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: 811-05207
ALLIANCEBERNSTEIN INCOME FUND, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Mark R. Manley
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: December 31, 2006
Date of reporting period: December 31, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
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ANNUAL REPORT
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ACM Income Fund
Annual Report
December 31, 2006
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
You may obtain a description of the Fund's proxy voting policies and
procedures, and information regarding how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30,
without charge. Simply visit AllianceBernstein's web site at
www.alliancebernstein.com, or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein(R) at
(800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
AllianceBernstein Investments, Inc. is an affiliate of AllianceBernstein L.P.,
the manager of the AllianceBernstein funds, and is a member of the NASD.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
February 26, 2007
Annual Report
This report provides management's discussion of fund performance for ACM Income
Fund (the "Fund") for the annual reporting period ended December 31, 2006. The
Fund is a closed-end fund that trades under the New York Stock Exchange symbol
"ACG". Please note, on January 26, 2007, this fund officially changed its name
to AllianceBernstein Income Fund, Inc.
Investment Objectives and Policies
This closed-end fund is designed to provide high current income consistent with
the preservation of capital. The Fund normally invests at least 80% of its net
assets in income producing securities. The Fund normally invests at least 65%
of its assets in securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, and repurchase agreements pertaining to U.S.
Government securities. The Fund may also invest up to 35% of its assets in
other fixed-income securities, including those issued by non-governmental
issuers in the U.S. and those issued by foreign governments. The Fund may
invest up to 35% of its net assets in below-investment-grade securities.
Additionally, the Fund may utilize other investment instruments, including
options and futures, and may employ leverage. For more information regarding
the Fund's risks, please see "A Word About Risk" on pages 4-5 and "Note G-Risks
Involved in Investing in the Fund" of the Notes to Financial Statements on page
41.
Investment Results
The table on page 6 provides performance data for the Fund and its benchmark,
the Lehman Brothers (LB) U.S. Aggregate Index, for the six- and 12-month
periods ended December 31, 2006.
The Fund outperformed its benchmark for both the six- and 12-month periods
ended December 31, 2006. The Fund's use of leverage, as well as its holdings in
emerging-market debt and high-yield securities, were primary contributors to
the outperformance for both periods. Both high-yield and emerging-market debt
significantly outperformed the Fund's benchmark, which contains only U.S.
investment-grade securities.
Also contributing positively to performance was the Fund's emerging-market
security selection in Latin America, particularly local- and
U.S.-dollar-denominated debt in Brazil. Latin America has benefited throughout
the year from a continued cycle of capital inflows, sound policy management and
strong trade performance. These conditions have bolstered dollar reserves and
enabled improvements in credit profiles through better liability management.
Brazil experienced stable growth, central bank easing and debt buy backs, all
of which led to its solid returns.
Market Review and Investment Strategy
Major bond markets experienced weak to negative returns in the first half of
the year as yields rose globally alongside official rate increases by the U.S.
Federal Reserve (the "Fed"), the European Central Bank and several other major
central banks. The second half of the year, however, saw a broad-based rally in
both fixed-income and
ACM INCOME FUND o 1
equity markets as the U.S. and global economy moderated, and the Fed ended its
interest-rate hike cycle. The Fed raised official rates 100 basis points in
quarter point increments through mid-summer to end the period at 5.25%.
Within the Fund's benchmark, U.S. Treasuries underperformed for the period
under review, returning a modest 3.08%. U.S. Treasury yields rose roughly 75
basis points in the first half of the year, then retreated in the third quarter
as evidence of a cooling economy allowed the Fed to end its tightening cycle.
At the end of the period under review, the U.S. yield curve was flat to
inverted, with both the two-year and 30-year yield near 4.81%
Among other sectors of the Fund's benchmark, mortgage-backed securities
outperformed returning 5.22% for the annual reporting period. Mortgages
benefited during the year from relatively low volatility and muted prepayment
risk. Investment-grade corporates posted benchmark-like returns in absolute
terms, however, they significantly outperformed the LB U.S. Aggregate Index on
a duration-neutral basis. The corporate sector produced positive returns for
the year, as a historically low default rate and healthy corporate fundamentals
outweighed increasing event risk and leveraged buyout activity. Corporate bond
spreads remained historically tight, with companies posting strong earnings and
cash flows.
The high yield market posted a strong, positive return of 11.85%, according to
the Lehman Brothers (LB) High Yield Index, significantly outperforming
investment-grade sectors. For the period under review, high yield was supported
by a low default risk environment, improving credit conditions, low volatility
and the end of monetary tightening. By quality tier, lower-rated debt
outperformed higher-quality debt with CCC-rated debt returning 17.66%, B-rated
debt returning 11.22% and BB-rated debt returning 10.07%. Spreads in high yield
continued to compress during the reporting period, tightening an additional 82
basis points to end the year at 275 basis points over U.S. Treasuries.
Finally, the emerging-market debt class continued to post strong returns in
2006, outperforming all fixed-income sectors with the exception of high-yield
debt. According to the JP Morgan EMBI Global Index, emerging-market debt
returned 9.88% in 2006. With the exception of Ecuador, all emerging-market
countries posted positive returns for the year. Emerging-market debt was
supported by positive global growth, adequate liquidity, higher commodity
prices and steadily improving individual country economic fundamentals. As a
result, emerging-market debt spreads continued to tighten, reaching near-record
lows at the end of 2006. During the year, the Latin region, which returned
11.94%, outpaced non-Latin countries, which returned 7.20%.
During the reporting period, the Fund generally maintained its allocations to
U.S. governments, mortgage-backed and corporate securities, as well as
emerging-market debt. Within the investment-grade and high yield corporate
allocation, the Fund maintained
2 o ACM INCOME FUND
a defensive posture given what the Fund's management team (the "team")
perceived as insufficient compensation for assuming risk. The team's
quantitative analysis indicated that the reward for assuming incremental risk
was greatly diminished in times of a flat or inverted yield curve. In this
environment, the team reduced the Fund's corporate risk by underweighting
longer-maturity corporates and more volatile credits. The team also maintained
the Fund's exposure to bank loans within its high yield allocation. Bank loans
are very short-dated, below-investment-grade floating-rate securities that
offer attractive yields relative to other cash instruments. Additionally, bank
loan assets provide price stability due to their extremely short duration.
Within the Fund's emerging market allocation, the team favored Brazil, Mexico
and Russia. Like most Latin American countries, Brazil has been benefiting from
a continued cycle of robust net exports, capital inflows, and prudent fiscal
and monetary policy. Brazil has shown impressive progress in building dollar
reserves and has made great strides in decreasing its external and sovereign
debt ratios--two of the most critical factors for advancing to investment
grade. The team also continued to find Mexico compelling, due to its high real
interest rates, comfortable inflation levels and moderating growth, which the
team believed would lead to central bank easing. Finally, Russia continued to
amass tremendous reserves and repaid its entire Paris Club debt (the Paris Club
is an informal group of financial officials from 19 of the world's wealthiest
nations which provide financial concessions such as debt restructuring, debt
relief and debt cancellation to indebted countries).
ACM INCOME FUND o 3
HISTORICAL PERFORMANCE
An Important Note About the Value of Historical Performance
The performance on page 6 represents past performance and does not guarantee
future results. Current performance may be lower or higher than the performance
information shown. All fees and expenses related to the operation of the Fund
have been deducted. Performance assumes reinvestment of distributions and does
not account for taxes.
ACM Income Fund Shareholder Information
The Fund's NYSE trading symbol is "ACG." 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 in other newspapers in a table called "Closed-End Bond Funds."
For additional shareholder information regarding this Fund, please see page 62.
Benchmark Disclosure
The unmanaged Lehman Brothers (LB) U.S. Aggregate Index does not reflect fees
and expenses associated with the active management of a mutual fund portfolio.
It also does not reflect the costs and benefits of leverage. The Index covers
the U.S. investment-grade fixed-rate bond market, including government and
credit securities, agency mortgage passthrough securities, asset-backed
securities and commercial mortgage-backed securities. An investor cannot invest
directly in an index, and its results are not indicative of the performance for
any specific investment, including the Fund.
A Word About Risk
The Fund participates in a credit facility for the purpose of utilizing
investment leverage. The Fund may utilize additional leverage through the
investment techniques of reverse repurchase agreements and dollar rolls. The
Fund maintains asset coverage of at least 300% with respect to borrowings.
Reverse repurchase agreements involve sales by the Fund of portfolio assets
concurrently with an agreement by the Fund to repurchase the same assets at a
later date at a fixed price. Generally, the effect of such a transaction is
that the Fund can recover all or most of the cash invested in the portfolio
securities involved during the term of the reverse repurchase agreement, while
it will be able to keep the interest income associated with those portfolio
securities. Such transactions are only advantageous if the interest cost to the
Fund of the reverse repurchase agreement transaction is less than the cost of
otherwise obtaining the cash.
The Fund may enter into dollar rolls in which the Fund sells securities for
delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type and coupon) securities on a specified future
date. During the roll period, the Fund forgoes principal and interest paid on
the securities, The Fund is compensated by the difference between the current
sales price and the lower forward price for the future purchase (often referred
to as the "drop") as well as by the interest earned on the cash proceeds of the
initial sale.
(Historical Performance continued on next page)
4 o ACM INCOME FUND
HISTORICAL PERFORMANCE
(continued from previous page)
Reverse repurchase agreements and dollar rolls are speculative techniques and
are considered borrowings by the Fund.
The effect of leverage can produce higher shareholder returns than if the Fund
were not leveraged, and the use of leverage techniques can add to the net asset
value (NAV) of the Common Stock. However, the risks of such techniques are
potentially a higher volatility of the NAV of the Common Stock, potentially
more volatility in the market value of the Common Stock, and the relatively
greater effect on the NAV of the Common Stock caused by favorable or adverse
changes in the currency exchange rates. In addition, changes in the interest
rate environment can increase or decrease shareholder returns. The Fund
maintains asset coverage of at least 300% with respect to borrowings.
To the extent that the current interest rate on the Fund's indebtedness
approaches the net return on the leveraged portion of the Fund's investment
portfolio, then the benefit to the shareholders will be reduced. If the rate on
indebtedness were to exceed the net return on the same portion of the
portfolio, then this would result in a lower rate of return for the
shareholders. Similarly, the use of leverage in a declining market can advance
the decrease of the Fund's NAV more so than if the Fund were not leveraged,
which would likely be reflected in a greater decline in the market price for
shares of Common Stock than if the Fund were not leveraged. In extreme cases,
if the Fund's current investment income were not sufficient to meet interest
payments on indebtedness or if the Fund failed to maintain the asset coverage
required by the 1940 Act, then it could be necessary for the Fund to liquidate
certain investments at a time when it may be disadvantageous to do so, thereby
reducing its NAV.
Part of the Fund's assets will be invested in foreign securities. A significant
portion of the Fund's investments in foreign securities is in emerging markets.
Since the Fund invests in foreign currency denominated securities, fluctuations
may be magnified by changes in foreign exchange rates. Foreign markets can be
more volatile than the U.S. market due to increased risks of adverse issuer,
political, regulatory, market or economic developments. The Fund may invest in
high yield bonds or below-investment grade securities ("junk bonds"). High
yield bonds involve a greater risk of default and price volatility than other
bonds. While the Fund invests principally in 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.
(Historical Performance continued on next page)
ACM INCOME FUND o 5
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE FUND VS. ITS BENCHMARK -----------------------------
PERIODS ENDED DECEMBER 31, 2006 6 Months 12 Months
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ACM Income Fund (NAV) 8.90% 8.71%
Lehman Brothers U.S. Aggregate Index 5.09% 4.33%
The Fund's Market Price per share on December 31, 2006 was $8.14. The Fund's
Net Asset Value Price per share on December 31, 2006 was $8.31. For additional
Financial Highlights, please see page 49.
GROWTH OF A $10,000 INVESTMENT IN THE FUND
12/31/96 TO 12/31/06
ACM Income Fund (NAV): $22,033
Lehman Brothers U.S. Aggregate Index: $18,313
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Lehman Brothers
ACM Income Fund (NAV) U.S. Aggregate Index
-------------------------------------------------------------------------------
12/31/96 $ 10,000 $ 10,000
12/31/97 $ 11,491 $ 10,966
12/31/98 $ 10,528 $ 11,918
12/31/99 $ 10,156 $ 11,820
12/31/00 $ 12,554 $ 13,194
12/31/01 $ 12,946 $ 14,308
12/31/02 $ 14,664 $ 15,776
12/31/03 $ 17,254 $ 16,423
12/31/04 $ 18,710 $ 17,136
12/31/05 $ 20,267 $ 17,552
12/31/06 $ 22,033 $ 18,313
This chart illustrates the total value of an assumed $10,000 investment in ACM
Income Fund at net asset value (NAV) (from 12/31/96 to 12/31/06) as compared to
the performance of the Fund's benchmark. The chart assumes the reinvestment of
dividends and capital gains distributions at prices obtained pursuant to the
Fund's dividend reinvestment plan.
See Historical Performance and Benchmark disclosures on pages 4-5.
6 o ACM INCOME FUND
PORTFOLIO SUMMARY
December 31, 2006
PORTFOLIO STATISTICS
Net Assets ($mil): $1,907.3
SECURITY TYPE BREAKDOWN*
[ ] 63.0% U.S. Government and Government [PIE CHART OMITTED]
Sponsored Agency Obligations
[ ] 18.1% Sovereign Debt Obligations
[ ] 5.7% Corporate Debt Obligations
[ ] 3.0% Bank Loans
[ ] 10.2% Short-Term
* All data are as of December 31, 2006. The Fund's security type breakdown is
expressed as a percentage of total investments (excluding security lending
collateral) and may vary over time. The percentages shown within the Portfolio
of Investments are stated as percentage of net assets.
ACM INCOME FUND o 7
PORTFOLIO OF INVESTMENTS
December 31, 2006
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
U.S. GOVERNMENT AND
GOVERNMENT SPONSORED
AGENCY OBLIGATIONS-103.1%
U.S. Treasury Bonds-35.9%
5.375%, 2/15/31(a) U.S.$ 1,961 $ 2,100,568
6.25%, 5/15/30(b) 62,230 74,131,488
7.25%, 5/15/16(b) 21,695 25,789,085
11.25%, 2/15/15(b) 160,000 229,862,560
12.00%, 8/15/13(b) 82,000 91,077,646
12.50%, 8/15/14(b) 70,300 83,555,417
13.25%, 5/15/14(a) 150,000 178,236,300
---------------
684,753,064
U.S. Treasury Strips-15.5%
Zero coupon, 5/15/17(a) 260,000 158,805,920
Zero coupon, 11/15/21(a) 285,350 137,297,579
---------------
296,103,499
U.S. Treasury Notes-15.3%
1.875%, 7/15/13 TIPS(a) 11,875 12,611,802
3.00%, 11/15/07(a)(c) 19,000 18,674,188
3.25%, 8/15/07(b) 19,000 18,794,420
3.375%, 10/15/09(b) 24,550 23,685,005
3.50%, 11/15/09(a) 154 148,953
4.00%, 9/30/07(b) 49,771 49,386,071
4.00%, 2/15/15(a) 179 170,519
4.125%, 8/15/08-5/15/15(a) 3,074 3,002,625
4.25%, 11/30/07-8/15/14(a) 11,627 11,538,490
4.375%, 8/15/12(a) 700 689,938
4.50%, 2/15/16(a) 598 588,469
4.625%, 11/15/16(b) 15,966 15,861,231
4.75%, 5/15/14(b) 60,280 60,435,402
4.875%, 2/15/12(a) 250 252,285
4.875%, 8/15/16(b) 75,000 75,896,475
---------------
291,735,873
Federal National Mortgage
Association-11.2%
4.104%, 11/01/34(a)(e) 2,628 2,631,777
4.176%, 9/01/35(a)(e) 1,441 1,440,525
4.408%, 8/01/34(a)(e) 2,362 2,370,611
4.464%, 1/01/36(a)(e) 2,072 2,069,363
4.486%, 5/01/33(a)(e) 2,249 2,265,412
4.527%, 8/01/35(a)(e) 1,249 1,247,621
4.611%, 7/01/35(a)(e) 2,997 3,000,956
4.715%, 5/01/35(a)(e) 2,458 2,449,747
4.793%, 7/01/35(a)(e) 5,194 5,177,259
4.822%, 7/01/35(a)(e) 2,142 2,139,418
5.00%, TBA 95,905 93,941,586
8 o ACM INCOME FUND
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
5.00%, 2/01/18-3/01/35(a)
(Interest only) U.S.$ 88,506 $ 19,512,347
5.00%, 12/01/19(a) 7,983 7,865,681
5.375%, 6/07/21(d) GBP 144 295,174
5.50%, 1/01/36(a) U.S.$ 37,927 37,493,728
6.50%, 8/1/34-5/1/35(a) 25,606 26,214,790
6.778%, 1/01/36(a)(e) 3,701 3,801,375
---------------
213,917,370
Government National Mortgage
Association-11.2%
0.485%, 11/16/45(d)(e) 16,436 914,262
5.50%, 7/15/33-12/15/36(a) 209,649 208,448,395
7.00%, 12/15/26(a) 3,632 3,750,323
---------------
213,112,980
Federal Home Loan Mortgage
Corporation-10.1%
4.113%, 1/01/35(a)(e) 15,749 15,632,399
4.212%, 4/01/35(a)(e) 7,536 7,475,570
4.23%, 10/01/35(a)(e) 2,542 2,543,048
4.588%, 4/01/35(a)(e) 1,831 1,822,456
4.676%, 6/01/35(a)(e) 3,728 3,703,532
4.75%, 11/03/09(a) 16,000 15,912,720
5.00%, 7/01/33-8/01/35(a)
(Interest only) 33,434 7,470,265
5.50%, 3/25/29(a) 6,661 6,627,831
5.875%, 5/15/16(a) 39,826 39,921,213
6.00%, 9/01/36(a) 89,762 90,425,723
---------------
191,534,757
Resolution Funding Corp.-3.9%
Zero coupon, 10/15/20 150,000 74,972,250
Total U.S. Government and
Government Sponsored
Agency Obligations
(cost $1,953,679,206) 1,966,129,793
SOVEREIGN DEBT
OBLIGATIONS-29.6%
Argentina-1.5%
Republic of Argentina
Zero coupon, 12/15/35(d)(e) ARS 4,423 174,244
0.63%, 12/31/38(d)(e) 1,285 242,817
4.889%, 8/03/12 FRN(d)(e) U.S.$ 12,556 11,845,899
5.83%, 12/31/33(d) ARS 1,500 707,189
7.00%, 3/28/11(d) U.S.$ 365 361,472
7.82%, 12/31/33(d) EUR 5,881 8,150,685
8.28%, 12/31/33(d) U.S.$ 6,051 6,565,816
---------------
28,048,122
ACM INCOME FUND o 9
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Brazil-9.3%
Brazilian Real Structured Notes
Zero Coupon, 1/05/09(f) BRL 76,692 $ 28,383,443
Zero Coupon, 1/05/10(f) 180,614 59,337,974
Republic of Brazil
7.125%, 1/20/37(d) U.S.$ 5,345 5,759,237
8.00%, 1/15/18(d) 1,144 1,277,276
8.25%, 1/20/34(d) 5,311 6,452,865
8.875%, 10/14/19-4/15/24(d) 10,161 12,475,684
11.00%, 8/17/40(d) 821 1,087,825
12.50%, 1/05/16-1/05/22(d) BRL 118,379 63,006,794
---------------
177,781,098
Bulgaria-0.0%
Republic of Bulgaria
8.25%, 1/15/15(f) U.S.$ 346 410,010
Colombia-0.8%
Republic of Colombia
7.375%, 9/18/37(d) 315 338,152
8.125%, 5/21/24(d) 150 173,250
10.75%, 1/15/13(d) 314 387,476
11.75%, 3/01/10(d) COP 26,673,000 12,844,268
11.75%, 2/25/20(d) U.S.$ 1,113 1,608,285
---------------
15,351,431
Costa Rica-0.0%
Costa Rican Colon Structured Notes
Zero coupon, 1/12/07(f) CRC 226,359 435,029
Republic of Costa Rica
8.05%, 1/31/13(f) U.S.$ 220 242,220
8.11%, 2/01/12(f) 202 220,685
---------------
897,934
Dominican Republic-0.1%
Dominican Peso Structured Notes
Zero coupon, 3/12/07-11/04/08(f) DOP 27,336 663,720
Dominican Republic
8.625%, 4/20/27(f) U.S.$ 406 466,494
---------------
1,130,214
El Salvador-0.1%
Republic of El Salvador
7.625%, 9/21/34(f) 527 610,002
7.65%, 6/15/35(f) 469 534,660
---------------
1,144,662
France-0.0%
French Treasury Note
3.00%, 1/12/10(d) EUR 600 771,672
10 o ACM INCOME FUND
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Indonesia-0.7%
Indonesian Rupiah Structured Notes
11.00%, 10/15/14-11/18/20(f) IDR 6,057,537 $ 707,898
12.90%, 6/17/22(f) 2,102,200 276,690
14.00%, 6/17/09(f) 4,000,000 491,370
14.25%, 6/19/13(f) 80,000,000 10,756,923
Republic of Indonesia
6.75%, 3/10/14(f) U.S.$ 565 581,950
6.875%, 3/09/17(f) 269 284,467
7.25%, 4/20/15(f) 362 390,055
8.50%, 10/12/35(f) 251 311,240
---------------
13,800,593
Jamaica-0.0%
Government of Jamaica
9.25%, 10/17/25(d) 104 115,440
10.625%, 6/20/17(d) 207 248,400
---------------
363,840
Lebanon-0.1%
Lebanese Republic
7.875%, 5/20/11(f) 420 404,880
10.125%, 8/06/08(f) 875 897,750
11.625%, 5/11/16(f) 120 136,860
---------------
1,439,490
Malaysia-0.1%
Government of Malaysia
7.50%, 7/15/11(d) 1,145 1,245,970
Mexico-5.0%
Mexican Bonos
8.00%, 12/24/08(d) MXN 353,550 33,208,107
9.00%, 12/20/12(d) 51,038 5,090,532
10.00%, 12/05/24(d) 355,347 40,829,634
United Mexican States
5.625%, 1/15/17(d) U.S.$ 1,400 1,401,400
6.375%, 1/16/13(d) 2,626 2,767,804
6.75%, 9/27/34(d) 460 496,800
7.50%, 1/14/12(d) 775 848,625
8.00%, 9/24/22(d) 2,370 2,897,325
8.125%, 12/30/19(d) 2,788 3,394,390
9.875%, 2/01/10(d) 2,180 2,463,400
11.375%, 9/15/16(d) 1,201 1,729,440
---------------
95,127,457
Norway-0.0%
Norwegian Government
6.00%, 5/16/11(d) NOK 2,490 424,451
ACM INCOME FUND o 11
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Panama-0.2%
Republic of Panama
6.70%, 1/26/36(d) U.S.$ 654 $ 681,795
7.125%, 1/29/26(d) 1,133 1,228,172
7.25%, 3/15/15(d) 142 153,573
8.875%, 9/30/27(d) 372 470,580
9.375%, 7/23/12-4/01/29(d) 516 668,211
---------------
3,202,331
Peru-0.8%
Peru Bono Soberano
7.84%, 8/12/20(d) PEN 1,250 440,058
8.20%, 8/12/26(d) 1,699 621,893
8.60%, 8/12/17(d) 7,350 2,706,040
9.91%, 5/05/15(d) 1,600 622,105
Republic of Peru
7.35%, 7/21/25(d) U.S.$ 1,742 1,975,428
8.375%, 5/03/16(d) 3,928 4,664,500
8.75%, 11/21/33(d) 2,669 3,503,063
9.875%, 2/06/15(d) 246 310,329
---------------
14,843,416
Philippines-1.4%
Republic of Philippines
7.75%, 1/14/31(d) 4,441 5,040,535
8.00%, 1/15/16(d) 142 160,815
8.25%, 1/15/14(d) 1,113 1,252,125
8.375%, 2/15/11(d) 84 91,980
8.875%, 3/17/15(d) 2,203 2,591,830
9.00%, 2/15/13(d) 266 306,565
9.50%, 10/21/24-2/02/30(d) 4,662 6,201,623
9.875%, 1/15/19(d) 1,087 1,418,535
10.625%, 3/16/25(d) 6,332 9,023,100
---------------
26,087,108
Poland-0.1%
Poland Government Bond
4.25%, 5/24/11(d) PLN 3,009 1,007,206
Russia-0.7%
Russian Federation
5.00%, 3/31/30(e)(f) U.S.$ 6,172 6,983,618
11.00%, 7/24/18(f) 490 709,275
Russian Ministry of Finance
3.00%, 5/14/08-5/14/11(d) 6,690 6,413,010
---------------
14,105,903
South Africa-0.0%
Republic of South Africa
7.375%, 4/25/12(d) 304 326,800
Spain-0.0%
Kingdom of Spain
5.25%, 4/06/29(d) GBP 109 228,357
12 o ACM INCOME FUND
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Sweden-0.0%
Swedish Government
5.25%, 3/15/11(d) SEK 1,340 $ 206,404
Turkey-5.7%
Republic of Turkey
6.875%, 3/17/36(d) U.S.$ 1,073 1,024,715
7.00%, 6/05/20(d) 1,430 1,437,150
7.375%, 2/05/25(d) U.S.$ 991 1,015,775
8.00%, 2/14/34(d) 150 163,688
9.50%, 1/15/14(d) 740 862,100
11.00%, 1/14/13(d) 2,090 2,560,250
11.50%, 1/23/12(d) 860 1,049,200
11.75%, 6/15/10(d) 623 736,698
Turkey Government Bond
Zero coupon, 7/16/08-8/13/08(f) TRY 98,545 51,189,621
Turkish Lira Structured Notes
Zero coupon, 1/25/07(f) 914 637,585
Zero coupon, 6/28/07(f) 75,196 48,984,451
---------------
109,661,233
Ukraine-0.1%
Government of Ukraine
6.875%, 3/04/11(f) U.S.$ 302 310,305
7.65%, 6/11/13(f) 1,818 1,963,440
11.00%, 3/15/07(f) 160 161,633
---------------
2,435,378
United Kingdom-1.4%
United Kingdom Gilt
4.00%, 3/07/09(d) GBP 8,666 16,564,492
4.25%, 12/07/27-3/07/36(d) 2,210 4,295,321
4.75%, 3/07/20(d) 917 1,814,042
5.00%, 3/07/08-3/07/25(d) 1,214 2,469,970
8.00%, 6/07/21(d) 150 395,904
8.75%, 8/25/17(d) 105 274,617
---------------
25,814,346
Uruguay-0.4%
Republic of Uruguay
5.00%, 9/14/18(d) UYU 6,700 302,548
7.625%, 3/21/36(d) U.S.$ 185 204,425
7.875%, 1/15/33 PIK(d) 429 478,425
8.00%, 11/18/22(d) 5,240 5,947,394
9.25%, 5/17/17(d) 739 901,580
---------------
7,834,372
Venezuela-1.1%
Republic of Venezuela
5.75%, 2/26/16(d) 1,847 1,759,268
6.00%, 12/09/20(d) 170 159,375
6.51%, 4/20/11 FRN(e)(f) 420 417,942
7.00%, 12/01/18(f) 2,510 2,585,300
ACM INCOME FUND o 13
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
8.50%, 10/08/14(d) U.S.$ 612 $ 693,090
9.25%, 9/15/27(d) 6,315 8,098,988
10.75%, 9/19/13(d) 4,433 5,496,920
13.625%, 8/15/18(d) 637 977,795
---------------
20,188,678
Total Sovereign Debt Obligations
(cost $506,357,251) 563,878,476
CORPORATE DEBT
OBLIGATIONS-9.2%
Corporate Debt - High Yield
Obligations-6.1%
AK Steel Corp.
7.875%, 2/15/09(d)* 5,000 5,000,000
ALB Finance BV
9.25%, 9/25/13(f) 226 222,452
Alfa Bond Issuance PLC for OJC
8.625%, 12/09/15(e) 300 304,719
Allied Domecq Finance PLC
6.625%, 4/18/11(d) GBP 50 100,327
Antenna TV SA
7.25%, 2/15/15(f) EUR 10 12,276
Associated Materials Inc.
11.25%, 3/01/14(d)(g) U.S.$ 12,545 8,467,875
Banco BMG SA
9.15%, 1/15/16(f) 400 405,400
Broder Brothers Co.
11.25%, 10/15/10(d) 1,000 970,000
Burlington Coat Factory Warehouse
Corp.
11.125%, 4/15/14(f)* 1,500 1,462,500
C&M Finance LTD
8.10%, 2/01/16(f) 1,690 1,736,475
Centennial Communication CP
10.00%, 1/01/13(d)* 1,500 1,595,625
Central European Distribution Corp.
8.00%, 7/25/12(f) EUR 78 111,201
Chaoda Modern Agriculture
7.75%, 2/08/10(f) U.S.$ 505 505,000
Charter Communications Holdings
11.00%, 10/01/15(d) 4,009 4,114,236
11.75%, 5/15/14(d) 10,000 9,025,000
Citigroup (JSC Severstal)
9.25%, 4/19/14(f) 230 248,973
Cognis GmbH
9.50%, 5/15/14(f) EUR 5 7,236
Digicel, Ltd.
9.25%, 9/01/12(f) U.S.$ 465 496,387
Dole Foods Co.
8.875%, 3/15/11(d)* 1,000 985,000
14 o ACM INCOME FUND
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Evraz Group SA
8.25%, 11/10/15(f) U.S.$ 489 $ 503,059
Fairfax Financial Holdings Ltd.
8.30%, 4/15/26(d)* 5,000 4,975,000
Ford Motor Credit Co.
4.95%, 1/15/08(d) 152 149,432
6.625%, 6/16/08(d) 454 453,690
7.00%, 10/01/13(d)* 1,500 1,432,471
Freeport-McMoran Copper & Gold, Inc.
10.125%, 2/01/10(d) 500 525,625
Gallery Capital
10.125%, 5/15/13(f) 315 313,474
General Motors Acceptance Corp.
6.125%, 3/15/07(d) EUR 20 26,470
6.75%, 12/01/14(d)* U.S.$ 10,000 10,271,330
6.875%, 9/15/11(d) 3,960 4,061,764
8.00%, 11/01/31(d) 4,000 4,592,272
Heckler & Koch GmbH
9.25%, 7/15/11(f) EUR 5 6,650
Hertz Corporation
10.50%, 1/01/16(f) U.S.$ 5,000 5,500,000
Iirsa Norte Finance Ltd.
8.75%, 5/30/24(f) 200 234,500
Inmarsat Finance PLC
10.375%, 11/15/12(d)(g) 6,475 5,965,094
Intelsat Bermuda Ltd.
11.25%, 6/15/16(f) 3,000 3,292,500
Kazkommerts International BV
8.50%, 4/16/13(f) 325 348,969
Kyivstar
7.75%, 4/27/12(f) 100 104,000
10.375%, 8/17/09(f) 200 218,750
Level 3 Communications Inc.
11.50%, 3/01/10(d)* 2,500 2,650,000
Mobile Telesystems Finance S.A.
9.75%, 1/30/08(f)* 460 476,100
NCL Corp.
10.625%, 7/15/14(d) 3,845 3,845,000
Noble Group Ltd.
6.625%, 3/17/15(f) 560 508,682
NRG Energy Inc.
7.25%, 2/01/14(d) 5 5,038
7.375%, 2/01/16(d) 15 15,075
Paxson Communications Corp.
11.623%, 1/15/13 FRN(f) 6,000 6,075,000
Quality Distribution LLC
9.00%, 11/15/10(d) 1,775 1,730,625
Rainbow National Services LLC
10.375%, 9/01/14(f) 2,500 2,778,125
RBS Global Inc. & Rexnord Corp.
11.75%, 8/01/16(f) 2,000 2,090,000
ACM INCOME FUND o 15
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
R H Donnelley Corp.
6.875%, 1/15/13(d) U.S.$ 9 $ 8,629
Rhodia S.A.
10.25%, 6/01/10(d) 5 5,700
Rural Cellular Corp.
9.75%, 1/15/10(d)* 4,500 4,623,750
Russian Standard Finance SA
7.50%, 10/07/10(f) 386 372,008
Select Medical Corp.
11.175%, 9/15/15 FRN(d)(e)* 5,000 4,125,000
Sirius Satellite Radio Inc.
9.625%, 8/01/13(d)* 1,500 1,475,625
Six Flags Inc.
9.625%, 6/01/14(d)* 1,500 1,391,250
Tyumen Oil Co.
11.00%, 11/06/07(f) 90 93,680
Unibanco
8.70%, 2/11/10(f) BRL 4,290 1,897,519
William Lyon Homes Inc.
10.75%, 4/01/13(d) U.S.$ 2,000 1,905,000
XM Satellite Radio Inc.
9.75%, 5/01/14(d)* 1,500 1,500,000
Yioula Glassworks S.A.
9.00%, 12/01/15(f) EUR 253 333,136
Total Corporate Debt -
High Yield Obligations
(cost $112,662,238) 116,650,674
Corporate Debt - High Grade
Obligations-3.1%
Aegon NV
6.125%, 12/15/31(d) GBP 26 57,734
AMP Group Finance Services
7.125%, 8/06/19(d)(e) 50 99,282
AMP UK Finance Services
6.375%, 11/17/10(d) 110 216,039
AT&T Corp.
8.00%, 11/15/31(d) U.S.$ 1,000 1,240,678
Australia & New Zealand
Banking Group Ltd.
4.875%, 12/22/08(d) GBP 106 204,790
Bank of Scotland Capital Funding
8.117%, 5/31/10(d)(e) 90 189,135
Barclays Bank
8.55%, 6/15/11(e)(f) U.S.$ 638 713,952
9.875%, 5/12/08(d)(e) GBP 195 401,972
BMW U.S. Capital Corp.
4.625%, 11/28/08(d) 60 115,330
British Sky Broadcasting PLC
7.75%, 7/09/09(d) 94 191,909
16 o ACM INCOME FUND
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
BSKYB Finance UK PLC
5.625%, 10/15/15(f) U.S.$ 350 $ 342,788
5.75%, 10/20/17(f) GBP 50 95,453
Centrica PLC
5.50%, 10/24/16(d) 100 193,248
CIT Group, Inc.
5.50%, 12/15/08(d) 175 341,397
Citigroup, Inc.
5.50%, 11/18/15(d) 85 167,206
5.875%, 7/01/24(d) 32 66,222
Clear Channel Communications, Inc.
5.75%, 1/15/13(d) U.S.$ 220 195,639
Countrywide Home Loan
5.875%, 12/15/08(d) GBP 53 103,750
DaimlerChrysler NA Holding
5.625%, 2/27/09(d) 100 194,758
5.75%, 8/10/11(d) 110 212,456
Deutsche Bank AG for Gazstream S.A.
5.625%, 7/22/13(f) U.S.$ 218 216,743
Electronic Data Systems Corp.
6.00%, 8/01/13(d) 600 604,040
Embarq Corp.
7.082%, 6/01/16(d) 1,202 1,223,660
Foodcorp Ltd.
8.875%, 6/15/12(f) EUR 194 274,015
Friends Provident PLC
6.292%, 7/01/15(d)(e) GBP 50 97,106
Gazprom OAO
5.03%, 2/25/14(f) EUR 60 79,599
9.625%, 3/01/13(f) U.S.$ 8,330 9,927,267
General Electric Capital Corp.
5.375%, 12/18/40(d) GBP 41 86,801
Goldman Sachs Group Inc.
5.50%, 10/12/21(d) 50 95,574
6.125%, 2/14/17(d) 45 91,821
GPB Eurobond Finance
6.50%, 9/23/15(d) U.S.$ 400 393,601
ING Bank NV
7.00%, 10/05/10(d) GBP 95 194,031
Inter-American Development Bank
9.75%, 5/15/15(d) 56 144,236
Ipalco Enterprises Inc.
8.375%, 11/14/08(d) U.S.$ 100 103,750
JPMorgan Chase & Co.
5.375%, 9/28/16(d) GBP 50 96,270
Legal & General Finance PLC
5.875%, 4/05/33(d) 26 56,080
Legrand S.A.
8.50%, 2/15/25(d) U.S.$ 10 11,500
Lend Lease Europe Fin
6.125%, 10/12/21(d) GBP 50 96,120
ACM INCOME FUND o 17
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Lloyds TSB Capital
7.834%, 2/07/15(d)(e) GBP 49 $ 107,758
10.625%, 10/21/08(d) 134 285,233
Marks & Spencer PLC
5.625%, 3/24/14(d) 89 171,545
MBNA Europe Funding PLC
6.00%, 11/12/10(d) 70 138,998
MM02 PLC
7.625%, 1/25/12(d) 106 223,506
MMG Fiduciary (AES EL Salvador)
6.75%, 2/01/16(f) U.S.$ 350 348,152
Mobifon Holdings BV
12.50%, 7/31/10(d) 5,205 5,751,598
Morgan Stanley
5.125%, 11/30/15(d) GBP 100 189,553
Nationwide Building Society
5.25%, 2/12/18(d)(e) 25 48,141
Petronas Capital Ltd.
7.00%, 5/22/12(f) U.S.$ 412 444,109
Philip Morris
7.75%, 1/15/27(d)* 3,500 4,245,112
Prudential PLC
6.125%, 12/19/31(d) GBP 27 56,275
Qantas Airways Ltd.
6.05%, 4/15/16(f) U.S.$ 15,000 13,350,480
Red Arrow Intl Leasing
8.375%, 3/31/12(d) RUB 14,691 576,472
Resolution PLC
6.5864%, 4/25/16(d)(e) GBP 50 96,614
Resona Bank Ltd.
4.125%, 9/27/12(e)(f) EUR 67 85,443
5.986%, 8/10/11(e) GBP 50 97,730
Rexam PLC
7.125%, 3/27/09(d) 58 116,350
Royal & Sun Alliance Insurance
7.387%, 12/31/10(d) 117 241,386
Santander Central Hispano Issue Ltd.
6.80%, 11/29/10(d) 83 168,388
7.25%, 12/07/11(e)(f) 70 145,518
SLM Student Loan Trust
5.15%, 9/17/15(f) 100 193,452
South Wales Electricity
9.25%, 11/09/20(d) 19 49,401
Southern Peru Copper Corp.
7.50%, 7/27/35(d) U.S.$ 370 401,186
Standard Chartered Bank
6.75%, 4/27/09(d) GBP 100 200,136
Starwood Hotels & Resorts
7.375%, 11/15/15(d) U.S.$ 1,213 1,241,866
STB Finance Cayman
5.834%, 10/20/11(e) GBP 100 194,201
18 o ACM INCOME FUND
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Svenska Handelsbanken
6.125%, 3/04/09(d)(e) GBP 169 $ 333,348
TCNZ Finance Ltd.
6.125%, 12/12/08(d) 60 118,069
Telecom Italia Finance S.A.
7.75%, 1/24/33(d) EUR 20 31,380
Telekom Finanzmanagement
5.00%, 7/22/13(d) 1,112 1,490,936
Tengizchevroil Fin Co.
6.124%, 11/15/14(f) U.S.$ 2,172 2,166,570
TNK-BP Finance
7.50%, 7/18/16(f) 766 815,976
TYCO International Group S.A.
6.00%, 11/15/13(d) 140 144,854
6.50%, 11/21/31(d) GBP 1,585 3,500,636
Union Carbide Corp.
7.75%, 10/01/96(d) U.S.$ 1,785 1,865,213
Vale Overseas Ltd.
6.875%, 11/21/36(d) 210 215,386
Vodafone Group PLC
6.250%, 7/10/08(d) GBP 47 92,679
Western Power Distribution LLC
5.875%, 3/25/27(d) 30 62,628
Yorkshire Power Finance
7.25%, 8/04/28(d) 86 204,623
Zurich Finance PLC
6.625%, 10/02/22(d)(e) 47 97,376
Total Corporate Debt - High Grade
Obligations
(cost $57,622,191) 59,444,229
Total Corporate Debt Obligations
(cost $170,284,429) 176,094,903
BANK LOANS-4.9%
Alion Science and Technology
Corporation
10.86%, 12/31/11 U.S.$ 1,000 997,500
Alix Partners, LLP
7.88%, 10/12/13 1,500 1,512,195
Altivity Packaging
10.33%, 12/30/13 758 763,736
10.35%, 12/30/13 242 243,990
Amscan Holdings, Inc.
8.38-8.39%,12/21/12 496 506,175
Atlantic Broadband Finance, LLC
8.10-8.11%, 8/10/11 1,993 2,012,427
ATP Oil & Gas Corporation
8.87-9.11%, 4/30/10 499 502,805
ACM INCOME FUND o 19
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Blockbuster Inc.
8.87-9.05%, 8/20/11 U.S.$ 1,020 $ 1,021,697
Blue Pearl USA Ltd.
10.13%, 10/26/12 1,500 1,515,000
Builders FirstSource, Inc.
7.87%, 7/11/11 177 177,327
Building Materials Holding
Corporation
7.86%, 11/10/13 998 1,002,069
Burlington Coat Factory Warehouse
Corporation
7.62%, 5/28/13 983 968,313
Butler Animal Health Supply, LLC
8.11%, 6/30/11 1,970 1,974,925
Calgen Ommerc
9.10%, 4/01/09 500 510,895
Cebridge Conn Assets Ale Ln
10.36%, 10/30/07 2,000 1,997,500
Cebridge Conn Lien 2 Tranche A
9.87%, 4/30/14 1,250 1,252,600
Cebridge Conn PIK
11.38%, 5/04/15 2,085 2,082,953
Cebridge Conn
7.62%, 10/01/13 1,000 1,000,180
Cellnet Technology, Inc.
8.37%, 4/22/12 950 954,336
Crescent Resources, LLC
8.35%, 11/01/12 1,000 997,500
Dealer Computer Services
7.85-10.85%, 10/26/13 2,246 2,258,830
Delphi Corporation
13.75%, 6/14/11 1,500 1,537,965
Doubleclick, Inc.
9.38-9.48%, 6/14/12 777 784,843
DynCorp International LLC
7.63-7.69%, 2/08/11 985 991,777
Eastman Kodak Company
7.60%, 10/18/12 542 543,255
Ferro Corporation
8.10%, 6/06/12 833 830,900
FHC Health Systems, Inc.
5.37%, 6/28/08 1,000 1,010,000
Flakeboard Co. Ltd.
9.12%, 7/28/12 1,941 1,936,463
Ford Motor Company
8.36%, 12/15/13 1,000 1,001,720
GBGH, LLC
10.86%, 8/07/13 650 650,000
Golden Gate National Senior Care
8.80-9.07%, 7/24/11 1,241 1,249,930
Graham Packaging Company, L.P.
7.63-7.69%, 4/07/12 714 718,450
20 o ACM INCOME FUND
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
HIT Entertainment, Inc.
7.60%, 8/10/11 U.S.$ 990 $ 994,643
Infor Enterprise Solutions Holdings,
Inc.
9.12%, 7/28/12 1,995 2,008,946
Infrastrux Group, Inc.
8.60%, 11/03/12 467 468,764
IPC Acquisition Corp.
11.86%, 8/24/14 2,500 2,512,500
Keystone Automotive Operations, Inc.
7.85%, 12/30/12 993 991,885
Kranson Industries, Inc.
8.11%, 7/31/13 1,496 1,501,861
LandSource Communities Development
7.875%, 3/31/10 1,000 986,250
Live Nation Worldwide, Inc.
8.10%, 6/21/13 1,500 1,501,875
London Arena and Waterfront
Finance, LLC
8.85%, 1/31/12 1,737 1,747,730
LPL Holdings Inc.
8.11%, 6/28/13 1,489 1,492,472
Maax, Inc.
8.85-8.88%, 6/04/11 1,670 1,590,863
Marvell Technology Group
7.35%, 11/06/09 1,994 1,993,750
MGM Holdings II, Inc.
8.61%, 3/15/12 2,481 2,453,038
NCO Financial Systems, Inc.
8.38%, 11/13/13 1,500 1,498,125
NE Energy, Inc.
7.87%, 10/15/13 1,500 1,514,250
9.88%, 5/01/14 2,000 2,027,500
N.E.W. Holdings
12.35-12.37%, 2/08/14 500 503,125
NewPage Corporation
8.33-8.36%, 4/15/11 697 700,543
North Las Vegas
8.12%, 4/20/11 116 115,783
12.36%, 4/20/12 2,100 2,058,000
Northeast Biofuels, LLC
8.61-8.62%, 6/30/13 1,000 1,005,000
Oceania Cruises
8.12%, 11/13/12 2,000 2,013,760
PetCo Animal Supplies, Inc.
8.10%, 10/25/13 1,000 1,005,630
Plum Point Energy Associates, LLC
10.61%, 9/15/14 1,691 1,725,058
Prestige Brands, Inc.
7.71%, 4/05/11 2,452 2,462,556
Riverside Energy Center
9.63%, 6/22/11 1,595 1,626,486
ACM INCOME FUND o 21
Shares or
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Rocky Mountain Energy Center, LLC
5.28-9.63%, 6/22/11 U.S.$ 1,229 $ 1,253,384
Select Personal Services
9.86%, 6/30/12 988 982,563
SemCrude, L.P.
7.60%, 8/27/08 801 804,912
Solo Cup Company
11.37%, 3/31/12 2,000 2,040,000
Stratus Technologies Inc.
14.35%, 3/29/12 1,500 1,440,000
Swett & Crawford
12.12%, 11/16/12 500 505,000
Talecris Biotherapeutics Holdings Corp.
10.50%, 12/06/13 1,000 1,000,000
13.50%, 12/06/14 1,000 1,001,250
Targus Group International
8.87%, 11/22/12 995 970,065
TDS Investor Corp.
8.36%, 8/22/13 998 999,928
Trinidad Drilling
7.83%, 4/13/11 993 995,817
United Air Lines, Inc.
9.12-9.13%, 2/01/12 249 250,616
Universal City Development
Partners, Ltd.
7.35-7.38%, 6/09/11 925 927,768
Vanguard Car Rental USA Holding, Inc.
8.35-8.36%, 5/15/13 745 749,194
Venetian Macau
1.375-8.12%, 2/01/13 667 670,833
Vertafore, Inc.
7.87%, 1/31/12 291 291,754
Visteon Corporation
8.36-8.61%, 5/31/13 2,000 2,007,500
VTR Globalcom
8.36%, 9/20/13 500 493,750
Wide Open West Finance, LLC
10.37%, 4/28/14 1,000 1,009,690
Xerium Technology, Inc.
7.86%, 5/18/12 692 691,257
Total Bank Loans
(cost $92,835,486) 93,093,930
WARRANTS(h)-0.0%
Central Bank of Nigeria
Warrants, expiring 11/15/20(d) 4,500 855,000
Republic of Venezuela
Warrants, expiring 4/15/20 1,785 0
Total Warrants
(cost $0) 855,000
22 o ACM INCOME FUND
Shares or
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS-16.7%
U.S. Government & Government
Sponsored Agency
Obligations-8.9%
Federal Home Loan Bank
Zero coupon, 1/29/07(d) U.S.$ 70,000 $ 69,740,160
Federal Home Loan Mortgage Corp.
Zero coupon, 2/02/07(d) 40,000 39,829,000
Federal National Mortgage Association
Zero coupon, 2/26/07(d) 60,000 59,538,300
---------------
(cost $169,057,667) 169,107,460
U.S. Treasury Obligations-6.8%
U.S. Treasury Bills
4.779%, 1/11/07 63,000 62,916,682
4.848%, 3/29/07(a) 60,000 59,307,960
4.927%, 1/11/07 4,000 3,994,567
5.013%, 2/01/07(a) 4,000 3,984,888
---------------
(cost $130,191,311) 130,204,097
Money Market Fund-1.0%
Alliance Bernstein Fixed Income Shares
Prime STIFPortfolio(i)
(cost $20,111,056) 20,111,056 20,111,056
Total Short-Term Investments
(cost $319,360,034) 319,422,613
Total Investments Before Security
Lending Collateral-163.5%
(cost $3,042,516,406) 3,119,474,715
INVESTMENT OF CASH COLLATERAL FOR
SECURITIES LOANED-1.8%
Short-Term Investment
UBS Private Money Market Fund, LLC
(cost $33,483,943) 33,483,943 33,483,943
Total Investments-165.3%
(cost $3,076,000,349) 3,152,958,658
Other assets less liabilities-(65.3%) (1,245,626,743)
Net Assets-100.0% $ 1,907,331,915
ACM INCOME FUND o 23
FINANCIAL FUTURES CONTRACTS SOLD (see Note C)
Value at
Number of Expiration Original December 31, Unrealized
Type Contracts Month Value 2006 Appreciation
-------------------------------------------------------------------------------
U.S. Treasury
10 Year March
Futures 2,705 2007 $ 294,530,281 $ 290,702,969 $ 3,827,312
U.S. Treasury
30 Year March
Futures 166 2007 18,873,453 18,498,625 374,828
-----------
$ 4,202,140
-----------
FORWARD EXCHANGE CURRENCY CONTRACTS (see Note C)
U.S. $
Contract Value on U.S. $ Unrealized
Amount Origination Current Appreciation/
(000) Date Value (Depreciation)
-------------------------------------------------------------------------------
Buy Contracts:
Australian Dollar,
settling 1/19/07 83,912 $ 65,492,243 $ 66,196,320 $ 704,077
settling 1/25/07 1,050 800,791 828,185 27,394
Brazilian Real,
settling 3/15/07 130 59,469 60,126 657
British Pound,
settling 1/16/07 5,187 10,192,200 10,158,247 (33,953)
settling 1/16/07 3,479 6,619,292 6,811,955 192,663
settling 1/25/07 734 1,407,554 1,438,305 30,751
settling 1/26/07 1,545 2,932,702 3,026,530 93,828
settling 2/16/07 905 1,731,840 1,773,070 41,230
settling 3/15/07 121 237,851 236,829 (1,022)
Canadian Dollar,
settling 1/25/07 350 306,536 300,378 (6,158)
settling 1/26/07 290 254,044 248,893 (5,151)
settling 2/09/07 15,895 13,861,000 13,646,976 (214,024)
Euro,
settling 1/29/07 2,462 3,114,944 3,255,034 140,090
settling 3/15/07 360 476,834 476,856 22
Japanese Yen,
settling 1/12/07 2,014,058 17,321,206 16,957,077 (364,129)
Mexican Peso,
settling 1/26/07 1,100 99,880 101,698 1,818
settling 1/31/07 377,957 34,789,882 34,935,812 145,930
New Zealand Dollar,
settling 2/16/07 390 265,374 273,941 8,567
Polish Zloty,
settling 1/17/07 475 159,339 163,860 4,521
South African Rand,
settling 1/09/07 3,261 444,251 464,399 20,148
24 o ACM INCOME FUND
FORWARD EXCHANGE CURRENCY CONTRACTS (see Note C) (continued)
U.S. $
Contract Value on U.S. $ Unrealized
Amount Origination Current Appreciation/
(000) Date Value (Depreciation)
-------------------------------------------------------------------------------
Buy Contracts (continued):
South Korean Won,
settling 1/16/07 18,408,728 $ 19,851,965 $ 19,801,996 $ (49,969)
settling 1/23/07 4,864,083 5,242,953 5,233,010 (9,943)
settling 2/15/07 12,843,165 13,856,041 13,823,678 (32,363)
Swedish Krona,
settling 2/14/07 2,829 410,383 414,552 4,169
Swiss Franc,
settling 1/25/07 210 173,539 172,789 (750)
Sale Contracts:
Australian Dollar,
settling 1/25/07 210 164,489 165,637 (1,148)
British Pound,
settling 1/16/07 20,414 37,959,052 39,974,582 (2,015,530)
settling 1/25/07 776 1,480,303 1,519,022 (38,719)
settling 1/26/07 638 1,213,135 1,249,284 (36,149)
settling 2/14/07 213 410,392 415,785 (5,393)
settling 2/16/07 136 265,377 267,721 (2,344)
settling 3/15/07 242 476,808 474,128 2,680
settling 3/15/07 30 59,469 59,144 325
Canadian Dollar,
settling 1/25/07 280 243,073 240,303 2,770
settling 1/26/07 290 259,694 248,893 10,801
settling 2/09/07 20,126 17,441,170 17,279,983 161,187
Euro,
settling 1/26/07 815 1,046,875 1,077,832 (30,957)
settling 1/29/07 16,975 21,806,153 22,443,078 (636,925)
Japanese Yen,
settling 1/12/07 2,027,373 17,290,731 17,069,180 221,551
settling 3/15/07 16,100 137,852 136,645 1,207
Mexican Peso,
settling 1/26/07 7,306 669,135 675,502 (6,367)
settling 1/31/07 1,007,129 91,404,465 93,092,118 (1,687,653)
settling 2/23/07 261,775 24,186,474 24,174,100 12,374
New Zealand Dollar,
settling 2/21/07 2,390 1,509,182 1,678,497 (169,315)
Norwegian Krone,
settling 2/16/07 9,070 1,429,645 1,457,850 (28,205)
Polish Zloty,
settling 1/17/07 1,055 353,605 363,637 (10,032)
South Korean Won,
settling 1/16/07 18,408,728 19,707,448 19,801,996 (94,548)
settling 1/23/07 4,864,083 5,097,353 5,233,010 (135,657)
settling 2/15/07 12,843,165 13,937,540 13,823,678 113,862
Swedish Krona,
settling 1/22/07 1,116 158,433 163,326 (4,893)
Swiss Franc,
settling 2/16/07 375 302,198 309,135 (6,937)
ACM INCOME FUND o 25
CREDIT DEFAULT SWAP CONTRACTS (see Note C)
Notional Unrealized
Swap Counterparty & Amount Interest Termination Appreciation/
Referenced Obligation (000) Rate Date (Depreciation)
-------------------------------------------------------------------------------
Buy Contracts:
Citigroup Global
Markets, Inc.
Republic of Hungary
4.50%, 2/06/13 10,250 0.50% 11/26/13 $ (125,933)
Citibank Global
Markets, Inc.
Republic of Hungary
4.50%, 1/29/14 10,000 0.30 10/20/15 32,751
J P Morgan Chase
Republic of Hungary
4.75%, 2/03/15 1,280 0.30 10/20/15 4,213
Lehman Brothers
Qantas Airways Ltd.
5.125%, 6/20/13 15,000 2.75 3/20/16 (12,570)
Sale Contracts:
Citibank N.A.
Republic of Brazil
12.25%, 3/06/30 1,910 3.09 8/20/10 169,992
Citigroup Global
Markets, Inc.
Gazprom OAO
5.875-10.50%,
4/25/07-4/28/34 10,000 1.04 10/20/10 145,667
Citigroup Global
Markets, Inc.
Republic of Brazil
12.25%, 3/06/30 1,932 1.98 4/20/07 18,402
Citigroup Global
Markets, Inc.
Republic of Colombia
8.375%, 2/15/27 3,750 1.13 1/20/07 21,673
Citigroup Global
Markets, Inc.
Republic of Philippines
10.625%, 3/16/25 3,360 4.95 3/20/09 313,323
Credit Suisse
First Boston
Republic of Brazil
12.25%, 3/06/30 600 6.90 6/20/07 20,280
Credit Suisse
First Boston
Republic of Venezuela
9.25%, 9/15/27 950 3.17 10/20/15 85,788
Deutsche Bank AG
Republic of Brazil
12.25%, 3/06/30 1,932 1.90 4/20/07 17,695
J P Morgan Chase
Gazprom OAO
5.875-10.50%,
4/25/07-4/28/34 1,380 1.04 10/20/10 20,102
26 o ACM INCOME FUND
REVERSE REPURCHASE AGREEMENTS (see Note C)
Interest
Broker Rate Maturity Amount
-------------------------------------------------------------------------------
Deutsche Bank 4.73% 1/02/07 $ 76,502,948
Deutsche Bank 5.05 1/02/07 60,087,978
Deutsche Bank 5.10 1/02/07 74,109,034
Deutsche Bank 5.13 1/02/07 25,701,862
JPMorgan 5.10 1/02/07 233,629,477
Merrill Lynch 4.60 1/02/07 16,072,484
Merrill Lynch 5.10 1/02/07 23,888,101
Merrill Lynch 5.12 1/02/07 49,800,692
Merrill Lynch 5.12 1/02/07 18,987,541
Merrill Lynch 5.18 1/02/07 94,887,160
Merrill Lynch 5.18 1/02/07 84,869,958
-------------
$ 758,537,235
-------------
* Represents entire or partial securities out on loan.
(a) Positions, or portion thereof, with an aggregate market value of
$1,104,730,889 have been pledged to collateralize the loan payable outstanding.
(b) Positions, or portion thereof, with an aggregate market value of
$765,786,927 have been segregated to collateralize reverse repurchase
agreements.
(c) Positions, or portion thereof, with an aggregate market value of
$6,093,682 has been segregated to collateralize margin requirements for the
open futures contracts.
(d) Positions, or portion thereof, with an aggregate market value of
$649,059,723 have been pledged to collateralize open forward exchange currency
contracts.
(e) Variable rate coupon, rate shown as of December 31, 2006.
(f) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At December 31, 2006, the aggregate market value of these securities
amounted to $280,041,059 or 14.7% of net assets.
(g) Indicates a security that has a zero coupon that remains in effect until a
predetermined date at which time the stated coupon rate becomes effective until
final maturity.
(h) Non-income producing security.
(i) Investment in affiliated money market mutual fund.
Currency Abbreviations:
ARS - Argentine Peso
BRL - Brazilian Real
COP - Colombian Peso
CRC - Costa Rican Colon
DOP - Dominican Peso
EUR - Euro
GBP - British Pound
IDR - Indonesian Rupiah
MXN - Mexican Peso
NOK - Norwegian Krone
PEN - Peruvian Nuevo Sol
PLN - Polish Zloty
RUB - Russian Ruble
SEK - Swedish Krona
TRY - New Turkish Lira
U.S.$ - United States Dollar
UYU - Uruguayan Peso
ACM INCOME FUND o 27
Glossary of Terms:
FRN - Floating Rate Note
PIK - Pay-In-Kind payments
TBA - To Be Assigned--Securities are purchased on a forward commitment with
an approximate principal amount (generally +/- 1.0%) and no definite maturity
date. The actual principal amount and maturity date will be determined upon
settlement when the specific mortgage pools are assigned.
TIPS - Treasury Inflation Protected Security
COUNTRY BREAKDOWN+
Percent of
Country Total Investments
--------------------------------------------------
United States 79.43%
Brazil 5.74
Turkey 3.53
Mexico 3.07
United Kingdom 1.17
Argentina 0.90
Philippines 0.84
Russia 0.82
Venezuela 0.65
Colombia 0.49
Peru 0.49
Australia 0.44
Indonesia 0.44
Bermuda 0.26
Uruguay 0.25
Netherlands 0.20
Canada 0.17
Luxembourg 0.17
Cayman Islands 0.16
Panama 0.11
Ukraine 0.09
Kazakhstan 0.08%
Austria 0.05
Lebanon 0.05
Malaysia 0.05
Dominican Republic 0.04
El Salvador 0.04
Costa Rica 0.03
France 0.03
Ireland 0.03
Nigeria 0.03
Poland 0.03
South Africa 0.02
Spain 0.02
Sweden 0.02
Bulgaria 0.01
Germany 0.01
Greece 0.01
Jamaica 0.01
Japan 0.01
Norway 0.01
+ The Fund's country breakdown is expressed as a percentage of total
investments (before security lending collateral) and may vary over time.
See notes to financial statements.
28 o ACM INCOME FUND
STATEMENT OF ASSETS & LIABILITIES
December 31, 2006
Assets
Investments in securities, at value
Unaffiliated issuers (cost $3,055,889,293--including
investment of cash collateral for securities loaned
of $33,483,943) $ 3,132,847,602(a)
Affiliated issuers (cost $20,111,056) 20,111,056
Cash 1,792,685
Foreign cash, at value (cost $12,991,715) 13,341,601
Interest and dividends receivable 34,953,074
Unrealized appreciation on forward exchange currency
contracts 1,908,669
Paydown receivable 1,849,579
Receivable for investments securities sold 1,733,254
Unrealized appreciation on credit default swap contracts 849,886
Receivable for variation margin on futures contracts 353,688
Total assets 3,209,741,094
Liabilities
Reverse repurchase agreements 758,537,235
Loan payable 400,000,000
Payable for investment securities purchased 98,836,099
Payable for collateral received on securities loaned 33,483,943
Unrealized depreciation on forward exchange currency
contracts 5,594,281
Loan interest payable 4,353,844
Advisory fee payable 1,190,428
Unrealized depreciation on credit default swap contracts 138,503
Administrative fee payable 38,665
Accrued expenses 236,181
Total liabilities 1,302,409,179
Net Assets $ 1,907,331,915
Composition of Net Assets
Common stock, at par $ 2,294,363
Additional paid-in capital 2,135,586,986
Distributions in excess of net investment income (35,092,347)
Accumulated net realized loss on investments and foreign
currency transactions (274,112,204)
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 78,655,117
$ 1,907,331,915
Net Asset Value Per Share--300 million shares of common
stock authorized, $.01 per value (based on 229,436,279
shares outstanding) $8.31
(a) Includes securities on loan with a value of $31,890,186 (see Note E).
See notes to financial statements.
ACM INCOME FUND o 29
STATEMENT OF OPERATIONS
Year Ended December 31, 2006
Investment Income
Interest
Unaffiliated issuers (net of foreign taxes
withheld of $357,107) 201,795,212
Affiliated issuers 128,782
Dividends 176,623 $ 202,100,617
Expenses
Advisory fee 11,951,901
Custodian 493,963
Administrative fee 373,832
Printing 302,932
Registration fee 204,727
Transfer agency 125,477
Audit 93,950
Legal 79,049
Directors' fees 36,891
Miscellaneous 90,094
Total expenses before interest expense 13,752,816
Interest expense 51,039,273
Total expenses 64,792,089
Net investment income 137,308,528
Realized and Unrealized Gain (Loss)
on Investment and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment transactions 66,812,530
Swap contracts (1,437,121)
Futures contracts 3,840,783
Written options (10,292)
Foreign currency transactions 16,189,787
Net change in unrealized
appreciation/depreciation of:
Investments (75,874,069)
Swap contracts 741,348
Futures contracts 11,008,544
Foreign currency denominated assets
and liabilities (2,635,423)
Net gain on investment and foreign
currency transactions 18,636,087
Net Increase in Net Assets from
Operations $ 155,944,615
See notes to financial statements.
30 o ACM INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, December 31,
2006 2005
-------------- --------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 137,308,528 $ 150,595,096
Net realized gain on investment and
foreign currency transactions 85,395,687 44,424,809
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities (66,759,600) (43,820,796)
Net increase in net assets from
operations 155,944,615 151,199,109
Dividends and Distributions to
Shareholders from
Net investment income (141,066,107) (155,530,605)
Common Stock Transactions
Reinvestment of dividends resulting in the
issuance of Common Stock 2,527,804 5,985,431
Total increase 17,406,312 1,653,935
Net Assets
Beginning of period 1,889,925,603 1,888,271,668
End of period (including distributions in
excess of net investment income of
$35,092,347 and $46,747,088,
respectively) $1,907,331,915 $1,889,925,603
See notes to financial statements.
ACM INCOME FUND o 31
STATEMENT OF CASH FLOWS
Year Ended December 31, 2006
Increase (Decrease) in Cash from
Operating Activities:
Interest and dividends received $ 152,149,554
Interest expense paid (49,059,680)
Operating expenses paid (13,829,465)
Net increase in cash from operating
activities $ 89,260,409
Investing Activities:
Purchases of long-term investments (5,156,563,670)
Proceeds from disposition of long-term
investments 5,134,458,159
Purchases of short-term investments, net (107,849,400)
Proceeds from written options (10,292)
Proceeds from swap contracts (1,437,121)
Variation margin paid on futures
contracts 15,769,001
Realized currency losses on foreign
forward currency contracts closed (313,241)
Net decrease in cash from investing
activities (115,946,564)
Financing Activities*:
Cash dividends paid (138,538,303)
Effect of exchange rate on cash (111,281)
Increase in reverse repurchase
agreements 142,361,022
Net increase in cash from financing
activities 3,711,438
Net decrease in cash (22,974,717)
Cash at beginning of period 38,109,003
Cash at end of period $ 15,134,286
Reconciliation of Net Increase in
Net Assets from Operations to
Net Increase in Cash from
Operating Activities:
Net increase in net assets from
operations $ 155,944,615
Adjustments:
Increase in interest and dividend
receivable $ (1,870,387)
Accretion of bond discount and
amortization of bond premium (48,080,676)
Increase in interest payable 1,979,593
Decrease in accrued expenses (76,649)
Net realized gain on investments and
foreign currency transactions (85,395,687)
Net change in unrealized
appreciation/depreciation of investments
and foreign currency denominated
assets and liabilities 66,759,600
Total adjustments (66,684,206)
Net Increase in Cash from Operating
Activities $ 89,260,409
* Non-cash financing activities not included herein consist of reinvestment of
dividends.
See notes to financial statements.
32 o ACM INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 2006
NOTE A
Significant Accounting Policies
ACM Income Fund, Inc. (the "Fund'') is registered under the Investment Company
Act of 1940 as a diversified, closed-end management investment company. The
financial statements have been prepared in conformity with U.S. generally
accepted accounting principles, which require management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the
basis of market quotations or, if market quotations are not readily available
or are deemed unreliable, at "fair value" as determined in accordance with
procedures established by and under the general supervision of the Fund's Board
of Directors.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange (other than securities listed on the NASDAQ Stock Market,
Inc. ("NASDAQ")) or on a foreign securities exchange are valued at the last
sale price at the close of the exchange or foreign securities exchange. If
there has been no sale on such day, the securities are valued at the mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities listed only on NASDAQ are valued in
accordance with the NASDAQ Official Closing Price; listed put or call options
are valued at the last sale price. If there has been no sale on that day, such
securities will be valued at the closing bid prices on that day; open futures
contracts and options thereon are valued using the closing settlement price or,
in the absence of such a price, the most recent quoted bid price. If there are
no quotations available for the day of valuation, the last available closing
settlement price is used; securities traded in the over-the-counter market,
(OTC) are valued at the mean of the current bid and asked prices as reported by
the National Quotation Bureau or other comparable sources; U.S. Government
securities and other debt instruments having 60 days or less remaining until
maturity are valued at amortized cost if their original maturity was 60 days or
less; or by amortizing their fair value as of the 61st day prior to maturity if
their original term to maturity exceeded 60 days; fixed-income securities,
including mortgage backed and asset backed securities, may be valued on the
basis of prices provided by a pricing service or at a price obtained from one
or more of the major broker/dealers. In cases where broker/dealer quotes are
obtained, AllianceBernstein L.P. (prior to February 24, 2006 known as Alliance
Capital Management L.P.) (the "Adviser") may establish procedures whereby
changes in market yields or spreads are used to adjust, on a daily basis,
ACM INCOME FUND o 33
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. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at the rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent amounts actually received or paid.
Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of unrealized appreciation and depreciation of investments and
foreign currency denominated assets and liabilities.
3. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required. The Fund may be subject to taxes imposed by countries in which it
invests. Such taxes are generally based on income and/or capital gains earned
or repatriated. Taxes are accrued and applied to net investment income, net
realized gains and net unrealized appreciation/depreciation as such income
and/or gains are earned.
34 o ACM INCOME FUND
4. Investment Income and Investment Transactions
Interest income is accrued daily. Investment transactions are accounted for on
the date the securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. The Fund amortizes premiums and
accretes discounts as adjustments to interest income.
5. 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.
6. Repurchase Agreements
The Fund's custodian or designated subcustodian will take control of securities
as collateral under repurchase agreements and determine on a daily basis that
the value of such securities are sufficient to cover the value of the
repurchase agreements. If the seller defaults and the value of collateral
declines, or if bankruptcy proceedings are commenced with respect to the seller
of the security, realization of collateral by the Fund may be delayed or
limited.
NOTE B
Advisory, Administrative Fees and Other Transactions with Affiliates
Under the terms of the investment advisory agreement (the "Advisory
Agreement"), the Fund pays the Adviser a monthly advisory fee in an amount
equal to the sum of 1/12th of .30 of 1% of the Fund's average weekly net assets
up to $250 million, 1/12th of .25 of 1% of the Fund's average weekly net assets
in excess of $250 million, and 4.75% of the Fund's daily gross income (i.e.,
income other than gains from the sale of securities and foreign currency
transactions or gains realized from options and futures contracts less interest
on money borrowed by the Fund) accrued by the Fund during the month (the
"Income Component"). However, such monthly advisory fee shall not exceed in the
aggregate 1/12th of .95% of the Fund's average weekly net assets during the
month (approximately .95% on an annual basis). Prior to February 11, 2005, the
Income Component of the advisory fee was 5.25% of the Fund's daily gross
income, as described above, and the monthly advisory fee was not to exceed
1/12th of 1% of the Fund's average weekly net assets during each respective
month (approximately 1% on an annual basis).
Under the terms of the Shareholder Inquiry Agency Agreement with
AllianceBernstein Investor Services, Inc. (prior to February 24, 2006 known as
Alliance Global Investor Services, Inc.) ("ABIS"), a wholly-owned subsidiary of
the
ACM INCOME FUND o 35
Adviser, the Fund reimburses ABIS for costs relating to servicing phone
inquiries on behalf of the Fund. During the year ended December 31, 2006, the
Fund reimbursed $3,295 to ABIS.
Under the terms of the Administrative Agreement, the Fund pays Princeton
Administrators, LLC (the "Administrator"), a fee at the annual rate of .02 of
1% of the Fund's average weekly net assets. Such fee is accrued daily and paid
monthly. The Administrator prepares certain financial and regulatory reports
for the Fund and provides clerical and other services.
NOTE C
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the year ended December 31, 2006, were as follows:
Purchases Sales
-------------- --------------
Investment securities (excluding
U.S. government securities) $ 944,262,664 $1,182,463,342
U.S. government securities 4,106,338,160 3,955,569,125
At December 31, 2006, the cost of investments for federal income tax purposes,
gross unrealized appreciation and gross unrealized depreciation (excluding
foreign currency transactions, futures contracts, written options and swap
contracts) are as follows:
Cost $3,128,382,757
Gross unrealized appreciation $ 73,894,787
Gross unrealized depreciation (49,318,886)
Net unrealized appreciation $ 24,575,901
1. Financial Futures Contracts
The Fund may buy or sell financial futures contracts for the purpose of hedging
its portfolio against adverse affects of anticipated movements in the market.
The Fund bears the market risk that arises from changes in the value of these
financial instruments and the imperfect correlation between movements in the
price of the future contracts and movements in the price of the securities
hedged or used for cover.
At the time the Fund enters into a futures contract, the Fund deposits and
maintains as collateral an initial margin with the broker as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in the value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized gains or
losses. Risks may arise from the potential inability of a counterparty to meet
the terms of the contract. When the contract is closed, the Fund records a
realized gain or loss equal
36 o ACM INCOME FUND
to the difference between the value of the contract at the time it was opened
and the time it was closed.
2. Forward Exchange Currency Contracts
The Fund may enter into forward exchange currency contracts in order to hedge
its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings, to hedge certain firm purchase and sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized appreciation and
depreciation by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or other liquid assets in a separate account of the Fund having a value at
least equal to the aggregate amount of the Fund's commitments under forward
exchange currency contracts entered into with respect to position hedges.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount in U.S.
dollars, reflects the total exposure the Fund has in that particular currency
contract.
3. Option Transactions
For hedging and investment purposes, the Fund may purchase and write (sell) put
and call options on U.S. and foreign government securities and foreign
currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk
of loss of the premium and a change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired
through the exercise of call options is increased by the premiums paid. The
proceeds from securities sold through the exercise of put options are decreased
by the premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from written options which expire unexer-
ACM INCOME FUND o 37
cised are recorded by the Fund on the expiration date as realized gains from
options written. The difference between the premium received and the amount
paid on effecting a closing purchase transaction, including brokerage
commissions, is also treated as a realized gain, or if the premium received is
less than the amount paid for the closing purchase transaction, as a realized
loss. If a call option is exercised, the premium received is added to the
proceeds from the sale of the underlying security or currency in determining
whether the Fund has realized a gain or loss. If a put option is exercised, the
premium received reduces the cost basis of the security or currency purchased
by the Fund. In writing an option, the Fund bears the market risk of an
unfavorable change in the price of the security or currency underlying the
written option. Exercise of an option written by the Fund could result in the
Fund selling or buying a security or currency at a price different from the
current market value.
Transactions in written options for the year ended December 31, 2006 were as
follows:
Number of
Contracts Premiums
(000) Received
-------------- --------------
Options outstanding at
December 31, 2005 -0- $ -0-
Options written 1,370 11,782
Options terminated in closing purchase
transactions (1,370) (11,782)
Options expired -0- -0-
Options outstanding at
December 31, 2006 -0- $ -0-
4. Swap Agreements
The Fund may enter into swaps to hedge its exposure to interest rates and
credit risk or 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
specified amount of an underlying asset. The payment flows are usually netted
against each other, with the difference being paid by one party to the other.
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 a counterparty is generally limited to the net interim payment
to be received by the Fund, and/or the termination value at the end of the
contract. Therefore, the Fund considers the creditworthiness of each
counterparty to a swap contract in evaluating potential credit risk.
Additionally, risks may arise from unanticipated movements in interest rates or
in the value of the underlying securities.
38 o ACM INCOME FUND
As of January 1, 2004, the Fund 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 January 1, 2004, 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.
The Fund may enter into credit default swaps. The Fund may purchase credit
protection on the referenced obligation of the credit default swap ("Buy
Contract") or provide credit protection on the referenced obligation of the
credit default swap ("Sale Contract"). A sale/(buy) in a credit default swap
provides upon the occurrence of a credit event, as defined in the swap
agreement, for the Fund to buy/(sell) from/(to) the counterparty at the
notional amount (the "Notional Amount") and receive/(deliver) the principal
amount of the referenced obligation. If a credit event occurs, the maximum
payout amount for a Sale Contract is limited to the Notional Amount of the swap
contract ("Maximum Payout Amount"). During the term of the swap agreement, the
Fund receives/(pays) fixed payments from/(to) the respective counterparty,
calculated at the agreed upon interest rate applied to the Notional Amount.
These interim payments are recorded within unrealized appreciation/depreciation
of swap contracts on the statement of assets and liabilities.
Credit default swaps may involve greater risks than if a Fund had invested in
the referenced obligation directly. Credit default swaps are subject to general
market risk, liquidity risk, counterparty risk and credit risk. If the Fund is
a buyer and no credit event occurs, it will lose its investment. In addition,
if the Fund is a seller and a credit event occurs, the value of the referenced
obligation received by the Fund coupled with the periodic payments previously
received, may be less than the Maximum Payout Amount it pays to the buyer,
resulting in a loss to the Fund.
At December 31, 2006, the Fund had Sale Contracts outstanding with Maximum
Payout Amounts aggregating $25,814,000 with net unrealized appreciation of
$812,922 and terms ranging from 1 year to 10 years, as reflected in the
portfolio of investments.
In certain circumstances, the Fund may hold Sale Contracts on the same
referenced obligation and with the same counterparty it has purchased credit
protection, which may reduce its obligation to make payments on Sale Contracts,
if a
ACM INCOME FUND o 39
credit event occurs. As of December 31, 2006, the Fund did not have Buy
Contracts outstanding with respect to the same referenced obligations and same
counterparties of certain Sale Contracts outstanding.
5. Dollar Rolls
The Fund may enter into dollar rolls. Dollar rolls involve sales by the Fund of
securities for delivery in the current month and the Fund's simultaneously
contracting to repurchase substantially similar (same type and coupon)
securities on a specified future date. During the roll period, the Fund forgoes
principal and interest paid on the securities. The Fund is compensated by the
difference between the current sales price and the lower forward price for the
future purchase (often referred to as the "drop") as well as by the interest
earned on the cash proceeds of the initial sale. Dollar rolls involve the risk
that the market value of the securities the Fund is obligated to repurchase
under the agreement may decline below the repurchase price. Dollar rolls are
speculative techniques and may be considered to be borrowings by the Fund. For
the year ended December 31, 2006, the Fund earned drop income of $1,296,739
which is included in interest income in the accompanying statement of
operations.
6. Reverse Repurchase Agreements
Under a reverse repurchase agreement, the Fund sells securities and agrees to
repurchase them at a mutually agreed upon date and price. At the time the Fund
enters into a reverse repurchase agreement, it will establish a segregated
account with the custodian containing liquid assets having a value at least
equal to the repurchase price.
For the year ended December 31, 2006, the average amount of reverse repurchase
agreements outstanding was $608,136,831 and the daily weighted average annual
interest rate was 4.83%.
NOTE D
Common Stock
During the year ended December 31, 2006 and the year ended December 31, 2005,
the Fund issued 305,006 and 728,742 shares, respectively, in connection with
the Fund's dividend reinvestment plan.
NOTE E
Securities Lending
The Fund has entered into a securities lending agreement with AG Edwards &
Sons, Inc. (the "Lending Agent"). Under the terms of the agreement, the Lending
Agent, on behalf of the Fund, administers the lending of portfolio securities
to certain broker-dealers. In return, the Fund receives fee income from the
lending transactions or it retains a portion of interest on the investment of
any cash received as collateral. The Fund also continues to receive dividends
or interest on the securities loaned. Unrealized gain or loss on the value of
the
40 o ACM INCOME FUND
securities loaned that may occur during the term of the loan will be reflected
in the accounts of the Fund. All loans are continuously secured by collateral
exceeding the value of the securities loaned. All collateral consists of either
cash or U.S. Government securities. The Lending Agent may invest the cash
collateral received in accordance with the investment restrictions of the Fund
in one or more of the following investments: U.S. government or U.S. government
agency obligations, bank obligations, corporate debt obligations, asset-backed
securities, structured products, repurchase agreements and an eligible money
market fund. The Lending Agent will indemnify the Fund for any loss resulting
from a borrower's failure to return a loaned security when due. As of December
31, 2006, the Fund had loaned securities with a value of $31,890,186 and
received cash collateral of $33,483,943, which was invested in a money market
fund as included in the accompanying portfolio of investments. For the year
ended December 31, 2006, the Fund earned fee income of $209,167, which is
included in interest income in the accompanying statement of operations.
NOTE F
Bank Borrowing
The Fund participated in a credit facility for a commercial paper asset
securitization program with Societe Generale ("SG") as Administrative Agent,
and Barton Capital Corporation ("Barton") as lender. The credit facility has a
maximum limit of $400 million. Under the SG Program, Barton will fund advances
to the Fund through the issuance of commercial paper rated A-1+ by Standard &
Poor's Ratings Services and P-1 by Moody's Investors Service, Inc. The
collateral value must be at least 171% of outstanding borrowings. The
borrowings under the SG program are secured by the pledging of the Fund's
portfolio securities as collateral. The interest rate on the Fund's borrowings
is based on the interest rate carried by the commercial paper. The weighted
average annual interest rate was 5.12% and the average borrowing was
$400,000,000 for the year ended December 31, 2006. At December 31, 2006, the
interest rate in effect was 5.29% and the amount of borrowings outstanding was
$400,000,000.
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, notes and bank loans. Increases in
interest rates may cause the value of the Fund's investments to decline. Credit
risk is the risk that the issuer or guarantor of a debt security, or the
counterparty to a derivative contract, will be unable or unwilling to make
timely principal and/or interest payments, or to otherwise honor its
obligations. The degree of risk for a particular security may be reflected in
its credit risk rating. Credit risk is greater for medium quality and
lower-rated securities. Lower-rated debt securities and similar unrated
securities (commonly known as "junk bonds") have speculative elements or are
predominantly speculative risks.
ACM INCOME FUND o 41
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include changes in foreign
exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable United States companies or the United States government.
The Fund invests in sovereign debt obligations of countries that are considered
emerging market countries at the time of purchase. Therefore, the Fund is
susceptible to governmental factors and economic and debt restructuring
developments adversely affecting the economies of these emerging market
countries. In addition, these debt obligations may be less liquid and subject
to greater volatility than debt obligations of more developed countries.
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.
Leverage Risk--The Fund participates in a credit facility for the purpose of
utilizing investment leverage. The Fund may utilize additional leverage through
the investment techniques of reverse repurchase agreements and dollar rolls.
Reverse repurchase agreements and dollar rolls are speculative techniques and
are considered borrowings by the Fund.
The effect of leverage can produce higher shareholder returns than if the Fund
were not leveraged, and the use of leverage techniques can add to the net asset
value (NAV) of the Common Stock. However, the risks of such techniques are
potentially a higher volatility of the NAV of the Common Stock, potentially
more volatility in the market value of the Common Stock and the relatively
greater effect on the NAV of the Common Stock caused by favorable or adverse
changes in the currency exchange rates. In addition, changes in the interest
rate environment can increase or decrease shareholder returns. The Fund
maintains asset coverage of at least 300% with respect to borrowings.
To the extent that the current interest rate on the Fund's indebtedness
approaches the net return on the leveraged portion of the Fund's investment
portfolio, then the benefit to the shareholders will be reduced. If the rate on
indebtedness were to exceed the net return on the same portion of the
portfolio, then this would result in a lower rate of return for the
shareholders. Similarly, the use of leverage in a declining market can advance
the decrease of the Fund's NAV more so than if the Fund were not leveraged,
which would likely be reflected in a greater decline in the market price for
shares of Common Stock than if the Fund
42 o ACM INCOME FUND
were not leveraged. In extreme cases, if the Fund's current investment income
were not sufficient to meet interest payments on indebtedness or if the Fund
failed to maintain the asset coverage required by the 1940 Act, then it could
be necessary for the Fund to liquidate certain investments at a time when it
may be disadvantageous to do so, thereby reducing its NAV.
NOTE H
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December
31, 2006 and December 31, 2005 were as follows:
2006 2005
-------------- --------------
Distributions paid from:
Ordinary income $ 141,066,107 $ 155,530,605
Total taxable distributions 141,066,107 155,530,605
Total distributions paid $ 141,066,107 $ 155,530,605
As of December 31, 2006, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed Ordinary income 10,817,931
Accumulated capital and other losses $ (266,303,546)(a)
Unrealized appreciation/(depreciation) 24,936,181(b)
Total accumulated earnings/(deficit) $ (230,549,434)
(a) On December 31, 2006, the Fund had a net capital loss carryforward of
$261,019,528 of which $66,358,885 expires in the year 2007, $8,878,672 expires
in the year 2008, $48,113,872 expires in the year 2009 and $137,668,099 expires
in the year 2010. To the extent future capital gains are offset by capital loss
carryforwards, such gains will not be distributed. Based on certain provisions
in the Internal Revenue Code, various limitations regarding the future
utilization of these carryforwards, brought forward as a result of the Fund's
merger with ACM Government Securities Fund and ACM Government Spectrum Fund,
may apply. During the fiscal year, the Fund utilized capital loss carryforwards
of $68,788,777. For the year ended December 31, 2006, the Fund deferred losses
on straddles of $5,284,018.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales, the difference between book and tax amortization methods
for premium, the realization for tax purposes of unrealized gains and losses on
certain derivative instruments and the difference between book and tax
treatment of swap income.
During the current fiscal year, permanent differences primarily due to the tax
treatment of foreign currency gains and losses, tax treatment of swap income,
tax treatment of paydown losses and the tax treatment of bond premium, resulted
in a net decrease in distributions in excess of net investment income and a net
increase in accumulated net realized loss on investment and foreign currency
transactions. These reclassifications had no effect on net assets.
ACM INCOME FUND o 43
NOTE I
Legal Proceedings
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of the New York Attorney General ("NYAG")
have been investigating practices in the mutual fund industry identified as
"market timing" and "late trading" of mutual fund shares. Certain other
regulatory authorities have also been conducting investigations into these
practices within the industry and have requested that the Adviser provide
information to them. The Adviser has been cooperating and will continue to
cooperate with all of these authorities. The shares of the Fund are not
redeemable by the Fund, but are traded on an exchange at prices established by
the market. Accordingly, the Fund and its shareholders are not subject to the
market timing and late trading practices that are the subject of the
investigations mentioned above or the lawsuits described below. Please see
below for a description of the agreements reached by the Adviser and the SEC
and NYAG in connection with the investigations mentioned above.
Numerous lawsuits have been filed against the Adviser and certain other
defendants in which plaintiffs make claims purportedly based on or related to
the same practices that are the subject of the SEC and NYAG investigations
referred to above. Some of these lawsuits name the Fund as a party. The
lawsuits are now pending in the United States District Court for the District
of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict
Litigation transferring and centralizing all of the mutual funds involving
market and late trading in the District of Maryland (the "Mutual Fund MDL").
Management of the Adviser believes that these private lawsuits are not likely
to have a material adverse effect on the results of operations or financial
condition of the Fund.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuation dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the "Reimbursement
Fund") to compensate mutual fund shareholders for the adverse effects of market
timing attributable to market timing relationships described in the SEC Order.
According to the SEC Order, the Reimbursement Fund is to be paid, in order of
priority, to fund investors based on (i) their aliquot share of losses suffered
by the fund due to market timing, and (ii) a proportionate share of advisory
fees paid by such fund during the period of such market timing;
44 o ACM INCOME FUND
(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.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), and various other defendants not affiliated with the Adviser. The
WVAG Complaint was filed in the Circuit Court of Marshall County, West Virginia
by the Attorney General of the State of West Virginia. The WVAG Complaint makes
factual allegations generally similar to those in certain of the complaints
related to the lawsuits discussed above. On October 19, 2005, the WVAG
Complaint was transferred to the Mutual Fund MDL.
On August 30, 2005, the West Virginia Securities Commissioner signed a Summary
Order to Cease and Desist, and Notice of Right to Hearing addressed to the
Adviser and Alliance Holding. The Summary Order claims that the Adviser and
Alliance Holding violated the West Virginia Uniform Securities Act, and makes
factual allegations generally similar to those in the SEC Order and the NYAG
Order. On January 26, 2006, the Adviser, Alliance Holding, and various
unaffiliated defendants filed a Petition for Writ of Prohibition and Order
Suspending Proceedings in West Virginia state court seeking to vacate the
Summary
ACM INCOME FUND o 45
Order and for other relief. The court denied the writ and in September 2006 the
Supreme Court of Appeals declined the defendants' petition for appeal. On
September 22, 2006, Alliance and Alliance Holding filed an answer and motion to
dismiss the Summary Order with the Securities Commissioner.
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Capital Management Holding L.P., Alliance Capital
Management Corporation, AXA Financial, Inc., AllianceBernstein Investment
Research & Management, Inc., certain current and former directors of the
AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin
Complaint names certain of the AllianceBernstein mutual funds as nominal
defendants. The Fund was not named as a defendant in the Aucoin Complaint. The
Aucoin Complaint was filed in the United States District Court for the Southern
District of New York by alleged shareholders of an AllianceBernstein mutual
fund. The Aucoin Complaint alleges, among other things, (i) that certain of the
defendants improperly authorized the payment of excessive commissions and other
fees from fund assets to broker-dealers in exchange for preferential marketing
services, (ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims
46 o ACM INCOME FUND
set forth in the Aucoin Consolidated Amended Complaint, except for plaintiffs'
claim under Section 36(b) of the Investment Company Act. On January 11, 2006,
the District Court granted defendants' motion for reconsideration and dismissed
the remaining Section 36(b) claim. On May 31, 2006 the District Court denied
plaintiffs' motion for leave to file an amended complaint. On July 5, 2006,
plaintiffs filed a notice of appeal. On October 4, 2006 the appeal was
withdrawn by stipulation, with plaintiffs reserving the right to reinstate it
at a later date.
The Adviser believes that these matters are not likely to have a material
adverse effect on the Fund or the Adviser's ability to perform advisory
services relating to the Fund.
NOTE J
Recent Accounting Pronouncements
On July 13, 2006, the Financial Accounting Standards Board ("FASB") released
FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN
48"). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in
the course of preparing a fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded in the current period. Adoption of FIN 48 is required for
fiscal years beginning after December 15, 2006 and is to be applied to all open
tax years as of the effective date. On December 22, 2006, the Securities and
Exchange Commission notified the industry that the implementation of FIN 48 by
registered investment companies could be delayed until the last business day of
the first required financial statement reporting period for fiscal years
beginning after December 15, 2006. At this time, management is evaluating the
implications of FIN 48 and its impact on the financial statements has not yet
been determined.
On September 20, 2006, the FASB released Statement of Financial Accounting
Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an
authoritative definition of fair value, sets out a framework for measuring fair
value, and requires additional disclosures about fair-value measurements. The
application of FAS 157 is required for fiscal years beginning after November
15, 2007 and interim periods within those fiscal years. At this time,
management is evaluating the implications of FAS 157 and its impact on the
financial statements has not yet been determined.
ACM INCOME FUND o 47
NOTE K
Subsequent Events
On January 26, 2007, the Fund acquired all of the assets and assumed all of the
liabilities of ACM Government Opportunity Fund, Inc. ("AOF") in a tax free
event, pursuant to an Agreement and Plan of Acquisition and Liquidation
approved by the stockholders of AOF at a Special Meeting of Stockholders held
on December 12, 2006. As a result of the acquisition, stockholders of AOF
received shares of the Fund equivalent to the aggregate net asset value of the
shares they held in AOF. Stockholders participating in AOF's dividend
reinvestment plan received full and fractional shares of the Fund. Other
stockholders received cash in lieu of fractional shares.
On January 25, 2007, the aggregate net assets of the Fund and AOF were
$1,918,566,501 and $109,791,445, respectively. As of the close of business on
January 26, 2007, the combined net assets of the Fund amounted to
$2,025,471,645.
Effective January 26, 2007, the Fund's new name is AllianceBernstein Income
Fund, Inc. The Board of Directors of the Fund approved the name change at the
recommendation of AllianceBernstein L.P., the Fund's investment adviser, to
brand the Fund with the same AllianceBernstein name used for other funds in the
AllianceBernstein family of funds.
At a meeting of the Board of Directors of the Fund held on February 8, 2007,
the Board approved a change to the Advisory Agreement, effective as of the
close of business on such date, such that the monthly advisory fee shall not
exceed in the aggregate 1/12th of .80% of the Fund's average weekly net assets
during the month (approximately .80% on an annual basis).
At a meeting of the Board of Directors of the Fund held on November 2, 2006,
the Board appointed the Adviser as the Fund's administrator, effective March 1,
2007, to act pursuant to the terms of an Administration Agreement. Pursuant to
the Administration Agreement, the Fund will reimburse the Adviser for its costs
incurred for providing administrative services.
48 o ACM INCOME FUND
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
Year Ended December 31,
-----------------------------------------------------------------
2006 2005 2004(a) 2003 2002
------------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $8.25 $8.27 $8.39 $7.91 $7.87
Income From Investment
Operations
Net investment income(b) .60 .66 .67 .76 .89
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions .08 -0- (.01) .59 .07
Net increase in net asset value
from operations .68 .66 .66 1.35 .96
Less: Dividends and
Distributions
Dividends from net investment
income (.62) (.68) (.78) (.87) (.85)
Tax return of capital -0- -0- -0- -0- (.07)
Total dividends and
distributions (.62) (.68) (.78) (.87) (.92)
Net asset value, end of period $8.31 $8.25 $8.27 $8.39 $7.91
Market value, end of period $8.14 $8.28 $8.16 $8.58 $8.46
Premium/(Discount) (2.05)% 0.36% (1.33)% 2.26% 6.95%
Total Investment Return
Total investment return
based on:(c)
Market value 6.10% 10.18% 4.63% 12.50% 30.60%
Net asset value 8.71% 8.32% 8.44% 17.66% 13.27%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $1,907,332 $1,889,926 $1,888,272 $1,904,853 $1,785,164
Ratio to average net assets of:
Expenses 3.47% 2.46% 1.66% 1.67% 1.87%
Expenses, excluding interest
expense(d) .74% .79% .98% 1.10% 1.26%
Net investment income 7.35% 7.99% 8.27% 9.28% 11.69%
Portfolio turnover rate 177% 160% 139% 276% 414%
Asset coverage ratio 529% 443% 492% 559% 376%
Bank borrowing outstanding
(in millions) $400 $400 $400 $400 $400
See footnote summary on page 50.
ACM INCOME FUND o 49
(a) As of January 1 2004, 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
January 1 2004, these interim payments were reflected within interest
income/expense on the statement of operations. The effect of this change for
the year ended December 31, 2004, was to decrease net investment income per
share and increase net realized and unrealized gain (loss) on investment
transactions. The effect on the per share amounts was less than $0.005. The
ratio of net investment income to average net assets was decreased by 0.02%.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day of
each period reported. Dividends and distributions, if any, are assumed for
purposes of this calculation, to be reinvested at prices obtained under the
Fund's Dividend Reinvestment Plan. Generally, total investment return based on
net asset value will be higher than total investment return based on market
value in periods where there is an increase in the discount or a decrease in
the premium of the market value to the net asset value from the beginning to
the end of such periods. Conversely, total investment return based on net asset
value will be lower than total investment return based on market value in
periods where there is a decrease in the discount or an increase in the premium
of the market value to the net asset value from the beginning to the end of
such periods. Total investment return calculated for a period of less than one
year is not annualized.
(d) Excludes net interest expense of 2.73%, 1.67%, .68%, .57%, and .61%,
respectively, on borrowings (see Notes C and F).
50 o ACM INCOME FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of ACM Income Fund, Inc.
We have audited the accompanying statement of assets and liabilities of ACM
Income Fund, Inc. (the "Fund"), including the portfolio of investments, as of
December 31, 2006, and the related statements of operations and cash flows for
the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of
the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standard require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Fund's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2006, by correspondence
with the custodian and others, or by other appropriate auditing procedures
where replies from others were not received. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of ACM
Income Fund, Inc. at December 31, 2006, the results of its operations and cash
flows 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
February 23, 2007
ACM INCOME FUND o 51
TAX INFORMATION
(unaudited)
63.7% of the ordinary income dividends paid by the Fund during the fiscal year
ended December 31, 2006 qualify as "interest related dividends" for non-U.S.
shareholders.
52 o ACM INCOME FUND
ADDITIONAL INFORMATION
(unaudited)
Shareholders whose shares are registered in their own names may elect to 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. Computershare Trust
Company, N.A. (the "Agent") will act as agent for participants under the Plan.
Shareholders whose shares are held in the name of a 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 Agent will receive the dividend or
distribution in cash and apply it to the purchase of the Fund's shares of
Common Stock in the open market on the New York Stock Exchange or elsewhere,
for the participants' accounts. Such purchases will be made on or shortly after
the payment date for such dividend or distribution and in no event more than 30
days after such date except where temporary curtailment or suspension of
purchase is necessary to comply with Federal securities laws. If, before the
Agent has completed its purchases, the market price exceeds the net asset value
of a share of Common Stock, the average purchase price per share paid by the
Agent may exceed the net asset value of the Fund's shares of Common Stock,
resulting in the acquisition of fewer shares than if the dividend or
distribution had been paid in shares issued by the Fund.
The Agent will maintain all shareholders' accounts in the Plan and furnish
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Agent in non-certificate form in the name of
the participant, and each shareholder's proxy will include those shares
purchased or received pursuant to the Plan.
There will be no charges with respect to shares issued directly by the Fund to
satisfy the dividend reinvestment requirements. However, each participant will
pay a pro-rata share of brokerage commissions incurred with respect to the
Agent's open market purchases of shares. In each case, the cost per share of
shares purchased for each shareholder's account will be the average cost,
including brokerage commissions, of any shares purchased in the open market
plus the cost of any shares issued by the Fund.
ACM INCOME FUND o 53
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payments made and any dividend or distribution paid subsequent
to written notice of the change sent to participants in the Plan at least 90
days before the record date for such dividend or distribution. The Plan may
also be amended or terminated by the Agent on at least 90 days written notice
to participants in the Plan. All correspondence concerning the Plan should be
directed to the Agent at Computershare Trust Company, N.A., P.O. Box 43010,
Providence, RI 02940-3010.
Since the filing of the most recent amendment to the Fund's registration
statement with the Securities and Exchange Commission, there have been (i) no
material changes in the Fund's investment objectives or policies, (ii) no
changes to the Fund's charter or by-laws that would delay or prevent a change
of control of the Fund's, (iii) no material changes in the principal risk
factors associated with investment in the Fund.
54 o ACM INCOME FUND
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Marc O. Mayer, President
David H. Dievler(1)
John H. Dobkin(1)
Michael J. Downey(1)
D. James Guzy(1)
Nancy P. Jacklin(1)
Marshall C. Turner, Jr.(1)
Earl D. Weiner(1)
OFFICERS
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer
Andrew M. Aran(2), Vice President
Paul J. DeNoon(2), Vice President
Gershon Distenfeld(2), Vice President
Michael L. Mon, Vice President
Douglas J. Peebles(2), Vice President
Kewjin Yuoh(2), Vice President
Emilie D. Wrapp, Secretary
Joseph J. Mantineo, Treasurer and Chief Financial Officer
Vincent S. Noto, Controller
Administrator(3)
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, NY 10105
Dividend Paying Agent, Transfer Agent and Registrar
Computershare Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-3010
Custodian
State Street Bank and Trust Company
One Lincoln Street
Boston, MA 02111
Independent Registered Public Accounting Firm
Ernst & Young LLP
5 Times Square
New York, NY 10036
Legal Counsel
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
(1) Member of the Audit Committee, the Governance and Nominating Committee and
the Independent Directors Committee.
(2) The day-to-day management of and investment decisions for the Fund's
portfolio are made by a team of investment professionals consisting of Messrs.
Aran, DeNoon, Distenfeld, Peebles and Yuoh.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase from time to time at market
prices shares of its Common Stock in the open market.
This report, including the financial statements herein, is transmitted to the
shareholders of ACM Income Fund for their information. The financial
information included herein is taken from the records of the Fund. This is not
a prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in this report.
Annual Certifications-As required, on April 20, 2006, the Fund submitted to the
New York Stock Exchange ("NYSE") the annual certification of the Fund's Chief
Executive Officer certifying that he is not aware of any violation of the
NYSE's Corporate Governance listing standards. The Fund also has included the
certifications of the Fund's Chief Executive Officer and Chief Financial
Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 as exhibits
to the Fund's Form N-CSR filed with the Securities and Exchange Commission for
the annual period.
(3) Prior to March 1, 2007, the Fund's Administrator was Princeton
Administrators, LLC, P.O. Box 9095, Princeton, NJ 08543-9095.
ACM INCOME FUND o 55
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 DIRECTORSHIP
DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY
(FIRST YEAR ELECTED**) DURING PAST 5 YEARS DIRECTOR DIRECTOR
---------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTOR
Marc O. Mayer, + Executive Vice President of the 108 SCB Partners,
1345 Avenue of the Adviser since 2001 and Executive Inc. and
Americas Managing Director of Alliance- SCB Inc.
New York, NY 10105 Bernstein Investments, Inc. ("ABI")
49 since 2003; prior thereto he was
(2003) head of AllianceBernstein
Institutional Investments, a unit
of the Adviser, from 2001-2003.
Prior thereto, Chief Executive
Officer of Sanford C. Bernstein
& Co., LLC (institutional research
and brokerage arm of Bernstein
& Co. LLC) ("SCB & Co.") and its
predecessor since prior to 2002.
DISINTERESTED DIRECTORS
William H. Foulk, Jr., #, ++ Investment Adviser and an Inde- 110 None
74 pendent Consultant. He was for-
(1998) merly Senior Manager of Barrett
Chairman of the Board Associates, Inc., a registered invest-
ment adviser, with which he had
been associated since prior to 2002.
He was formerly Deputy Comptroller
and Chief Investment Officer of the
State of New York and, prior thereto,
Chief Investment Officer of the New
York Bank for Savings.
David H. Dievler, # Independent Consultant. Until 109 None
77 December 1994, he was Senior
(1987) Vice President of AllianceBernstein
Corporation ("AB Corp.") (for-
merly Alliance Capital Manage-
ment Corporation) responsible
for mutual fund administration.
Prior to joining AB Corp. in 1984,
he was Chief Financial Officer of
Eberstadt Asset Management
since 1968. Prior to that, he
was a Senior Manager at Price
Waterhouse & Co. Member
of the American Institute of
Certified Public Accountants
since 1953.
56 o ACM INCOME FUND
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS*, PRINCIPAL COMPLEX DIRECTORSHIP
DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY
(FIRST YEAR ELECTED**) DURING PAST 5 YEARS DIRECTOR DIRECTOR
---------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
John H. Dobkin, # Consultant. Formerly President 108 None
65 of Save Venice, Inc. (preservation
(1998) organization) from 2001-2002, 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, Director and Chairman
of the Audit Committee of AB Corp.
(formerly Alliance Capital Manage-
ment Corporation).
Michael J. Downey, # Consultant since January 2004. 108 Asia Pacific
63 Formerly managing partner of Fund, Inc.
(2005) Lexington Capital, LLC (investment and The
advisory firm) from December 1997 Merger Fund
until December 2003. Prior thereto,
Chairman and CEO of Prudential
Mutual Fund Management from
1987 to 1993.
D. James Guzy, # Chairman of the Board of PLX 108 Intel Corporation
70 Technology (semi-conductors) (semi-conductors)
(2005) and of SRC Computers Inc., with and Cirrus Logic
which he has been associated since (semi-conductors)
prior to 2002. He is also President
of the Arbor Company (private
family investments).
Nancy P. Jacklin, # Formerly U.S. Executive Director 108 None
58 of the International Monetary Fund
(2006) (December 2002-May 2006);
Partner, Clifford Chance (1992-
2002); Senior Counsel, International
Banking and Finance, and Associate
General Counsel, Citicorp (1985-
1992); Assistant General Counsel
(International), Federal Reserve
Board of Governors (1982-1985);
and Attorney Advisor, U.S. Depart-
ment of the Treasury (1973-1982).
Member of the Bar of the District
of Columbia and of New York; and
member of the Council on Foreign
Relations.
ACM INCOME FUND o 57
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS*, PRINCIPAL COMPLEX DIRECTORSHIP
DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY
(FIRST YEAR ELECTED**) DURING PAST 5 YEARS DIRECTOR DIRECTOR
---------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
Marshall C. Turner, Jr., # Principal of Turner Venture Associ- 108 The George Lucas
65 ates (venture capital and consulting) Educational
(2005) since prior to 2002. From 2003 until Foundation
May 31, 2006, he was CEO of Toppan and National
Photomasks, Inc., Austin, Texas Datacast, Inc.
(semi-conductor manufacturing
services).
Earl D. Weiner, # Of Counsel, and Partner from 1976 107 None
67 -2006, of the law firm Sullivan &
(2007) Cromwell LLP, specializing in invest-
ment management, corporate and
securities law; member of Task
Force on Fund Director's
Guidebook, Federal Regulation of
Securities Committee.
* The address for each of the Fund's disinterested Directors is c/o
AllianceBernstein L.P., Attn. Philip L. Kirstein, 1345 Avenue of the Americas,
New York, NY 10105.
** There is no stated term of office for the Fund's Directors.
# Member of the Audit Committee, the Governance and Nominating Committee and
the Independent Directors Committee.
+ Mr. Mayer is an "interested person", as defined in the 1940 Act, due to his
position as an Executive Vice President of the Adviser.
++ Member of the Fair Value Pricing Committee.
58 o ACM INCOME FUND
Management of the Fund
Officer Information
Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) PRINCIPAL OCCUPATION
AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS
--------------------------------------------------------------------------------------------------------
Marc O. Mayer President and Chief See biography above.
49 Executive Officer
Philip L. Kirstein Senior Vice President Senior Vice President and Independent
61 and Independent Compliance Officer of the Alliance-
Compliance Officer Bernstein Funds, with which he has
has been associated since October
2004. Prior thereto, he was Of Counsel
to Kirkpatrick & Lockhart, LLP from
October 2003 to October 2004, and
General Counsel of Merrill Lynch Invest-
ment Managers, L.P. since prior to
2002 until March 2003.
Andrew M. Aran Vice President Senior Vice President of the Adviser**,
49 with which he has been associated
since prior to 2002.
Paul J. DeNoon Vice President Senior Vice President of the Adviser**,
44 with which he has been associated
since prior to 2002.
Gershon Distenfeld Vice President Vice President of the Adviser**, with
31 which he has been associated since
prior to 2002.
Michael L. Mon Vice President Vice President of the Adviser**, with
37 which he has been associated since
prior to 2002.
Douglas J. Peebles Vice President Executive Vice President of the
41 Adviser**, with which he has been
associated since prior to 2002,
Co-Chief Investment Officer and
Co-Head of Fixed Income.
Kewjin Yuoh Vice President Vice President of the Adviser** since
35 March 2003. Prior thereto, he was a
Vice President of Credit Suisse Asset
Management since prior to 2002.
Emilie D. Wrapp Secretary Senior Vice President, Assistant
51 General Counsel and Assistant
Secretary of ABI**, with which she has
been associated since prior to 2002.
ACM INCOME FUND o 59
NAME, ADDRESS* POSITION(S) PRINCIPAL OCCUPATION
AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS
--------------------------------------------------------------------------------------------------------
Joseph J. Mantineo Treasurer and Chief Senior Vice President of ABIS**, with
47 Financial Officer which he has been associated since
prior to 2002.
Vincent S. Noto Controller Vice President of ABIS**, with which
42 he has been associated since prior to
2002.
* The address for each of the Fund's officers is 1345 Avenue of the Americas,
New York, NY 10105.
** The Adviser, ABI, ABIS and SCB & Co. are affiliates of the Fund.
60 o ACM INCOME FUND
THIS PAGE IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
ALLIANCEBERNSTEIN FAMILY OF FUNDS
--------------------------------------------
Wealth Strategies Funds
--------------------------------------------
Balanced Wealth Strategy
Wealth Appreciation Strategy
Wealth Preservation Strategy
Tax-Managed Balanced Wealth Strategy
Tax-Managed Wealth Appreciation Strategy
Tax-Managed Wealth Preservation Strategy
--------------------------------------------
Blended Style Funds
--------------------------------------------
U.S. Large Cap Portfolio
International Portfolio
Tax-Managed International Portfolio
--------------------------------------------
Growth Funds
--------------------------------------------
Domestic
Growth Fund
Mid-Cap Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
Global & International
Global Health Care Fund
Global Research Growth Fund
Global Technology Fund
Greater China '97 Fund
International Growth Fund
International Research Growth Fund
--------------------------------------------
Value Funds
--------------------------------------------
Domestic
Balanced Shares
Focused Growth & Income Fund
Growth & Income Fund
Real Estate Investment Fund
Small/Mid-Cap Value Fund
Utility Income Fund
Value Fund
Global & International
Global Value Fund
International Value Fund
--------------------------------------------
Taxable Bond Funds
--------------------------------------------
Global Government Income Trust
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Intermediate Bond Portfolio
Short Duration Portfolio
U.S. Government Portfolio
--------------------------------------------
Municipal Bond Funds
--------------------------------------------
National Michigan
Insured National Minnesota
Arizona New Jersey
California New York
Insured California Ohio
Florida Pennsylvania
Massachusetts Virginia
--------------------------------------------
Intermediate Municipal Bond Funds
--------------------------------------------
Intermediate California
Intermediate Diversified
Intermediate New York
--------------------------------------------
Closed-End Funds
--------------------------------------------
All-Market Advantage Fund
AllianceBernstein Income 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
AllianceBernstein Global High Income Fund*
--------------------------------------------
Retirement Strategies Funds
--------------------------------------------
2000 Retirement Strategy
2005 Retirement Strategy
2010 Retirement Strategy
2015 Retirement Strategy
2020 Retirement Strategy
2025 Retirement Strategy
2030 Retirement Strategy
2035 Retirement Strategy
2040 Retirement Strategy
2045 Retirement Strategy
We also offer Exchange Reserves,** which serves as the money market fund
exchange vehicle for the AllianceBernstein mutual funds.
You should consider the investment objectives, risks, charges and expenses of
any AllianceBernstein fund/portfolio carefully before investing. For free
copies of our prospectuses, which contain this and other information, visit us
online at www.alliancebernstein.com or contact your financial advisor. Please
read the prospectus carefully before investing.
* Prior to January 26, 2007, AllianceBernstein Income Fund was named ACM
Income Fund and AllianceBernstein Global High Income Fund was named Alliance
World Dollar Government Fund II.
** 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.
ACM INCOME FUND o 61
SUMMARY OF GENERAL INFORMATION
ACM Income Fund Shareholder Information
The daily net asset value of the Fund's shares is available from the Fund's
Transfer Agent by calling (800) 426-5523. The Fund also distributes its daily
net asset value to various financial publications or independent organizations
such as Lipper Inc., Morningstar, Inc. and Bloomberg.
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
designation "ACM IncFd." The Fund's NYSE trading symbol is "ACG." Weekly
comparative net asset value (NAV) and market price information about the Fund
is published each Monday in The Wall Street Journal and each Sunday in The New
York Times 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 distributions in additional Fund shares. The Plan also allows you
to make optional cash investments in Fund Shares through the Plan Agent. If you
wish to participate in the Plan and your shares are held in your name, simply
complete and mail the enrollment form in the brochure. If your shares are held
in the name of your brokerage firm, bank or other nominee, you should ask them
whether or how you can participate in the Plan.
For questions concerning shareholder account information, or if you would like
a brochure describing the Dividend Reinvestment Plan, please call Computershare
Trust Company, N.A. at (800) 219-4218.
62 o ACM INCOME FUND
NOTES
ACM INCOME FUND o 63
NOTES
64 o ACM INCOME FUND
Privacy Notice
Alliance, the AllianceBernstein Family of Funds and AllianceBernstein
Investment Research and Management, Inc. (collectively, "Alliance" or "we")
understand the importance of maintaining the confidentiality of our customers'
nonpublic personal information. In order to provide financial products and
services to our customers efficiently and accurately, we may collect nonpublic
personal information about our customers from the following sources: (1)
information we receive from account documentation, including applications or
other forms (which may include information such as a customer's name, address,
social security number, assets and income) and (2) information about our
customers' transactions with us, our affiliates and others (including
information such as a customer's account balances and account activity).
It is our policy not to disclose nonpublic personal information about our
customers (or former customers) except to our affiliates, or to others as
permitted or required by law. From time to time, Alliance may disclose
nonpublic personal information that we collect about our customers (or former
customers), as described above, to non-affiliated third party providers,
including those that perform processing or servicing functions and those that
provide marketing services for us or on our behalf pursuant to a joint
marketing agreement that requires the third party provider to adhere to
Alliance's privacy policy. We have policies and procedures to safeguard
nonpublic personal information about our customers (or former customers) which
include: (1) restricting access to such nonpublic personal information and (2)
maintaining physical, electronic and procedural safeguards that comply with
federal standards to safeguard such nonpublic personal information.
ACM INCOME FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
ACMI-0151-1206
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer and principal accounting
officer. A copy of the registrant's code of ethics is filed herewith as
Exhibit 12(a)(1).
(b) During the period covered by this report, no material amendments were made
to the provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers
to the provisions of the code of ethics adopted in 2(a) above were granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors has determined that independent directors
David H. Dievler and William H. Foulk, Jr. qualify as audit committee financial
experts.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) - (c) The following table sets forth the aggregate fees billed by the
independent registered public accounting firm Ernst & Young LLP, for the Fund's
last two fiscal years for professional services rendered for: (i) the audit of
the Fund's annual financial statements included in the Fund's annual report to
stockholders; (ii) assurance and related services that are reasonably related
to the performance of the audit of the Fund's financial statements and are not
reported under (i), which include advice and education related to accounting
and auditing issues and quarterly press release review (for those Funds that
issue quarterly press releases), and preferred stock maintenance testing (for
those Funds that issue preferred stock); and (iii) tax compliance, tax advice
and tax return preparation.
Audit-Related
Audit Fees Fees Tax Fees
---------- ------------- ---------
2005 $60,000 $3,100 $18,900
2006 $70,000 $6,450 $19,375
(d) Not applicable.
(e) (1) Beginning with audit and non-audit service contracts entered into on or
after May 6, 2003, the Fund's Audit Committee policies and procedures require
the pre-approval of all audit and non-audit services provided to the Fund by
the Fund's independent registered public accounting firm. The Fund's Audit
Committee policies and procedures also require pre-approval of all audit and
non-audit services provided to the Adviser and Service Affiliates to the extent
that these services are directly related to the operations or financial
reporting of the Fund.
(e) (2) All of the amounts for Audit Fees, Audit-Related Fees and Tax Fees in
the table under Item 4 (a) - (c) are for services pre-approved by the Fund's
Audit Committee.
(f) Not applicable.
(g) The following table sets forth the aggregate non-audit services provided to
the Fund, the Fund's Adviser and entities that control, are controlled by or
under common control with the Adviser that provide ongoing services to the
Fund, which include conducting an annual internal control report pursuant to
Statement on Auditing Standards No. 70 ("Service Affiliates"):
Total Amount of
Foregoing Column
Pre-approved by the
All Fees for Audit Committee
Non-Audit Services (Portion Comprised of
Provided to the Audit Related Fees)
Portfolio, the Adviser (Portion Comprised of
and Service Affiliates Tax Fees)
---------------------- ---------------------
2005 $ 848,540 [ $192,000 ]
( $173,100 )
( $ 18,900 )
2006 $1,162,557 [ $159,496 ]
( $140,121 )
( $ 19,375 )
(h) The Audit Committee of the Fund has considered whether the provision of any
non-audit services not pre-approved by the Audit Committee provided by the
Fund's independent registered public accounting firm to the Adviser and Service
Affiliates is compatible with maintaining the auditor's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934.
The audit committee members are as follows:
David H. Dievler D. James Guzy
John H. Dobkin Nancy P. Jacklin
Michael J. Downey Marshall C. Turner, Jr.
William H. Foulk, Jr Earl D. Weiner
ITEM 6. SCHEDULE OF INVESTMENTS.
Please see Schedule of Investments contained in the Report to Shareholders
included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Statement of Policies and Procedures for Proxy Voting
October 2006
1. Introduction
As a registered investment adviser, AllianceBernstein L.P.
("AllianceBernstein", "we" or "us") has a fiduciary duty to act solely in the
best interests of our clients. We recognize that this duty requires us to vote
client securities in a timely manner and make voting decisions that are in the
best interests of our clients. Consistent with these obligations, we will
disclose our clients' voting records only to them and as required by mutual
fund vote disclosure regulations. In addition, the proxy committees may, after
careful consideration, choose to respond to surveys regarding past votes.
This statement is intended to comply with Rule 206(4)-6 of the Investment
Advisers Act of 1940. It sets forth our policies and procedures for voting
proxies for our discretionary investment advisory clients, including investment
companies registered under the Investment Company Act of 1940. This statement
applies to AllianceBernstein's growth, value and blend investment groups
investing on behalf of clients in both US and non-US securities.
2. Proxy Policies
This statement is designed to be responsive to the wide range of proxy voting
subjects that can have a significant effect on the investment value of the
securities held in our clients' accounts. These policies are not exhaustive
due to the variety of proxy voting issues that we may be required to consider.
AllianceBernstein reserves the right to depart from these guidelines in order
to avoid voting decisions that we believe may be contrary to our clients' best
interests. In reviewing proxy issues, we will apply the following general
policies:
2.1 Corporate Governance
AllianceBernstein's proxy voting policies recognize the importance of good
corporate governance in ensuring that management and the board of directors
fulfill their obligations to the shareholders. We favor proposals promoting
transparency and accountability within a company. We will vote for proposals
providing for equal access to the proxy materials so that shareholders can
express their views on various proxy issues. We also support the appointment
of a majority of independent directors on key committees and separating the
positions of chairman and chief executive officer. Finally, because we believe
that good corporate governance requires shareholders to have a meaningful voice
in the affairs of the company, we will support shareholder proposals that
request that companies amend their by-laws to provide that director nominees be
elected by an affirmative vote of a majority of the votes cast.
2.2 Elections of Directors
Unless there is a proxy fight for seats on the Board or we determine that there
are other compelling reasons for withholding votes for directors, we will vote
in favor of the management proposed slate of directors. That said, we believe
that directors have a duty to respond to shareholder actions that have received
significant shareholder support. We may withhold votes for directors (or vote
against in non-US markets) that fail to act on key issues such as failure to
implement proposals to declassify boards, failure to implement a majority vote
requirement, failure to submit a rights plan to a shareholder vote or failure
to act on tender offers where a majority of shareholders have tendered their
shares. In addition, we will withhold votes for directors who fail to attend
at least seventy-five percent of board meetings within a given year without a
reasonable excuse. Finally, we may abstain or vote against directors of
non-U.S. issuers where there is insufficient information about the nominees
disclosed in the proxy statement.
2.3 Appointment of Auditors
AllianceBernstein believes that the company remains in the best position to
choose the auditors and will generally support management's recommendation.
However, we recognize that there may be inherent conflicts when a company's
independent auditor performs substantial non-audit related services for the
company. The Sarbanes-Oxley Act of 2002 prohibited certain categories of
services by auditors to US issuers, making this issue less prevalent in the US.
Nevertheless, in reviewing a proposed auditor, we will consider the fees paid
for non-audit services relative to total fees as well as if there are other
reasons to question the independence of the auditors.
2.4 Changes in Legal and Capital Structure
Changes in a company's charter, articles of incorporation or by-laws are often
technical and administrative in nature. Absent a compelling reason to the
contrary, AllianceBernstein will cast its votes in accordance with the
company's management on such proposals. However, we will review and analyze on
a case-by-case basis any non-routine proposals that are likely to affect the
structure and operation of the company or have a material economic effect on
the company. For example, we will generally support proposals to increase
authorized common stock when it is necessary to implement a stock split, aid in
a restructuring or acquisition or provide a sufficient number of shares for an
employee savings plan, stock option or executive compensation plan. However, a
satisfactory explanation of a company's intentions must be disclosed in the
proxy statement for proposals requesting an increase of greater than one
hundred percent of the shares outstanding. We will oppose increases in
authorized common stock where there is evidence that the shares will be used to
implement a poison pill or another form of anti-takeover device. We will
support shareholder proposals that seek to eliminate dual class voting
structures.
2.5 Corporate Restructurings, Mergers and Acquisitions
AllianceBernstein believes proxy votes dealing with corporate reorganizations
are an extension of the investment decision. Accordingly, we will analyze such
proposals on a case-by-case basis, weighing heavily the views of our research
analysts that cover the company and our investment professionals managing the
portfolios in which the stock is held.
2.6 Proposals Affecting Shareholder Rights
AllianceBernstein believes that certain fundamental rights of shareholders must
be protected. We will generally vote in favor of proposals that give
shareholders a greater voice in the affairs of the company and oppose any
measure that seeks to limit those rights. However, when analyzing such
proposals we will weigh the financial impact of the proposal against the
impairment of shareholder rights.
2.7 Anti-Takeover Measures
AllianceBernstein believes that measures that impede corporate transactions
such as takeovers or entrench management not only infringe on the rights of
shareholders but may also have a detrimental effect on the value of the
company. We will generally oppose proposals, regardless of whether they are
advanced by management or shareholders, the purpose or effect of which is to
entrench management or excessively or inappropriately dilute shareholder
ownership. Conversely, we support proposals that would restrict or otherwise
eliminate anti-takeover or anti-shareholder measures that have already been
adopted by corporate issuers. For example, we will support shareholder
proposals that seek to require the company to submit a shareholder rights plan
to a shareholder vote. We will evaluate, on a case-by-case basis, proposals to
completely redeem or eliminate such plans. Furthermore, we will generally
oppose proposals put forward by management (including the authorization of
blank check preferred stock, classified boards and supermajority vote
requirements) that appear to be anti-shareholder or intended as management
entrenchment mechanisms.
2.8 Executive Compensation
AllianceBernstein believes that company management and the compensation
committee of the board of directors should, within reason, be given latitude to
determine the types and mix of compensation and benefit awards offered to
company employees. Whether proposed by a shareholder or management, we will
review proposals relating to executive compensation plans on a case-by-case
basis to ensure that the long-term interests of management and shareholders are
properly aligned. In general, we will analyze the proposed plan to ensure that
shareholder equity will not be excessively diluted taking into account shares
available for grant under the proposed plan as well as other existing plans.
We generally will oppose plans that have below market value grant or exercise
prices on the date of issuance or permit repricing of underwater stock options
without shareholder approval. Other factors such as the company's performance
and industry practice will generally be factored into our analysis. We
generally will support shareholder proposals seeking additional disclosure of
executive and director compensation. This policy includes proposals that seek
to specify the measurement of performance based compensation. In addition, we
will support proposals requiring managements to submit severance packages that
exceed 2.99 times the sum of an executive officer's base salary plus bonus that
are triggered by a change in control to a shareholder vote. Finally, we will
support shareholder proposals requiring companies to expense stock options
because we view them as a large corporate expense that should be appropriately
accounted for.
2.9 Social and Corporate Responsibility
AllianceBernstein will review and analyze on a case-by-case basis proposals
relating to social, political and environmental issues to determine whether
they will have a financial impact on shareholder value. We will vote against
proposals that are unduly burdensome or result in unnecessary and excessive
costs to the company. We may abstain from voting on social proposals that do
not have a readily determinable financial impact on shareholder value.
3. Proxy Voting Procedures
3.1 Proxy Voting Committees
Our growth and value investment groups have formed separate proxy voting
committees to establish general proxy policies for AllianceBernstein and
consider specific proxy voting matters as necessary. These committees
periodically review these policies and new types of corporate governance
issues, and decide how we should vote on proposals not covered by these
policies. When a proxy vote cannot be clearly decided by an application of our
stated policy, the proxy committee will evaluate the proposal. In addition,
the committees, in conjunction with the analyst that covers the company, may
contact corporate management and interested shareholder groups and others as
necessary to discuss proxy issues. Members of the committee include senior
investment personnel and representatives of the Legal and Compliance
Department. The committees may also evaluate proxies where we face a potential
conflict of interest (as discussed below). Finally, the committees monitor
adherence to these policies.
3.2 Conflicts of Interest
AllianceBernstein recognizes that there may be a potential conflict of interest
when we vote a proxy solicited by an issuer whose retirement plan we manage, or
we administer, who distributes AllianceBernstein sponsored mutual funds, or
with whom we or an employee has another business or personal relationship that
may affect how we vote on the issuer's proxy. Similarly, AllianceBernstein may
have a potential material conflict of interest when deciding how to vote on a
proposal sponsored or supported by a shareholder group that is a client. We
believe that centralized management of proxy voting, oversight by the proxy
voting committees and adherence to these policies ensures that proxies are
voted with only our clients' best interests in mind. Additionally, we have
implemented procedures to ensure that our votes are not the product of a
material conflict of interests, including: (i) on an annual basis, the proxy
committees will take reasonable steps to evaluate the nature of
AllianceBernstein's and our employees' material business and personal
relationships (and those of our affiliates) with any company whose equity
securities are held in client accounts and any client that has sponsored or has
material interest in a proposal upon which we will be eligible to vote; (ii)
requiring anyone involved in the decision making process to disclose to the
chairman of the appropriate proxy committee any potential conflict that they
are aware of (including personal relationships) and any contact that they have
had with any interested party regarding a proxy vote; (iii) prohibiting
employees involved in the decision making process or vote administration from
revealing how we intend to vote on a proposal in order to reduce any attempted
influence from interested parties; and (iv) where a material conflict of
interests exists, reviewing our proposed vote by applying a series of objective
tests and, where necessary, considering the views of third party research
services to ensure that our voting decision is consistent with our clients'
best interests. Because under certain circumstances AllianceBernstein considers
the recommendation of third party research services, the proxy committees will
take reasonable steps to verify that any third party research service is in
fact independent based on all of the relevant facts and circumstances. This
includes reviewing the third party research service's conflict management
procedures and ascertaining, among other things, whether the third party
research service (i) has the capacity and competency to adequately analyze
proxy issues; and (ii) can make such recommendations in an impartial manner and
in the best interests of our clients.
3.3 Proxies of Certain Non-US Issuers
Proxy voting in certain countries requires "share blocking." Shareholders
wishing to vote their proxies must deposit their shares shortly before the date
of the meeting with a designated depositary. During this blocking period,
shares that will be voted at the meeting cannot be sold until the meeting has
taken place and the shares are returned to the clients' custodian banks.
Absent compelling reasons to the contrary, AllianceBernstein believes that the
benefit to the client of exercising the vote does not outweigh the cost of
voting (i.e. not being able to sell the shares during this period).
Accordingly, if share blocking is required we generally abstain from voting
those shares.
In addition, voting proxies of issuers in non-US markets may give rise to a
number of administrative issues that may prevent AllianceBernstein from voting
such proxies. For example, AllianceBernstein may receive meeting notices
without enough time to fully consider the proxy or after the cut-off date for
voting. Other markets require AllianceBernstein to provide local agents with
power of attorney prior to implementing AllianceBernstein's voting
instructions. Although it is AllianceBernstein's policy to seek to vote all
proxies for securities held in client accounts for which we have proxy voting
authority, in the case of non-US issuers, we vote proxies on a best efforts
basis.
3.4 Loaned Securities
Many clients of AllianceBernstein have entered into securities lending
arrangements with agent lenders to generate additional revenue.
AllianceBernstein will not be able to vote securities that are on loan under
these types of arrangements. However, under rare circumstances, for voting
issues that may have a significant impact on the investment, we may request
that clients recall securities that are on loan if we determine that the
benefit of voting outweighs the costs and lost revenue to the client or fund
and the administrative burden of retrieving the securities.
3.5 Proxy Voting Records
You may obtain information regarding how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30,
without charge. Simply visit AllianceBernstein's web site at
www.alliancebernstein.com, go to the Securities and Exchange Commission's web
site at www.sec.gov or call AllianceBernstein at (800) 227-4618.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
The day-to-day management of and investment decisions for the Fund are made by
a team of investment professionals consisting of Messrs. Andrew M. Aran, Paul
J. DeNoon, Gershon Distenfeld, Michael L. Mon, Douglas J. Peebles and Kewjin
Yuoh.
The following table sets forth when each person became involved in the
management of the Fund, and each person's principal occupation during the past
five years:
-------------------------------------------------------------------------------
Employee; Year; Title Principal Occupation During the Past
Five (5) Years
-------------------------------------------------------------------------------
Andrew M. Aran; since 2006- Senior Vice President of the Adviser
Senior Vice President of the with which he has been associated in
Adviser and Director of Global a substantially similar capacity to his
Credit Strategies current position since prior to 2002
and Director of Global Credit Strategies.
-------------------------------------------------------------------------------
Paul J. DeNoon; since 2002- Senior Vice President of the Adviser,
Senior Vice President of the with which he has has been associated in
Adviser and Director of Emerging a substantially similar capacity to his
Market Debt current position since prior to 2002 and
Director of Emerging Market Debt.
-------------------------------------------------------------------------------
Gershon Distenfeld; since 2006- Vice President of the Adviser, with which
Vice President of the Adviser he has been associated in a substantially
similar capacity to his current position
since prior to 2002.
-------------------------------------------------------------------------------
Michael L. Mon; since 2006- Vice Vice President of the Adviser, with which
President of the Adviser he has been associated in a substantially
similar capacity to his current position
since prior to 2002.
-------------------------------------------------------------------------------
Douglas J. Peebles; since 2002- Executive Vice President of the Adviser,
Executive Vice President of the with which he has been associated in a
Adviser, Chief Investment Officer substantially similar capacity to his
and Co-Head of Fixed-Income current position since prior to 2002,
Chief Investment Officer and Co-Head of
Fixed Income.
-------------------------------------------------------------------------------
Kewjin Yuoh; since 2006- Vice Vice President of the Adviser, with which
President of the Adviser he has been associated in a substantially
similar capacity to his current position
since March 2003. Prior thereto, he was a
Vice President of Credit Suisse Asset
Management since prior to 2002.
-------------------------------------------------------------------------------
(a) (2) The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which the Fund's portfolio managers also have day-to-day
management responsibilities. The tables provide the numbers of such accounts,
the total assets in such accounts and the number of accounts and total assets
whose fees are based on performance. The information is provided as of the
Fund's fiscal year ended December 31, 2006.
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
-----------------------------------------------------------------------------
Number of Total Assets
Registered of Registered
Total Number Total Assets Investment Investment
of Registered of Registered Companies Companies
Investment Investment Managed with Managed with
Portfolio Companies Companies Performance- Performance-
Manager Managed Managed based Fees based Fees
-----------------------------------------------------------------------------
Andrew M. None None None None
Aran
-----------------------------------------------------------------------------
Paul J. 8 $3,388,000,000 None None
DeNoon
-----------------------------------------------------------------------------
Gershon 3 $846,000,000 None None
Distenfeld
-----------------------------------------------------------------------------
Michael L. 2 $153,000,000 None None
Mon
-----------------------------------------------------------------------------
Douglas J. 1 $77,000,000 None None
Peebles
-----------------------------------------------------------------------------
Kewjin Yuoh 2 $1,291,000,000 None None
-----------------------------------------------------------------------------
POOLED INVESTMENT VEHICLES
-----------------------------------------------------------------------------
Number of Total Assets
Pooled of Pooled
Total Number Total Assets Investment Investment
of Pooled of Pooled Vehicles Vehicles
Investment Investment Managed with Managed with
Portfolio Vehicles Vehicles Performance- Performance-
Manager Managed Managed based Fees based Fees
-----------------------------------------------------------------------------
Andrew M.
Aran None None None None
-----------------------------------------------------------------------------
Paul J.
DeNoon 6 $13,729,000,000 None None
-----------------------------------------------------------------------------
Gershon
Distenfeld None None None None
-----------------------------------------------------------------------------
Michael L.
Mon None None None None
-----------------------------------------------------------------------------
Douglas J.
Peebles None None None None
-----------------------------------------------------------------------------
Kewjin Yuoh 3 $84,000,000 1 $19,000,000
-----------------------------------------------------------------------------
OTHER ACCOUNTS
-----------------------------------------------------------------------------
Number Total Assets
of Other of Other
Total Number Total Assets Accounts Accounts
of Other of Other Managed with with
Portfolio Accounts Accounts Performance- Performance-
Manager Managed Managed based Fees based Fees
-----------------------------------------------------------------------------
Andrew M.
Aran 2 $256,000,000 None None
-----------------------------------------------------------------------------
Paul J.
DeNoon 2 $231,000,000 None None
-----------------------------------------------------------------------------
Gershon
Distenfeld 1 $59,000,000 None None
-----------------------------------------------------------------------------
Michael L.
Mon None None None None
-----------------------------------------------------------------------------
Douglas J.
Peebles None None None None
-----------------------------------------------------------------------------
Kewjin Yuoh 6 $1,041,000,000 1 $542,000,000
-----------------------------------------------------------------------------
Investment Professional Conflict of Interest Disclosure
As an investment adviser and fiduciary, Alliance owes its clients and
shareholders an undivided duty of loyalty. We recognize that conflicts of
interest are inherent in our business and accordingly have developed policies
and procedures (including oversight monitoring) reasonably designed to detect,
manage and mitigate the effects of actual or potential conflicts of interest in
the area of employee personal trading, managing multiple accounts for multiple
clients, including AllianceBernstein Mutual Funds, and allocating investment
opportunities. Investment professionals, including portfolio managers and
research analysts, are subject to the above-mentioned policies and oversight
monitoring to ensure that all clients are treated equitably. We place the
interests of our clients first and expect all of our employees to meet their
fiduciary duties.
Employee Personal Trading. Alliance has adopted a Code of Business Conduct and
Ethics that is designed to detect and prevent conflicts of interest when
investment professionals and other personnel of Alliance own, buy or sell
securities which may be owned by, or bought or sold for, clients. Personal
securities transactions by an employee may raise a potential conflict of
interest when an employee owns or trades in a security that is owned or
considered for purchase or sale by a client, or recommended for purchase or
sale by an employee to a client. Subject to the reporting requirements and
other limitations of its Code of Business Conduct and Ethics, Alliance permits
its employees to engage in personal securities transactions, and also allows
them to acquire investments in the AllianceBernstein Mutual Funds through
direct purchase, 401K/profit sharing plan investment and/or notionally in
connection with deferred incentive compensation awards. Alliance's Code of
Ethics and Business Conduct requires disclosure of all personal accounts and
maintenance of brokerage accounts with designated broker-dealers approved by
Alliance. The Code also requires preclearance of all securities transactions
and imposes a one-year holding period for securities purchased by employees to
discourage short-term trading.
Managing Multiple Accounts for Multiple Clients. Alliance has compliance
policies and oversight monitoring in place to address conflicts of interest
relating to the management of multiple accounts for multiple clients.
Conflicts of interest may arise when an investment professional has
responsibilities for the investments of more than one account because the
investment professional may be unable to devote equal time and attention to
each account. The investment professional or investment professional teams for
each client may have responsibilities for managing all or a portion of the
investments of multiple accounts with a common investment strategy, including
other registered investment companies, unregistered investment vehicles, such
as hedge funds, pension plans, separate accounts, collective trusts and
charitable foundations. Among other things, Alliance's policies and procedures
provide for the prompt dissemination to investment professionals of initial or
changed investment recommendations by analysts so that investment professionals
are better able to develop investment strategies for all accounts they manage.
In addition, investment decisions by investment professionals are reviewed for
the purpose of maintaining uniformity among similar accounts and ensuring that
accounts are treated equitably. No investment professional that manages client
accounts carrying performance fees is compensated directly or specifically for
the performance of those accounts. Investment professional compensation
reflects a broad contribution in multiple dimensions to long-term investment
success for our clients and is not tied specifically to the performance of any
particular client's account, nor is it directly tied to the level or change in
level of assets under management.
Allocating Investment Opportunities. Alliance has policies and procedures
intended to address conflicts of interest relating to the allocation of
investment opportunities. These policies and procedures are designed to ensure
that information relevant to investment decisions is disseminated promptly
within its portfolio management teams and investment opportunities are
allocated equitably among different clients. The investment professionals at
Alliance routinely are required to select and allocate investment opportunities
among accounts. Portfolio holdings, position sizes, and industry and sector
exposures tend to be similar across similar accounts, which minimizes the
potential for conflicts of interest relating to the allocation of investment
opportunities. Nevertheless, investment opportunities may be allocated
differently among accounts due to the particular characteristics of an account,
such as size of the account, cash position, tax status, risk tolerance and
investment restrictions or for other reasons.
Alliance's procedures are also designed to prevent potential conflicts of
interest that may arise when Alliance has a particular financial incentive,
such as a performance-based management fee, relating to an account. An
investment professional may perceive that he or she has an incentive to devote
more time to developing and analyzing investment strategies and opportunities
or allocating securities preferentially to accounts for which Alliance could
share in investment gains.
To address these conflicts of interest, Alliance's policies and procedures
require, among other things, the prompt dissemination to investment
professionals of any initial or changed investment recommendations by analysts;
the aggregation of orders to facilitate best execution for all accounts; price
averaging for all aggregated orders; objective allocation for limited
investment opportunities (e.g., on a rotational basis) to ensure fair and
equitable allocation among accounts; and limitations on short sales of
securities. These procedures also require documentation and review of
justifications for any decisions to make investments only for select accounts
or in a manner disproportionate to the size of the account.
(a) (3) Portfolio Manager Compensation
Alliance's compensation program for investment professionals is designed to be
competitive and effective in order to attract and retain the highest caliber
employees. The compensation program for investment professionals is designed to
reflect their ability to generate long-term investment success for our clients,
including shareholders of the AllianceBernstein Mutual Funds. Investment
professionals do not receive any direct compensation based upon the investment
returns of any individual client account, nor is compensation tied directly to
the level or change in level of assets under management. Investment
professionals' annual compensation is comprised of the following:
(i) Fixed base salary: This is generally the smallest portion of compensation.
The base salary is a relatively low, fixed salary within a similar range for
all investment professionals. The base salary is determined at the outset of
employment based on level of experience, does not change significantly from
year-to-year and hence, is not particularly sensitive to performance.
(ii) Discretionary incentive compensation in the form of an annual cash bonus:
Alliance's overall profitability determines the total amount of incentive
compensation available to investment professionals. This portion of
compensation is determined subjectively based on qualitative and quantitative
factors. In evaluating this component of an investment professional's
compensation, Alliance considers the contribution to his/her team or discipline
as it relates to that team's overall contribution to the long-term investment
success, business results and strategy of Alliance. Quantitative factors
considered include, among other things, relative investment performance (e.g.,
by comparison to competitor or peer group funds or similar styles of
investments, and appropriate, broad-based or specific market indices), and
consistency of performance. There are no specific formulas used to determine
this part of an investment professional's compensation and the compensation is
not tied to any pre-determined or specified level of performance. Alliance
also considers qualitative factors such as the complexity and risk of
investment strategies involved in the style or type of assets managed by the
investment professional; success of marketing/business development efforts and
client servicing; seniority/length of service with the firm; management and
supervisory responsibilities; and fulfillment of Alliance's leadership criteria.
(iii) Discretionary incentive compensation in the form of awards under
Alliance's Partners Compensation Plan ("deferred awards"): Alliance's overall
profitability determines the total amount of deferred awards available to
investment professionals. The deferred awards are allocated among investment
professionals based on criteria similar to those used to determine the annual
cash bonus. There is no fixed formula for determining these amounts. Deferred
awards, for which there are various investment options, vest over a four-year
period and are generally forfeited if the employee resigns or Alliance
terminates his/her employment. Investment options under the deferred awards
plan include many of the same AllianceBernstein Mutual Funds offered to mutual
fund investors, thereby creating a close alignment between the financial
interests of the investment professionals and those of Alliance's clients and
mutual fund shareholders with respect to the performance of those mutual funds.
Alliance also permits deferred award recipients to allocate up to 50% of their
award to investments in Alliance's publicly traded equity securities.(1)
(iv) Contributions under Alliance's Profit Sharing/401(k) Plan: The
contributions are based on Alliance's overall profitability. The amount and
allocation of the contributions are determined at the sole discretion of
Alliance.
(1) Prior to 2002, investment professional compensation also included
discretionary long-term incentive in the form of restricted grants of
Alliance Capital's Master Limited Partnership Units.
(a) (4) The dollar range of the Fund's equity securities owned directly or
beneficially by the Fund's portfolio managers as of the Fund's fiscal year
ended December 31, 2006 is set forth below:
DOLLAR RANGE OF EQUITY
SECURITIES IN THE FUND
----------------------------------------------
Andrew M. Aran None
Paul J. DeNoon None
Gershon Distenfeld None
Michael L. Mon None
Douglas J. Peebles
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
There have been no purchases of equity securities by the Fund or by affiliated
parties for the reporting period.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Fund's Board of Directors since the Fund last
provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and procedures
(as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as
amended) are effective at the reasonable assurance level based on their
evaluation of these controls and procedures as of a date within 90 days of the
filing date of this document.
(b) There were no changes in the registrant's internal controls over financial
reporting that occurred during the second fiscal quarter of the period that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
12 (a) (1) Code of Ethics that is subject to the disclosure of
Item 2 hereof
12 (b) (1) Certification of Principal Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
12 (b) (2) Certification of Principal Financial Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
12 (c) Certification of Principal Executive Officer and
Principal Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): AllianceBernstein Income Fund, Inc.
By: /s/ Marc O. Mayer
-------------------------
Marc O. Mayer
President
Date: February 28, 2007
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: February 28, 2007
By: /s/ Joseph J. Mantineo
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Joseph J. Mantineo
Treasurer and Chief Financial Officer
Date: February 28, 2007