United States
Securities and Exchange Commission
Washington, D.C. 20549
Form N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-07510
ACM MUNICIPAL SECURITIES INCOME FUND, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Mark R. Manley
Alliance Capital Management 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, 2004
Date of reporting period: October 31, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
- -------------------------------------------------------------------------------
Closed End
- -------------------------------------------------------------------------------
AllianceBernstein [LOGO](SM)
Investment Research and Management
ACM Municipal Securities Income Fund
Annual Report -- October 31, 2004
Investment Products Offered
- ---------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
- ---------------------------
You may obtain a description of the Fund's proxy voting policies and
procedures, and information regarding how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30,
without charge. Simply visit AllianceBernstein's web site at
www.alliancebernstein.com, or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330
AllianceBernstein Investment Research and Management, Inc. is an affiliate of
Alliance Capital Management L.P., the manager of the funds, and is a member of
the NASD.
December 14, 2004
Annual Report
This report provides management's discussion of fund performance for ACM
Municipal Securities Income Fund (the "Fund"), a closed-end fund that trades
under the New York Stock Exchange symbol "AMU", for the annual reporting period
ended October 31, 2004.
Investment Objective and Policies
The Fund is a closed-end management investment company designed to provide high
current income exempt from regular federal income tax. The Fund invests
substantially all of its assets in investment grade municipal securities. For
more information regarding the Fund's risks, please see "A Word About Risk" on
page 3 and "Note G--Risks Involved in Investing in the Fund" of the Notes to
Financial Statements on page 21.
Investment Results
The table on page 4 provides performance data for the Fund and its benchmark,
the Lehman Brothers (LB) Municipal Index, for the six- and 12-month periods
ended October 31, 2004. For comparison, returns for the Lipper General
Municipal Debt Funds (Leveraged) Average (the "Lipper Average") are also
included. The funds that comprise the Lipper Average have generally similar
investment objectives to the Fund, although some may have different investment
policies and sales and management fees.
The Fund outperformed its benchmark during both the six- and 12-month reporting
periods ended October 31, 2004. The Fund's stronger relative performance during
the 12-month period was largely the result of security selection in the general
obligation, insured and tobacco settlement sectors. The Fund's relative
exposure to the pre-refunded, industrial revenue bond and hospital sectors also
contributed positively to the Fund's performance. In addition, the Fund's
leveraged structure benefited its performance, primarily because of
historically low borrowing costs. During the 12-month reporting period, the
Fund also outperformed its peer group, as represented by the Lipper Average.
Market Review and Investment Strategy
From October 31, 2003 to October 31, 2004, yields for long-term muni-cipal
bonds declined and yields for short-term municipal bonds rose. For example,
yields for bonds maturing in 20 years declined by 0.37%; yields for 5-year
bonds rose 0.21%. Institutional investors generated strong demand for bonds
maturing in 20 years. Short maturity bond yields generally rose as investors
anticipated a stronger economy and likely tighter monetary policy by the U.S.
Federal Reserve. Over that time period, the long municipal bond market
outperformed the taxable bond market. For example, the LB Municipal Index
gained 6.03% during the 12-month reporting period ended October 31, 2004 while
the LB U.S. Aggregate Index, representing taxable bonds, generated a return of
5.53% over the same period. The Treasury bond component of the LB U.S.
Aggregate Index posted an even lower return of 4.97%. As of October 31, 2004,
30-year municipal bonds were yielding approximately 96% of comparable maturity
Treasury bonds.
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ACM MUNICIPAL SECURITIES INCOME FUND o 1
The low rate environment has resulted in continued strong demand for
lower-rated bonds that carry higher yields. Bonds in sectors with generally
lower credit profiles again led the market in performance; the industrial
development and hospital sub-sectors of the LB Municipal Index, for example,
generated returns of 10.47% and 8.52%, respectively. Several states, notably
California, showed improved credit fundamentals compared to the beginning of
2004 and, as a result, their bonds outperformed the general market.
During the annual reporting period, the Fund's portfolio management team
employed a number of investment strategies which included reducing the Fund's
exposure to 30-year 5.0% coupon bonds and replacing the longer maturity bonds
with 20- to 25-year 5.0%-5.25% coupon bonds. The team also increased the term
structure diversification of the Fund's investment portfolio. In addition, the
team focused on buying premium coupon callable bonds versus discount coupon
bonds and non-callable bonds, and capitalized on the market's strong demand for
yield by selling lower-rated bonds.
In Memory
It is with sadness that we announce the passing of Clifford L. Michel, a member
of the Board of Directors of ACM Municipal Securities Income Fund. Mr. Michel
served the interests of the Fund's shareholders for the last 11 years. His hard
work, dedication and contributions to the Fund will be greatly missed.
_______________________________________________________________________________
2 o ACM MUNICIPAL SECURITIES INCOME FUND
Historical Performance
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HISTORICAL PERFORMANCE
An Important Note About the Value of Historical Performance
The performance on the following page represents past performance and does not
guarantee future results. Current performance may be lower or higher than the
performance information shown. Returns are annualized for periods longer than
one year. All fees and expenses related to the operation of the Fund have been
deducted. Performance assumes reinvestment of distributions and does not
account for taxes.
ACM Municipal Securities Income Fund Shareholder Information
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transaction section of The Wall Street Journal under the
abbreviation "ACM MuniSec." The Fund's NYSE trading symbol is "AMU." Weekly
comparative net asset value (NAV) and market price information about the Fund
is published each Monday in The Wall Street Journal, each Sunday in The New
York Times and each Saturday in Barron's and other newspapers in a table called
"Closed-End Bond Funds." For additional shareholder information regarding this
Fund, please see page 35.
Benchmark Disclosure
The unmanaged Lehman Brothers (LB) Municipal Index does not reflect fees and
expenses associated with the active management of a mutual fund portfolio. The
Index is a total return performance benchmark for the long-term, investment
grade, tax-exempt bond market. For the six- and 12-month periods ended October
31, 2004, the Lipper General Municipal Debt Funds (Leveraged) Average consisted
of 66 and 65 funds, respectively. These funds have generally similar investment
objectives to the Fund, although some may have different investment policies
and sales and management fees. An investor cannot invest directly in an index
or average, and their results are not indicative of the performance for any
specific investment, including the Fund.
A Word About Risk
Among the risks of investing in the Fund are changes in the general level of
interest rates or bond credit quality ratings. Changes in interest rates have a
greater effect on bonds with longer maturities than on those with shorter
maturities. While the Fund invests principally in bonds and other fixed-income
securities, in order to achieve its investment objectives, the Fund may at
times use certain types of investment derivatives, such as options, futures,
forwards and swaps. These instruments involve risks different from, and in
certain cases, greater than, the risks presented by more traditional
investments. At the discretion of the Fund's Adviser, the Fund may invest up to
20% of its total assets in securities that are not rated and up to 10% in
securities that are not readily marketable.
The issuance of the Fund's preferred stock results in leveraging of the Common
Stock, an investment technique usually considered speculative. Leverage creates
certain risks for holders of Common Stock, including higher volatility of both
the net asset value and market value of the Common Stock, and fluctuations in
the dividend rates on the preferred stock will affect the return to holders of
Common Stock. If the Fund were fully invested in longer-term securities and if
short-term interest rates were to increase, then the amount of dividends paid
on the preferred shares would increase and both net investment income available
for distribution to the holders of Common Stock and the net asset value of the
Common Stock would decline. At the same time, the market value of the Fund's
Common Stock (that is, its price as listed on the New York Stock Exchange) may,
as a result, decline. Furthermore, if long-term interest rates rise, the Common
Stock's net asset value will reflect the full decline in the price of the
portfolio's investments, since the value of the Fund's Preferred Stock does not
fluctuate. In addition to the decline in net asset value, the market value of
the Fund's Common Stock may also decline.
(Historical Performance continued on next page)
_______________________________________________________________________________
ACM MUNICIPAL SECURITIES INCOME FUND o 3
Historical Performance
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HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE FUND VS. ITS BENCHMARK -------------------------
PERIODS ENDED OCTOBER 31, 2004 6 Months 12 Months
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ACM Municipal Securities Income Fund (NAV) 7.97% 11.20%
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LB Municipal Index 4.79% 6.03%
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Lipper General Municipal Debt Funds
(Leveraged) Average 6.58% 8.93%
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The Fund's Market Price per share on October 31, 2004 was $12.09. For
additional Financial Highlights, please see page 25.
GROWTH OF A $10,000 INVESTMENT IN THE FUND
10/31/94 TO 10/31/04
ACM Municipal Securities Income Fund (NAV): $20,385
LB Municipal Index: $19,771
[THE FOLLOWING TABLE WAS DEPICTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL.]
ACM Municipal Securities
Income Fund (NAV) LB Municipal Index
- -------------------------------------------------------------------------------
10/31/94 $ 10,000 $ 10,000
10/31/95 $ 11,771 $ 11,484
10/31/96 $ 12,800 $ 12,139
10/31/97 $ 14,494 $ 13,169
10/31/98 $ 15,493 $ 14,225
10/31/99 $ 14,291 $ 13,974
10/31/00 $ 15,540 $ 15,163
10/31/01 $ 17,341 $ 16,756
10/31/02 $ 16,760 $ 17,740
10/31/03 $ 18,334 $ 18,646
10/31/04 $ 20,385 $ 19,771
This chart illustrates the total value of an assumed $10,000 investment in ACM
Municipal Securities Income Fund at net asset value (NAV) (from 10/31/94 to
10/31/04) as compared to the performance of the Fund's benchmark. The chart
assumes the reinvestment of dividends and capital gains.
See Historical Performance and Benchmark disclosures on previous page.
_______________________________________________________________________________
4 o ACM MUNICIPAL SECURITIES INCOME FUND
Portfolio Summary
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PORTFOLIO SUMMARY
October 31, 2004
PORTFOLIO STATISTICS
Net Assets of Common Shareholders ($mil): $126.7
Market Value of Investments ($mil): $222.5
BOND QUALITY RATING BREAKDOWN*
49.9% AAA
22.0% AA
16.2% A [PIE CHART OMITTED]
10.2% BBB
1.7% BB
* All data are as of October 31, 2004. The Fund's bond quality rating
breakdown is expressed as a percentage of the Fund's total investments rated in
particular ratings categories by Standard & Poor's Rating Services and Moody's
Investors Service. The distributions may vary over time. If ratings are not
available, the Fund's Adviser will assign ratings that are considered to be of
equivalent quality to such ratings.
_______________________________________________________________________________
ACM MUNICIPAL SECURITIES INCOME FUND o 5
Portfolio of Investments
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PORTFOLIO OF INVESTMENTS
October 31, 2004
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Long-Term Municipal Bonds-164.5%
Alabama-3.6%
Jefferson Cnty Wtr and Swr Rev
FGIC Ser 02B
Prerefunded 8/01/12 @ 100
5.00%, 2/01/41 $ 1,535 $ 1,713,091
Jefferson Cnty Wtr and Swr Rev
FGIC Ser 02B
5.00%, 2/01/41 2,465 2,786,954
-------------
4,500,045
-------------
Alaska-6.4%
Alaska International Airport
MBIA Ser 03B
5.00%, 10/01/26 1,000 1,029,160
Alaska Muni Bond Bank Auth
MBIA Ser 03E
5.25%, 12/01/26 3,000 3,196,860
Alaska Muni Bond Bank Auth
MBIA Ser 04G
5.00%, 2/15/22 1,585 1,683,333
Four Dam Pool Alaska
Ser 04
5.25%, 7/1/25 2,195 2,255,780
-------------
8,165,133
-------------
Arizona-1.3%
Arizona Cap Facs Fin Corp
(Arizona St Univ Proj)
6.25%, 9/01/32 1,550 1,613,504
-------------
California-17.2%
Burbank Redev Agy
FGIC Ser 03
5.625%, 12/01/28 1,660 1,820,422
California Dept of Wtr
Ser 02A
5.375%, 5/01/22 2,000 2,171,320
California St
General Obligation Ser 03
5.00%, 2/01/32 2,450 2,483,173
5.00%, 2/01/33 1,100 1,114,894
California St
General Obligation Ser 04
5.00%, 2/01/33 1,000 1,017,960
5.125%, 4/01/23 2,000 2,128,800
Golden St
Tobacco Settlement XLCA Ser 03B
5.50%, 6/01/33 3,000 3,234,240
_______________________________________________________________________________
6 o ACM MUNICIPAL SECURITIES INCOME FUND
Portfolio of Investments
- -------------------------------------------------------------------------------
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Golden St
Tobacco Settlement RADIAN
Ser 03B
5.50%, 6/01/43 $ 2,250 $ 2,392,582
Lincoln California Spl Tax
Ser 04
5.90%, 9/01/2024 500 506,340
Pomona Lease Rev
AMBAC Ser 03
5.50%, 6/01/24 1,465 1,624,333
5.50%, 6/01/34 3,000 3,244,830
-------------
21,738,894
-------------
Colorado-0.8%
Colorado Toll Rev
(Hwy E-470) Ser 00
Zero coupon, 9/01/35 10,000 1,022,100
-------------
Connecticut-7.3%
Connecticut Gaming Auth
(Mohegan Tribe) Ser 01
6.25%, 1/01/31(a) 3,000 3,171,240
Connecticut St General Obligation
MBIA Ser 412
7.96%, 12/01/11(a)(b) 5,000 6,078,700
-------------
9,249,940
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Florida-21.9%
Florida Hsg Fin Corp Rev MFHR
(Westlake Apts) FSA Ser 02-D1 AMT
5.40%, 3/01/42 8,780 8,992,652
Florida Hsg Fin Corp Rev MFHR
(Westminster Apts) FSA Ser 02-E1
AMT
5.40%, 4/01/42 2,850 2,923,644
Lee Cnty Hlth Fac Rev
(Shell Point Village Proj) Ser 99A
5.50%, 11/15/29 3,670 3,549,220
Miami Beach Hlth Fac Rev
(Mount Sinai Med Ctr)
6.75%, 11/15/24(a) 2,000 2,130,100
Miami-Dade Cnty Spl Oblig
MBIA Ser 04B
5.00%, 4/01/24 4,000 4,209,680
Orange Cnty Hlth Fac Rev
(Orlando Regl Healthcare) Ser 02
5.75%, 12/01/32 1,400 1,493,142
_______________________________________________________________________________
ACM MUNICIPAL SECURITIES INCOME FUND o 7
Portfolio of Investments
- -------------------------------------------------------------------------------
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Osceola Cnty Sch Brd Ctfs
FGIC Ser 04A
5.00%, 6/01/22 $ 2,815 $ 3,014,020
UCF Assn Ctfs
FGIC Ser 04A
5.125%, 10/01/24 1,325 1,416,279
-------------
27,728,737
-------------
Hawaii-2.1%
Hawaii Elec Rev
XLCA Ser 03B AMT
5.00%, 12/01/22 2,500 2,603,075
-------------
Illinois-9.2%
Chicago
General Obligation FSA Ser 04A
5.00%, 1/01/25 2,165 2,262,577
Chicago Arpt Rev
(O'Hare Intl Arpt) XLCA Ser B-1
5.25%, 1/01/34 3,100 3,219,319
Chicago Hsg Agy SFMR
(Mortgage Rev) GNMA/FNMA
Ser 02B AMT
6.00%, 10/01/33 710 770,180
Chicago Park Dist
General Obligation AMBAC Ser 04A
5.00%, 1/01/25 2,585 2,706,779
Cook Cnty Sch Dist
FSA Ser 04
4.60%, 12/01/20(c) 1,000 909,550
Metropolitan Pier & Exposition Rev
(McCormick Pl) MBIA Ser 02A
5.25%, 6/15/42 1,750 1,821,575
-------------
11,689,980
-------------
Indiana-1.9%
Hendricks Cnty Bldg Facs
General Obligation Ser 04
5.50%, 7/15/21 1,045 1,164,632
Indiana Bd Bk Rev
FSA Ser 04B
5.00%, 2/01/21 1,100 1,177,594
-------------
2,342,226
-------------
Louisiana-0.1%
Calcasieu Parish Hsg Agy SFMR
(Mortgage Rev) GNMA/FNMA
Ser 97A AMT
6.40%, 4/01/32 55 56,912
-------------
_______________________________________________________________________________
8 o ACM MUNICIPAL SECURITIES INCOME FUND
Portfolio of Investments
- -------------------------------------------------------------------------------
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Massachusetts-13.3%
Mass General Obligation
FSA Ser 04D
5.00%, 11/01/24 $ 2,200 $ 2,325,730
Mass General Obligation Ser 02
Prerefunded 11/01/12 @ 100
5.25%, 11/01/30 3,310 3,737,983
Mass General Obligation Ser 02
5.25%, 11/01/30 1,690 1,908,517
Mass Hlth & Ed Fac Hosp Rev
(New England Med Ctr) MBIA Ser 94
8.83%, 7/01/18(b) 5,000 5,221,550
Mass Hsg Fin Agy MFHR
(Rental Rev) AMBAC Ser 00A AMT
6.00%, 7/01/41 2,965 3,123,539
Mass Hsg Fin Agy MFHR
(Rental Rev) MBIA Ser 00H AMT
6.65%, 7/01/41 545 587,118
-------------
16,904,437
-------------
Michigan-5.0%
Michigan St Hosp Rev
(Trinity Hlth) Ser 00A
6.00%, 12/01/27 3,000 3,291,210
Saginaw Hosp Fac Rev
(Covenant Med Ctr) Ser 00F
6.50%, 7/01/30 2,775 3,057,301
-------------
6,348,511
-------------
Minnesota-0.9%
Shakopee Health Care Facs Rev
(St Francis Regl Med Ctr) Ser 04
5.10%, 9/01/25 1,200 1,201,176
-------------
Mississippi-7.4%
Adams Cnty Poll Ctl Rev
(International Paper Co) Ser 99 AMT
6.25%, 9/01/23 5,000 5,244,950
Gulfport Hosp Fac Rev
(Mem Hosp at Gulfport Proj) Ser 01A
5.75%, 7/01/31 4,000 4,176,720
-------------
9,421,670
-------------
Nevada-1.7%
Carson City Hosp Rev
(Carson-Tahoe Hosp Proj)
RADIAN Ser 03A
5.00%, 9/01/23 2,100 2,159,157
-------------
New Jersey-3.2%
New Jersey St Edl Facs
AMBAC Ser 02A-213
7.13%, 9/01/21(a)(b) 3,400 4,072,656
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_______________________________________________________________________________
ACM MUNICIPAL SECURITIES INCOME FUND o 9
Portfolio of Investments
- -------------------------------------------------------------------------------
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
New Mexico-5.3%
Dona Ana Cnty Tax Rev
AMBAC Ser 03
5.25%, 5/01/25 $ 750 $ 802,072
University of New Mexico
FSA FHA Ser 04
5.00%, 1/01/24 2,235 2,327,752
5.00%, 7/01/24 3,445 3,587,968
-------------
6,717,792
-------------
New York-10.3%
New York City
General Obligation Ser 04I
5.00%, 8/01/21 3,300 3,477,969
New York City Indl Dev Agy Rev
(Terminal One Group) Ser 94 AMT
6.125%, 1/01/24 8,100 8,436,555
New York City Indl Dev Agy Rev
(British Airways) Ser 98 AMT
5.25%, 12/01/32 1,500 1,093,515
-------------
13,008,039
-------------
North Carolina-0.8%
Charlotte NC Arpt Rev
MBIA Ser 04
5.25%, 7/01/24 1,000 1,069,070
-------------
North Dakota-2.2%
North Dakota Hsg Fin Agy SFMR
(Mortgage Rev) Ser 98E AMT
5.25%, 1/01/30 2,775 2,800,363
-------------
Ohio-10.0%
Cuyahoga Cnty Hosp Fac Rev
(University Hosp Hlth) Ser 00
7.50%, 1/01/30 2,400 2,664,960
Fairfield Cnty Hosp Fac Rev
(Fairfield Med Ctr Proj) RADIAN Ser 03
5.00%, 6/15/23 1,255 1,294,269
Ohio Hsg Fin Agy MFHR
(Mortgage Rev) GNMA Ser 97 AMT
6.15%, 3/01/29 4,340 4,483,741
Ohio State Wtr Dev Auth
(North Star) Ser 95 AMT
6.45%, 9/01/20 4,075 4,281,195
-------------
12,724,165
-------------
Pennsylvania-4.3%
Pennsylvania Parking Fac Rev
(30th St Station) ACA Ser 02 AMT
5.875%, 6/01/33 2,050 2,139,687
_______________________________________________________________________________
10 o ACM MUNICIPAL SECURITIES INCOME FUND
Portfolio of Investments
- -------------------------------------------------------------------------------
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Philadelphia Gas Wks Rev
AGC Ser 04
5.25%, 9/01/19 $ 2,045 $ 2,232,711
5.25%, 8/01/21 1,000 1,076,140
-------------
5,448,538
-------------
South Carolina-0.4%
Richland Lexington Arpt Rev
(Columbia Met Arpt)
FSA Ser 04 AMT
5.125%, 1/01/25 500 513,100
-------------
Tennessee-8.7%
Tenn Ed Loan Rev
(Educational Funding of South)
Ser 97B AMT
6.20%, 12/01/21 10,600 11,029,088
-------------
Texas-12.9%
Dallas TX Arpt Rev
(Fort Worth Intl Arpt) MBIA
Ser 03A AMT
5.25%, 11/01/25 2,000 2,095,380
Harris Cnty
Ser 03
5.00%, 10/01/23 1,400 1,476,482
Harris Cnty Toll Rev
FSA Ser 02
5.125%, 8/15/32 5,000 5,170,150
Lower Colorado Riv Auth
AMBAC Ser 03
5.25%, 5/15/25 1,800 1,918,782
Lower Colorado Riv Auth
MBIA Ser 02
5.00%, 5/15/31 1,500 1,537,920
Matagorda Cnty Rev
(Centerpoint Energy Houston
Electric LLC)
Ser 04
5.60%, 3/01/27 1,000 1,035,550
Richardson Hosp Auth Rev
(Richardson Medical Center) Ser 04
6.00%, 12/01/19 915 988,255
5.875%, 12/01/24 1,155 1,195,818
Seguin Ed Fac Rev
(Texas Lutheran Univ) Ser 04
5.25%, 9/01/28 1,000 982,650
-------------
16,400,987
-------------
_______________________________________________________________________________
ACM MUNICIPAL SECURITIES INCOME FUND o 11
Portfolio of Investments
- -------------------------------------------------------------------------------
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
Utah-2.1%
Davis Cnty Sales Tax Rev
AMBAC Ser 03B
5.25%, 10/01/23 $ 1,005 $ 1,085,852
Salt Lake City Wtr Rev
AMBAC Ser 04
5.00%, 7/01/23 1,500 1,587,645
-------------
2,673,497
-------------
Washington-1.2%
Seattle Hsg Auth Rev MFHR
(Wisteria Ct Proj) GNMA Ser 03
5.20%, 10/20/28 1,475 1,526,079
-------------
Wisconsin-3.0%
Wisconsin General Obligation Ser 03
5.00%, 11/01/26 3,700 3,779,550
-------------
Total Long-Term Municipal Bonds
(cost $199,236,916) 208,508,421
-------------
Short-Term Municipal Bonds-11.1%
Alabama-1.6%
Decatur Indl Dev Brd
(BP Amoco Chem Co) AMT Ser 01
1.79%, 11/01/35(d) 2,000 2,000,000
-------------
Massachusetts-4.4%
Massachusetts Central Artery
Ser 00A
1.74%, 12/01/30(d) 5,500 5,500,000
-------------
New York-3.4%
New York City Transitional Fin Auth Rev
NYC Recovery Ser 1-Sub 1C
1.72%, 11/01/22(d) 4,300 4,300,000
-------------
South Carolina-0.4%
Florence Cnty Solid Waste Disp
(Roche Carolina Inc) AMT Ser 97
1.81%, 4/01/27(d) 500 500,000
-------------
Texas-1.3%
Gulf Coast Indl Dev Auth Rev
(BP Global Power Corp) AMT
Ser 03
1.79%, 4/01/38(d) 1,700 1,700,000
-------------
Total Short-Term Municipal Bonds
(cost $14,000,000) 14,000,000
-------------
_______________________________________________________________________________
12 o ACM MUNICIPAL SECURITIES INCOME FUND
Portfolio of Investments
- -------------------------------------------------------------------------------
Value
- -------------------------------------------------------------------------------
Total Investments-175.6%
(cost $213,236,916) $ 222,508,421
Other assets less liabilities-(4.6)% (5,769,915)
Preferred Stock, at redemption
value-(71.0)% (90,000,000)
-------------
Net Assets Applicable to Common
Shareholders-100%(e) $ 126,738,506
=============
INTEREST RATE SWAP TRANSACTIONS (see Note C)
Rate Type
-----------------------------------
Notional Payments Payments
Swap Amount Termination made by received by Unrealized
Counter Party (000) Date the Fund the Fund Appreciation
- --------------- ---------- ------------ -------------- ------------------- ---------------
BMA* Municipal
J.P. Morgan $3,400 11/18/2004 1.297% Swap Index(TM) $ 2,078
BMA* Municipal
J.P. Morgan 5,000 7/8/2005 1.257% Swap Index(TM) 22,630
--------
$ 24,708
========
* BMA (Bond Market Association)
(a) Private Placement.
(b) Inverse Floater Security-Security with variable interest rate that moves
in the opposite direction of short-term interest rates.
(c) Initial yield is presented. Interest rate after 12/01/07 will be 5.00%.
(d) Variable rate coupon, rate shown as of October 31, 2004.
(e) Portfolio percentages are calculated based on net assets applicable to
common shareholders.
Glossary of Terms:
ACA - American Capital Access (Financial Guaranty Corporation)
AGC - American Guaranty Corporation
AMBAC - American Municipal Bond Assurance Corporation
AMT - Alternative Minimum Tax
FGIC - Financial Guaranty Insurance Company
FHA - Federal Housing Administration
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance, Inc.
GNMA - Government National Mortgage Association
MBIA - Municipal Bond Investors Assurance Corporation
MFHR - Multi-Family Housing Revenue
RADIAN - Radian Group, Inc.
SFMR - Single Family Mortgage Revenue
XLCA - XL Capital Assurance, Inc.
See notes to financial statements.
_______________________________________________________________________________
ACM MUNICIPAL SECURITIES INCOME FUND o 13
Statement of Assets & Liabilities
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
October 31, 2004
ASSETS
Investments in securities, at value (cost $213,236,916) $ 222,508,421
Cash 266,960
Interest receivable 3,337,877
Receivable for investment securities sold 2,040,000
Unrealized appreciation of swap contracts 24,708
Prepaid expenses 13,316
-------------
Total assets 228,191,282
-------------
LIABILITIES
Payable for investment securities purchased 11,174,166
Advisory fee payable 109,001
Dividend payable--preferred shares 40,077
Administrative fee payable 32,700
Accrued expenses and other liabilities 96,832
-------------
Total liabilities 11,452,776
-------------
PREFERRED STOCK, AT REDEMPTION VALUE
$.01 par value per share; 3,600 shares
Auction Preferred Stock authorized,
issued and outstanding at $25,000
per share liquidation preference 90,000,000
-------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 126,738,506
=============
COMPOSITION OF NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS
Common Stock, $.01 par value per share;
99,996,400 shares authorized,
11,140,470 shares issued and outstanding $ 111,405
Additional paid-in capital 140,842,492
Undistributed net investment income 119,931
Accumulated net realized loss on investment transactions (23,631,535)
Net unrealized appreciation of investments 9,296,213
-------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 126,738,506
=============
NET ASSET VALUE APPLICABLE TO COMMON SHAREHOLDERS
(based on 11,140,470 common shares outstanding) $11.38
======
See notes to financial statements.
_______________________________________________________________________________
14 o ACM MUNICIPAL SECURITIES INCOME FUND
Statement of Operations
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended October 31, 2004
INVESTMENT INCOME
Interest $ 11,807,915
EXPENSES
Advisory fee $ 1,069,790
Administrative fee 320,937
Auction Preferred Stock--auction
agent's fees 225,873
Audit and legal 134,014
Custodian 125,113
Printing 42,789
Directors' fees and expenses 34,615
Transfer agency 26,694
Registration fees 24,461
Miscellaneous 46,198
------------
Total expenses 2,050,484
------------
Net investment income 9,757,431
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) on:
Investment transactions 397,519
Swap transactions (9,493)
Net change in unrealized appreciation/
depreciation of:
Investments 4,142,446
Swaps 24,708
------------
Net gain on investments 4,555,180
------------
DIVIDENDS TO AUCTIONED PREFERRED
SHAREHOLDERS FROM
Net investment income (980,894)
------------
NET INCREASE IN NET ASSETS APPLICABLE
TO COMMON SHAREHOLDERS RESULTING
FROM OPERATIONS $ 13,331,717
============
See notes to financial statements.
_______________________________________________________________________________
ACM MUNICIPAL SECURITIES INCOME FUND o 15
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS
Year Ended Year Ended
October 31, October 31,
2004 2003
============= =============
INCREASE (DECREASE) IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS
RESULTING FROM OPERATIONS
Net investment income $ 9,757,431 $ 10,678,570
Net realized gain (loss) on investment
transactions 388,026 (4,988,518)
Net change in unrealized
appreciation/depreciation
of investments 4,167,154 6,318,119
DIVIDENDS TO AUCTION PREFERRED
SHAREHOLDERS FROM
Net Investment Income (980,894) (1,026,752)
------------- -------------
Net increase in net assets
applicable to common shareholders
resulting from operations 13,331,717 10,981,419
DIVIDENDS AND DISTRIBUTIONS TO
COMMON SHAREHOLDERS FROM
Net investment income (9,660,631) (8,802,335)
COMMON STOCK TRANSACTIONS
Reinvestment of dividends resulting in the
issuance of common stock 744,979 820,580
------------- -------------
Total increase 4,416,065 2,999,664
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS
Beginning of period 122,322,441 119,322,777
------------- -------------
End of period (including undistributed
net investment income of $119,931
and $1,013,518, respectively) $ 126,738,506 $ 122,322,441
============= =============
See notes to financial statements.
_______________________________________________________________________________
16 o ACM MUNICIPAL SECURITIES INCOME FUND
Notes to Financial Statements
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
NOTE A
Significant Accounting Policies
ACM Municipal Securities Income Fund, Inc. (the "Fund"), was incorporated in
the state of Maryland on February 11, 1993 and is registered under the
Investment Company Act of 1940 as a diversified, closed-end management
investment company. The financial statements have been prepared in conformity
with U.S. generally accepted accounting principles, which require management to
make certain estimates and assumptions that affect the reported amounts of
assets and liabilities in the financial statements and amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates. The following is a summary of significant accounting policies
followed by the Fund.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the
basis of market quotations or, if market quotations are not readily available
or are deemed unreliable, at "fair value" as determined in accordance with
procedures established by and under the general supervision of the Fund's Board
of Directors.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange or on a foreign securities exchange are valued at the last
sale price at the close of the exchange or foreign securities exchange. If
there has been no sale on such day, the securities are valued at the mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
are valued using the closing settlement price or, in the absence of such a
price, the most recent quoted bid price. If there are no quotations available
for the day of valuation, the last available closing settlement price is used;
securities traded in the over-the-counter market, (OTC) (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the
"Adviser") may
_______________________________________________________________________________
ACM MUNICIPAL SECURITIES INCOME FUND o 17
Notes to Financial Statements
- -------------------------------------------------------------------------------
establish procedures whereby changes in market yields or spreads are used to
adjust, on a daily basis, a recently obtained quoted price on a security; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund values its
securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim and may materially affect the
value of those securities.
2. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute substantially
all of its investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. Investment Income and Investment Transactions
Interest income is accrued daily. Investment transactions are accounted for on
the trade date securities are purchased or sold. Investment gains and losses
are determined on the identified cost basis. The Fund amortizes premiums and
accretes original issue discounts and market discounts as adjustments to
interest income.
4. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
U.S. generally accepted accounting principles. To the extent these differences
are permanent, such amounts are reclassified within the capital accounts based
on their federal tax basis treatment; temporary differences do not require such
reclassification.
NOTE B
Advisory, Administrative Fees and Other Transactions with Affiliates
Under the terms of an investment advisory agreement, the Fund pays the Adviser
an advisory fee at an annual rate of .50 of 1% of the average weekly net assets
of the Fund. Such fee is accrued daily and paid monthly.
Under the terms of a Shareholder Inquiry Agency Agreement with Alliance Global
Investor Services, Inc. (AGIS), an affiliate of the Adviser, the Fund reim-
_______________________________________________________________________________
18 o ACM MUNICIPAL SECURITIES INCOME FUND
Notes to Financial Statements
- -------------------------------------------------------------------------------
burses AGIS for costs relating to servicing phone inquiries for the Fund.
During the year ended October 31, 2004, there was no reimbursement paid to AGIS.
Under the terms of an Administration Agreement, the Fund pays Alliance Capital
Management L.P. (the "Administrator") an administration fee at an annual rate
of .15 of 1% of the average weekly net assets of the Fund. Such fee is accrued
daily and paid monthly. The Administrator has engaged Prudential Investments
LLC (the "Sub-Administrator"), an indirect, wholly-owned subsidiary of
Prudential Financial, Inc., to act as sub-administrator. The Administrator, out
of its own assets, will pay the Sub-Administrator a monthly fee equal to an
annual rate of .10 of 1% of the Fund's average weekly net assets. The
Sub-Administrator prepares financial and regulatory reports for the Fund and
provides other clerical services.
NOTE C
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the year ended October 31, 2004, were as follows:
Purchases Sales
============= =============
Investment securities (excluding
U.S. government securities) $ 75,792,898 $ 74,400,753
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation (excluding swaps) are as
follows:
Gross unrealized appreciation $ 10,307,605
Gross unrealized depreciation (1,202,180)
-------------
Net unrealized appreciation $ 9,105,425
=============
Swap Agreements
The Fund may enter into swaps to hedge its exposure to interest rates and
credit risk and for investment purposes. A swap is an agreement that obligates
two parties to exchange a series of cash flows at specified intervals based
upon or calculated by reference to changes in specified prices or rates for a
specific amount of an underlying asset. The payment flows are usually netted
against each other, with the difference being paid by one party to the other.
Risks may arise as a result of the failure of the counterparty to the swap
contract to comply with the terms of the swap contract. The loss incurred by
the failure of the counterparty is generally limited to the net interest
payment to be received by the Fund, and/or the termination value at the end of
the contract. Therefore, the Fund considers the creditworthiness of each
counterparty to a swap contract in evaluating potential credit risk.
Additionally, risks may arise from unanticipated movements in interest rates or
in the value of the underlying securities.
_______________________________________________________________________________
ACM MUNICIPAL SECURITIES INCOME FUND o 19
Notes to Financial Statements
- -------------------------------------------------------------------------------
As of November 1, 2003, the Fund has adopted the method of accounting for
interim payments on swap contracts in accordance with Financial Accounting
Standards Board Statement No. 133. The Fund accrues for the interim payments on
swap contracts on a daily basis, with the net amount recorded within unrealized
appreciation/depreciation of swap contracts on the statement of assets and
liabilities. Once the interim payments are settled in cash, the net amount is
recorded as realized gain/loss on swaps, in addition to realized gain/loss
recorded upon the termination of swap contracts on the statement of operations.
Prior to November 1, 2003, these interim payments were reflected within
interest income/expense in the statement of operations. Fluctuations in the
value of swap contracts are recorded as a component of net change in unrealized
appreciation/depreciation of investments.
NOTE D
Distributions To Common Shareholders
The tax character of distributions to be paid for the year ending October 31,
2004 will be determined at the end of the current fiscal year. The tax
character of distributions paid to common shareholders during the fiscal years
ended October 31, 2004 and October 31, 2003 were as follows:
2004 2003
============= =============
Distributions paid from:
Ordinary income $ 65,384 $ 87,103
Tax-exempt income 9,595,248 8,715,232
------------- -------------
Total distributions paid $ 9,660,632 $ 8,802,335
============= =============
As of October 31, 2004, the components of accumulated earnings/(deficit)
applicable to common shareholders on a tax basis were as follows:
Undistributed net tax exempt income $ 162,944
Accumulated capital and other losses (23,465,455)(a)
Unrealized appreciation/(depreciation) 9,127,197(b)
-------------
Total accumulated earnings/(deficit) $ (14,175,314)(c)
=============
(a) On October 31, 2004, the Fund had a net capital loss carryforward of
$23,465,455 of which $6,110,148 expires in the year 2007, $10,294,946 expires
in the year 2008, $1,971,343 expires in the year 2010, and $5,089,018 expires
in the year 2011. To the extent future capital gains are offset by capital loss
carryforward, such gains will not be distributed. During the current fiscal
year capital loss carryforward of $365,370 was utilized.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales and the difference between the book and tax treatment of
swap income.
(c) The difference between book-basis and tax-basis components of accumulated
earnings/(deficits) is attributable primarily to dividends payable.
During the current fiscal year, permanent differences, primarily due to the tax
treatment of swap income, resulted in a net decrease of undistributed net
investment income, and a decrease in accumulated net realized loss on
investment transactions. This reclassification had no effect on net assets.
_______________________________________________________________________________
20 o ACM MUNICIPAL SECURITIES INCOME FUND
Notes to Financial Statements
- -------------------------------------------------------------------------------
NOTE E
Common Stock
There are 99,996,400 shares of $0.01 par value common stock authorized. There
are 11,140,470 shares of common stock outstanding at October 31, 2004. During
the year ended October 31, 2004 and the year ended October 31, 2003, the Fund
issued 65,850 and 73,818 shares, respectively, in connection with the Fund's
dividend reinvestment plan.
NOTE F
Preferred Stock
The Fund has issued and outstanding 3,600 shares of Auction Preferred Stock,
consisting of 1,200 shares each of Series A, Series B and Series C. The
preferred shares have a liquidation value of $25,000 per share plus
accumulated, unpaid dividends.
The dividend rate on Series A is 1.323%, effective through March 9, 2005. The
dividend rate on Series B is 1.55%, effective through November 1, 2004. The
dividend rate on Series C is 1.51%, effective through November 4, 2004.
At certain times, the Preferred Shares are redeemable by the Fund, in whole or
in part, at $25,000 per share plus accumulated, unpaid dividends.
Although the Fund will not ordinarily redeem the Preferred Shares, it may be
required to redeem shares if, for example, the Fund does not meet an asset
coverage ratio required by law or to correct a failure to meet a rating agency
guideline in a timely manner. The Fund voluntarily may redeem the Preferred
Shares in certain circumstances.
The Preferred Shareholders, voting as a separate class, have the right to elect
at least two Directors at all times and to elect a majority of the Directors in
the event two years' dividends on the Preferred Shares are unpaid. In each
case, the remaining Directors will be elected by the Common Shareholders and
Preferred Shareholders voting together as a single class. The Preferred
Shareholders will vote as a separate class on certain other matters as required
under the Fund's Charter, the Investment Company Act of 1940 and Maryland law.
NOTE G
Risks Involved in Investing in the Fund
Interest Rate Risk and Credit Risk--Interest rate risk is the risk that changes
in interest rates will affect the value of the Fund's investments in
fixed-income debt securities such as bonds or notes. Increases in interest
rates may cause the value of the Fund's investments to decline. Credit risk is
the risk that the issuer or guarantor of a debt security, or the counterparty
to a derivative contract, will be unable or unwilling to make timely principal
and/or interest payments, or to
_______________________________________________________________________________
ACM MUNICIPAL SECURITIES INCOME FUND o 21
Notes to Financial Statements
- -------------------------------------------------------------------------------
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.
Indemnification Risk--In the ordinary course of business, the Fund enters into
contracts that contain a variety of indemnifications. The Fund's maximum
exposure under these arrangements is unknown. However, the Fund has not had
prior claims or losses pursuant to these indemnification provisions and expects
the risk of loss thereunder to be remote.
NOTE H
Legal Proceedings
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of the New York Attorney General ("NYAG")
have been investigating practices in the mutual fund industry identified as
"market timing" and "late trading" of mutual fund shares. Certain other
regulatory authorities have also been conducting investigations into these
practices within the industry and have requested that the Adviser provide
information to them. The Adviser has been cooperating and will continue to
cooperate with all of these authorities. The shares of the Fund are not
redeemable by the Fund, but are traded on an exchange at prices established by
the market. Accordingly, the Fund and its shareholders are not subject to the
market timing and late trading practices that are the subject of the
investigations mentioned above or the lawsuits described below. Please see
below for a description of the agreements reached by the Adviser and the SEC
and NYAG in connection with the investigations mentioned above.
Numerous lawsuits have been filed against the Adviser and certain other
defendants in which plaintiffs make claims purportedly based on or related to
the same practices that are the subject of the SEC and NYAG investigations
referred to above. Some of these lawsuits name the Fund as a party. The
lawsuits are now pending in the United States District Court for the District
of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict
Litigation transferring and centralizing all of the mutual funds involving
market and late trading in the District of Maryland. Management of the Adviser
believes that these private lawsuits are not likely to have a material adverse
effect on the results of operations or financial condition of the Fund.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in
_______________________________________________________________________________
22 o ACM MUNICIPAL SECURITIES INCOME FUND
Notes to Financial Statements
- -------------------------------------------------------------------------------
an Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among
the key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the "Reimbursement
Fund") to compensate mutual fund shareholders for the adverse effects of market
timing attributable to market timing relationships described in the SEC Order.
According to the SEC Order, the Reimbursement Fund is to be paid, in order of
priority, to fund investors based on (i) their aliquot share of losses suffered
by the fund due to market timing, and (ii) a proportionate share of advisory
fees paid by such fund during the period of such market timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from some of
the AllianceBernstein long-term, open-end retail funds, commencing January 1,
2004, for a period of at least five years; and
(iii) The Adviser agreed to implement changes to its governance and compliance
procedures. Additionally, the SEC Order contemplates that the Adviser's
registered investment company clients, including the Fund, will introduce
governance and compliance changes.
The shares of the Fund are not redeemable by the Fund, but are traded on an
exchange at prices established by the market. Accordingly, the Fund and its
shareholders are not subject to the market timing practices described in the
SEC Order and are not expected to participate in the Reimbursement Fund. Since
the Fund is a closed-end fund, it will not have its advisory fee reduced
pursuant to the terms of the agreements mentioned above.
The Adviser and approximately twelve other investment management firms were
publicly mentioned in connection with the settlement by the SEC of charges that
an unaffiliated broker/dealer violated federal securities laws relating to its
receipt of compensation for selling specific mutual funds and the disclosure of
such compensation. The SEC has indicated publicly that, among other things, it
is considering enforcement action in connection with mutual funds' disclosure
of such arrangements and in connection with the practice of considering mutual
fund sales in the direction of brokerage commissions from fund portfolio
transactions. The SEC has issued subpoenas to the Adviser in connection with
this matter and the Adviser has provided documents and other information to the
SEC and is cooperating fully with its investigation.
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Capital Management Holding L.P., Alliance Capital
Management Corporation, AXA Financial, Inc., AllianceBernstein Investment
Research & Management, Inc., certain current and former directors of the
_______________________________________________________________________________
ACM MUNICIPAL SECURITIES INCOME FUND o 23
Notes to Financial Statements
- -------------------------------------------------------------------------------
AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin
Complaint names certain of the AllianceBernstein mutual funds as nominal
defendants. The Aucoin Complaint was filed in the United States District Court
for the Southern District of New York by an alleged shareholder of an
AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other
things, (i) that certain of the defendants improperly authorized the payment of
excessive commissions and other fees from fund assets to broker-dealers in
exchange for preferential marketing services, (ii) that certain of the
defendants misrepresented and omitted from registration statements and other
reports material facts concerning such payments, and (iii) that certain
defendants caused such conduct as control persons of other defendants. The
Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and
48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act,
breach of common law fiduciary duties, and aiding and abetting breaches of
common law fiduciary duties. Plaintiffs seek an unspecified amount of
compensatory damages and punitive damages, rescission of their contracts with
the Adviser, including recovery of all fees paid to the Adviser pursuant to
such contracts, an accounting of all fund-related fees, commissions and soft
dollar payments, and restitution of all unlawfully or discriminatorily obtained
fees and expenses.
Since June 22, 2004, numerous additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants, and others may be filed.
The Adviser believes that these matters are not likely to have a material
adverse effect on the Fund or the Adviser's ability to perform advisory
services relating to the Fund.
_______________________________________________________________________________
24 o ACM MUNICIPAL SECURITIES INCOME FUND
Financial Highlights
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Year Ended October 31,
---------------------------------------------------------------
2004(a) 2003 2002 2001 2000
----------- ----------- ----------- ----------- -----------
Net asset value, beginning
of period $11.05 $10.85 $12.10 $11.71 $11.64
INCOME FROM INVESTMENT
OPERATIONS
Net investment income .88 .97 1.08 1.15 1.12
Net realized and unrealized
gain (loss) on investment
transactions .41 .12 (1.32) .45 .16
Dividends to preferred
shareholders from net
investment income (common
stock equivalent basis) (.09) (.09) (.14) (.27) (.34)
Net increase (decrease) in net
asset value from operations 1.20 1.00 (.38) 1.33 .94
LESS: DIVIDENDS AND
DISTRIBUTIONS TO COMMON
SHAREHOLDERS
Dividends from net investment
income (.87) (.80) (.87) (.88) (.78)
Distributions in excess of net
investment income -0- -0- -0- (.06) (.09)
Total dividends and distributions
to common shareholders (.87) (.80) (.87) (.94) (.87)
Net asset value, end of period $11.38 $11.05 $10.85 $12.10 $11.71
Market price, end of period $12.09 $11.62 $11.50 $12.70 $12.56
Premium 6.24% 5.16% 5.99% 4.96% 7.26%
TOTAL RETURN
Total investment return
based on:(b)
Market price 12.34% 8.53% (2.44)% 9.14% 16.16%
Net asset value 11.20% 9.39% (3.35)% 11.59% 8.74%
RATIOS/SUPPLEMENTAL DATA
Net assets, applicable to
common shareholders, end
of period (000's omitted) $126,739 $122,322 $119,323 $132,201 $127,142
Preferred stock, at redemption
value ($25,000 per share
liquidation preference)
(000's omitted) $90,000 $90,000 $90,000 $90,000 $90,000
Ratios to average net assets
applicable to common
shareholders of:
Expenses(c) 1.65% 1.71% 1.65% 1.53% 1.61%
Net investment income,
before preferred stock
dividends(c) 7.87% 8.78% 9.32% 9.60% 9.92%
Preferred stock dividends .79% .84% 1.19% 2.26% 3.03%
Net investment income, net of
preferred stock dividends 7.08% 7.94% 8.13% 7.34% 6.89%
Portfolio turnover rate 36% 32% 24% 82% 360%
Asset coverage ratio 241% 236% 233% 247% 241%
See footnote summary on page 26.
_______________________________________________________________________________
ACM MUNICIPAL SECURITIES INCOME FUND o 25
Financial Highlights
- -------------------------------------------------------------------------------
(a) As of November 1, 2003, the Fund has adopted the method of accounting for
interim payments on swap contracts in accordance with Financial Accounting
Standards Board Statement No. 133. These interim payments are reflected within
net realized and unrealized gain (loss) on swap contracts, however, prior to
November 1, 2003, these interim payments were reflected within interest
income/expense on the statement of operations. For the year ended October 31,
2004, the effect of this change to the net investment income and the net
realized and unrealized gain (loss) on investment transactions was less than
$0.01 per share and the ratio of net investment income to average net assets
was less than .01%.
(b) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day of
each period reported. Dividends and distributions, if any, are assumed for
purposes of this calculation, to be reinvested at prices obtained under the
Fund's dividend reinvestment plan. Generally, total investment return based on
net asset value will be higher than total investment return based on market
value in periods where there is an increase in the discount or a decrease in
the premium of the market value to net asset value from the beginning to the
end of such periods. Conversely, total investment return based on net asset
value will be lower than total investment return based on market value in
periods where there is a decrease in the discount or an increase in the premium
of the market value to the net asset value from the beginning to the end of the
period.
(c) These expense and net investment income ratios do not reflect the effect
of dividend payments to preferred shareholders.
_______________________________________________________________________________
26 o ACM MUNICIPAL SECURITIES INCOME FUND
Report of Independent Registered Public Accounting Firm
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
ACM Municipal Securities Income Fund, Inc.
We have audited the accompanying statement of assets and liabilities of ACM
Municipal Securities Income Fund, Inc., (the "Fund") including the portfolio of
investments, as of October 31, 2004, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of
the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with 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. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements and financial
highlights. Our procedures included confirmation of securities owned as of
October 31, 2004, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of ACM
Municipal Securities Income Fund, Inc. at October 31, 2004, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
December 15, 2004
FEDERAL TAX INFORMATION (unaudited)
In accordance with Federal tax law, the Fund's designation of "exempt-interest
dividends" paid during the fiscal year ended October 31, 2004 was $10,569,502.
As required by Federal tax law rules, shareholders will receive notification of
their portion of the Fund's taxable ordinary dividends (if any) and capital
gain distributions (if any) paid for the 2004 calendar year on Form 1099-DIV
which will be mailed by January 31, 2005.
_______________________________________________________________________________
ACM MUNICIPAL SECURITIES INCOME FUND o 27
Additional Information
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION
(unaudited)
Shareholders whose shares are registered in their own names will automatically
be participants in the Dividend Reinvestment and Cash Purchase Plan (the
"Plan"), pursuant to which dividends and capital gain distributions to
shareholders will be paid in or reinvested in additional shares of the Fund
(the "Dividend Shares"). Equiserve Trust Company N.A. (the "Agent") will act as
agent for participants under the Plan. Shareholders whose shares are held in
the name of broker or nominee should contact such broker or nominee to
determine whether or how they may participate in the Plan.
If the Board declares an income distribution or determines to make a capital
gain distribution payable either in shares or in cash, as holders of the Common
Stock may have elected, non-participants in the Plan will receive cash and
participants in the Plan will receive the equivalent in shares of Common Stock
of the Fund valued as follows:
(i) If the shares of Common Stock are trading at net asset value or at a
premium above net asset value at the time of valuation, the Fund will issue new
shares at the greater of net asset value or 95% of the then current market
price.
(ii) If the shares of Common Stock are trading at a discount from net asset
value at the time of valuation, the Plan Agent will receive the dividend or
distribution in cash and apply it to the purchase of the Fund's shares of
Common Stock in the open market on the New York Stock Exchange or elsewhere,
for the participants' accounts. Such purchases will be made on or shortly after
the payment date for such dividend or distribution and in no event more than 30
days after such date except where temporary curtailment or suspension of
purchase is necessary to comply with Federal securities laws. If, before the
Plan agent has completed its purchases, the market price exceeds the net asset
value of a share of Common Stock, the average purchase price per share paid by
the Plan agent may exceed the net asset value of the Fund's shares of Common
Stock, resulting in the acquisition of fewer shares than if the dividend or
distribution had been paid in shares issued by the Fund.
The Agent will maintain all shareholders' accounts in the Plan and furnish
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Agent in non-certificate form in the name of
the participant, and each shareholder's proxy will include those shares
purchased or received pursuant to the Plan.
There will be no charges with respect to shares issued directly by the Fund to
satisfy the dividend reinvestment requirements. However, each participant will
pay a pro rata share of brokerage commissions incurred with respect to the
Agent's open market purchases of shares. In each case, the cost per share of
shares purchased for each shareholder's account will be the average
_______________________________________________________________________________
28 o ACM MUNICIPAL SECURITIES INCOME FUND
Additional Information
- -------------------------------------------------------------------------------
cost, including brokerage commissions, of any shares purchased in the open
market plus the cost of any shares issued by the Fund.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payments made and any dividend or distribution paid subsequent
to written notice of the change sent to participants in the Plan at least 90
days before the record date for such dividend or distribution. The Plan may
also be amended or terminated by the Agent on at least 90 days' written notice
to participants in the Plan. All correspondence concerning the Plan should be
directed to the Agent at Equiserve Trust Company N.A., P.O. Box 43011,
Providence, RI 02940-3011.
Since the filing of the most recent amendment to the Fund's registration
statement with the Securities and Exchange Commission, there have been (i) no
material changes in the Fund's investment objectives or policies, (ii) no
changes to the Fund's charter or by-laws that would delay or prevent a change
of control of the Fund, and (iii) no material changes in the principal risk
factors associated with investment in the Fund, and (iv) no change to the
persons primarily responsible for the day-to-day management of the Fund's
investment port-folio, who are David Dowden and Terrance Hults, each of whom is
a Vice President of the Fund.
_______________________________________________________________________________
ACM MUNICIPAL SECURITIES INCOME FUND o 29
Board of Directors
- -------------------------------------------------------------------------------
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Marc O. Mayer, President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
Dr. James M. Hester(1)
Donald J. Robinson(1)
OFFICERS
Robert B. Davidson, III, Senior Vice President
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer
David M. Dowden(2), Vice President
Terrance T. Hults(2), Vice President
Mark R. Manley, Secretary
Mark D. Gersten, Treasurer and Chief Financial Officer
Thomas R. Manley, Controller
Administrator
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, NY 10105
Sub-Administrator
Prudential Investments LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Common Stock: Dividend Paying Agent, Transfer Agent and Registrar
Equiserve Trust Company N.A.
P.O. Box 43011
Providence, RI 02940-3011
Preferred Stock: Dividend Paying Agent, Transfer Agent and Registrar
The Bank of New York
100 Church Street
New York, NY 10286
Independent Registered Public Accounting Firm
Ernst & Young LLP
5 Times Square
New York, NY 10036-6530
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Notice is hereby given in accordance with Section 23(c) of the Investment
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 ACM Municipal Securities Income Fund for their information.
This is not a prospectus, circular or representation intended for use in the
purchase of shares of the Fund or any securities mentioned in the report.
(1) Member of the Audit Committee and the Governance and Nominating Committee.
(2) Messrs. Dowden and Hults are the persons primarily responsible for the
day-to-day management of the Fund's investment portfolio.
_______________________________________________________________________________
30 o ACM MUNICIPAL SECURITIES INCOME FUND
Management of the Fund
- -------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the
Board of Directors. Certain information concerning the Fund's Directors is set
forth below.
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
DATE OF BIRTH, OCCUPATION(S) OVERSEEN BY HELD BY
(YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- -----------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTOR
Marc O. Mayer, + Executive Vice President of ACMC 68 None
1345 Avenue of the since 2001; prior thereto, Chief
Americas Executive Officer of Sanford C.
New York, NY 10105 Bernstein & Co., LLC and its
10/2/57 (2003) predecessor since prior to 1999.
DISINTERESTED DIRECTORS
William H. Foulk, Jr., # Investment adviser and an 116 None
2 Sound View Drive independent consultant. He was
Suite 100 formerly Senior Manager of Barrett
Greenwich, CT 06830 Associates, Inc., a registered
9/7/32 (1998) investment adviser, with which
Chairman of the Board he had been associated since
prior to 1999. 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.
Ruth Block, #** Formerly Executive Vice President 96 None
500 SE Mizner Blvd., and Chief Insurance Officer of The
Boca Raton, FL 33432 Equitable Life Assurance Society
11/7/30 (1993) of the United States; Chairman and
Chief Executive Officer of Evlico;
Director of Avon, BP (oil and gas),
Ecolab Incorporated (specialty
chemicals), Tandem Financial Group
and Donaldson, Lufkin & Jenrette
Securities Corporation; former
Governor at Large National Associ-
ation of Securities Dealers, Inc.
David H. Dievler, # Independent consultant. Until 100 None
P.O. Box 167 December 1994 he was Senior
Spring Lake, NJ 07762 Vice President of Alliance Capital
10/23/29 (1993) Management Corporation ("ACMC")
responsible for mutual fund admin-
istration. Prior to joining ACMC in
1984 he was Chief Financial Officer
of Eberstadt Asset Management
since 1968. Prior to that he was a
Senior Manager at Price Waterhouse
& Co. Member of American Institute
of Certified Public Accountants
since 1953.
_______________________________________________________________________________
ACM MUNICIPAL SECURITIES INCOME FUND o 31
Management of the Fund
- -------------------------------------------------------------------------------
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
DATE OF BIRTH, OCCUPATION(S) OVERSEEN BY HELD BY
(YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- -----------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
John H. Dobkin, # Consultant. Formerly President of 98 None
P.O. Box 12 Save Venice, Inc. (preservation
Annandale, NY 12504 organization) from 2001-2002,
2/19/42 (1998) a 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 and during 1988-1992,
he was Director and Chairman of
the Audit Committee of ACMC.
Dr. James M. Hester, # Formerly President of the Harry 11 None
25 Cleveland Lane Frank Guggenheim Foundation,
Princeton, NJ 08540 New York University and the
4/19/24 (1993) New York Botanical Garden.
Formerly Rector of the United
Nations University and Vice
Chairman of the Board of the
Federal Reserve Bank of New York.
Donald J. Robinson, # Senior Counsel to the law firm of 96 None
98 Hell's Peak Road Orrick, Herrington & Sutcliffe LLP
Weston, VT 05161 since prior to 1999. Formerly a
8/24/34 (1996) senior partner and a member of
the Executive Committee of that
firm. Formerly a member and
Chairman of the Municipal Securities
Rulemaking Board and Trustee of
the Museum of the City of New York.
* There is no stated term of office for the Fund's Directors.
# Member of the Audit Committee and the Governance and Nominating Committee.
** Ms. Block was an "interested person", as defined in the 1940 Act, until
October 21, 2004 by reason of her ownership of 116 American Depositary Shares
of AXA having a value of approximately $2,396. AXA is a controlling person of
ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part
of the demutualization of The Equitable Life Assurance Society of the United
States, which were subsequently converted through a corporate action into 116
American Depositary Shares of AXA.
+ Mr. Mayer is an "interested person", as defined in the 1940 Act, due to his
position as Executive Vice President of ACMC.
_______________________________________________________________________________
32 o ACM MUNICIPAL SECURITIES INCOME FUND
Management of the Fund
- -------------------------------------------------------------------------------
Officer Information
Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION
AND DATE OF BIRTH WITH FUND DURING PAST 5 YEARS
- --------------------------------------------------------------------------------------------------------------
Marc O. Mayer President See biography above.
10/2/57
Robert B. Davidson, III Senior Vice President Senior Vice President of ACMC,** with
4/8/61 which he has been associated since
prior to 1999.
Philip L. Kirstein Senior Vice President Senior Vice President, Independent
5/29/45 and Independent Compliance Officer-Mutual Funds of
Compliance Officer ACMC 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 and First Vice
President of Merrill Lynch Investment
Managers, LLP since prior to 1999 until
March 2003.
David M. Dowden Vice President Senior Vice President of ACMC,** with
11/21/65 which he has been associated since
prior to 1999.
Terrance T. Hults Vice President Senior Vice President of ACMC,** with
5/17/66 which he has been associated since
prior to 1999.
Mark R. Manley Secretary Senior Vice President, Deputy General
10/23/62 Counsel and Chief Compliance Officer
of ACMC,** with which he has been
associated since prior to 1999.
Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global
10/4/50 Financial Officer Investor Services, Inc. ("AGIS"),** and a
Vice President of AllianceBernstein
Investment Research and
Management, Inc. ("ABIRM"),** with
which he has been associated since
prior to 1999.
Thomas R. Manley Controller Vice President of ACMC, ** with which
8/3/51 he has been associated since prior to
1999.
* The address for each of the Fund's officers is 1345 Avenue of the Americas,
New York, NY 10105.
** ACMC, AGIS and ABIRM are affiliates of the Fund.
_______________________________________________________________________________
ACM MUNICIPAL SECURITIES INCOME FUND o 33
AllianceBernstein Family of Funds
- -------------------------------------------------------------------------------
ALLIANCEBERNSTEIN FAMILY OF FUNDS
- --------------------------------------------
Wealth Strategies Funds
- --------------------------------------------
Balanced Wealth Strategy
Wealth Appreciation Strategy
Wealth Preservation Strategy
Tax-Managed Balanced Wealth Strategy
Tax-Managed Wealth Appreciation Strategy
Tax-Managed Wealth Preservation Strategy
- --------------------------------------------
Blended Style Funds
- --------------------------------------------
U.S. Large Cap Portfolio
International Portfolio
Tax-Managed International Portfolio
- --------------------------------------------
Growth Funds
- --------------------------------------------
Domestic
Growth Fund
Mid-Cap Growth Fund
Large Cap Growth Fund*
Small Cap Growth Fund
Global & International
All-Asia Investment Fund
Global Health Care Fund*
Global Research Growth Fund
Global Technology Fund*
Greater China '97 Fund
International Premier Growth Fund
New Europe Fund
Worldwide Privatization Fund
- --------------------------------------------
Value Funds
- --------------------------------------------
Domestic
Balanced Shares
Focused Growth & Income Fund*
Growth & Income Fund
Real Estate Investment Fund
Small Cap Value Fund**
Utility Income Fund
Value Fund
Global & International
Global Value Fund
International Value Fund
- --------------------------------------------
Taxable Bond Funds
- --------------------------------------------
Americas Government Income Trust
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Multi-Market Strategy Trust
Quality Bond Portfolio
Short Duration Portfolio
U.S. Government Portfolio
- --------------------------------------------
Municipal Bond Funds
- --------------------------------------------
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
- --------------------------------------------
Intermediate Municipal Bond Funds
- --------------------------------------------
Intermediate California
Intermediate Diversified
Intermediate New York
- --------------------------------------------
Closed-End Funds
- --------------------------------------------
All-Market Advantage Fund
ACM Income Fund
ACM Government Opportunity Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
California Municipal Income Fund
National Municipal Income Fund
New York Municipal Income Fund
The Spain Fund
World Dollar Government Fund
World Dollar Government Fund II
We also offer Exchange Reserves,*** which serves as the money market fund
exchange vehicle for the AllianceBernstein mutual funds.
For more complete information on any AllianceBernstein mutual fund, including
investment objectives and policies, sales charges, expenses, risks and other
matters of importance to prospective investors, visit our web site at
www.alliancebernstein.com or call us at (800) 227-4618 for a current
prospectus. You should read the prospectus carefully before you invest.
* Prior to December 15, 2004, these Funds were named as follows: Global Health
Care Fund was Health Care Fund; Large Cap Growth Fund was Premier Growth Fund;
Global Technology Fund was Technology Fund; and Focused Growth & Income Fund
was Disciplined Value Fund.
** Effective February 1, 2005, Small Cap Value Fund will be renamed
Small/Mid-Cap Value Fund.
*** An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
_______________________________________________________________________________
34 o ACM MUNICIPAL SECURITIES INCOME FUND
Summary of General Information
- -------------------------------------------------------------------------------
SUMMARY OF GENERAL INFORMATION
Shareholder Information
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transaction section of The Wall Street Journal under the
abbreviation "ACM MuniSec." The Fund's NYSE trading symbol is "AMU." Weekly
comparative net asset value (NAV) and market price information about the Fund
is published each Monday in The Wall Street Journal, each Sunday in The New
York Times and each Saturday in Barron's and other newspapers in a table called
"Closed-End Bond Funds."
Dividend Reinvestment Plan
A Dividend Reinvestment Plan provides automatic reinvestment of dividends and
capital gains in additional Fund shares.
For questions concerning shareholder account information, or if you would like
a brochure describing the Dividend Reinvestment Plan, please call Equiserve
Trust Company at (800) 219-4218.
_______________________________________________________________________________
ACM MUNICIPAL SECURITIES INCOME FUND o 35
NOTES
_______________________________________________________________________________
36 o ACM MUNICIPAL SECURITIES INCOME FUND
ACM MUNICIPAL SECURITIES INCOME FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
AllianceBernstein [LOGO](SM)
Investment Research and Management
(SM) This service mark used under license from the owner, Alliance Capital
Management L.P.
MSIAR1004
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 11(a)(1).
(b) During the period covered by this report, no material amendments were made
to the provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers to
the provisions of the code of ethics adopted in 2(a) above were granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors has determined that independent directors
David H. Dievler and William H. Foulk, Jr. qualify as audit committee financial
experts.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) - (c) The following table sets forth the aggregate fees billed by the
independent auditor 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 on accounting and auditing issues and quarterly press
release review, and preferred stock maintenance testing (for those Funds that
issue preferred stock); and (iii) tax compliance, tax advice and tax return
preparation.
Audit-Related
Audit Fees Fees Tax Fees
ACM Municipal Securities Income Fund, Inc. 2003 $44,000 $23,144 $13,100
2004 $47,000 $13,145 $21,213
(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 auditors. The Fund's Audit Committee policies and procedures
also require pre-approval of all audit and non-audit services provided to the
Adviser and Service Affiliates to the extent that these services are directly
related to the operations or financial reporting of the Fund.
(e) (2) All of the amounts for Audit Fees, Audit-Related Fees and Tax Fees in
the table under Item 4 (a) - (c) are for services pre-approved by the Fund's
Audit Committee.
(f) Not applicable.
(g) The following table sets forth the aggregate non-audit services provided to
the Fund, the Fund's Adviser and entities that control, are controlled by or
under common control with the Adviser that provide ongoing services to the Fund,
which include conducting an annual internal control report pursuant to Statement
on Auditing Standards No. 70 ("Service Affiliates"):
:
Total Amount of
Foregoing Column
Pre-approved by the
Audit Committee
All Fees for (Portion Comprised of
Non-Audit Services Audit Related Fees)
Provided to the (Portion Comprised of
Portfolio, the Adviser Tax Fees)
and Service Affiliates
ACM Municipal Securities Income Fund, Inc. 2003 $728,443 $203,178
$190,078
$13,100
2004 $1,136,090 $184,358
$163,145
$21,213
(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 auditor 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:
Ruth Block William H. Foulk, Jr.
David H. Dievler Dr. James M. Hester
John H. Dobkin Donald J. Robinson
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.
The registrant has adopted the following proxy voting policies and procedures of
its investment adviser, Alliance Capital Management L.P.
October 2004
ALLIANCE CAPITAL MANAGEMENT L.P.
Statement of Policies and Procedures for Proxy Voting
Introduction
As a registered investment adviser, Alliance Capital Management L.P. ("Alliance
Capital", "we" or "us") has a fiduciary duty to act solely in the best
interests of our clients. We recognize that this duty requires us to vote
client securities in a timely manner and make voting decisions that are in the
best interests of our clients. Consistent with these obligations, we will
disclose our clients' voting records only to them and as required by mutual
fund vote disclosure regulations. In addition, the proxy committees may, after
careful consideration, choose to respond to surveys regarding past votes.
This statement is intended to comply with Rule 206(4)-6 of the Investment
Advisers Act of 1940. It sets forth our policies and procedures for voting
proxies for our discretionary investment advisory clients, including investment
companies registered under the Investment Company Act of 1940. This statement
applies to Alliance Capital's growth and value investment groups investing on
behalf of clients in both US and non-US securities.
Proxy Policies
This statement is designed to be responsive to the wide range of proxy voting
subjects that can have a significant effect on the investment value of the
securities held in our clients' accounts. These policies are not exhaustive due
to the variety of proxy voting issues that we may be required to consider.
Alliance Capital reserves the right to depart from these guidelines in order to
avoid voting decisions that we believe may be contrary to our clients' best
interests. In reviewing proxy issues, we will apply the following general
policies:
Corporate Governance: Alliance Capital's proxy voting policies recognize the
importance of good corporate governance in ensuring that management and the
board of directors fulfill their obligations to the shareholders. We favor
proposals promoting transparency and accountability within a company. We will
vote for proposals providing for equal access to the proxy materials so that
shareholders can express their views on various proxy issues. We also support
the appointment of a majority of independent directors on key committees and
separating the positions of chairman and chief executive officer.
Elections of Directors: Unless there is a proxy fight for seats on the Board or
we determine that there are other compelling reasons for withholding votes for
directors, we will vote in favor of the management proposed slate of directors.
That said, we believe that directors have a duty to respond to shareholder
actions that have received significant shareholder support. We may withhold
votes for directors that fail to act on key issues such as failure to implement
proposals to declassify boards, failure to implement a majority vote
requirement, failure to submit a rights plan to a shareholder vote or failure
to act on tender offers where a majority of shareholders have tendered their
shares. In addition, we will withhold votes for directors who fail to attend at
least seventy-five percent of board meetings within a given year without a
reasonable excuse. Finally, we may withhold votes for directors of non-U.S.
issuers where there is insufficient information about the nominees disclosed in
the proxy statement.
Appointment of Auditors: Alliance Capital believes that the company remains in
the best position to choose the auditors and will generally support
management's recommendation. However, we recognize that there may be inherent
conflicts when a company's independent auditor performs substantial nonaudit
related services for the company. While we will recognize that there may be
special circumstances that could lead to high non-audit fees in some years, we
would normally consider non-audit fees in excess of 70% to be disproportionate.
Therefore, we may vote against the appointment of auditors if the fees for
non-audit related services exceed 70% of the total audit fees paid by the
company or there are other reasons to question the independence of the
company's auditors.
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, Alliance Capital will cast
its votes in accordance with the company's management on such proposals.
However, we will review and analyze on a case-by-case basis any non-routine
proposals that are likely to affect the structure and operation of the company
or have a material economic effect on the company. For example, we will
generally support proposals to increase authorized common stock when it is
necessary to implement a stock split, aid in a restructuring or acquisition or
provide a sufficient number of shares for an employee savings plan, stock
option or executive compensation plan. However, a satisfactory explanation of a
company's intentions must be disclosed in the proxy statement for proposals
requesting an increase of greater than one hundred percent of the shares
outstanding. We will oppose increases in authorized common stock where there is
evidence that the shares will be used to implement a poison pill or another
form of anti-takeover device, or if the issuance of new shares could
excessively dilute the value of the outstanding shares upon issuance.
Corporate Restructurings, Mergers and Acquisitions: Alliance Capital 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 the research analysts that
cover the company and the investment professionals managing the portfolios in
which the stock is held.
Proposals Affecting Shareholder Rights: Alliance Capital 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.
Anti-Takeover Measures: Alliance Capital believes that measures that impede
takeovers or entrench management not only infringe on the rights of
shareholders but may also have a detrimental effect on the value of the
company. We will generally oppose proposals, regardless of whether they are
advanced by management or shareholders, the purpose or effect of which is to
entrench management or dilute shareholder ownership. Conversely, we support
proposals that would restrict or otherwise eliminate antitakeover 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 blank check
preferred stock, classified boards and supermajority vote requirements) that
appear to be intended as management entrenchment mechanisms.
Executive Compensation: Alliance Capital believes that company management and
the compensation committee of the board of directors should, within reason, be
given latitude to determine the types and mix of compensation and benefit
awards offered. 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. We will analyze the proposed plans to ensure that shareholder equity
will not be excessively diluted, the option exercise price is not below market
price on the date of grant and an acceptable number of employees are eligible
to participate in such programs. We will generally oppose plans that permit
repricing of underwater stock options without shareholder approval. Other
factors such as the company's performance and industry practice will generally
be factored into our analysis. We will support proposals to submit severance
packages that do not exceed 2.99 times the sum of an executive officer's base
salary plus bonus that are triggered by a change in control to a shareholder
vote. Finally, we will support shareholder proposals requiring companies to
expense stock options because we view them as a large corporate expense.
Social and Corporate Responsibility: Alliance Capital will review and analyze
on a case-by-case basis proposals relating to social, political and
environmental issues to determine whether they will have a financial impact on
shareholder value. We will vote against proposals that are unduly burdensome or
result in unnecessary and excessive costs to the company. We may abstain from
voting on social proposals that do not have a readily determinable financial
impact on shareholder value.
Proxy Voting Procedures
Proxy Voting Committees
Our growth and value investment groups have formed separate proxy voting
committees to establish general proxy policies for Alliance Capital and
consider specific proxy voting matters as necessary. These committees
periodically review these policies and new types of corporate governance
issues, and decide how we should vote on proposals not covered by these
policies. When a proxy vote cannot be clearly decided by an application of our
stated policy, the proxy committee will evaluate the proposal. In addition, the
committees, in conjunction with the analyst that covers the company, may
contact corporate management and interested shareholder groups and others as
necessary to discuss proxy issues. Members of the committee include senior
investment personnel and representatives of the Legal and Compliance
Department. The committees may also evaluate proxies where we face a potential
conflict of interest (as discussed below). Finally, the committees monitor
adherence to these policies.
Conflicts of Interest
Alliance Capital recognizes that there may be a potential conflict of interest
when we vote a proxysolicited by an issuer whose retirement plan we manage, or
we administer, who distributes Alliance Capital sponsored mutual funds, or with
whom we or an employee has another business or personal relationship that may
affect how we vote on the issuer's proxy. Similarly, Alliance may have a
potential material conflict of interest when deciding how to vote on a proposal
sponsored or supported by a shareholder group that is a client. We believe that
centralized management of proxy voting, oversight by the proxy voting
committees and adherence to these policies ensures that proxies are voted with
only our clients' best interests in mind. That said, we have implemented
additional procedures to ensure that our votes are not the product of a
material conflict of interests, including: (i) on an annual basis, the proxy
committees will take reasonable steps to evaluate the nature of Alliance
Capital's and our employees' material business and personal relationships (and
those of our affiliates) with any company whose equity securities are held in
client accounts and any client that has sponsored or has material interest in a
proposal upon which we will be eligible to vote; (ii) requiring anyone involved
in the decision making process to disclose to the chairman of the appropriate
proxy committee any potential conflict that they are aware of (including
personal relationships) and any contact that they have had with any interested
party regarding a proxy vote; (iii) prohibiting employees involved in the
decision making process or vote administration from revealing how we intend to
vote on a proposal in order to reduce any attempted influence from interested
parties; and (iv) where a material conflict of interests exists, reviewing our
proposed vote by applying a series of objective tests and, where necessary,
considering the views of a third party research service to ensure that our
voting decision is consistent with our clients' best interests. Because under
certain circumstances Alliance Capital considers the recommendation of third
party research services, the proxy committees will take reasonable steps to
verify that any third party research service is in fact independent based on
all of the relevant facts and circumstances. This includes reviewing the third
party research service's conflict management procedures and ascertaining, among
other things, whether the third party research service (i) has the capacity and
competency to adequately analyze proxy issues; and (ii) can make such
recommendations in an impartial manner and in the best interests of our clients.
Proxies of Certain Non-US Issuers
Proxy voting in certain countries requires "share blocking." Shareholders
wishing to vote their proxies must deposit their shares shortly before the date
of the meeting (usually one-week) with a designated depositary. During this
blocking period, shares that will be voted at the meeting cannot be sold until
the meeting has taken place and the shares are returned to the clients'
custodian banks. Alliance Capital may determine that the benefit to the client
of exercising the vote does not outweigh the cost of voting, which is not being
able to transact in the shares during this period. Accordingly, if share
blocking is required we may abstain from voting those shares.
In addition, voting proxies of issuers in non-US markets may give rise to a
number of administrative issues that may prevent Alliance Capital from voting
such proxies. For example, Alliance Capital may receive meeting notices without
enough time to fully consider the proxy or after the cut-off date for voting.
Other markets require Alliance Capital to provide local agents with power of
attorney prior to implementing Alliance Capital's voting instructions. Although
it is Alliance Capital's policy to seek to vote all proxies for securities held
in client accounts for which we have proxy voting authority, in the case of
non-US issuers, we vote proxies on a best efforts basis.
Proxy Voting Records
Clients may obtain information about how we voted proxies on their behalf by
contacting their Alliance Capital administrative representative. Alternatively,
clients may make a written request for proxy voting information to: Mark R.
Manley, Senior Vice President & Chief Compliance Officer, Alliance Capital
Management L.P., 1345 Avenue of the Americas, New York, NY 10105.
ITEM 8. 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 9. 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 the requirements of Item 7(d)(2)(ii)(G) of Schedule
14A in its proxy statement filed with the Commission on February 23, 2004.
ITEM 10. 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-2(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 significant changes in the registrant's internal controls that
could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
ITEM 11. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
Exhibit No. DESCRIPTION OF EXHIBIT
11 (a) (1) Code of ethics that is subject to the disclosure of Item 2
hereof
11 (b) (1) Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
11 (b) (2) Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
11 (c) Certification of Principal Executive Officer and Principal
Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): ACM Municipal Securities Income Fund, Inc.
By: /s/ Marc O. Mayer
--------------------
Marc O. Mayer
President
Date: December 31, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Marc O. Mayer
-----------------
Marc O. Mayer
President
Date: December 31, 2004
By: /s/ Mark D. Gersten
-------------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: December 31, 2004