and in our Proxy Voting Manual. We assess each proxy proposal in light of those principles. Our proxy voting “litmus test” will always be what we view as most likely to maximize long-term shareholder value. We believe that authority and accountability for setting and executing corporate policies, goals and compensation should generally rest with the board of directors and senior management. In return, we support strong investor rights that allow shareholders to hold directors and management accountable if they fail to act in the best interests of shareholders. In addition, if we determine that ESG issues that arise with respect to an issuer’s past, current or anticipated behaviors are, or are reasonably likely to become, material to its future earnings, we address these concerns in our proxy voting and engagement.
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 make voting decisions that are in our clients’ best interests. In reviewing proxy issues, we will apply the following general policies:
2.1. Corporate Governance
We recognize the importance of good corporate governance in our proxy voting policies and engagement practices in ensuring that management and the board of directors fulfill their obligations to shareholders. We favor proposals promoting transparency and accountability within a company. We support the appointment of a majority of independent directors on boards and key committees. Because we believe that good corporate governance requires shareholders to have a meaningful voice in the affairs of the company, we generally will support shareholder proposals which 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. Furthermore, we have written to the SEC in support of shareholder access to corporate proxy statements under specified conditions with the goal of serving the best interests of all shareholders.
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 to oppose 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. Therefore, we may vote against directors (or withhold votes for directors where plurality voting applies) who fail to act on key issues such as failure to implement proposals to declassify the board, 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 vote against directors who fail to attend at least seventy-five percent of board meetings within a given year without a reasonable excuse, and 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. Also, we will generally not oppose directors who meet the definition of independence promulgated by the primary exchange on which the company’s shares are traded or set forth in the code we determine to be best practice in the country where the subject company is domiciled. Finally, because we believe that cumulative voting in single shareholder class structures provides a disproportionately large voice to minority shareholders in the affairs of a company, we will generally vote against such proposals and vote for management proposals seeking to eliminate cumulative voting. However, in dual class structures (such as A&B shares) where the shareholders with a majority economic interest have a minority voting interest, we will generally vote in favor of cumulative voting.
2.3. Appointment of Auditors
AllianceBernstein believes that the company is in the best position to choose its auditors, so we will generally support management’s recommendation. However, we recognize that there are inherent conflicts when a company’s independent auditor performs substantial non-audit services for the company. The Sarbanes-Oxley Act of 2002 prohibits certain categories of services by auditors to U.S. issuers, making this issue less prevalent in the U.S. Nevertheless, in reviewing a proposed auditor, we will consider the fees paid for non-audit services relative to total fees and whether there are other reasons for us to question the independence or performance 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 management’s recommendations 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 plan 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 100% 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. Therefore, we will generally oppose proposals, regardless of whether they are advanced by management or
shareholders, when their purpose or effect 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 benefits 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 allow stock options to be granted with below market value exercise prices on the date of issuance or permit re-pricing 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. In markets where remuneration reports or advisory votes on executive compensation are not required for all companies, we will generally support shareholder proposals asking the board to adopt a policy (i.e., “say on pay”) that the company’s shareholders be given the opportunity to vote on an advisory resolution to approve the compensation practices of the company. Although “say on pay” votes are by nature only broad indications of shareholder views, they do lead to more compensation-related dialogue between management and shareholders and help ensure that management and shareholders meet their common objective: maximizing the value of the company. In markets where votes to approve remuneration reports or advisory votes on executive compensation are required, we review the compensation practices on a case-by-case basis. With respect to companies that have received assistance through government programs such as TARP, we will generally oppose shareholder proposals that seek to impose greater executive compensation restrictions on subject companies than are required under the applicable program because such restrictions could create a competitive disadvantage for the subject company. We believe the U.S. Securities and Exchange Commission (“SEC”) took appropriate steps to ensure more complete and transparent disclosure of executive compensation when it issued modified executive compensation and corporate governance disclosure rules in 2006 and February 2010. Therefore, while we will consider them on a case-by-case basis, we generally vote against shareholder proposals seeking additional disclosure of executive and director compensation, including proposals that seek to specify the measurement of performance-based compensation, if the company is subject to SEC rules. We will support requiring a shareholder vote on management proposals to provide 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. Finally, we will support shareholder
proposals requiring a company to expense compensatory employee stock options (to the extent the jurisdiction in which the company operates does not already require it) because we view this form of compensation as a significant corporate expense that should be appropriately accounted for.
2.9. ESG
We are appointed by our clients as an investment manager with a fiduciary responsibility to help them achieve their investment objectives over the long term. Generally, our clients’ objective is to maximize the financial return of their portfolios within appropriate risk parameters. We have long recognized that ESG issues can impact the performance of investment portfolios. Accordingly, we have sought to integrate ESG factors into our investment and proxy voting processes to the extent that the integration of such factors is consistent with our fiduciary duty to help our clients achieve their investment objectives and protect their economic interests. For additional information regarding our approach to incorporating ESG issues in our investment and decision-making processes, please refer to our RI Policy, which is attached to this Statement as an Exhibit.
Shareholder proposals relating to environmental, social (including political) and governance issues often raise complex and controversial issues that may have both a financial and non-financial effect on the company. And while we recognize that the effect of certain policies on a company may be difficult to quantify, we believe it is clear that they do affect the company’s long-term performance. Our position in evaluating these proposals is founded on the principle that we are a fiduciary. As such, we carefully consider any factors that we believe could affect a company’s long-term investment performance (including ESG issues) in the course of our extensive fundamental, company-specific research and engagement, which we rely on in making our investment and proxy voting decisions. Maximizing long-term shareholder value is our overriding concern when evaluating these matters, so we consider the impact of these proposals on the future earnings of the company. In so doing, we will balance the assumed cost to a company of implementing one or more shareholder proposals against the positive effects we believe implementing the proposal may have on long-term shareholder value.
3. Proxy Voting Procedures
3.1. Engagement
In evaluating proxy issues and determining our votes, we welcome and seek out the points of view of various parties. Internally, the Proxy Committee may consult chief investment officers, directors of research, research analysts across our value and growth equity platforms, portfolio managers in whose managed accounts a stock is held and/or other Investment Policy Group members. Externally, the Proxy Committee may consult company management, company directors, interest groups, shareholder activists and research providers. If we believe an ESG issue is, or is reasonably likely to become, material, we engage a company’s management to discuss the relevant issues.
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 administer, who distributes AllianceBernstein-sponsored mutual funds, or with whom we have, or one of our employees has, a business or personal relationship that may affect (or may be reasonably viewed as affecting) how we vote on the issuer’s proxy. Similarly, AllianceBernstein may have a potentially 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 Committee and adherence to these policies ensures that proxies are voted based solely on our clients’ best interests. Additionally, we have implemented procedures to ensure that our votes are not the product of a material conflict of interest, including: (i) on an annual basis, the Proxy Committee taking reasonable steps to evaluate (A) 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 (B) any client that has sponsored or has a 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 Chair of the Proxy Committee any potential conflict that he or she is aware of (including personal relationships) and any contact that he or she has 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 Committee takes reasonable steps to verify that any third party research service is, in fact, independent taking into account 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 recommendations in an impartial manner and in the best interests of our clients.
3.3. Proxies of Certain Non-U.S. 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 is outweighed by the cost of voting (i.e., not being able to sell the shares during this period). Accordingly, if share blocking is required we generally choose not to vote those shares.
AllianceBernstein seeks to vote all proxies for securities held in client accounts for which we have proxy voting authority. However, in non-US markets, administrative issues beyond our control may at times prevent AllianceBernstein from voting such proxies. For example, AllianceBernstein may receive meeting notices after the cut-off date for voting or without sufficient time to fully consider the proxy. As another example, certain markets require periodic renewals of powers of attorney that local agents must have from our clients prior to implementing AllianceBernstein’s voting instructions.
3.4. Loaned 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 Committee
We have formed a Proxy Committee, which includes investment professionals from both our growth and value equities teams, which is directly involved in the decision-making process to ensure that our votes are guided by the investment professionals who are most familiar with a given company. The Proxy Committee establishes general proxy policies for AllianceBernstein and considers specific proxy voting matters as necessary. The Proxy Committee periodically reviews these policies and new types of environmental, social and governance issues, and decides 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 Proxy Committee, in conjunction with the analyst that covers the company, may contact corporate management, interested shareholder groups and others as necessary to discuss proxy issues.
Different investment philosophies may occasionally result in different conclusions being drawn regarding certain proposals and, in turn, may result in the Proxy Committee making different voting decisions on the same proposal for value and growth holdings. Nevertheless, the Proxy Committee always votes proxies with the goal of maximizing the value of the securities in client portfolios.
It is the responsibility of the Proxy Committee to evaluate and maintain proxy voting procedures and guidelines, to evaluate proposals and issues not covered by these guidelines, to evaluate proxies where we face a potential conflict of interest (as discussed in section 3.2), to consider changes in policy and to review the Proxy Voting Statement and the Proxy Voting Manual no less frequently than annually. In addition, the Proxy Committee meets as necessary to address special situations.
Members of the Proxy Committee include senior investment personnel and representatives of the Legal and Compliance Department. The Proxy Committee is chaired by Linda Giuliano, Senior Vice President and Chief Administrative Officer-Equities.
Proxy Committee
Vincent DuPont: SVP-Equities
Linda Giuliano: SVP-Equities
David Lesser: VP-Legal
Mark Manley: SVP-Legal
Anthony Rizzi: VP-Operations
Andrew Weiner: SVP-Equities
3.6. Proxy Voting Records
Clients may obtain information about how we voted proxies on their behalf by contacting their AllianceBernstein administrative representative. Alternatively, clients may make a written request for proxy voting information to: Mark R. Manley, Senior Vice President & Chief Compliance Officer, AllianceBernstein L.P., 1345 Avenue of the Americas, New York, NY 10105.
[FOR U.S. MUTUAL FUNDS]
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.
Statement of Policy Regarding
Responsible Investment
Principles for Responsible Investment,
ESG, and Socially Responsible Investment
1. Introduction
AllianceBernstein L.P. (“AllianceBernstein” or “we”) is appointed by our clients as an investment manager with a fiduciary responsibility to help them achieve their investment objectives over the long term. Generally, our clients’ objective is to maximize the financial return of their portfolios within appropriate risk parameters. AllianceBernstein has long recognized that environmental, social and governance (“ESG”) issues can impact the performance of investment portfolios. Accordingly, we have sought to integrate ESG factors into our investment process to the extent that the integration of such factors is consistent with our fiduciary duty to help our clients achieve their investment objectives and protect their economic interests.
Our policy draws a distinction between how the Principles for Responsible Investment (“PRI” or “Principles”), and Socially Responsible Investing (“SRI”) incorporate ESG factors. PRI is based on the premise that, because ESG issues can affect investment performance, appropriate consideration of ESG issues and engagement regarding them is firmly within the bounds of a mainstream investment manager’s fiduciary duties to its clients. Furthermore, PRI is intended to be applied only in ways that are consistent with those mainstream fiduciary duties.
SRI, which refers to a spectrum of investment strategies that seek to integrate ethical, moral, sustainability and other non-financial factors into the investment process, generally involves exclusion and/or divestment, as well as investment guidelines that restrict investments. AllianceBernstein may accept such guideline restrictions upon client request.
2. Approach to ESG
Our long-standing policy has been to include ESG factors in our extensive fundamental research and consider them carefully when we believe they are material to our forecasts and investment decisions. If we determine that these aspects of an issuer’s past, current or anticipated behavior are material to its future expected returns, we address these concerns in our forecasts, research reviews, investment decisions and engagement. In addition, we have well-developed proxy voting policies that incorporate ESG issues and engagement.
3. Commitment to the PRI
In recent years, we have gained greater clarity on how the PRI initiative, based on information from PRI Advisory Council members and from other signatories, provides a framework for incorporating ESG factors into investment research and decision-making. Furthermore, our industry has become, over time, more aware of the importance of ESG factors. We acknowledge these developments and seek to refine what has been our process in this area.
After careful consideration, we determined that becoming a PRI signatory would enhance our current ESG practices and align with our fiduciary duties to our clients as a mainstream investment manager. Accordingly, we became a signatory, effective November 1, 2011.
In signing the PRI, AllianceBernstein as an investment manager publicly commits to adopt and implement all six Principles, where consistent with our fiduciary responsibilities, and to make progress over time on implementation of the Principles.
The six Principles are:
1.We will incorporate ESG issues into investment research and decision-making processes.
AllianceBernstein Examples: ESG issues are included in the research analysis process. In some cases, external service providers of ESG-related tools are utilized; we have conducted proxy voting training and will have continued and expanded training for investment professionals to incorporate ESG issues into investment analysis and decision-making processes across our firm.
2. We will be active owners and incorporate ESG issues into our ownership policies and practices.
AllianceBernstein Examples: We are active owners through our proxy voting process (for additional information, please refer to our Statement of Policies and Procedures for Proxy Voting Manual); we engage issuers on ESG matters in our investment research process (we define “engagement” as discussions with management about ESG issues when they are, or we believe they are reasonably likely to become, material).
3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.
AllianceBernstein Examples: Generally, we support transparency regarding ESG issues when we conclude the disclosure is reasonable. Similarly, in proxy voting, we will support shareholder initiatives and resolutions promoting ESG disclosure when we conclude the disclosure is reasonable.
4. We will promote acceptance and implementation of the Principles within the investment industry.
AllianceBernstein Examples: By signing the PRI, we have taken an important first step in promoting acceptance and implementation of the six Principles within our industry.
5. We will work together to enhance our effectiveness in implementing the Principles.
AllianceBernstein Examples: We will engage with clients and participate in forums with other PRI signatories to better understand how the PRI are applied in our respective businesses. As a PRI signatory, we have access to information, tools and other signatories to help ensure that we are effective in our endeavors to implement the PRI.
6. We will report on our activities and progress towards implementing the Principles.
AllianceBernstein Examples: We will respond to the 2012 PRI questionnaire and disclose PRI scores from the questionnaire in response to inquiries from clients and in requests for proposals; we will provide examples as requested concerning active ownership activities (voting, engagement or policy dialogue).
4. RI Committee
Our firm’s RI Committee provides AllianceBernstein stakeholders, including employees, clients, prospects, consultants and service providers alike, with a resource within our firm on which they can rely for information regarding our approach to ESG issues and how those issues are incorporated in different ways by the PRI and SRI. Additionally, the RI Committee is responsible for assisting AllianceBernstein personnel to further implement our firm’s RI policies and practices, and, over time, to make progress on implementing all six Principles.
The RI Committee has a diverse membership, including senior representatives from investments, distribution/sales and legal. The Committee is chaired by Linda Giuliano, Senior Vice President and Chief Administrative Officer-Equities.
If you have questions or desire additional information about this Policy, we encourage you to conact the RI Committee at RIinquiries@alliancebernstein.com or reach out to a Committee member:
| | |
| Travis Allen: VP-Private Client, Washington, DC | | Erin Bigley: SVP-Fixed Income, New York |
| Nicholas Davidson: SVP-Value, London | | Henry D’Auria: SVP-Equities, New York |
| Linda Giuliano: SVP-Equities, New York | | Christopher Kotowicz: SVP-Growth, Chicago |
| David Lesser: VP-Legal, New York | | Mark Manley: SVP-Legal, New York |
| Takuji Oya: SVP-Growth, Japan | | Guy Prochilo: SVP-Institutional Investments, New York |
| Nitish Sharma: VP- Institutional Investments, Australia | | Liz Smith: SVP-Institutional Investments, New York |
| Willem Van Gijzen: VP-Institutional Investments, Netherlands | | James Wallin: SVP-Fixed Income, New York |
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 teams work jointly to determine the majority of the investment strategy including security selection for the Fund, Messrs. Michael G. Brooks, Fred S. Cohen, Robert B. Davidson III and Terrance T. Hults are primarily responsible for the day-to-day management of the Fund’s portfolio.
(a)(1) 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 G. Brooks; since October 2005– Senior Vice President of AllianceBernstein L.P. (“AB”) | | Senior Vice President of AB with which he has been associated in a substantially similar capacity to his current position since prior to 2005. |
| |
| Fred S. Cohen; since October 2005–Senior Vice President of AB | | Senior Vice President of AB, with which he has been associated in a substantially similar capacity to his current position since prior to 2005. |
| |
| Robert B. Davidson III; since April 2002– Senior Vice President of AB | | Senior Vice President of AB with which he has been associated in a substantially similar capacity to his current position since prior to 2005. |
| |
| Terrance T. Hults; since December 2001– Senior Vice President of AB | | Senior Vice President of AB with which he has been associated in a substantially similar capacity to his current position since prior to 2005. |
(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, 2013.
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
| | | | | | | | | | | | | | | | |
Portfolio Manager | | Total Number
of Registered
Investment
Companies
Managed | | | Total Assets of
Registered
Investment
Companies
Managed | | | Number of
Registered
Investment
Companies Managed
with Performance-
based Fees | | | Total Assets of
Registered
Investment
Companies
Managed with
Performance-based
Fees | |
Michael G. Brooks | | | 32 | | | $ | 17,184,000,000 | | | | None | | | | None | |
Fred S. Cohen | | | 32 | | | $ | 17,184,000,000 | | | | None | | | | None | |
Robert B. Davidson III | | | 32 | | | $ | 17,184,000,000 | | | | None | | | | None | |
Terrance T. Hults | | | 32 | | | $ | 17,184,000,000 | | | | None | | | | None | |
Wayne Godlin | | | 32 | | | $ | 17,184,000,000 | | | | None | | | | None | |
POOLED INVESTMENT VEHICLES
| | | | | | | | | | | | | | | | |
Portfolio Manager | | Total Number
of Pooled
Investment
Vehicles
Managed | | | Total Assets of
Pooled Investment
Vehicles
Managed | | | Number of Pooled
Investment Vehicles
Managed with
Performance-based
Fees | | | Total Assets of
Pooled Investment
Vehicles
Managed
with Performance-
based Fees | |
Michael G. Brooks | | | 5 | | | | 345,000,000 | | | | None | | | | None | |
Fred S. Cohen | | | 5 | | | | 345,000,000 | | | | None | | | | None | |
Robert B. Davidson III | | | 5 | | | | 345,000,000 | | | | None | | | | None | |
Terrance T. Hults | | | 5 | | | | 345,000,000 | | | | None | | | | None | |
Wayne Godlin | | | 5 | | | | 345,000,000 | | | | None | | | | None | |
OTHER ACCOUNTS
| | | | | | | | | | | | | | | | |
Portfolio Manager | | Total Number
of Other
Accounts
Managed | | | Total Assets of
Other Accounts
Managed | | | Number of Other
Accounts Managed
with Performance-
based Fees | | | Total Assets of
Other Accounts
with Performance-
based Fees | |
Michael G. Brooks | | | 1,624 | | | $ | 11,645,000,000 | | | | 2 | | | $ | 338,000,000 | |
Fred S. Cohen | | | 1,624 | | | $ | 11,645,000,000 | | | | 2 | | | $ | 338,000,000 | |
Robert B. Davidson III | | | 1,624 | | | $ | 11,645,000,000 | | | | 2 | | | $ | 338,000,000 | |
Terrance T. Hults | | | 1,624 | | | $ | 11,645,000,000 | | | | 2 | | | $ | 338,000,000 | |
Wayne Godlin | | | 1,624 | | | $ | 11,645,000,000 | | | | 2 | | | $ | 338,000,000 | |
Investment Professional Conflict of Interest Disclosure
As an investment adviser and fiduciary, the Adviser owes its clients and shareholders an undivided duty of loyalty. 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. The Adviser has adopted a Code of Business Conduct and Ethics that is designed to detect and prevent conflicts of interest when investment professionals and other personnel of the Adviser own, buy or sell securities which may be owned by, or bought or sold for, clients. Personal securities transactions by an employee may raise a potential conflict of interest when an employee owns or trades in a security that is owned or considered for purchase or sale by a client, or recommended for purchase or sale by an employee to a client. Subject to the reporting requirements and other limitations of its Code of Business Conduct and Ethics, the Adviser permits its employees to engage in personal securities transactions, and also allows them to acquire investments in certain Funds managed by the Adviser. The Adviser’s Code of Business Conduct and Ethics requires disclosure of all personal accounts and maintenance of brokerage accounts with designated broker-dealers approved by the Adviser. The Code of Business Conduct and Ethics also requires preclearance of all securities transactions (except transactions in U.S. Treasuries and open-end mutual funds) and imposes a 90-day holding period for securities purchased by employees to discourage short-term trading.
Managing Multiple Accounts for Multiple Clients. The Adviser has compliance policies and oversight monitoring in place to address conflicts of interest relating to the management of multiple accounts for multiple clients. Conflicts of interest may arise when an investment professional has responsibilities for the investments of more than one account because the investment professional may be unable to devote equal time and attention to each account. The investment professional or investment professional teams for each client may have responsibilities for managing all or a portion of the investments of multiple accounts with a common investment strategy, including other registered investment companies, unregistered investment vehicles, such as hedge funds, pension plans, separate accounts, collective trusts and charitable foundations. Among other things, the Adviser’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. Investment professional compensation reflects a broad contribution in multiple dimensions to long-term investment success for our clients and is generally not tied specifically to the performance of any particular client’s account, nor is it generally tied directly to the level or change in level of assets under management.
Allocating Investment Opportunities. The investment professionals at the Adviser routinely are required to select and allocate investment opportunities among accounts. The Adviser has adopted policies and procedures intended to address conflicts of interest relating to the allocation of investment opportunities. These policies and procedures are designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities (e.g., on a rotational basis), and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Portfolio holdings, position sizes, and industry and sector exposures tend to be similar across similar accounts, which minimize the potential for conflicts of interest relating to the allocation of investment opportunities. Nevertheless, access to portfolios funds or other investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
The Adviser’s procedures are also designed to address potential conflicts of interest that may arise when the Adviser has a particular financial incentive, such as a performance-based management fee, relating to an account. 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 the Adviser could share in investment gains.
Portfolio Manager Compensation
The Adviser’s compensation program for investment professionals is designed to align with clients’ interests, emphasizing each portfolio manager’s ability to generate long-term investment success for the Adviser’s clients, including the Funds. The Adviser also strives to ensure that compensation is competitive and effective in attracting and retaining the highest caliber employees.
Portfolio managers receive a base salary, incentive compensation and contributions to AllianceBernstein’s 401(k) plan. Part of the annual incentive compensation is generally paid in the form of a cash bonus, and part through an award under the firm’s Incentive Compensation Award Plan (ICAP). The ICAP awards vest over a four-year period. Deferred awards are paid in the form of restricted grants on the firm’s Master Limited Partnership Units, and award recipients have the ability to receive a portion of their awards in deferred cash. The amount of contributions to the 401(k) plan is determined at the sole discretion of the Adviser. On an annual basis, the Adviser endeavors to combine all of the foregoing elements into a total compensation package that considers industry compensation trends and is designed to retain its best talent.
The incentive portion of total compensation is determined by quantitative and qualitative factors. Quantitative factors, which are weighted more heavily, are driven by investment performance. Qualitative factors are driven by contributions to the investment process and client success.
The quantitative component includes measures of absolute, relative and risk-adjusted investment performance. Relative and risk-adjusted returns are determined based on the benchmark in the Fund’s prospectus and versus peers over one-, three- and five-year calendar periods, with more weight given to longer-time periods. Peer groups are chosen by Chief Investment Officers, who consult with the product management team to identify products most similar to our investment style and most relevant within the asset class. Portfolio managers of the Funds do not receive any direct compensation based upon the investment returns of any individual client account, and compensation is not tied directly to the level or change in level of assets under management.
Among the qualitative components considered, the most important include thought leadership, collaboration with other investment colleagues, contributions to risk-adjusted returns of other portfolios in the firm, efforts in mentoring and building a strong talent pool and being a good corporate citizen. Other factors that can play a part in determining portfolio managers’ compensation, such as the complexity of investment strategies managed, volume of assets managed and experience.
The Adviser emphasizes four behavioral competancies—relentlessness, ingenuity, team orientation and accountability—that support its mission to be the most trusted advisor to its clients. Assessments of investment professionals are formalized in a year-end review process that includes 360-degree feedback from other professionals from across the investment teams and the Adviser.
(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, 2013 is set forth below:
| | |
| | | DOLLAR
RANGE OF
EQUITY
SECURITIES
IN THE
FUND |
Michael G. Brooks | | None |
Fred S. Cohen | | None |
Robert B. Davidson III | | None |
Terrance 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): Alliance California Municipal Income Fund, Inc.
| | |
| By: | | /s/ Robert M. Keith |
| | Robert M. Keith |
| | President |
| |
| Date: | | December 23, 2013 |
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/ Robert M. Keith |
| | Robert M. Keith |
| | President |
| |
| Date: | | December 23, 2013 |
| |
| By: | | /s/ Joseph J. Mantineo |
| | Joseph J. Mantineo |
| | Treasurer and Chief Financial Officer |
| |
| Date: | | December 23, 2013 |
